Podcast episode

Digital Money Demystified w/ Prof. Tonya Evans – EP216

Professor Tonya Evans is the author of the new book “Digital Money Demystified: Go from Cash to Crypto Safely, Legally, and Confidently.” She discusses the topic of cryptocurrency with show host Gene Tunny. Professor Evans argues there are many myths surrounding digital assets, including their association with criminal activity and extreme volatility. She aims to dispel these myths and provide readers with a more accurate understanding of cryptocurrencies. Professor Evans is distinguished professor at Penn State Dickinson Law and a leading expert in intellectual property and new technologies. Please note this episode is for general information only and does not constitute financial or investment advice.

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About Professor Tonya M. Evans

Dr. Tonya M. Evans is a distinguished professor at Penn State Dickinson Law and a leading expert in intellectual property and new technologies. With a prestigious 2023 EDGE in Tech Athena Award, she is highly sought-after as a keynote speaker and consultant. Her expertise spans blockchain, entrepreneurship, entertainment law, and more.

As a member of international boards and committees, including the World Economic Forum/Wharton DAO Project Series, Dr. Evans remains at the forefront of cutting-edge research. She recently testified before the House Financial Services Committee and the Copyright Office and USPTO to advise on the intellectual property law issues related to NFTs and blockchain technology.

What’s covered in EP216

  • [00:05:31] Prudent crypto investing according to Prof. Evans.
  • [00:09:18] Crypto scams.
  • [00:13:18] Peer-to-peer technology.
  • [00:17:34] Taxing crypto assets.
  • [00:22:45] Central bank digital currencies.
  • [00:29:13] Exchanging value without government support.
  • [00:38:17] The currency of outer space.
  • [00:41:10] Self-custody and centralized exchanges.
  • [00:47:48] “Not your keys, not your crypto.”
  • [00:49:17] Underrepresentation in the crypto ecosystem.
  • [00:54:07] Learning the language of crypto.
  • [00:59:47] Tracking Bitcoin transactions.
  • [01:01:57] The speed of prosecuting crypto fraud.

Links relevant to the conversation

Amazon page for Digital Money Demystified:

Regarding a spot Bitcoin ETF, Yahoo Finance reported on 28 November 23 that “Crypto investors are awaiting Security & Exchange Commission (SEC) approval for a spot bitcoin ETF, which could unlock a surge of capital investment in the crypto space.”

Treasury Secretary Janet Yellen on Binance:

Transcript: Digital Money Demystified w/ Prof. Tonya Evans – EP216

N.B. This is a lightly edited version of a transcript originally created using the AI application We then used a human application, Tim Hughes from Adept Economics, to exercise his primitive brain and see if he could successfully hunt down mondegreens. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording

Tonya Evans  00:03

Now we have web three where not only are we exchanging messages of information, packets of information. Now those packets are about value. It gets at the heart of even why governments tax, particularly in times of war, etc, and to protect borders that are now being threatened by a borderless currency.

Gene Tunny  00:32

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory, evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show.

Hello, and welcome to the show. In this episode, I talked about cryptocurrency with the author of a new book on the topic. The book is “Digital Money Demystified” and the author is Professor Tonya Evans from Dickinson Law at Pennsylvania State University. Among her many achievements, Professor Evans was a 2021 Forbes over 50 listee in the investment category. She’s on the board of directors of Digital Currency Group and she’s testified before a congressional committee on digital assets. In other words, she knows what she’s talking about on crypto. This episode was recorded in mid November 2023. Please check out the show notes for any important developments since then, particularly for any news about spot Bitcoin ETFs that may have happened. I should note that one big thing that’s happened since the interview is Binance and its CEO pleading guilty to criminal charges for anti money laundering and US sanctions violations. US Treasury Secretary Janet Yellen has said “it’s willful failures allowed money to flow to terrorists, cyber criminals and child abusers through its platform.” As always, if you have thoughts on this episode, or other episodes or ideas for future episodes, please get in touch. I’d love to hear your thoughts on crypto, positive or negative. What do you think about Professor Evans defence of crypto against the major criticisms that it faces? Has she changed your mind on crypto? What about the recent news about Binance or SBF before that? Please let me know what you think after listening to the episode. Let’s get into it. I hope you enjoy my conversation with Professor Tonya Evans on crypto.

Professor Tonya Evans, welcome to the programme.

Tonya Evans  02:42

Thank you, Gene. Thank you so much. I’ve been looking forward to this. So I’m happy to, happy to chat about my favourite topic.

Gene Tunny  02:49

Oh very good yes. You’re certainly passionate about it, I’ve been reading your book over, well the last two nights. It’s, it’s an easy to read book. And I got through it in in two sittings on my Kindle. So well done on that. So yes, your book is Digital Money Demystified from go from cash to crypto safely, legally and confidently. To start off with, what do you think needs to be demystified about digital money? Or in other words, what motivated you to write this book?

Tonya Evans  03:26

Yeah, this it’s interesting because I do so many speaking engagements, obviously, as a not only as a law professor, which is kind of a different exercise in exploring things. I know, we’ll get into some regulatory stuff later. But at a higher level, there’s so much misinformation about the nature of the assets, why they even exist, what types there are, how they’re different. Some of the most common myths that I constantly explore and help people to right size include the level of crypto involvement in criminal activity, which is actually quite low. The nature of volatility, and the the existence of volatility is not the myth. This is a nascent asset class. And so, obviously, it’s very volatile. So when I compare crypto as a nascent asset class to earlier developments of assets like the stock exchange, for example, we go back to the 30s and Buttonwood and the volatility that was involved, so many things going on behind the scenes that people weren’t aware of. And that was very problematic when you think about the asymmetry of information which is often extremely problematic in the finance lane. You really need to have the transparency and accessibility for an open market. Otherwise you don’t have an open market and people are left to their own devices. People are investing in things when they don’t have all of the information. And so that’s what made it really interesting for me to 1) start to study the area, but 2) to make sure that people understood the existing system, how crypto assets and blockchain technology actually changed that. And kind of where we go from here. As you can tell, the book is not an argument. For someone to absolutely buy crypto, I still leave that up to the person, but I want them to have a more informed body of information to draw from so that they can actually make good choices. One of the ways that I like to explain it is to say, you can actually be a prudent crypto investor, which sounds like an oxymoron. It’s like prudent and crypto investing, how do those things go together, but people are afraid of what they don’t understand. And the reality is, and we will continue to talk about this in our conversation. This technology is here, not just as a matter of Bitcoin and Etherium, and some of the other coins, but every major, not major, but every country is looking at its own version of digital currency in the form of central bank digital currencies. We have FedNow which is not in and of itself a cryptocurrency. But it’s kind of like the the framework or the platform for digital assets that I believe, my personal opinion, the government would not have this official statement today. But three to five years from now, we’ll look back on this moment in time, where FedNow, the rails, the frameworks to enable digital asset transmission, I believe will be the precursor to a central bank digital currency in the United States. And finally, when I think about the various investment products that will become available, probably, I’m pretty conservative so I would say at the beginning of 2024, we will see an exchange traded fund specifically for Bitcoin, probably 12 to 18 months after that, for Etherium. This will be an investment product that is available to investors, and also the professionals, the financial advisors that have to make sense of this, the CPAs the lawyers. So for all of these reasons, at least demystifying the space so that people don’t fall victim to the clickbait and the sensational headlines, some of which are horrible. I, there is no place for criminal activity, Sam Bankman-Fried is going to enjoy a lot of time in jail. I’m absolutely for that. But you know, that is one small part of a larger ecosystem where the great majority is used for legitimate not nefarious purposes. So for all those reasons, I just think it’s important that people level up their, their understanding, you see from the book, The glossary of terms, just helping to demystify and understand so that people will lean into the education piece to decide then if this is something that they want to add to their profession, or their portfolio.

Gene Tunny  08:04

Yeah, yeah, absolutely. So you mentioned the glossary of terms just then I think that’s one of the standout features of the book. So yeah good work on that. Professor Evans, could you just explain the difference between some of these scams until, I read your your book, I didn’t appreciate the difference between an exit scam and a rug pull. So I hear about rug pulls all the time on Coffeezilla’s channel on YouTube, could, are you able to go over what those different crypto scams are and what to watch out for? Please?

Tonya Evans  08:40

Yeah they’re quite close, right. So it’s the difference of having a team that from the beginning, knows that they are going to turn the lights off at some point, they’re gonna, you know, pump up the price, get a lot of enthusiasm. And their goal from the beginning is to scam people out of their money, right, and to set the market conditions in order to get the highest price possible to leave others downstream holding the bag. Right, as opposed to someone that at least in the beginning, has some good intention and realises at some point in time, it’s not going well. And that people who have invested fall into what we talked about earlier about not having all the information. So you have a key some key decision makers that still have an influence on a project. Oftentimes, it’s not built yet. So they have grand plans, they have a roadmap, they might have a white paper, but at a certain point they run out of gas and they disappear with everyone’s money and all of a sudden you can’t find them anymore, closely aligned but so it’s more of the intentionality from the beginning. But the end result is a lot of people get caught holding the bag.

Gene Tunny  09:51

Right so the exit scam is where there’s that intentionality at the beginning is that right and the rug pull is yeah, we stuffed up let’s just try and get out of it. And yeah well…

Tonya Evans  10:01

That’s right, that’s right.

Gene Tunny  10:05

Bad luck investors. Okay. Righto, so you’re a Gen X law professor right? So I think I read that in the book. So you’re same generation is me and I often feel I’m probably, if I was five years younger, I probably would have got massively into crypto, but I was probably, at the start of it, I was a bit sceptical of it. How did you become like, as a lawyer, as a law professor, how did you become interested in crypto in the first place?

Tonya Evans  10:34

I had a friend who was getting an advanced degree in the future of media and kind of the intersection of media and new technologies. And to take a step back, I actually am primarily an intellectual property lawyer, and law professor, I just actually celebrated my 25th reunion from Howard University School of Law. So I’ve been around for a minute, I practiced law for 10 years before I even started teaching. And now as a recovering practitioner, also known as a law professor. And I get to lean in to things normatively, how they should be rather than day to day kind of practically what they are, right? That’s really the transition from representing clients to informing law as it’s being developed. And so I was very interested in the work that she was doing at the intersection of media and blockchain. I had heard of Bitcoin at the time, this was in 2017. Bitcoin was first launched in January of 2009. So it had been around for some time, but was really relegated to the fringes of cypher, the cypherpunk movement, mostly those kind of tech men, mostly with a technology, technology background, and also in finance, and kind of like this microcosm of two microcosms is the area of cryptocurrency. So mainstream adoption or even awareness just wasn’t a thing at that time. And also, as you mentioned, I’m a lawyer. I’m licenced to practice law in four states, New York, New Jersey, Pennsylvania, and DC, I am highly revered. In my profession, I have no intention of losing my licence. And so trying to make sense of this magic internet money was not something that, that I was at all interested in at the time. But what I was interested in is her discussions around the underlying technology that was organising financial data, the transactions and the balances in a very novel way, using existing technologies. But again, organised in a novel way. So what were the technologies, are the technologies? Cryptography, which is the encrypted messaging that has been around in some form or fashion, quite frankly, for millennia, obviously, it’s digital now. But the idea of going from point A to point B, or sending a message, often in times of war and other areas, the ability to send to encrypt and decrypt messaging was critically important. But that’s been around for forever, then we have peer to peer technology. So as an IP lawyer, I’m also interested in this part, because when I first learned about peer to peer technology, it was gonna, you know, upend the media, ecosystem, and that entire industry was going to fall because you and I could be in completely different places but I could send you a perfect digital copy of a media file, and then go on the internet and send it to 1000 of my not-so-closest friends without exhausting the original. So I guess that was great if you wanted to share music, not so great for the music industry, but for everybody else. But obviously, if you are doing that with money that runs into the double spend problem, where, you know, I can say I have $100 in the bank to send it to you and also to Susan, and the first person to cash that check is the one who wins that is that’s not going to work for money. So the novel way of using cryptography, peer to peer technology, the internet, and then a novel way of coming to agreement, we would call it we call this the consensus mechanism of coming to agreement where I don’t have to trust you, but I trust a software that is pre-coded with the rules of engagement. It’s open source software, which is also lends itself to copyright, to patent areas of interest as an intellectual property attorney, where I was like, Well, I have to figure that out. I have to let my students know that this is something that is changing the nature of intellectual property. And it doesn’t, it didn’t seem at the time that I needed to also fundamentally understand cryptographically secure digital assets. But I fell down the rabbit hole, it was quickly apparent that understanding the technology I need needed to understand the nature of the assets that were being validated, verified and secured. In this type of news decentralised database, I didn’t have any appreciation for all that language at the time. But being drawn in, in my existing area of expertise, I think was the best way for me to be intellectually curious, and to really learn more.

Gene Tunny  15:31

Gotcha. And are there many legal cases? Is there much litigation regarding crypto?

Tonya Evans  15:38

What we’re seeing now involves, the short answer is yes. Now, but mostly at the federal and state levels against federal or state regulators and various parties or, or stakeholders, participants in crypto. I don’t know if you have a lot of them in terms of the actual number but the import of of actions with the SEC, the Security Exchange, Securities Exchange Commission against some of the big ones we have coinbase, we have the ripple case with ripple is a network that has a native token called XRP. That has been tied up for a long time until recently, when a federal court said that the SEC led by Gary Gensler had really overstepped the boundaries of their regulatory power. The way that reg, regulatory bodies in the executive actually get their power is it’s delegated from Congress. So an agency can only do as much as they are empowered to do by their enabling legislation. And the federal court said that the SEC overstepped its bounds actually making it the, clearing the pathway I should say, for those spot, Bitcoin exchange traded funds or ETFs, that are likely to be approved begrudgingly by the SEC, in my humble opinion. But as soon as November 17, perhaps in the first quarter of 2024, that is one of the most exciting and also pressing legal issues that people will start to learn more about. There’s other things going on with Treasury, trying to make sense of how to properly tax crypto, it was always a nightmare when I first started buying and exchanging crypto in like 2018, where you literally had to have a spreadsheet because crypto, all crypto assets are taxed in the United States as a capital asset. So imagine that every time I am going from cash to crypto, as I say, from, you know, $1 to some portion of Bitcoin is a taxable event, even if I’m using the dollar to get bitcoin and then within the same day, or maybe the same week, then exchanging Bitcoin for ETH. And then using that to get a stablecoin every single time there’s a an exchange, that is considered a taxable event, even if it’s negligible. So the argument before the before treasury, in general and IRS in particular is there should be some de minimis amount. In right now, the number that’s floated is about the equivalent of $600, where we, I mean, it gets to be completely impractical to have to account for every single transaction under that amount, because you’re not worried about money laundering, you’re, you know, you’re not worried about significant fraud or anything like that at that level. And so that’s a really interesting thing to watch. And then finally, there’s a lot of, I don’t think it’s going to happen in 2024, because we’re in a presidential cycle, but a lot of support for various types of legislation to give greater certainty as a matter of regulation. But greater clarity of what agency is actually primarily empowered, if at all, will there be a primary or lead regulator as between this SEC and the CFTC? That’s major. The CFTC is responsible for futures and for commodities. But there doesn’t seem to be agreement between the head of the CFTC and the SEC about the taxonomy, the characterization of various assets. And it’s problematic because most of them are programmable. They actually can change the nature of their character, they might start out as a security. I argue that Ethereum actually did start out as a security. It was, the project was not yet built, they did an initial coin offering inviting people to invest and get a return on their investment. That is, and it was not registered. That would be a classic unregistered security. But years later when it was fully decentralised there’s no central foundation or entity responsible, I argue, and the head of the CFTC would agree that that ETH is a commodity. But the SEC is the head. Gary Gensler does not agree. So I say all that to say, there’s a lot of uncertainty that is driving business away from the United States, to other jurisdictions where it may not be easier, but at least it’s clear. And that’s one of the greatest dangers in the United States is that we would not lead in this area. So those are some of the things to really look for in the headlines that have a direct impact on mass adoption.

Gene Tunny  20:54

And what jurisdictions would they be Professor Evans that the activity could be driven to?

Tonya Evans  21:01

So we see a lot of offshore stuff in and by off, sometimes, when people hear offshore, they immediately think illegal, this is literally off of the shores of the United States. So it makes me think of the Bahamas that has its own central bank currency, the sand dollar, it makes me think of Bermuda. I’m a former member of their advisory board, their financial Technology Advisory Board. They were quite forward thinking. Bermuda is particularly interesting, because it’s a jurisdiction that has a long history of well regulated very clear insurance. And so that’s an interesting place. Zug Switzerland is known as you know, like the Crypto Valley, in the same way that we might think of Silicon Valley here in the United States, quite forward thinking. Singapore is ahead of the curve. Absolutely. It’s the UAE. Despite all that is going on in that area of the world. The UAE, in general, makes me think of Dubai in particular, and Abu Dhabi. A couple of years ago, I was one of the first of Forbes 50, over 50 listees and we celebrated in Abu Dhabi, for example. And I was amazed not only how opulent and beautiful, but how progressive in terms of forward thinking with with crypto. And finally, and this is not a leader that we want to follow, but it’s a caution… not, well, I’ll say it a cautionary tale regarding central bank digital currencies, is China. China was the first country to launch a central bank digital currency, which raises in me all sorts of alarm bells, not not for central bank digital currencies in and of themselves. But the huge issues around financial privacy that people need to get up to speed on if in fact, the United States would start to publicly explore CBDC here, that you want to have the same financial privacy that you do with cash, but have the convenience and things that are better, faster, cheaper, with respect to digital assets. So there’s a lot going on in this space and a lot of activity. In fairness to the United States, there’s some countries and I’ve mentioned a few where you have just one regulator. They don’t have the alphabet soup of the FCC and the CFTC and the partridge in a pear tree right in, in the executive. They don’t have the committees and the subcommittee’s wrangling for jurisdiction and oversight authority in the legislature. However, you know, it’s more simplistic. And so it used to kind of not be a great thing, but it is when you need to be nimble and move quickly because our system is not intended to move quickly. It’s actually built this way to slow things down and be more methodical, but that doesn’t work with this type of technology.

Gene Tunny  24:16

Hmmm, yeah, yeah, absolutely. I imagine that our regulators, I’m in Australia, so I imagine they’re looking closely at what’s happening in the States to see where things land. And you Yeah, it’s fascinating about this Bitcoin ETF. And I know that there was a group in Congress that’s looking at the regulations of how they changed the regulations around the SEC yet or is that something still to do? Do they need to give SEC more powers?

Tonya Evans  24:47

They’re exploring it. The short answer to your question is yes. Because the rulemaking authority that is delegated to an agency comes from Congress and so, we call those enabling or enabling acts, there’s another term as well, but enabling act. So basically, Congress says, here’s the framework, you’re the subject matter expert executive agency. So you all kind of you’re the mortar to these bricks. And it’s the executive branch in general agencies in particular that, that put into play the actual rules and regulations and actually run the thing you think of it like as you have a CEO, the President, and then you have all of these smaller bodies that take care of the day to day functioning, based upon, okay, we have this delegated authority from the legislative body, but it’s ultimately up to Congress to say you’ve over stepped, what we asked you to do, we empowered you to do X, Y, but now you’re doing Z, or also to say, hey, when we created this enabling legislation to empower this agency, we did not have this in mind. We did not have this in mind, right. And so we’re gonna need to go back to the drawing board on this. And I am encouraged that there is in many important, for many important issues, there seems to be a bipartisan effort. I don’t think this is beholden to one party or the other, although it is certainly playing itself out that way. When I think of President Biden’s executive order to order all of the agencies to look into the space and to come up with their rules, a report outs, etc. That happened back in 2022, in March of 2022. So a year later, we have some of those reports. The concern has been, and it’s been a bipartisan concern, that and what I what I testified about in March was about what appears to be a Choke Point 2.0. Choke Point 1.0 was an actual policy under the Obama administration that was cutting off banking access to certain industries deemed to be harmful at the time. So it was like the payday lenders and things like that. Ultimately, it was overturned. But you could at least intellectually understand why that might be. But it ended up not passing muster. We don’t have something on the books, but in effect, it has been very difficult for people operating in the crypto industry to actually be banked. They said, You know, it’s basically like, well, if you want it to be off, you know, off the grid and have your own little money, then you won’t use our banks to do it. And what we’re seeing is that and that has happened in the marijuana industry as well, it’s like if this is if something is otherwise legal, and lawful, that we shouldn’t have a government operating against it to thwart its progress and kind of kill it in its infancy, which what it appears to be. And so you will see this discussion around banking and and being able to onboard meaning going from cash to crypto, and off boarding, settling out, selling in the way that you would sell stocks, and then recoup in in Fiat. So we’ll see that playing itself out too. But that’s another major issue.

Gene Tunny  28:20

Right so is that really difficult at the moment so does the government make it difficult to do that?

Tonya Evans  28:24

It has been very difficult even for someone like me, in addition to teaching at Penn State, Dickinson Law School, I have my own onboarding platform. It’s a online business, I do not sell tokens, I do not invest for other people. And I have either been debanked or had an application denied just because I am a crypto educator, which makes no sense in the world. And it was too difficult because what banks were also hearing is, the government doesn’t like it, even though banks are private, they are in general, they are inextricably linked with the government, as we always see in terms of bailouts, etc, etc. And so when you hear from on high, that this is something that the government at this point in time does not fully support, in my humble opinion, because it is a customer service issue. When you start exchanging value that isn’t beholden to a government. That’s a big deal. You know, it’s we’re basically looking at a time where you have internet 3.0 web 3.0 is what people refer to it as, in the web 2.0 version. There was great support around the globe for the global exchange of information. Yeah, we had to use the internet, you had to protect the internet. Katie Couric and Bryant Gumbel had to figure out what the hell email was because we were all going to use it. Right. And that was great. And we wanted to support innovation, blah, blah, blah, blah, blah. Now we have web three where not only are we exchanging messages of information packets of information. Now those packets are about value. It gets at the heart of even why governments tax, particularly in times of war, etc, and to protect borders that are now being threatened by a borderless currency. That’s a BFD. And so that changes the conversation even though the technology is the same. And so we have a customer service issue. And until governments can figure it out, I don’t think they’re always going to be very excited, particularly in the United States where we have the globe currently. Let’s talk about it in 10 years, but currently the global reserve.

Gene Tunny  30:42

Yeah, yeah. In your books title, you talk about going from cash to crypto. And that’s a you’ve got a registered trademark sign there, is that your platform is it Professor Evans can you explain what cash to crypto is about please?

Tonya Evans  30:56

Yeah, that’s my signature course. So I when I launched Advantage Evans Academy, my primary course and it’s still up and very popular today. It’s an on demand, evergreen version, I’m constantly updating actually, because things change every year. And it takes you in five modules from introducing folks to fundamentals or even the purpose. We start with mindset of even trusting ourselves, managing our own money, because as a Gen Xer I grew up, the minute that you had any money, you’re gonna put it in the bank. And it’s interesting to learn more, as I’ve learned more about the crypto space to really fundamentally start to unpack savings and loans, it’s like, Alright, so let me get this straight, I’m going to put a whole bunch of money into the bank, maybe you used to be able to walk down to the bank, I don’t know if people can do that anymore. And I’m gonna put my money in and it’s gonna be safe there and up to $100,000. I’ll get it back. If we all want our money, even though I plan to have way more than $100,000 stored for another day, right? But let’s say I just have 100,000, it’s FDIC insured, and I’m going to earn a pittance, if anything in interest. And then that same bank is going to loan me back my money for cars for homes, and they’re going to keep the spread. I don’t like that. I don’t like that system. I didn’t know that was a system where I was taught not to trust myself. And not to worry my pretty little head about it. Well, I’ve learned so much in the last six, going on seven years than I had, and I went to Northwestern and went to all the best schools I graduated with honours that from law school. My dad’s a doc, my mom’s a lawyer. I knew nothing about money before I really started to lean in and see how disconnected I was even from the process. Even from understanding when people ask me, what is bitcoin backed by, like what is the dollar backed by? And I don’t hate dollars, I love dollars. But we haven’t been on the global, excuse me the gold system standard for decades. Based on the full faith and credit of the government, we keep coming up against the threat of government shutdown, we’ve had two downgrades in our credit rating, because people aren’t trusting us as much as they used to. Because it’s our full faith and credit. Our word is supposed to be our bond, and it’s scaring the rest of the world. So this is an also, an alternative, alternative to that, that people need to get aware of. Not necessarily replacement in toto today. But you definitely want options in this world.

Gene Tunny  33:33

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  33:38

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Gene Tunny  34:07

Now back to the show.

This is something I’ve covered on the show quite a bit because it’s obviously a huge issue in economics. And I mean the way that I think about it and that economists think about it’s well Milton Friedman in Monetary History of the United States, even you know, he acknowledged look, money is a fiction. But what will, what the question is which, which fiction is the most powerful do most believe and the fact is that with dollars, you can settle existing contracts, all the prices are in dollar terms. And you can pay your taxes to the inland ra…, internal revenue or to the Australian Taxation Office in the local currency. So that’s what gives the dollar power or means that that fiction is strongest. And I think that’s, that’s why many economists are concerned about that. And why there is that concern about well, maybe, I mean, is this volatility going to ever settle down? I don’t know. I mean, I think I take your points in your book, I think you make the best possible case for, for Bitcoin and for crypto. But yeah, I think that would be the concern of, of economists. Do you have any thoughts on that at all Professor Evans?

Tonya Evans  35:29

I think it’s important, it’s an important metric. I don’t even know if it’s a success or not, but just to understand what position crypto should have, if any, in an overall portfolio. And obviously, there is I mean, Bitcoin, for example, is up almost 70% this year. And it is one of the quickest ways over its lifecycle to get a significant return on investment as it goes through it’s bull and bear cycles in the same way that the stock market goes through bear, bullish and bearish cycles, the manipulation and I don’t use that pejoratively, but the way that monetary policy is set with inflation, we’re tweaking it’s kind of like we’re calibrating, right. And so there’s a natural energy lifecycle to assets. And as long as you are strategic, you could have something that is very, very safe and secure and predictable, offset with something that isn’t, with great risk comes greater reward, and then it’s an overall balance a balanced portfolio that I think is most important, I would not recommend, although I know some you know, Bitcoin maximalists will cash out their 401 K and put it all into Bitcoin and let it roll. They I think there’s a privilege in being able to do that, because I believe that if past is prologue, we are we will be entering a bull market soon. I think with more positive news. We’re getting past the crypto contagion, we have endured a two and a half, almost three year down cycle. And historically speaking, things have ticked upward. Bitcoin is generally the the rising tide that lifts all boats around. So even really crappy coins start to do modestly better. When bitcoin is doing better, that’s one of the many dangers I see in the space. But you know, whether or not this becomes this entire ecosystem becomes more stabilised. I believe that is possible. I just don’t know if I can read the tea leaves yet of when. But I do believe it’s not a matter of if but when giving, given the import of this technology that is just so pervasive across industry, and sector, it also makes me think of what will be the monetary standard. And this is not too far fetched to stay in space, in outer space, and we don’t have all of the sophisticated borders and things of that nature, but you’re gonna have to have a common currency that becomes more than any one government or, or country’s currency. What currency will that be? It’s probably going to be a digital asset. Which one I don’t know. It may not be Bitcoin, but it’s going to be some type of digital coin. And so preparing for that now and having a first mover advantage depending upon your risk tolerance is something that I’m willing personally to do. And I believe the first step to that is for folks to lean into education, from cash to crypto programme is great for fundamentals. Obviously, the book is a quick read that just level sets, facts so that people have a better idea of what questions to even ask, as they start to kind of become cautiously optimistic in the space, not fall victim to fear uncertainty and doubt or FUD and definitely not to fall victim to FOMO when people start talking about it and and celebrities are back in and NFT’s are all the rage and the next DOW comes out like you cannot be emotional about strategically investing for the long term. And so that’s what I want to educate and empower people to do through through my work through my courses. And certainly through the book.

Gene Tunny  39:22

Gotcha. You raise an interesting question about effectively what’s going to be the currency of the Galactic Empire. I’m gonna have to think more about that and see if any science fiction writers have thought about that. That’s quite a quite an important question. I like it. Right! With the, one thing I’m wondering is do you know how, how extensive is Bitcoin or crypto being used for actual transactions? Are contracts being written in do you see any of that going on?

Tonya Evans  39:53

That’s a great question. I’ve not quantified that yet. I love that question. You’ll have to have me back and we can uncover that. What I know for sure is that more and more legacy companies are creating opportunities for their existing customers to stay on platform and to have access, exposure or some of the the benefits of crypto and the underlying technology. So MasterCard and Visa have products now that will allow you to either earn crypto back, or to pay for things in crypto and you don’t really have to ever touch Bitcoin or whatever crypto is connected to it, because that happens behind the scenes. But you can say I offer this product, right? There’s still I don’t think they’re set their real time settlement is to the blockchain, right? They still have their legacy infrastructure, but they want to not lose customers, as people become more curious and have more opportunities. So Visa, MasterCard, PayPal, they will, PayPal first entered into the space, they would allow you to purchase Bitcoin, I don’t think it was other coins at the time, but you couldn’t take it off platform. So for me and for cypherpunks, or others, like the whole thing is your own personal self custody of your assets. So I don’t leave things on a centralised exchange, even if I trust it. Look what happened to you know, those who had left their property on FTX’s, centralised exchange or BlockFi. We saw a lot of lenders, you know, go out of business and file bankruptcy and your coins go with it. So self custody is a really important thing. But most people are not going to do that now. And PayPal knows that. So giving people the ability, they realised they weren’t going to get a lot of traction if they didn’t allow for people to take their Bitcoin off platform. And eventually they developed a product to do that. And in addition, they recently, I don’t know how to pronounce it, but they have their own coin. It’s like PY something. But it’s a PayPal, stablecoin so that they can do real time settlement within their own PayPal ecosystem, which is really really powerful Cash App, you have been able to buy bitcoin off of Cash App forever, and then transfer it off into your own self custody wallet. We have, in full transparency I am a member of the Board of Digital Currency Group, which owns Grayscale as in CoinDesk, it owns Genesis as well as well, probably 200 different projects and companies in its portfolio. And one of those is Grayscale, Grayscale has GBTC. So the Grayscale Trust, I’m sure a number of people have seen their commercials and Grayscale has petitioned or applied to exchange or change the character of GBTC into a spot Bitcoin ETF. And so there are so many companies BlackRock, one of the most prudent, traditional historical companies in the in the investment space has applied for an ETF as well. So Deutsche Bank, it just the gamut. So most of that exposure has been for high net worth individuals, but the crypto really is a democratic, inspiring currency. And that’s not a particular political party. It’s this the democratic with a little D that democratises access to, to money and not just money. Because we, it’s a bit of a misnomer to say cryptocurrencies. I feel like if we had to do all over again, we’d call it what I say as crypto asset, because some function well as currencies as we’ve talked about, but it also here in the States and around the world. In in Australia, for sure. We, it is a capital asset. So it’s not just currency. It has additional powers and properties, which is why many people right now, lending to its volatility. This idea of holding on we hoddle or huddle, you’ll see. So used to the proper word was hold and then it was misspelt and now it’s folklore to say huddle, instead of hold that holding for the long term, which makes Bitcoin in particular more valuable because it has a hard cap. Unlike many of the other coins and currencies that are more susceptible to inflation in the same way we see government issued currencies. So so so there’s a lot there to to focus on. You mentioned volatility is one thing I wanted to tie up with that as well, because it lends itself to what we’re talking about now. As more entrants come in to the space, as liquidity continues to rise, as clarity in the laws and regulations start to settle, historically speaking, the volatility of pricing starts to diminish. And the interesting question will be, how long will that take in this space? It just feels like everything is moving more quickly. I don’t know if it’s because I’m getting older or the world is moving faster or both. But what used to take decades and decades, I don’t know that it takes as long anymore, but time will tell.

Gene Tunny  45:36

Yeah, yeah. You mentioned GBT, was it GBTC? Could you? What does that mean? Sorry, I missed that before GB…

Tonya Evans  45:46

Grayscale has a Trust Company and it sells shares of its trust, and the trust holds Bitcoin and other assets. And what and so that was permissible, but it was set up as a trust, not offered as an exchange traded fund for Bitcoin specifically, and so Grayscale submitted a proposal, an application that is sitting before the SEC currently to be approved for a spot Bitcoin ETF. So it has an existing infrastructure. GBTC is available and traded, but based upon trust interests, not as a spot ETF, and that’s what we’re waiting to see. There are 12 different applications before the SEC, an important date for approval is the first one would be November 17. So there’s been a lot of speculation, will the SEC approve one, a few, all 12? So as not to be kind of like the kingmaker to say this is the first one we will approve, maybe that would unfairly, you know, nod to one particular company over another where I believe the SEC hates them all. My opinion, not the opinion of this show. But the federal court said what it said, so we’re gonna, you know, not a matter of if but when but will it be all of them? Will it just be the one from Grayscale? Will it be the first one that they receive? But there’s some date certains that are built into the application process and that’s what the SEC is coming up against now.

Gene Tunny  47:25

Right! Okay. Yeah, definitely. Look out for that. Right I’ve just got two more questions. If you have time Professor Evans this is fascinating. Really, really interesting. And I like the point you made about how you got to make sure you actually own the the assets, the crypto, there’s a phrase you use, I can’t remember off the top of my head but something about you if you don’t own the keys, you don’t own the crypto is that it? Something like that?

Tonya Evans  47:48

Yeah, not your keys, not your crypto not your keys, not your coins, not your keys, not your cheese, whatever you fancy.

Gene Tunny  47:54

Gotcha. Yeah, the other term I learned that is the Lamb bro. So for the Lamborghini bros. And so if we do have that, the bull market in in crypto, we’ll see a few more Lamborghinis out on the street. So it’s a bit of a…

Tonya Evans  48:10

We might, and I will have to say that those who, particularly cypherpunks, hate, hate, hate this moniker, they hate it, hate it, hate it, and I get it. I will tell you, as a woman who has gone to a number of conferences, it’s rough out there sometimes. I think there are men who have the privilege of not seeing how male dominated it, certain ecosystems can be, I mean, certain conferences can be and how intimidating it can be when people are drunk and things are going on and was very flashy. I think that is a misrepresentation in general of my experience, and I’m a black woman. As long as you know, I talk the talk and walk the walk I have, generally speaking, been received well, I have to say. That being said, the Lamborghinis, the parties, the strippers like that’s a lot. So when it makes me but, you know, you think of the idea that we have the finance world, and we have the tech world. And then they come together into this microcosm. The Crypto ecosystem is a microcosm of those two spaces where women are underrepresented significantly, even though it continues to improve people of colour, etc. And so there is no impediment other than one’s own education and knowledge and awareness of the space, which is encouraging. And I think for those who have been in the space for a long time, or maybe from the Cypherpunk movement would say, we’re not keeping anybody out. Right. Many are libertarians, they were like, equal …. is good. Get yours. I’m gonna get mine. I’m not going to keep you from yours. Don’t keep me from my, and I get that I respect that. I think there are other forces that work that make me want to be more intentional. To know how much personally and professionally I have benefited from the knowledge and awareness, the professional pivot I did as a lawyer, as a professor, as an educator, that now I believe, for anyone in the world, it is the best opportunity in countries like mine, and countries like yours, to get ahead to kind of level the playing field to get get caught up as a matter of generational wealth at any other time, in certainly my history, but I would argue the history of the world, because things are digitised, we’re starting to remove like redlining and gatekeepers, things that would maintain the status quo to have the best for just a few. And then the rest left for everybody else. This is one of those pivotal inflection points in life. And I don’t think it’s hyperbole to say, because I know personally, and for those who I’ve helped educate who are like me, that this was that makes it more exciting to. And so I, it was really important for me to put that chapter in the book, because I wanted to not only say, the crypto bro thing it has existed, but it hopefully is the exception and not the rule for people who are very serious in the space. But also it misrepresents all of those who are curious and well positioned to take advantage of the space too, because the only thing that is keeping people out presently is a lack of awareness, education, and some protection as they enter an untested space in many ways.

Gene Tunny  51:46

Gotcha. And that is one of the themes of your book, you were referencing it before. It’s the idea that you see this as it can level the playing field or can provide opportunities to people from minority groups. And I know you’re not saying definitely invest in crypto, but yeah, how do you think about it? Because I see risks in crypto. And I mean, is this the right thing for someone starting out or some someone with not a lot of resources to invest in first thing? How do you think about that?

Tonya Evans  52:17

I would like to see kind of a both and approach particularly with respect to Bitcoin. When I first started in the space I, for a number of reasons, one as a professional and thinking a lot of my profession and not wanting to misguide people, knowing people would trust my voice if they heard it from me. And so I didn’t want to be in the habit of saying buy Bitcoin, buy ETH, buy this, buy that, I’ve changed my approach because Bitcoin is quite special as are stablecoins, I actually think stablecoins are the best way for people to get in. They’re not going to get wrecked by volatility. There’s some really strong ones, USDC from Circle, I have great respect for that team doing exceptional job. I know some of those folks, personally, I love USDC. We also have Tether. I don’t know who the people are. But I know Tether is very important to the Etherium ecosystem. It’s kind of like the oil that keeps things going there. When people want to jump out of the volatility of the market, but not out of crypto, they often move in the stables. And there are ways that you can earn interest and yield and blah, blah, blah. And so, I believe the short answer to your question is that this is a space where you want to start buying, you do, the best days right now are when most people aren’t there. The best times to make a sizable return if it’s to be had at all, is when most people are scared. Right? Warren Buffett says be greedy when people are fearful and fearful when people are greedy. When people start to get greedy, that’s when you know you’re probably getting to the top of a cycle and it’s time to like stabilise move things around, rebalance, reposition. And to really understand that with all of those, you know, 1000s and 1000s of tokens and coins. I hope you’re not gonna buy them all. Probably not gonna buy the overwhelming majority but they’re the you know, the top five, top, top 10 have a proven track record. That doesn’t mean they’re always going to win. But if you start now, you start learning the language. It’s what I’ve even done with stocks when I started swing trading, not day trading, but swing trading sometimes I had to start to learn how to read charts and candles and wicks and bar graphs right to start understanding. If this is the way this particular assets move, once it hits this particular range, maybe that’s a great time to buy. Maybe I’m wrong, but at least I’m using some type of disciplined, non emo…, separate, disciplined approach like separate from emotion. And that’s really important. Some of those same strategies can be used in the crypto space, but the major caveat, not only as a matter of volatility, but also this is 24/7 365. There are no national holidays. There’s oftentimes no customer service. I mean, if you’re buying and holding on an exchange, you have some additional layers of protection. But you have some risks even being on exchanges. This is the time to learn about this. Stable coins, literally are pegged to a particular asset, in most cases, the dollar or some equivalent of that as well. So you don’t have to go up and down with the market, but you can learn about the market. And then finally, back to my original point about Bitcoin because it has a hard cap of 21 million coins that will ever be in circulation, and actually 19 million are already in circulation. But it’ll be a long time after my life. And yours when the final bitcoin is actually issued for some technical reasons we can talk about next time, but it’s special. It’s special. And actually, I don’t think and I think many people would agree with me, Bitcoin doesn’t really function well as a peer to peer cash for more stable economies in Australia, in the United States, in Canada, in very various places in Europe, because it’s a nice to have for most people, not a need to have. But then you go to other nations, you go to Central and South America, you go to countries on the continent of Africa, and you start to see places, Ecuador and El Salvador, where there’s complete destabilisation, there’s confiscation, it is critically important that people have access to something that will hold its value better than the national currency, that is more trustworthy and non-confiscatable in the same way that their local currency is. And when you when you start to learn about that, like people need to travel and understand different cultures and people to really get a handle on why this even if it’s not important, and like a nice investment to have, for some it’s life or death for others. And eventually, every one of us will be touched by some catastrophe at some point that will have a direct impact on our finances, be it natural disaster, something going on, God forbid, with the government and everything in between, like, we have to pay attention to what’s going on in the world. And to, there’s 99.9% of things we can’t control, control the controllables. And one of those is your own level of education in a space that’s transformative, but has the potential to be empowering and to protect you down the road. By the time you need to figure it out. It’s oftentimes too late. So now’s really the time, the market is kind of quiet, the bad actors are starting to get routed out. This is the time when you don’t have the FOMO and FUD pressure, and you can proactively start to take some significant steps in the right direction.

Gene Tunny  58:03

Righto, okay. Final question. You mentioned about criminal activity and as a proportion of all crypto activity, the criminal activities, very small proportion, okay, accept that, but has crypto, is there any evidence on whether crypto has enabled criminal activity? So it’s expanded the amount of criminal activity out there in, so does it make it easier to traffic arms or just you know, awful things like human trafficking, etc? Do we know in drugs? Do we know anything about that?

Tonya Evans  58:37

It’s just a small, small part. There are some significant bad actors who deal precisely in the things that you’ve mentioned. But and the Wall Street Journal here. Maybe within the last, well had to be within the last month, they ran this completely error-ridden report about Hamas, raising millions and millions in Bitcoin. And there was this huge rush by Senator Warren and some other folks signing off on letters saying that needs to be immediate action taken. And it was just completely wrong. And it was scary that our legislators would rely on something that was so faulty, and with not insignificant pushback and fact checking, mostly coming from the crypto community. The Wall Street Journal had to issue a retraction and the senators had to stand down. What was said to be millions and millions that Hamas, Hamas was like, please don’t send us any more money they can track it. Thank you. Send us dollars. Send us dollars do not, send send us dollars and oil. Do not send us Bitcoin because of the nature of the tracking. You can literally go to any bitcoin tracker and see in real time. Now it’s pseudonymous, not anonymous at but with Chainalysis and some other companies use what’sapp’s called blockchain forensics. And it’s really like following the money. It’s a paper trail. But only it’s not using paper and every single transaction all the way back to the original transaction in Bitcoin issued by Satoshi Nakamoto, him or herself, is on chain visible, and you can see from wallet to wallet to wallet to wallet, and you start aggregating pieces of data. This is the way the Department of Justice here in the United States starts to root that out, and it’s just a terrible place for activity. Now, the one point is, it might be easier to get it up front. But it’s not a matter of if but when, with the right resources behind behind it, some of that stuff is going to get found and people will be routed out and they will come to justice. So this is a terrible thing for for for criminal activity. That doesn’t mean criminals won’t try. They’re very lazy. And maybe they don’t know a lot about it either. But that’s why there’s a relatively insignificant amount because, you know, it’s easy to hide physical cash. Right? It’s not easy to hide something that’s there in plain sight. So it’s tough to combat that point because of the pervasiveness of, like the sensationalised headlines, and again not to diminish what’s going on we use Sam Bankman-Fried for example, as an you know, kind of the poster boy, but it took less time because he was apprehended in the Bahamas on November 7, in like basically almost a year to the date. He’s a convicted felon, and we’re just waiting for his sentence. It took way more time to find out who was involved in the the housing crisis, way more time to take down Bernie Madoff. It’s all garden variety fraud, but it happened far more quickly in the crypto space and I don’t think that the crypto space gets enough credit for that.

Gene Tunny  1:02:00

Yeah, good point. Very good point. Okay, Professor Tonya Evans, this has been amazing. I really value your insights and your your deep knowledge of this sector. This is this is really terrific. And I got a lot out of this. And yeah, I’d love to do a round two sometime in the future. But yep, Digital Money Demystified. I’ve got it on Kindle. I think it comes out in paperback. Next year, early next year. So yep, I think

Tonya Evans  1:02:28

It’s here now, yeah now here now go to your favourite place and buy buy buy, you can go to But it came out on October 24. So it’s available wherever books around the world are sold.

Gene Tunny  1:02:42

Okay, ah very good. I must have misread that. That’s, that’s terrific. Well, Professor Tonya Evans, thanks so much for your time. I really value the conversation.

Tonya Evans  1:02:50

Appreciate you Gene. Thank you.

Gene Tunny  1:02:53

Righto, thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


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Podcast episode

Iceland’s Secret: The Untold Story of the World’s Biggest Con w/ Jared Bibler – EP215

Show host Gene Tunny interviews Jared Bibler, author of the book “Iceland’s Secret: The Untold Story of the World’s Biggest Con.” Jared discusses his firsthand experience during the brutal 2008 financial crisis in Iceland, where he worked at a collapsed bank and later at the financial markets regulator. He sheds light on the dodgy behavior of bankers leading up to the crisis and the severe consequences that followed. Stay tuned to the end of the episode for Gene’s interpretation of Iceland’s secret and its relevance to economies worldwide.

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple Podcasts and Spotify.

About Jared Bibler

Jared started his career as a consultant for a Wall Street giant in Boston and New York until moving to Iceland to support the Icelandic pension funds’ foreign investments. He resigned from his job at a leading Icelandic bank a weekend before the 2008 Icelandic financial crisis.

He was subsequently hired to lead a special investigation team, which referred more than 30 criminal cases to the Special Prosecutor of Iceland, including the largest stock market manipulation cases to be prosecuted globally.

Jared’s insider knowledge and unwavering persistence helped Iceland to famously become the only country to jail its bank CEOs. But the real story, deeply complex and sinister, has direct relevance today as banks once again begin to tumble.

What’s covered in EP215

  • 00:02:56 Iceland’s financial crisis was fueled by the growth of banks that became Enron-sized and collapsed, causing significant damage to the economy.
  • 00:05:49 Financial industry corruption and collapse.
  • 00:11:30 Iceland’s banking system collapsed.
  • 00:19:33 Icelandic banks manipulated stock prices.
  • 00:27:26 The financial system is vulnerable.
  • 00:34:58 Banking fraud and economic collapse.
  • 00:35:58 Currency crisis in Iceland.
  • 00:47:19 Iceland faced economic crisis and unemployment.
  • 00:50:54 Iceland’s recovery transformed into something ugly.
  • 00:57:38 Lessons from Iceland’s banking collapse.
  • 01:00:16 Incentives and regulation in finance.

Links relevant to the conversation

Amazon page for Iceland’s Secret:

Transcript: Iceland’s Secret: The Untold Story of the World’s Biggest Con w/ Jared Bibler – EP215

N.B. This is a lightly edited version of a transcript originally created using the AI application It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Jared Bibler  00:04

What meagre foreign currency reserves we had at the Central Bank, were being depleted. That’s another piece of the book. You probably didn’t get to but the central bank gave away most of its FX reserves. After the first two banks collapsed, central bank gave 500 million euros to prop up the Third Bank. That money disappeared in one day and then the third bank also collapsed. And they, they have never got that money back. That was that was a substantial chunk of Iceland’s FX.

Gene Tunny  00:40

Welcome to the economics explored podcast, a frank and fearless exploration of important economic issues. I’m your host gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, and welcome to the show. This episode is about Iceland’s secret, the untold story of the world’s biggest con. That’s the title of a book by my guest, Jared nibbler. Jared witnessed the brutal 2008 financial crisis in Iceland firsthand, he worked at one of the banks that eventually collapsed, and later on he worked at the financial markets regulator. His work contributed to the prosecution and conviction of several bank executives. In his book, Jared highlights the dodgy behaviour of bankers leading up to the financial crisis in Iceland and just how bad things got stay tuned until the end of the episode to hear my interpretation of Iceland’s secret, which is relevant to economies worldwide. Okay, let’s get into the episode. I hope you enjoy it. Jared Biblia Welcome to the programme. Hey,

Jared Bibler  02:03

thanks so much for having me, Gene. It’s a pleasure to be here. Oh, of course,

Gene Tunny  02:07

Jared. So yep. I’ve been reading your book with much interest, Iceland’s secret The Untold Story of the world’s biggest con. Now, I was in the treasury here in Australia during the financial crisis. And so we had our own challenges here. And I mean, not as much as other places, but that I remember seeing the news about Iceland that I just didn’t realise just how crazy things that got in, in Iceland, and it was great. Your book, really set it all out and had all your personal stories and recollections in it too. So it’s terrific. So to kick off with, could you just give us a flavour please? What was Iceland secret?

Jared Bibler  02:54

Well, I think you have to read the book to see the secret. But the the secret of the of the crash, I think was that we had these banks, which had been very sleepy institutions catering to a population of just around the time at that time in the 90s, about 250,000 people, very sleepy small savings banks, one was called the agriculture bank. One banks really financed the fisheries, and so on. But these are very small institutions. And they were able to grow a Ponzi like doubling in size every year during the during the first decade of the century, for several years, and so they they grew to each become the size of an Enron. And at that time, when they crashed, the population was still only 300. Little over 300,000 people. So we had these, we had these huge Enron sized collapses in one week, in a country with, you know, one 1000 for the size of the US. When Enron collapsed, it was a it was a big story, you know, and it was, there was a task force of 600 federal investigators, I believe, looking into Enron, and there were movies, there were five or six books, there was an Enron musical, I don’t know if you remember. And I was talking to a reader the other day, and he said, Look, this Iceland story was just so much bigger. And what why is why is your book deal now there are a few other books about it. There’s a lot of books in Icelandic about it. But there’s not that much talking about it. I didn’t really want to write this book. But I felt like after a few years, I have to tell this story. And I actually really struggled to tell the story. But first because I was trying to tell the story as an outside, outside, you know, so third person just here’s what happened in Iceland. And a very good friend of mine who helped me with the book. She said, No, you have to tell it through your own, you know, your own walk through the crisis. So that’s, that’s what we ended up doing. Yeah,

Gene Tunny  04:52

because you had experience in a bank, one of the big banks in Iceland prior to the crash, and then you ended up as a regulator, didn’t you investigating what went wrong? Could you tell us? I mean, how did that transition go? How did you go from being the banker and then leaving just before the crash and then to the, to the regulatory agency? Well,

Jared Bibler  05:16

my wife who the book is dedicated to, she had a dream. And, and a prophetic dream, as I think you see in the book, and she told me just to get out of the bank, and I had been in an asset management role, we had been managing money for mainly the pension funds in Iceland. So we had we had funds of private equity funds and hedge fund to funds was my main product. But I was really unhappy with the things I was seeing around me in the asset management department. You know, it’s the standard asset management stuff that people do, you know, if you want a big client to come in you, you price things in a way that all the existing people in the fun pay for that person that come in, and they never know it, right. So there’s a lot of that stuff. And I guess that’s pretty endemic, still in that industry. But that really bothered me. I mean, I was really, I was studying for the CFA, I was signing these ethics statements, and I was saying, so my wife knew that how upset I was, she told me to quit. So I just quit, I didn’t have a job to go to. And that was a Friday that it was my last day the all the banks collapsed, the next two of them collapsed on Monday, and one of them collapsed on Thursday of the next week. Right? Then we were just really, almost penniless. Because at the time, I mean, the crash, how it felt to live through that cannot be overstated. It was it was a horrendous experience. Because we didn’t it at some points, we couldn’t even access the money in our bank accounts. And almost everything that we had was frozen and later hair cut and discounted, we ended up losing our house in the end. And a lot of our friends did as well. So I mean, it was it was a horrendous time, the British had invoked terrorist legislation against the whole country of Iceland, declaring Iceland a terrorist organisation. And, you know, and this is what was barely reported, you know, we were sitting there being called terrorists by Gordon Brown. And that meant that all the payments into the country and foreign currencies were frozen for weeks or months. So that was a very dark winter, people were out on the streets. And the winter in Iceland is not that cold, but it’s dark. You know, it’s in Reykjavik, it’s about zero degrees, most of the time in the winter, but it’s dark. And people would be out on the street in the dark banging pots and pans and in front of the parliament building. And so I finally I didn’t have a job for the for all these months, my wife had a new job. And so we were trying to live on what she was making. And in Iceland, your mortgage payment goes up every month. So the principal balance is recalculated with the inflation of the preceding month, and then the the monthly payment is recalculated each month. So our payments went up something like 40% 50% in a very short time. So then I got very luckily, hired by the regulator, they said they wanted to hire one investigator to help them untangle the mess of the collapsed, you know, the three Enron collapses that we’d had ended up hiring to others, they hired me, another guy who had been in the banks and a woman who was a lawyer. And they just said to us, you know, go investigate the crisis. And so that was about six months after. I eventually, as you see in the book, I eventually got more people. But it took, I think it took 12 months to get my first person to add add to my team. And then eventually, we got we got a nice team together to do these investigations. So yeah,

Gene Tunny  08:48

so I’ve got sort of halfway in the book. So I apologise I haven’t read it all. And I’m still learn Iceland secret. I thought I’d died. Yeah, yeah. What What I found fascinating about the book is just because you’re American, aren’t you? You’re You’re you’ve studied in the States, and you end up in, in Iceland, and the, the culture is different. And yeah, I thought some of those recollections were terrific. And you’re talking about, you know, working with your, your fellow team members, so that that was great. So it’s worth reading for that. So yes. Can I just fix it in time? So we’re talking, we’re talking about October 2008. Is that right? That’s right. Yeah. Yeah. And Lehman Brothers had collapsed a couple of weeks before so you weren’t worried about that?

Jared Bibler  09:40

Oh, everybody was ever Yeah. So for? Well, to put a timeline on the whole on the whole episode, from 1998 was the beginning. I believe of the banks being privatised in Iceland. So the banks had been government owned, more or less. And they were still Hold off in pieces, but not in a, in a way that’s still being criticised today, and in Iceland and still hasn’t really been fully investigated today. Because basically, the powerful politicians gave bank a lot of banks out to people affiliated with those political parties. And so there wasn’t a lot of transparency, there was no, there was apparently foreign interest for lunch bunkie which was the oldest bank, but then the guest that bid was never even really considered. They just wanted to keep it in the family. Keep it keep it national, you know, Icelandic owned. And so that was 98 203 was a sort of beginning of the privatisation wave. And then in oath 203, they floated the ISK on global currency markets. So it was an exchangeable currency. And when that happened, it just things just took off. Yeah, so So the boom years was really I moved there in oh four, which was maybe one year in one, two years into the boom. And the whole thing lasted only a couple of years, really. Because by oh five, according to one, former executive, I believe oh five, he said, a quick thing, bank was already insolvent. And so the only you know, they, they weren’t doing great banking, at any, in my opinion, in any of these years, the banks were not the only way to escape the bad decisions of the year before was to double the bank in size, the next year, and they had a they had big foreign lenders just pumping money into these banks, so that it for a few years, they could borrow as much as they wanted. From European and later American lenders, there was already a mini crisis in 2006, where the currency crash stock market crashed and everything was a bit a bit, you know, up in the air, what would happen. And at that point, the banks actually started open retail savings accounts for retail customers in Europe, in order to collect the funding that they needed. And they were able to then keep the party going. So then I started in LHINs. Bucky in the Asset Management Department in early oh seven. And the subprime in the trade press, people were talking about subprime already, January Oh, seven, I was started to follow it. And things got more and more. At first, we thought this isn’t gonna, this isn’t going to touch us. Now, Icelandic banks barely invested in subprime. They weren’t doing much, they were just making bad loans to their friends, more or less. But though eight was when things were getting more and more dicey in the bank. And by the end by, I think, looking back when Lehman collapsed, the credit markets between banks in the world really froze. And those weeks and the Icelandic banks were on writing on just fumes anyway. And so that was the final straw, but they were not healthy. Now, this is not the story that I’ll tell you today. By the way, my book is not so popular in Iceland. Because Because the story now is that we had a great banking system, even though it was 11 times bigger than our GDP, but we had a great banking system. And and Lehman killed it. When otherwise it would have been fantastic. But yeah, it was Yeah. Yeah.

Gene Tunny  13:26

What I was asking was because you you quit in a period where I mean, did you? Did you ever you had a parent or your wife or her or your partner had a premonition that the bank was just going to go down and you wanted to get out? You should get out as soon as possible is that is that she

Jared Bibler  13:45

actually said? And she never talked like this. She said, Don’t let those eight holes fire you. You need to get out of there. She said, she had a dream that I was being fired and something bad had happened. And she said you need to be the one to quit to get out of there first. So as soon as she said that, I I I went, you know, I think I quit within a couple of days. So yeah.

Gene Tunny  14:09

So it’s interesting you talking about the rock the fact that Iceland floated, visit the kroner the corona, was that in early 2000s, that late in I think it was oh two, I think oh two, right. And so probably liberalised capital flows. And, yes, so you’ve got all of these, all of this lending, what to have any idea what was in the minds of the lenders? I mean, what were they seen in Iceland? What is the story they’re telling themselves? I

Jared Bibler  14:44

have a thought experiment for you imagine if a small Caribbean nation with 300,000 people went to Deutsche Bank just to pick on them because Deutsche lay a lot of money and lost a lot on the Icelandic banks. Majan if a 300,000 person Island went to Deutsche Bank He said our main exports are fisheries and tourism. Yeah. And we’d like to have a great banking system. But they would have laughed, right? They would not have probably went into that. But because it’s this, especially in German because now we live in Switzerland, especially in the German speaking imagination, Iceland is really to lay Iceland is really the, the mythical land of of, well, well, it is. It is the mythical land of the Sagas and Vikings and so on. And so the they were happy to, to to lend into this. They said, Oh, we’re liberalising our banking system were developed Western economy. The interesting thing about No, I, I am an Icelander. So I have, you know, I have the passport. And, you know, we we have probably socially one of the very most developed countries in the world. Certainly for women’s rights, gay rights, it’s it’s, it’s, it’s, it’s leading edge. But the economy is not developed to match that. So the economy in those days was a lot of fishing, fish exports, and heavy power exports. And today, we’ve added huge and disgusting levels of tourism onto on top of that, so the cup before the pandemic, I think there were 10 tourists per year for every man, woman and child and in Iceland. And so that has become the, that has become the biggest export, I believe. Gotcha.

Gene Tunny  16:30

And can I ask you about? Yeah, that all of this lending, and where was it going? Was this going into your, into the property market in Iceland? Or what was what was being done with all the money that the banks were borrowing?

Jared Bibler  16:45

Yeah, the first thing they did is, is inflate all the bubbles they could domestically. So property bubble, they had a they had a little mini private equity boom in Iceland, maybe in? Oh, 304 I think where they, you know, did sale and lease backs of, I think who says Smithian, which is the it’s a home improvement chain in Iceland, but like a chain and Iceland maybe has only five, five locations or 10. You know, there’s really only one city in Iceland, which is Reykjavik. Yeah, most people live there. And so, so they did a sale and leaseback of these five or 10 properties, and you know, they did things like that. But then by Oh 405 They were increasingly looking to do investments abroad. And so there was a there were private equity style investment groups in Iceland that went and bought up things like European airlines. They bought a lot of high street shops in the UK, for example, they bought famously based on the really based on the historic relationship between the two countries. This was a big, this was a big win for Iceland. We bought Denmark’s Copenhagen’s most prestigious department store became Iceland owned, which was kind of a big, big faced, because Denmark had been the colonial masters for 700 years and just treat it still today that Danish tend to come to Iceland and bark orders at people on the street and so on. So to buy their department store was just seen as you know, the crown jewels, so they did a lot of very expensive deals in those years. You know, we had pretty low interest rates in those years, and there was a lot of a lot of these deals going on. But a lot of them ended up not being not being great. And so, yeah, so it was it was kind of a family family game where bankers made made loans to their colleagues in this in this connected private equity world of Iceland and they, you know, they went and did deals. The banks, the banks also bought other banks. So, they expanded hugely into Scandinavia. They bought some of the oldest London banks, singer and Friedlander inheritable and you know, they were by the time I think in oh eight, my bank lens bunkie had even opened a branch in Hong Kong, I believe, or Singapore. I mean, they were really they want it to be these globe straddling behemoths.

Gene Tunny  19:13

But a Yeah, yeah, but what happened? I mean, they, they borrowed too much from abroad. They learned domestically and in the, their, their data is they just, they couldn’t pay it back. And then the banks crash, they ran out of cash or liquidity. I mean, well, so what actually happened?

Jared Bibler  19:32

The first thing that I discovered as an investigator, which is which is how the book opens, is I get this letter from the stock exchange. Yeah. And the Stock Exchange says saying, hey, look, on the three days before these banks collapsed, they each seemed to be buying their own shares up on the exchange, and they seem to be doing it with with bank money. And I thought that’s a little bit crazy because they hadn’t announced any Any share buybacks, right. And the volumes on the last three days were huge. It was effectively, they bought the whole market. Every trade that came across the exchange was the bank’s cash on the buying side, keeping the price up. And I thought this is crazy, right. So as you saw in the book, I tried to figure out when that behaviour had begun. So I went back to the Lehman and went back a few weeks to cover Lehman because I thought, okay, probably after Lehman, they got really nervous, and they started trying to manipulate their own stock price, you know, I just wanted to put a book end on the activity, before I wrote up, you know, a criminal case to send to the prosecutor. And I had to keep going back and back and back. I went back to first I thought I was being very bold when I when I covered a six month period. And then it turned out that the activity was the same for the whole for basically the whole six months of April, oh, eight to the to the crash, more or less, they were in the market every day. And many days, they were buying more than 75% of the market for their own shares. And so I went back, we ended up going back to 2004, which is coincidentally when I had moved to Iceland, so for five years, they had been doing this behaviour. Later, when I was closing the research for the book, I came across some court documents where and we had seen indications of this. But there’s court documents where some of the traders openly talk about this behaviour going back to 1998. So from the first days of the banks being privatised by the government, they were already intervening in the market to to and so with my perspective, and of course, I’m biassed because I was the investigator who developed those cases, my perspective is without that share price manipulation, the banks could never have grown the way they did. Because they had such healthy performance on the equity market. One of them was dual listed in Stockholm and and Reykjavik. And so whenever they went to lenders, they could say, look at how great our results we will look. The markets love us, you know, look at our stock is up another 20% another 30% this year, or 100%. I mean, the markets, the Icelandic stock market in those boom years, it was going up 60% A year the whole market only Wow. Right. And, and the bat and that was that that lasted for several years, that was the broad market was 50 to 60% a year. And the banks, but the banks grew so fast, that they ended up becoming seven year 80 or 90% of the market cap because they crowded out everything else. And so when they collapsed, of course, the stock market lost 93%. In 2008, it was basically closed for equity trading after the bank collapse. And so all of our, for example, if you talk about damage to the people of Iceland, all of our pension funds had to be in the equity market. Right. And so, and basically that meant they had to be in the, in the banks. When when I was investigating the the manipulation that the banks did was looking at lists of buyers of the shares. And there were some periods in Oh 708, where the only legitimate buyers of the banking of the bank shares were the Icelandic pension funds. And all the rests were, you know, because, yeah, they were accumulating so many of their own shares each quarter that, you know, and that they were going to be in they had, you know, the big four auditors were, were their auditors. I mean, all this is all big names. You know, the Stock Exchange was called NASDAQ, oh, MX, Iceland, you have KPMG you have EY you don’t have the the big four auditors are in Iceland, they knew that when their books were audited, they couldn’t be sitting on, you know, $200 million worth of their own shares, which they had just bought on the exchange. So they did these complex and runs style machinations at the end of the quarter to offload the, the, the shares. And so they would create, I would find a shell company that British Virgin Islands that had just bought 100 million worth of shares. And so to answer your what one of your questions a few questions ago, what were they making loans to well, by the by Oh 607 their loan book was almost entirely to these bogus companies that they had just created to buy the shares from them. Yeah, so So you know, it doesn’t make any sense at all, but it was uh, I think fake wanted to keep that, that that. I call it shear laundering. I think they wanted to keep that scheme going as long as they could. Yeah. Now

Gene Tunny  24:59

is that all Iceland secret or is Iceland secret something far worse that I’ve yet to discover?

Jared Bibler  25:04

I think I’ll tell you that secret, if you want. I’ll do a spoiler alert. I don’t know. This. That is the secret is the share is certainly a big secret. Because you know, that that was never really reported. This is one of the reasons I wrote that was like, I have to tell this story. I mean, yeah, they basically deceived the whole country. And all the investing world, I mean, London, all the big markets knew about these Icelandic banks that were lending to them, they were doing business with them. And the whole time they had created, you know, an illusion of success based on this market manipulation that they were doing daily behind the scenes, you know, the guys who were doing the manipulation had to do it so much that if if there’s a famous phone call, and one of the court documents where the guy’s late for work in the summer, and the price in Sweden has already dropped a couple of percent, and his boss is calling him saying, Get in here, man, we’re losing, like, you know, if they had to be in there on every trade, to keep up this illusion, and they did this free for for a decade. So I think that’s, that’s, that’s one of the secrets of the book. Well,

Gene Tunny  26:14

I can we can leave it under wraps. Okay, because I don’t I don’t want to ruin any potential sales of your book. And I don’t want to spoil that for myself, too. But I was just wondering, because when I when I saw the title, and then I started radio, then I that must be the seagull you’re talking about. But if there’s something far worse that that really gets me interested,

Jared Bibler  26:35

there is something far worse. Okay. And I would, you know, go ahead. Well, I just want to make the point that a lot of people say, Who cares about Iceland, and I, of course, I love Iceland. So I care about it a lot. But, for example, when people here in Switzerland, read the book, or hear me talk about it, I get a lot, there’s a lot of scared faces in the crowd. Because a lot of a lot of the world’s financial markets are are subject to the same forces and incentives as we had in Iceland, which led to this incredible collapse, which devastated the country. And I think it’s really the story again, I’m biassed, of course, but I think this is really kind of the story of what we may be all facing in the next couple of decades. Because we, we haven’t managed yet. And that and I also people get offended when I say this, but in two or 300 years, I think people will look back on us and the way we structured our financial systems and laugh at the way we laugh at Dutch tulip mania, or, you know, because we have kind of no put in no incentives, or no structures to keep an Iceland from happening elsewhere. Now it’s going to be maybe the nice thing about Iceland is it’s such a small place. It’s such a small population that the scam is very easy to for me to describe to you. I think in a bigger market, it’s going to be more it’s gonna be more subtle. But But still, all the incentives are on the side of of cheating, and building in, in sustainability to our markets. And nobody is really paid good money to, to stop these things can mean you have some window dressing like you have comply. I mean, they stopped some things. But in my experience, when senior management of a bank wants a big deal to go through, that deal is gonna go through nobody’s sitting, nobody’s gonna get paid have a 5 million franc bonus to stop to stop to stop something. This is not how it works.

Gene Tunny  28:41

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  28:47

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Gene Tunny  29:16

Now back to the show. One of the interesting stories in the book is where you’re having to clear or run a transaction, aren’t you or make a transaction or deposit two was at a bank in Europe and trying to remember exactly yeah, it was trying to remember the details but in your manager, he initially said I Yep. Sounds fine to me. Just let it go through then. Later on. Oh, that must be it’s Jarrettsville. Sir, could you tell us about that?

Jared Bibler  29:49

Oh, yeah. So I tried to sprinkle in actually, my dream is to rereleased Iceland secrets sometime in the future with with more of the stories in there but my publishers said, you know, you’re a first time author, you only get 300 pages. Sorry, Jared, but, but I had more of more of those things have I tried to sprinkle in stories in the beginning, which are representative of the culture within the bank? And when actually when other bankers and other countries read this state, none of them says, They all say, oh, geez, yeah, that’s exactly how it is where I work, you know, none of them says, oh, Jared, this, this only happens in Iceland, they all say, Oh, yeah. So the story you’re referring to is we had a, some guys who call themselves a hedge fund. And they wanted our bank. To be basically we were the administrators of the fund, and the custodians of the funds, assets, but they were going to trade. And they had, they had got the investors, and they had, I think 120 million euros come into the fund. And they, as far as I could see, they weren’t hedging anything. They were just buying long positions and in equity, and very few companies. And I think they, I think they had some inside information, basically, on these few of these companies. But as the, as the saga went on, they did more and more crazy things. And one point they said, We’re, we’re investing in a shipping portfolio. I don’t even know what that means. And I was waiting for like the paperwork about because when you do an investment, you know, you know how it is. I mean, there’s there’s a contract, and there’s there’s there was nothing. They said just Just what please, they wrote me like, please help us wire 5 million euros to this account in Norway. Yeah. At at such and such bank, it was one of the biggest Norwegian or Scandinavian banks. So it was a reputable bank, but we didn’t count just had a person’s name. All I had was like an AI ban and a person’s name. And I went to my boss, and I said, I don’t think we should send 5 million customer money out of this fun to this account. We don’t have anything. He said, Why are you always making problems? You know, bring the solutions. And so I just decided, eventually I did it. I sent the money. I mean, I copied him on and and in an email to cover myself. And I said as as we discuss, you know, and as soon as I sent the 5 million, as soon as that went through they, they wanted another five. I mean, within within, as I remember it within a day. I mean, it was very quick. They ended up they ended up sending out 15 in cash. And the other weird thing about this was that it was such a, you know, when you’re looking for fraud, usually round numbers is a good flag, because most things don’t. There’s always a commission or you know, taxes or something, or exchange foreign exchange differences. Things never come out or rarely do they just come out to like 5,000,005. So yeah. So then the fund within a couple of weeks, got into trouble for some other things. Now, I had been trying to warn these guys about about the problems with this fund for more than a year. And they just said, you know, making problems just it’s going to be fine, you know, let it ride. And so you can see more of that in the book, but that they were going to scapegoat me then for this 15 million they went out. Because yeah, when his boss looked at it, and all the transactions that just jumped off the page, they were the biggest ones. And you know, all these zeros, they just jump off the page at you. He said, he said, What’s this? And my boss said, Oh, I don’t know, that looks like something that Jared did. That was that was the weekend. I think that happened on a Sunday. If I recall correctly that night was when my wife had the dream. And that Monday, she woke up and she said you have to get out of there. Yeah.

Gene Tunny  33:53

Was very smart. And that was a Friday. So yeah, there was the Friday that.

Jared Bibler  34:00

Well, I quit. So I put me so that was a Monday in Monday. Yeah, that. Well. That was right after Lehman. I have to go back. And look, it might have even been the Lehman weekend that that happened. It was in September, then I quit when you resign in Iceland, you you resign on the on a month end. Gotcha. So I put in my resignation for 31st of October. Sorry, 35th of September. So I probably put that in within a couple of days, effective 30. September, then I would have needed to work three more months, according to my contract. So So I should have been there October, November, December. But they was that stories in the book too. They basically let me go on the Friday October 3. And then the banks collapsed on the seventh eighth and the sixth, seventh and ninth of October.

Gene Tunny  34:58

So the banks collapsed. This is a day that was at the three biggest banks in Iceland collapsed. Yes. Right. Yeah. And you talked about the the hardship before. But so what did it mean, you know, one could get people weren’t able to get cash they the economy basically stalled? Yeah, it

Jared Bibler  35:18

was. So I’ll try to walk you through it. I mean, it was, it was frightening, because for months, the currency of the currency against the euro had been depreciating. So it’s through the, through the crisis week, the currency depreciated so much that it was it had lost half of its value, since maybe five, six months before that. So everything we were used to like flying to Europe and having vacations and things, everything was now double in price in a very short time. So that had already been going on. And the politicians were just saying, well, the currency will come back. There’s, there’s nothing on the other side, it’s never come back, of course, still today, and then what happened in the crisis is that it actually just, they just stopped trading. Nobody. So outside of Iceland, during the good years, it was 60 or 70 krona to the dollar. And then the offshore rate became something like two or three or 400 to the dollar raw. So anybody offshore who had ISK, they just wanted to dump it, they didn’t care what the rate was. So you had this offshore rate of two or three or 400, whatever it was. And then onshore, we had capital controls, which lasted a decade. So in Iceland, you could buy euros for, you know, for a predetermined rate set by the central bank. And they would basically give you the euros that they had against ISK. This lasted for a long time. And but you couldn’t get them you could only get them if you were travelling. Or if you hadn’t, if you had an invoice. That’s it. Yeah, there was no way to get dollars or euros or anything else for a long time. And of course, that that begat a huge new scam industry. All the bankers who had just been laid off from the banks, not all some of them started faking invoices from foreign companies. And you know, get if they had a relative in the UK, they have the relative send an invoice which said so and so’s consulting company 50,000 British pounds, they would get the, the onshore Icelandic rate, they’d wire the pounds out to the foreign account, the foreign guy would would take the British pounds and buy some Icelandic government bonds from a British guy who didn’t want them and would take the offshore rate. And they’d send the bonds back in in one in a one or two day round trip. They could double their money or triple their money in local currency terms. So that became a whole industry, which ran for about six. Yeah, to try to profit on the capital controls and but what it was really doing was depleting. The what meagre foreign currency reserves we had at the Central Bank, were being depleted. That’s another piece of the book. You probably didn’t get to. But the central bank gave away most of its FX reserves. After the first two banks collapse, central bank gave 500 million euros to prop up the Third Bank. That money disappeared in one day. And then the third bank also collapsed. And they they have never got that money back. That was that was a substantial chunk of Iceland’s FX. Yeah.

Gene Tunny  38:56

And you mentioned the the exchange rate and prior to the crisis, and you tell a story about how I mean teachers and people you would normally expect would be going they’ll be travelling overseas for shopping trips. Yeah.

Jared Bibler  39:10

Yeah. Because I just realised I didn’t really answer your question, the last one about how to live through it, but but to come to the teachers. Yeah, I mean, for those few years after the after the FX trading was free, you know, globally available. There was a huge demand for ISK assets among investors around the world because the yield was so high, you could get an eight or 10% and it was perceived to be a safe place to invest. And so a lot of money just flooded into the country. And that meant that the exchange rate went, the ISK got 20 3040 Maybe 50% stronger in a very short time. So people felt very rich and Um, but things in Iceland are still very expensive because you have almost no competition on retail and wholesale and, you know, maybe one wholesaler for anything you might buy. And so the currency was very strong. But that doesn’t mean that domestic prices are going to go down. They should, but they’re sticky. They don’t go down, right? Yeah, but that means you can go abroad and for and for the savings that you will have on buying, like, say, a laptop computer, you go to Boston to buy it would pay for the trip, the savings would pay for the trip. So that was a calculation that many of us made, people would just go to buy. I was in Boston once and someone had bought four big tires for his SUV in Iceland, and he was putting them on the plane they were putting them on, it’s just luggage with, you know, with a tag just wrapped around the tire and putting them on the belt, he probably saved enough on that to pay for a weekend in Boston. So as if it was a calculation a lot of us made. And so yeah, we felt super rare, we felt like the world was our oyster. And when we would go, also things seemed very cheap. So I went to Boston, and I took out my mom and dad, my brother and his wife for a meal. And even with a generous tip for a meal for the five of us, it cost only a little more than a meal for one person would have cost in Reykjavik at that time. So we just felt they felt like for me, it only lasted maybe 36 months or 24 months, but we felt like kings. Yeah. And then And then yeah, the the, the loss of that was that the times were very desperate in, in especially the autumn of Oh, eight, we had no idea what what the next week was going to bring. I mean, we had the terrorist thing from the UK, which really, that meant that all the companies in Iceland, let’s say that you had a fishing exporting fisheries company that was expecting to be paid for fish that they’d already exported to the UK or to the mate or mainland Europe. The payment would be just frozen in Swift, it would just have to be blocked somewhere in the UK and not allowed to go through because the whole country was considered a terrorist organisation. So

Gene Tunny  42:16

what was going on there? Jared? Was Was there any? Was that legit? I mean, what what’s going on? What were the banks? Did they have? Did they take deposits, so facilitate transactions for some shady people? What was actually going on?

Jared Bibler  42:31

That was just to punish Iceland? There’s many there’s different explanations? I’ve never heard a great one. I mean, Iceland, in England have a long standing tension are overfishing actually, there’s something called the cod wars in the 70s. Which Iceland one. But it meant that the fishing grounds that the English had been using, were no, we’re now claimed by Iceland. So some people say that this was retribution for the cod wars. Others say that, you know, it was retribution, because there was a lot of misunderstanding around savings accounts. And, and, and more generally bank products in the UK, that the Icelandic banks had offered. And so for example, there’s something called Icesave under under EU law, a bank in one country can open a branch in another country, and not be regulated by this by the new country. So so the Icelandic banks, when they were running out of money in oh six, they decided to use this to open online savings accounts in the UK. And take money from retail depositors in the UK, pay them higher interest rates to to lower them and take the British pounds, because they needed, they needed FX they needed foreign currency to keep to keep going. And so there was a there was a big misunderstanding between the two governments on the eve of the crisis, where famously the key was the finance minister, but he was a veterinarian, and he did not speak very good English, he should have had a interpreter. And he also should have had a UK cultural interpreter. Because as you as you know, you know, when, when an Englishman says I’m very concerned, that means like, you’re dead, you know. And so Alistair Darling was on this famous phone call. He says, I’m very concerned about the status of these deposits and so on, you know, I can’t remember the exact words, but the Icelandic guy just as well, well, we’re looking into that. And, you know, dollar darling is like, look, we’re going to talk tomorrow at eight in the morning, I’m going to call you but if this isn’t done, you know, we’re going to take we’re going to take measures, and I think I can’t remember the days how they played out but it was that day or the next that, because they had after 911, they had these new terrorist powers in the UK where they could put on her majesty’s treasury, they could put like al Qaeda on there, and that would just freeze all payments. Okay. So Gordon Brown just decided to put, so they put. So it was like al Qaeda, al Qaeda in Syria, I want to say or al Qaeda in Iraq, there was a whole bunch of terrorist names. And then it said republic of Iceland, Central Bank of Iceland. Financially, they even put the Financial Supervisory as a separate separately from the Republic as its own its own line item. But that just killed us, man, because that was in the middle of it. These countries are ostensibly NATO allies, right. And that just that just devastated us. And so yeah, so those months were just super dark we. Because they’re because of the freezing payments, there wasn’t like no food being imported. So we were eating more and more just locally, and we were anyway, for price reasons, eating only locally grown stuff. We just, I mean, we stopped driving the car. I mean, just I don’t want to sound like these are not complaints compared to what people have going through in Gaza right now, for example, but I mean, our lifestyle just was cut down to just the just getting through which we lived like that for years after, after that. Because the SAT and what is also sorry, the salaries were the same, but the buying power of the of the salary was half of what it had been in real terms. And then they they also raised taxes, the government raise taxes so that the income tax was almost 50%. In the years after the crisis, so I mean, I always tell Swiss people living in Iceland is like paying Zurich prices, but getting a Lisbon salary, you know, you have a quite low salary with high taxes, but then you have one of the most expensive cities in the world. So it’s all, even in the even in the good years. It was a struggle. Sometimes. Things are just unbelievably expensive. And even Swiss people today who go to Iceland as tourists, they say, Wow, it’s so expensive there. Then I say, Yeah, imagine living there and an Icelandic salary. It’s, you know, it’s not easy. Yeah. So

Gene Tunny  47:19

yeah. So during the crisis, you had a big increase in unemployment. Didn’t y’all have to look at what the stats are. But it was a huge economic shock. And it went

Jared Bibler  47:28

up four or 500% the unemployment rate. Right. Yeah, it was a huge shock, because the banks had employed the banks for so huge. I think they employ between them 10 or 12,000 people in a country of only at the time, 300,000 or so. And then you have all the you know, the follow on effects of such a big layoff. So, yeah, the unemployment rate was just just rocketed. And we just tried to Yeah, we just somehow got through it, everyone somehow got through it. But a lot of us lost our houses and, and all the pensions, pension savings that we had thought we had was was was decimated when the stock market dropped like that.

Gene Tunny  48:14

Right. So people are still feeling the effects of it. 15 years later, I would just I mean, people

Jared Bibler  48:20

don’t talk about it. Well, actually, they do. They do talk about it. Yeah, they are. Because they were they were projects like infrastructure projects. It’s almost like it’s, it’s almost though, like if so friend of mine was in Iceland, and said she was trying to talk to people about the crisis, and that nobody would talk about it still, like, people want to forget about it. Basically. There were infrastructure projects and ideas that we desperately need, like expansions to hospitals. There’s no rail infrastructure in the country at all. And the International Airport to Reykjavik is like a, it’s like an hour drive, it should have a train link. So there, there were things that the country needs that have just never been executed. And now they’re put on the back burner for 50 more years or something, who knows. So that’s definitely an effect and they actually closed some hospitals and some birthing centres, which forces people to drive over these, you know, really dangerous mountain passes and stuff in the winter to get medical care. So there were effects like that. And a lot of people lost their family businesses and, and so on. So the biggest effect is that when when the currency lost half of its value, Iceland suddenly became a tourist, you know, hotspot and, and Iceland marketed itself as such. And so that that that began the tourist wave, which continues today, but it’s like, it’s like what’s happened in other European cities but on steroids because the city of Reykjavik, the old towns centre is really only five or six streets. I mean, it’s a very small village. And now and that had very cosy things there like, like an old cafe with doily lace doilies, where the grandmothers drank coffee. And, you know, there was some classic things of old Reykjavik that were there. And almost all of that is gone now. Because it’s all just t shirts stores, or they’re selling like stuffed animal puffins, you know, and at the end, all the neighbourhoods around the old centre, including where I used to live, have become dominated by Airbnbs. So you can even walk around and not even hear the Icelandic language in the nation. And the, the old neighbourhoods are very giving because it’s just become tourists defied. And so that was the response. So people, often I face resistance, people say, Oh, Jared, come on Iceland recovered. And I’m like, well, first of all, nobody, nobody knocked on my door and said, Here, here’s the keys back to your house. But the other thing is that it all it only recovered by transforming into something pretty ugly for my from my eyes. Yeah, yeah.

Gene Tunny  51:19

Yeah, yeah. Yeah, it’s. Yeah, I mean, it really was a huge shock. And I mean, I didn’t appreciate like we we sort of sailed through it. Reasonably. Okay. Here in Australia, there was a little bit of a slowdown, but then we were insulated from a lot of it partly because of mining. Right? Yeah, it was extraordinary to see just how bad things were there. So I’d recommend the book on that count, for sure. Just a couple more things before we wrap up. What happened to the perpetrators? Were some of the people do jail time. Is that correct? That’s,

Jared Bibler  51:51

that’s part of the secret at the end. Yeah, they some of them actually did a few months here and there. We, because the headline of Iceland was it was the only country that prosecuted bankers after 2008. Yes, and that is true. And the cases that you read about in the book are the reason the main reason behind the big prosecutions, but in the end, so in many European, I’m not a lawyer, so this surprised me. But in many European legal codes, you can’t get charged for multiple counts of the same crime. So if you if you did market manipulation, but you did it every day, for 1000 days in a row, which is what they did, when I and the max penalty, if you read the way the law is written, which is a European legal code that Iceland imported. But clearly, the spirit of the law is for someone who did a manipulation, maybe for a day or two or a week or like a single event. And then in Iceland, its maximum of six years in prison for that. So I was naively thinking, Oh my God, these poor guys, like they did it every day for 1000 days. It was gonna be, yeah, up to 6000 years in prison. And people said, No, charity, don’t be silly. Like it’s market manipulation. That’s one thing. And so the sentences that the so we were able to show that a lot with emails and internal documents, we’re able to show that, of course, the knowledge of this multibillion dollar manipulation went all the way to the CEOs of the of the banks, and even higher into the boards, and the ownership. But we were able to show that that went up in the biggest bank to the executive chairman of the board that he was getting daily reports on the manipulation directly from the traders. So they were they were writing these things, and I’m paraphrasing here, but Hey, boss, you know, we bought another XYZ number of shares today, the price is up 1.2%. You know, so that was a daily update to the chairman.

Gene Tunny  54:10

And did they not just not appreciate what they were doing was? I mean, I presume this I mean, this is illegal in Yeah, it sounds it sounds healthy, go. Did they just not appreciate it or they?

Jared Bibler  54:23

That’s what I think the book is, of course, I’m biassed again, but I think the books super important because it gets into a little bit. And you see this now with Sam Backman freed and the FTX trial and so on. The behaviour of white collar scammers, part of their shtick is that they can’t even admit to themselves that they’re doing criminal things. They, even after they’re charged, convicted and they serve jail time. My experience with the Icelandic situation would would lead me to believe that Sambac been freed for example, will probably never have a moment of clarity He, where he says I did some bad stuff. I mean, he should because it would help his soul it would help him like karmically to, to release that right. But he, I hope he does, but he probably will not. Because So, for the very top people who are masterminding the scheme, their justification is always like, Well, we were doing great things with the bank. So whatever it took to keep the bank alive is good. And then the people lower down in the scheme are just following orders. You know, like, like the guards that Auschwitz or something, you know that, and, and many of them are naive. So, some of them knew it, but some of them in my experience actually didn’t even think about. Because Iceland can also sometimes be very hierarchical culture where if your boss tells you, hey, buy all the shares on the market today, you’ll do in, it’s like, oh, my boss told me, you know, I’ll do that. So I think this is kind of a good template story for how these frauds go on. And, and I don’t know if I say this in the book, but the entire business of the of these banks, by the end, was perpetuating, perpetuating the buying of shares in the hiding of shares offshore. And they involved every department. And so, a lot of those people, I think, just just were just doing their job.

Gene Tunny  56:34

That’s how they see it. And so this was an important or this was an essential part of making the banks look much better than they were, and attracting the letting them borrow more from overseas, and then they lend that onto their, their friends or cronies. Okay, that’s

Jared Bibler  56:52

right. That’s yeah.

Gene Tunny  56:55

Yeah. Yeah. So the untold story of the world’s biggest con so. Yeah, I mean, that’s a big call world’s biggest con, but you, you’re confident it is. So you think

Jared Bibler  57:05

maybe it’s maybe it’s been outpaced now by crypto or, you know, but but certainly in the sense of a con that takes down a whole country. I think that scale definitely is still the biggest.

Gene Tunny  57:18

Yeah, yeah. It’s pretty extraordinary. Yeah. Okay, so, Jared, this terrific. It’s really, this conversation has really motivated me to finish the book and make sure I understand all the details as best I can. I think it’s yeah, it’s just extraordinary. What happened, I guess, to end on what do you think the lessons are for the rest of the world? I mean, we talked about how the, you know, you mentioned there could be a certain type of person who’s a white collar criminal, and there’s the quite brazen, I guess, you’ve got to look out for those people. I don’t know how you do that. I mean, you obviously need some sort of regulation. It sounds like the regulator in in Islan, Mae, it probably wasn’t doing the job it should have been doing beforehand. I mean, you discovered that you could actually go and visit these banks and force them hand over documents, which are was very good. So yeah, what are the lessons for the rest of us? Now for the rest of the world?

Jared Bibler  58:15

I think we need to. So this pattern keeps repeating. And my point with the book is that if you let this thing get out of control, it can take down your whole country, because our financial system is not just a playground of of, you know, Sam Backman, freetds and billionaires. But it’s also how we pay for things. It’s also how we save money. And we rely on it to it’s, you know, we take it for granted. But it’s kind of like the air we breathe in our daily lives to get to get groceries to, you know, buy a car or house, whatever. And so those two things, unfortunately, are connected. And the incentives for for having a system that that works well, and is not subject to gaming and collapse, I think are not. We have we have plenty of we have too many regulations probably, you know, we have a lot of people who spend their days checking boxes and things like that, both at regulators and within these institutions. But we haven’t really yet thought about what structure do we want the market? The markets to have? Markets are always created by us, you know, they’re not we, you know, people say, oh, you know, that let the market sorted out. But markets always have rules. You know, I used to work at the Swiss stock market here you have an opening time and closing time you have a cloud closing auction, how that works. I mean, you have the whole thing is rules. And we need to think more about as citizens I think we need to think more about what do we want our banking system to do, what are the outcomes we want? And then how can we best get those incentives, incentivized and I think and again, I’m biassed, but And this is very controversial, but I would like to see someone try this, I would like to see what happens in a country where the country’s regulator regulators would be incentivized to bring in the biggest cases they could, or prosecutors, right? Imagine, imagine if the incentives that bankers get, because if you do a $10 million, or $100 million deal, you get a piece of that as a as a bank employee, if you bring in that business, if I bring in which in Iceland, I brought in three, I don’t know, you can measure the cases different ways. But let’s just say conservatively, three $4 billion frauds. Each of the banks, for example, if you just take the last year, each of them spent about a billion US dollars or more just buying up their own shares on this tiny Icelandic stock market that you’d never heard of. Right. So but my team doesn’t get any, we don’t get any team dinners or anything for that, we just get a salary. So there’s actually, it’s even worse in most regulators. If you are someone like me, who’s a bit of a maverick, who wants to go after things, you don’t last, you won’t have a job, because that’s not the personality that anybody is looking for in those in those institutions, unfortunately. So we need to incentivize that we need to have the same type of risk taking and so on, on the regulation side that we have on the banking side, because otherwise you have a and the same thing with salaries. I mean, if you’re a great regulator, you know, you can always walk across the street to a bank and double your salary. So, so what’s going to make you you know, go after people at that bank or or look too deeply into anything you don’t. So the whole system is kind of really tilted. One one way. I don’t have all the answers to this, but I would really like to have this be in the conversation. And I suspect that after the next financial crisis, which I think is coming, I think it I hope, my hope with writing the book was to get this out there so that we could start to have that conversation. Because since 2008, we haven’t changed enough to keep that from happening again.

Gene Tunny  1:02:10

Yeah, absolutely. Fully agree with you there. Have been talking about this on my show from time to time, so absolutely, fully agree there. Okay, Jared, is there another book coming out anytime soon? I

Jared Bibler  1:02:23

have one but I’m, I’m not sure what I’m gonna do with it. But I’m working on one.

Gene Tunny  1:02:26

Okay. Okay, so

Jared Bibler  1:02:28

you keep that under? Yeah, under under wraps. It’s another secret, it might have secret in the title.

Gene Tunny  1:02:35

If they’re sick if they’re if I still don’t know, Iceland’s secret, I’ll put a segment at the end of this episode just for those who want to know, but I’ll encourage people to read the book. Because I think it’s an enjoyable read. And I love the all the stories and just how you learned about the issues in Iceland’s before the time before you saw teachers going by on buying trips overseas, people were importing BMWs and Mercedes while you are importing your rav4. Stories. Thank you, Jared. That’s, that’s great. Right. Any any final thoughts for wrap up?

Jared Bibler  1:03:13

No, I just really appreciate the time to talk to you. And that was it was lovely to be on your show. Very

Gene Tunny  1:03:20

good. Thanks, Jared. Thanks. Okay, I hope you enjoyed my chat with Jared. Thanks got pretty messed up in Iceland didn’t that. According to Jared, things aren’t much better today. Jared left his job at the regulator in late 2011. After there was a reduction in the resources he had to investigate the misdeeds of the bankers. Unfortunately, the response to Iceland’s financial crisis ended up being inadequate. Several wrongdoers were punished, but they received relatively light sentences and many bankers got away with it. In Jarrods opinion, the regulator’s still don’t have enough power in Iceland. Politicians were unwilling to make tough decisions and apply the level of oversight and enforcement that is required in Jarrods view. That’s possibly because of the close relationships between politicians and bankers and business people in Iceland. Iceland is still experiencing financial scandals. For example, in October 2023 Bjarni Bennett Dixon, a former Iceland Prime Minister, he had to resign as finance minister, there was an irregularity with the privatisation of one of the banks that was taken over by the government during the financial crisis. It turns out is a company owned by his father was one of the purchasers of shares in the bank that was, that was privatised, so that raised a few eyebrows. Okay, Mr. Bennett Dixon, he has a reputation for being a Teflon politician. Though and only a few days after resigning he was appointed as Iceland’s foreign minister. That’s an impressive comeback for sure. From what I can tell what Jared thinks is Iceland’s big secret is this ongoing permissiveness regarding dubious financial dealings. It could be a big secret in in many other countries too. So for those of us in Australia, the US, UK and elsewhere, we need to be vigilant and watch for any signs of financial shenanigans in our countries. Finally, I’d encourage you to pick up a copy of Gerrard’s book, Iceland secret. There’s a lot of fascinating and intricate detail about the various financial shenanigans that occurred in the lead up to Iceland’s financial crisis. Jared did a great job with his book, and I’m very grateful to have had him on the show. Thanks for listening rato thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economics Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


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Podcast episode

Is the American Dream a Broken Promise for Latinos? w/ Dr Paul Rivera – EP213

Dr Paul Rivera provides insights into the $3 trillion Latino economy in the United States and questions whether the American dream is a broken promise for Latinos. Dr. Paul Rivera is co-founder of BeActChange, a former senior economist at USAID, and lecturer at California State University Channel Islands. Dr Rivera and show host Gene Tunny also discuss the challenges of delivering foreign aid and the importance of understanding local communities. Rivera shares a compelling example to illustrate this point.

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google Podcasts, Apple Podcasts and Spotify.

What’s covered in EP213

  • The American Dream and Latino economy with Paul Rivera. (0:03)
  • International development, strategic planning, and community engagement. (4:41)
  • Inadequate consultation in international development projects. (10:23)
  • Latino population’s role in US economy and American dream. (14:07)
  • Latino mental health and the American Dream. (20:13)
  • The economic power of the Latino community in the US. (25:45)
  • Latino homeownership, education, and mental health. (29:12)
  • The American Dream and its accessibility. (34:46)
  • Immigrant experiences and the American dream. (40:06)
  • Latino population growth in the US and its impact. (43:48)
  • Marketing to the Latino community in the US. (47:26)

Links relevant to the conversation

About Dr Paul Rivera on his BeActChange website:

Paul’s LinkedIn page:

Paul’s book Creating Your Limitless Life co-authored with  Dr. Esther Zeledón:

Latino GDP report 2023:

Transcript: Is the American Dream a Broken Promise for Latinos? w/ Dr Paul Rivera – EP213

N.B. This is a lightly edited version of a transcript originally created using the AI application It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Paul Rivera  00:03

Part of the problem with the American Dream is how we’ve translated it, how we’ve measured it. You know, if you look in the Oxford Dictionary, the definition of the American Dream is basically that this idea that the situation in America offers those who work hard, the equal opportunity to achieve and the dictionary says their highest aspirations. And that highest aspirations piece is something really important that I think people don’t hang on to enough.

Gene Tunny  00:35

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. In this episode, we explore the Latino economy in the United States. And we consider whether the American Dream is a broken promise for Latinos. My guest is Dr. Paul Rivera. He’s the co founder of be act change. He’s a former senior economist at USA ID. And he’s a former academic at CSU Channel Islands, which is part of the California State University system. Given his background, as well as asking Paul about Latino economy asked him about the challenges of delivering foreign aid. Paul gave some great advice about the need for donors to really understand the local communities they’re providing aid to. And he illustrates that point with a vivid example, which is worth listening to the episode for. Right, so let’s get into it. I hope you enjoy my conversation with Dr. Paul Rivera. Dr. Paul Rivera, welcome to the programme.

Paul Rivera  02:03

Thanks so much for having me. Gene. It’s so great to be here.

Gene Tunny  02:05

It’s good to have you on Paul, you’re really interested in the conversation, you’ve got a background in economic development, which is something I’m very, very much interested in. And also well, at the moment, you are the VP and co founder of the Act change. Could you tell us a bit about big change? Please, before we get into the conversation, absolutely.

Paul Rivera  02:27

No, that would be my pleasure. It’s basically my spouse, and I who’ve co founded this company, it’s a consultancy, where at the end of the day, our job, our mission is really to impact lives. And it really comes from from our background, you know, it’s both of us have lived to the immigrant experience in the United States, we’ve both have careers in academia, and international development, you know, I come from, I come very much from the lens of critical thinking, that’s, that’s the most important thing for me is sort of attacking, looking for solutions from the lens of critical thinking. And I know that that’s, for example, what led me to economics as a field, you know, and that’s one of the reasons why I love it, the whole idea of of optimization and having a goal, and having an understanding of what are the constraints there? And what are the resources? And what are they efficient ways to get there is something that really, really sort of warms my soul a little bit in a strange way. I don’t know that. I don’t know that anybody ever talks about economics that way, but, but it’s really very much that my, you know, that, that for me, you know, because that approach to problem solving. I think that there’s a lot of, you know, as I look around the world, and I, you know, you see, you know, the world’s kind of a mess right now, and you see how much bias there is and prejudice and all of these things. And I think that if people really went out of their way to approach things from a critical thinking lens, that that there would be much less of that, you know, people, if people took the time to read the data to do the analysis to ask the questions, you know, to what are the questioning the assumptions, I think is huge. So, I started out actually, after I finished my PhD in academia, I spent I spent about 15 years as a as a professor at an at a university that was brand new, it actually opened the year that I arrived. And so I got to be founding faculty at a brand new University, which is an incredible experience just to see the level of impact that you can have, you know, on the formation of that university and, and the direction that it takes and this particular university was, was set in a heavily Hispanic Latino Area in California, in the US where there was no public university at the time. So it was a very underserved market. And so just just to be able to create that impact and bring that access into of university education there was was tremendous, you know, and I saw so much of what people struggled with, you know, this whole concept of of the American Dream, which I know we’re gonna get into a little bit later. Yeah, but you know, folks who who really did everything they could, they left their homelands, you know, to come to this land of opportunity and, and to see their kids getting into that university collegiate sphere was really, really impactful, you know, and I get emotional about it sometimes when I talk about it, because you see the transformation in these kids and these families and that sort of thing. And, you know, my, my whole thing has always been critical thinking, and so bringing that to the, to the youth. But as you mentioned, in my intro, my field is development economics. Yeah. And that’s always, that’s always what I studied. That comes a lot from my background to my parents, my mom was from Mexico, my dad is from El Salvador. And so I come very much from from that perspective and understanding not only the economic forces that are there, but really the cultural things, and, and understanding how those things mesh together to, to sort of create a reality both back in the home country, and in and in the the sort of immigrant receiving countries, you know, and so my, my push was always to go into that international development field, because I saw that there was so much opportunity there, I’ve travelled to 112 countries in the world at this point. And, you know, you go and you see that these countries have so much potential, there’s so much that can be done there to really improve quality of life. For for folks there, you know, and so I moved, I left academia after a while, and moved into this international development realm. Because I saw that opportunity, I wanted to have a greater impact in the world, you know. And as we sort of went into this, it was, it was really interesting, because the way in which development is carried out by a lot of these large organisations, you know, whether it’s bilateral governments or these international financial institutions, the World Bank, the IMF, there’s, there’s a changing of the tide a little bit, but it’s very paternalistic. Very, very, you know, it’s, it’s very prescriptive, that we are the experts, we come in to these countries, we assess the problem, and we fund the solution. If we happen to ask the local communities what it is that that they want, it’s just to say that we consulted them oftentimes, but that genuine integration with the community and what they need, and what’s really going to be sustainable, in terms of an intervention for them is, is really rare. You know, and it’s one of the biggest problems in international development, that that sustainability of impact is, is really difficult. And I’m 100% convinced that a large portion of that comes from failure to secure that buy in to actually listen to those communities. So from all of that, from all of that experience, really came this motivation to create the change, where it’s something that so we work with individuals, and we work with teams and organisations to really help them think of themselves as not just high achievers, and you know, and we’re high achiever, you and I sitting here, we’re definitely high achievers, you know, we have people who’ve achieved a certain success academically, professionally, and that sort of thing. But it’s folks who really want to take that and, and move to what we call trailblazers. So not just necessarily following the prescription that they’ve been given, but really digging deep, finding their purpose, and creating the the real action plan that moves them ahead in a way that fulfils them. So and so it’s something that’s been really, really rewarding for us at this point, you know, in terms of the business, because we’ve really been able to see tremendous transformation in how people, people in organisations perceive themselves, how they understand their mission, and how that impacts how they carry on their day to day, how they think about their future, how they talk about themselves. So it’s something that that it’s, we’re just really excited about it, it’s something that’s going gangbusters at this point. And, and we’re happy to, to be sort of spreading that message of, of self empowerment, and how that dovetails with, with with especially for a lot of these Latino communities that we work with, you know, how that dovetails with not only greater satisfaction, but also improvements in their economic standing and their ability to help themselves, their family, their community. Rod, okay,

Gene Tunny  09:19

so just specifically, are you doing, you’re doing consulting work for the communities? Are you are you engaged by aid organisations to to work with communities, how does it work?

Paul Rivera  09:31

So we’re sort of two parts, right? So I’m a specialist in strategic planning. So when one of our arms is still actually doing strategic planning with some of these larger aid organisations, they have a country strategy that they need to develop and how it is that they’re going to carry out the depending on the country, you know, so um, sometimes hundreds of millions of dollars that are going to go towards that country. And so when some of the contracting that we do is basically helping the As aid organisations create strategic plans, and then action plans, and then monitoring and evaluation plans that are going to push them towards their objectives in that sense, you know, and my push always is really to make sure that that’s, you know, founded at the grassroots that that’s something that’s been vetted and not just vetted, but really engaged and bought into by those local communities.

Gene Tunny  10:23

Gotcha. And I thought that was interesting. That comment you made about historically the, say, the World Bank and other big, big lenders for development, Asian development, bank, etc. Were you suggesting that? Yeah, they weren’t. They didn’t think enough about what the communities needed? Do you have any examples? Was it too much of a focus on big ticket or big, you know, flashy or fashionable projects or big infrastructure, projects, dams, etc? Is that part of the problem?

Paul Rivera  11:00

I would say there’s, there’s a couple levels I’ll give you. I’ll give you an example. That’s my anecdote. Okay. One of my first consulting jobs that I ever that I ever took was with one of these large international financial institutions, which shall remain nameless. But they had a they had been working in Western Africa somewhere with these with these fishery fisherman communities. Somebody had the idea that, you know, in my last situation, they said, they had worked somewhere in East Asia, I think, I believe it was in Thailand. And they had worked with Fisher communities, and they had created this project through which they purchased sort of these long boats with motor but with motors, that would help the fishermen they said, basically, that the problem in that situation was that there was a sort of a low level capital investment. And so they just infused this capital. And that’s what was needed to bring our productivity. And so they said, copy paste, it worked in East Asia, so it’s going to work in West Africa. And they they did absolutely no consultation. Okay. So I came in actually, as an ex post evaluator, about three years after the project had been completed. And so I go in to this community where I know they had worked. And I started asking about the boats and the fishermen and how things are going and people are looking at me with blank stares, like, What are you talking? I’m like, I’m like, a few years ago, there was this project and this organisation came, and they’re like, Oh, you have to talk to the chief. And so this particular country still had sort of a chief says, Chief type chiefdom society organisation, right? So they take me to the chief, and the chief walks me down to the beach, and I see 10 of these boats upside down, sitting on the beach completely rotted out, and there’s no motors. Okay. And so what they, when I started asking about it, he said, Well, what if what essentially they didn’t understand was that their society is a very highly structured society. And the fishermen, they were considered to be sort of not high loss, high status, folks. And so this organisation had come in, and given a very high status gift, in effect, to a relatively not high status person. And so the natural thing for them to do was to say, I can’t accept this gift. So they gifted all of the boats to the chief, the chief is the chief. So the chief doesn’t fish. He doesn’t, he’s not a fisherman. So the chief basically sold the boats, sold all the motors, he used the income to buy himself a new house in Switzerland. And that was it. Right? So what happened, right, and I can, I can give you five other similar examples, there was there was basically they external parties came in, they gave some sort of analysis of what they perceive to be the problem, they copy pasted a solution. And they put in millions of dollars for it. And at the end of the day, there was no real impact from that, because they failed to secure the buy in from the community, they failed to do the basic consultation that would show you know, what it is that was actually needed in those communities. So you know, that’s our, that’s our big thing is really, really engaging in listening. You know, before, you know, when we talk about wasting taxpayer dollars, and that sort of thing, it’s our responsibility to make sure that that’s that that’s going to be used in a proper fashion, you know, yeah,

Gene Tunny  14:23

yeah, that’s a that’s a really good example. I didn’t bring you on to chat about foreign aid or development assistance, but we might have to have another session on it. Because it’s it’s a big area and I know that there have been a voice I’ve read Billy’s delete stuff. I think there’s some good stuff there. I mean, he’s doing some great analysis that that that is a really good example Paul. So yeah, really, really thankful that You sure that Yeah, but we’ll have to we’ll have to have another conversation otherwise, we’re going to use the whole hour on, on on talking about those issues. Okay, so let’s go Miko back to Through the question of Latinos and the American dream, because that’s what, yeah, what got my interest? When when I learned about you, there’s this idea that you have of the broken promise or the what is it the fallacy of the American Dream for Latinos, and you mentioned this university, this new university was this in California is this part of the University of California system,

Paul Rivera  15:26

it’s actually part of the California State University system. So So California has, has multiple tiers, the, you know, the University of California has, you know, it’s the UCLA, it’s the UC Berkeley, which are the high level, what they call the, you know, the r1 institutions and that sort of thing. And then there’s the California State University system, which I believe has 23 campuses across the state, and they’re really the ones that are designed. So most teachers in California have gone through the California State University system, and it’s, you know, it’s, it’s, it’s a, it’s a huge amount of, of students, and it’s really the most is the entry point, it’s the access point for for, for collegiate education there. And it’s, it’s a wonderful, wonderful kind of institution, that that, you know, has, it has helped so many but, you know, the Latino thing, especially in the United States, and in California is really fascinating, there are close to 63 million Latinos in the United States, which is not quite 20% of the population. So it you know, if you, if you kind of separate them out, they’re kind of a country all all in themselves. And if they were a country in and of themselves, that that $3.2 trillion, Latino GDP. So that’s, that’s the latest calculation that Latinos in the United States generate 3.2 dollars $3.2 trillion dollars in GDP, which would make them the fifth largest economy in the world, right? It’s a massive amount of, of money, that that is generated through that. Yeah. And, you know, and and if you look at at that figure in terms of growth rates, for example, over the last 1012 years, it’s been almost a 4% annual growth rate, which is pretty much double what the US GDP growth rate has been in this in the comparable period, right? So it’s really, as a as a whole at a macro lens, it’s really something that has grown substantially, right. And then there has to be, though, the, the flip side, the micro side, that has to be looked at a little bit, right. And so when, when you start to dig into it a little bit, you start to see that, so much of that of that macro level of growth for one is coming from population growth. Yeah, it’s the it’s the largest, you know, it’s the most, it’s the fastest growing population demographic in the US, Latinos work like crazy. It’s the it’s the, it’s the population group with the highest labour force participation rate. And the estimate is that over the next 10 years from now, 78% of the net growth in the in the labour force will come from Latinos in the United States. So you know, that those numbers are really accelerating. So when you think about it, when you start, when you start thinking about that, that calculation, the per capita figures are not doing great, right? That the macro figures are doing, you know, are significant. But as you start to look at that per capita scenario, it’s not something that’s super robust, you know, and, and so, Latinos are really very much invested in this idea of the American dream. And, you know, I’ve been to just about every country in Latin America, and all my family’s in the United States. And these are the folks that I talked to, and, and that’s my community. And as you talk to as you talk to Latinos, the statistics and the statistics bear it out, it’s the population group that most believes in the American dream, right, this idea that, that in a land of equal opportunity, hard work is going to get you to success, you know, and that’s, that’s really the core of the American dream as, as, as immigrants see them, and it’s, you know, it’s worth saying that having having been all over the place, the American dream, it’s what we call it, but it’s something that’s, that’s really universal, right? I know, like, I know that Australia has a tremendous amount of, of immigration, and I know that basically, they’re all going there looking for some whatever it it is, but it’s some version of the American dream, you know, and so it’s it’s, it’s a it’s an aspiration that you see worldwide, but at least in the US, at least looking at the at this Latino population. Their their progress on it is stumbling in a lot of ways. You know, the, the there’s a wage gap of about 23% compared to non Latino white population. More significantly, is Is this wealth gap. So the average Latino household has about $36,000 in wealth measured as compared to about 190,000. For non Hispanic white population. So it’s, that’s more than a five fold difference. And you know that difference, that gap is really something that drives so many of the decisions that Latinos are making, right, so they don’t have that wealth base, which means they don’t have the investment base, they don’t necessarily they don’t have the same levels of financial security, they don’t invest as much in health, and certainly not mental health, which is one of the places where you really see these impacts play out, you know, we start looking at, at at the Latino populations, and how it is that they see themselves in their situation, and they’re so deeply invested in this idea that all I need to do is work hard and work hard and work hard and work hard. And that’s what they’re doing and still struggling, you know, so the statistic that always pops out to me is that of these 63 million, Latinos, 4 million of them every year suffer what what is termed a major depressive episode. So to the point where they are basically unable to function in some way that that others start to notice their, their depression and become worried for them. You know, and that’s part and parcel from, you know, the, the the sort of regular levels of depression that you see, these are people who are just down for the count in some way, you know, and when you ask them, What is it, you know, when they, when you ask them about the source of it, it’s exactly these things, you know, it’s this struggle, this chase toward the things of the American Dream towards that financial security towards the homeownership towards, towards the stability, that were there, they’re stumbling, and, and it’s stressful, you know, and they’re less likely Latinos are also less likely to seek help for it. So they’re sort of, they’re not making it, they’re not feeling good about it. And now they’re trying to make it while they’re, you know, their, their brains and their their emotions are not are not helping them either, you know, so,

Gene Tunny  22:12

yeah, it’s,

Paul Rivera  22:13

it’s a struggle, you know, it’s a, it’s a, it’s a tough place to be. And yet, you know, the, the Latino population continues to be so optimistic about immigration and the American dream and moving towards those things, you know, so a big part, I would say that a big part of our push, in our business and in our mentorship, and a lot of the work that we do, is really trying to shift that narrative, you know, to be to be a place where, where, for one, you know, I’m, I’m a micro economist, by, by training, by practice and by love. So for me, everything starts with the individual, you know, so so much of this work comes down to, I think helping people understand their, their why their purpose, like, like, I mentioned it earlier, but that sort of digging deep as to who you are, and why do you do what you do? And, and the how, you know, what, what’s your unique problem solving approach in this world? What’s the value that you bring, and having people understand their their own values and beliefs and how those things sort of come into play to create, really we work a lot on helping people create and organisations helping them create their brand? Yeah, you know, very good,

Gene Tunny  23:24

Paul. I’ve got about half a dozen questions after that, though. All right. That’s, that’s fascinating. First, what do we mean by Latina? And I don’t mean to sound dance, but because I understand Latin American, but predominantly, what what are we talking about now? Because I mean, like, I mean, I’m living in Australia. So I mean, my knowledge of America is limited by, you know, generally what I’m seeing in the media or in film and TV. And so I know, historically, you’ve had large, you have a large Puerto Rican population, and particularly in New York City, and and then you’ve got the Mexican immigrants and the, you know, lots in in oil and gas in Texas and California. And then there are the communities from Central and South America. What’s the Latino community look like in the US?

Paul Rivera  24:14

It’s extremely diverse, you know, as you look at as you look at the numbers, by far the largest Latino population is in California. And, and most of those are Mexican descent. But as you know, as you rightly point out there, there are basically pockets, pocket maybe to an understatement there. There’s there’s significant populations of Latinos in everything that is the southwest, so basically, California, Arizona, New Mexico, Texas. All in that path. I would say that most Latinos, by far are Mexican, Mexican American descent. And then you get to other other portions of the country, as you said, sort of New York, Atlanta, Miami, where you’re gonna get a lot more of the The Puerto Rican Dominican, especially as you get down in sort of that South Florida area, you’re gonna get the the mix of all all Latin Americans, you know, Cubans, Colombian, Salvadorans, Nicaraguans, and that sort of thing. So it’s that I’ve met Latinos of every variety at some point somewhere in the United States. But I would say that there’s definitely in terms of numbers, that concentration on the coasts. At the same time, 43% of people engaged in the farming industry, in the United States are Latinos. So there’s also a huge Latino population within sort of the mid sections of the country, but they don’t have that same density necessarily, that you find on the coasts.

Gene Tunny  25:45

Gotcha. And is there a recognition among Latinos of a, of a community of a broader Latino community for eternity, so to speak, I

Paul Rivera  25:54

would say that that’s something that that we, meaning I in this business, and the folks of us who work in similar things work really hard to create. I, you know, that there’s, there’s so much common history that that binds us, you know, I mean, I mean, for one, starting with, with language, you know, from South of Mexico, down to the tip, with, with a few exceptions, we all speak a common language. And, and obviously, it’s like, it’s like, it’s like the United States, you know, people in Texas don’t speak quite the same way that New Yorkers do or Californians do. And I think that those are differences that we need to celebrate. And I don’t think the Latino community does that enough. And then, the other side of it, though, is that everyone is very proud of their, their unique country heritage. You know, my family is very proud to be Mexican. My wife’s family’s very proud to be Nicaraguan. And so it is hard when you come to as an immigrant to the United States to suddenly you’re not Nicaraguan anymore, you’re not Colombian, you’re not Mexican, you are Latino, right, and you’re put under this general umbrella. And so it is, it is a bit of a mindset change to say, you know, I’m in a brotherhood with all of these people who don’t come from my country, you know, so it’s, I would say that it’s something that’s still evolving, and it’s something that that the Latino community would benefit tremendously from, by by having sort of that mindset shift that brings people closer together, I think, I think it would be revolutionary, you know, you would stop the just the ability to stop saying, you know, oh, you know, he’s, you know, whatever, he’s from x country, and you can’t trust those people kind of a thing, you know, to really say, you know, what, we have a common history of economic struggle, and, you know, it’s Latin America. So corrupt government is something that, you know, really binds Latin Americans together and, and the impacts of that. So, you know, I think you could be transformational in terms of how the Latino community would, would evolve as a as a group in the US if they were able to better come together those ways. Yeah.

Gene Tunny  27:58

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  28:03

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Gene Tunny  28:32

Now back to the show. Okay, so you mentioned a $3.2 trillion GDP. So yeah, that’s roughly that must be about twice the size of the Australian economy measured in Australia in US dollar terms. So maybe a bit under but now but yeah, it’s a it’s a substantial amount. What where does that figure come from? Pull? What does that estimate come from?

Paul Rivera  29:01

There’s a there’s a recent report that came out that’s called the Latino GDP report. They’ve published it every year, for the last six years or so. And they’ve seen it, you know, they’ve seen they’ve seen that growth, and it’s a group that their aim is really to see how it is, in particular that that sort of the three pillars of Latino homeownership and business ownership and asset ownership have increased or decreased over time. But you know, it’s it’s part it’s part of that that whole tracking and objective calculation there.

Gene Tunny  29:35

A lot link to that. In the show notes. Yep. You talked about a wage gap of 23%. Is that largely because Latinos are working in there are fewer Latinos working in professional occupations more so as labourers or in, in in service occupations? Would that be the I would say so

Paul Rivera  29:57

yeah, I would say so. You know, that the the If the educational attainment is not the same, and then you know, there’s, there’s a lot of things that that go that go with that, you know, we talk, as I said, I have a lot of experience at the university level, and one of the things that you see, for example, is that, you know, a lot of Latinos are scholarship kids, you know, they go to college under under these scholarships, because, you know, the parents don’t, we don’t have the wealth necessarily to, especially in the US to Shell out the money for their full collegiate education. So they have to take some sort of loans, and they have to take scholarships, and that sort of thing. And it’s fascinating, because the way that the system goes, it’s, it’s supposedly helping them out, you know, which it is, because otherwise they wouldn’t have access, but at the same time, it puts them behind the eight ball, you know, now, now you’re the kid whose parents didn’t go to college, so you didn’t grow up, talking about college, hearing about college or understanding what that culture is, like, suddenly, suddenly, you’re in this place where your school work is much tougher. And now you’re told oh, but to be here, you have to have a job. Now, right. And, and so there goes a big part of your time that should be devoted to studying and really dedicated to these other things. And now you have to know you have to have a job to pay for, for the privilege of being there, and that sort of thing. So you know, that all of these things, you know, they’re, it’s, it’s not that they’re, that they’re bad in any way, but that they, they’re there, they’re one more barrier, one more hurdle, that you have to jump, you know, and so once they get out to, for example, the workforce, a lot of them are not folks that have done, they’ve never done an internship, they can’t do an internship, they can’t afford an intern, and they can’t afford an unpaid internship, you know, so, you know, they get out into the working world, and you know, what the job that they’re going to apply for, is going to be, it’s good that the competition is tough, you know, they’re, they’re there, as I said, they’re behind the eight ball a little bit. And not, it’s not quite the same situation. So. So even those that are professionals have a wage gap, because they don’t necessarily see the same. They’re not perceived as being equivalently qualified. And the other thing is that, that goes sort of along with this as, as Latinos in our culture, as part of this whole American Dream thing, and believing that hard work is what matters, we’re really told, we’re really told that you just keep your head down, don’t make waves just work hard. And one of the consequences of that is that we’re not taught the value of networking, the importance, like the essential, the essential pneus, of, of networking, you know, and I know, it’s something that I’ve, I’ve had to learn the hard way over time, that, you know, if you really want to have that next level come to you, there has to be somebody at that level, who’s gonna vouch for you. And and we’re not we’re not taught that, you know, it’s something that that we’re told to be humble, we’re not we’re, that it’s, it’s rude, actually, to ask for some of those for that help for that push for that phone call? You know, so it’s, it’s something that, that we push for a lot. And as I said, you know, coming back to your question earlier, if there were a much stronger feeling of community among the Latino community, and I think that’s even something that that we could create for ourselves, and it’s slowly happening, but I think that pace needs to really accelerate.

Gene Tunny  33:25

Yeah, yeah, absolutely. Okay. So one of the other things you mentioned, is depression rates of depression, is the incidence of depression in Latino communities higher than in non Latino or non Hispanic? Do you know, it is,

Paul Rivera  33:40

it is a little bit higher, you know, statistically, it’s a little bit higher than that there are two major differences. One is that the basically, Latinos don’t have don’t have the wherewithal the resources to seek help as much. So, you know, they the incidence happens a little bit more often. But it’s it, it’s going untreated, basically, in a lot of ways. And then the second piece is that the the incidence, as I said, is slightly higher similar, but the depth of the depression is also is also different. So one of the things that you see is that the they measure the incidence of suicidal ideation, so not just are you depressed, but do you get to the point of actually thinking about an ending, you know, the pain and and that rate among Latinos, and especially among younger working age, Latinos is significantly higher than then, you know, other comparable groups,

Gene Tunny  34:46

as the Latino community have been affected by the opioid epidemic, and you know, data on that, that

Paul Rivera  34:51

I’m sure there isn’t that’s that’s not something that I am super specialised in. So I I wouldn’t want to go. I wouldn’t want to speculate beyond my beyond my realm on that one.

Gene Tunny  35:06

That’s okay. I might look into it. I was just interested, then when you’re talking about depression in the depths of depression, just

Paul Rivera  35:14

I mean, I mean, what is what is the case is that there’s a tremendous, I would say, more sort of high functioning alcoholism, and that that would be a much more prominent thing. But you know, I don’t I don’t as I say, I don’t want to speculate too much on Yeah,

Gene Tunny  35:30

fair enough. Fair enough. I might, I might look into that myself. Getting to the just going to the American dream. So I was interested in how you, you phrased it, how you conceptualise it, or how people conceptualise it, there’s this idea that given that America has this equal opportunity that you’ve got this, you should be able to prosper? And then if you don’t prosper, if you don’t do well, then in a way, it’s your own fault, and you’re a loser? I mean, that’s the implicit message there isn’t. I mean, it’s quite right. It’s terrible psychologically. When you think about it, so I guess one of the issues is this, just how, you know, is there this equal opportunity, and one of the things I’ve been looking at lately, those his book that came out a few years ago, Dream hoarders, and there’s this growing literature on just the transmission of advantage or disadvantage across generations, and it looks like the US if you look at the data, there’s less intergenerational mobility in the US than in, in other countries such as Australia. I mean, we’re, we’re maybe not as good as we once were. But we’re still better than the US, it seems. So this this issue of the American dream, is this this part of a broader problem ball? It’s not just for, it’s not just a problem affecting Latinos?

Paul Rivera  36:51

I think it absolutely is a much broader problem, you know, and I speak to it from, from my perspective, and, and my, my knowledge, where, you know, I have that that intimate connection, but I mean, as you look at things, I mean, yeah, as you say, the you know, the, the first one, just from a, from a basic, big level perspective, as you look at sort of the the top developing developed countries in the world, and you look at life expectancy, that the US is, is close to the bottom, on some of those, you know, there, there’s actually quite a few sort of middle middle income and developing countries that are, that are surpassing, if not, at least dangerously close to life expectancy in the US. So, you know, at a fundamental level, the, the, the sort of American Dream is failing Americans too, in a lot of ways, you know, and I think that, that there’s that there’s some interesting, there’s a lot of interesting things there. You know, in a, in a past life, I was a consular officer working for the, for the US government in basically issuing visas overseas. And so I met 1000s 1000s and 1000s, of, you know, people in other countries who were literally in front of me requesting to come to the United States, you know, and so I had a lot of a lot of conversations with, with people about that, that subject, you know, and, and the ones who, it’s a really interesting thing, so most of them want to come as tourists, right? They want to come to the US for some period of time, just to see and then go back. And your current your job as a consular officer is a terrible job, because you’re judging people that you’ve never met before, based on, you know, some sort of not arbitrary, but but at least you know, not very in depth criteria necessarily. But the people who are most sincere and the most convincing are the ones who are who are able to tell you a story about their community and their connections and their rootedness in their home country. Right. So you know, as as an American consular officer, you want to give a visa to the person who’s going to come to the US and then go back home. Right? That’s the whole idea. Yeah. And and those these folks who, who, some of them speak so eloquently, so romantically about their, their connections at home and their and their family and their roots and their beliefs, and that sort of thing. And those are the many of the same people who for because their situation in their home countries is often so tough, they find themselves in the position of where they make the choice to come to the United States, you know, and this whole concept of the American dream of part of the problem with the American Dream is how we’ve translated it, how we’ve measured it, you know, as you if you look in the Oxford Dictionary, the definition of the American Dream is basically that, that this idea that the situation in America offers those who work hard, the equal opportunity to achieve and the dictionary says their highest aspirations, and that highest aspirations piece is something really important that I think people don’t hang on to enough because as as we see it, As we measure it as we watch it play out, the American dream, so often is measured by Do you own a house? Do you? Do you have a certain income? And then do you? Do you have a college education? Are you married? Have you had kids yet? You know, and the conversations that go that way? And in many ways, it’s a very individualistic type of pursuit. It’s about what have I done? What have I achieved? What have I acquired, and so much of the value in I think any community, the US included, Australia included, but certainly, as we’ve seen in Latin America, and lots of other countries, community is the core, you know, community is what is it’s, it’s the place that that helps form your values. It’s the place that’s that helps you with your resilience, when things get tough, there’s, there’s a core that you rely on. And when you as an immigrant, you are extracted from that core and dropped in a new situation, and told that the checkmarks that measure your success, are these individualistic things, it’s really, really tough. You know, so, you know, we’ve come back a couple of times to this idea of, of community. But, you know, as we think about how it is that, that, that we sort of build that, that I think that community pieces is essential not. And really, it’s kind of interesting, because our our model is really one of individual purpose, right? Our whole big change model is really one of building individual purpose, but at the same time, recognising that in others, and then building that community, that sort of network of strength that sort of holds everybody up together. That’s that’s sort of our vision for it. Yeah.

Gene Tunny  41:42

Yeah. Very good. I should, I should also not so just so we’re getting the right, or we’ve got the balanced picture of what’s going on. Sure. Because we’ve talked about a lot of the issues with the American dream and challenges and how it’s, it may not be playing out as, as Latinos expect. Is it generally the case, though, that I mean, immigrants from Latin American countries into the United States, they’re generally doing better than they were in their, in their, their source countries, and they’re not going back? There’s, there’s not much of a flow back. Is there? Do you have any observations on that?

Paul Rivera  42:23

Yeah, yeah. So I think I think there’s, there’s a few ways to see it, you know, if you look at their, their same thing, if you look at their financial positions, I would say that that is true. You know, if you look at sort of their their household, their household GDP, sort of scenarios, I would say that that’s absolutely true. However, you know, I’ve spending, having spent a lot of time in these immigrant Latino communities, both in the US and outside, I would say that there’s, you kind of have to temper that with, with the reality of the situations in some ways, you know, there are safety, for example, safety and security aspects to a lot of the communities where, where Latinos end up, end up in, that they don’t necessarily have in their home communities, they don’t have the same, the same support systems that are there, the implicit and explicit sort of biases against them that they see in the workplace are real, and those things, those things have an impact as well. So you know, I, I would say that many, many, many Latinos dream very, speak very romantically and longingly about where they came from. And the and the option of going back is a tough one. You know, my, my dad actually just re emigrated back to El Salvador, not not long ago, but it’s basically in his retirement and because he was able to go back, in a sense, in a triumphant way, right, that he’s the guy here, it might and, you know, I’m fortunate that my parents were, were did well have done well in the United States, you know, and he’s able to go back as someone who is triumphant in that situation, but a lot of Latinos who, who are struggling more in the US, there’s, I think that they struggle with the, the pressure of not wanting to go back, not triumphant, you know, the, with the idea that, you know, it’s not that easy just to just to say, You know what, it didn’t work over here. So we’re gonna go back, you know, the folks count on them, remittances are a massive thing. So even though they may be struggling in the US, the remittances that they send back home are often supporting an entire extended family and They can’t just, you know, walk away from that either, you know, so there’s there’s a lot riding on them and, and you know, those those stresses are real and they affect how they live out their lives.

Gene Tunny  45:09

Yeah, that’s a really good point, I’ll have to look for data on that, because those remittance flows are potentially very large. So they’re massive,

Paul Rivera  45:18

you know, you get countries like El Salvador, and remittances on any given year are somewhere between 17 and 20%, of of GDP, is coming in as remittances from primarily from the United States, you know, so it’s, it’s really some, it’s more than just something that’s, that’s giving that little extra boost to the economy. It’s what’s really driving the economy. And in a lot of these cases, you know, and, and as you see countries that are struggling, like like Haiti, or or Venezuela and that sort of thing, you know, a lot oftentimes these remittances are what’s what’s keeping food on people’s plates back at home?

Gene Tunny  45:49

Yeah, absolutely. And it’s providing us dollars, but it’s providing foreign exchange that helps you there Exactly. Yep. By imports, for sure. That’s a very good point. Right. Oh, so just to just to finish off all and I’m wondering, do you have any reflections or thoughts on what this means the growing proportion of the growing role of Latinos in the US? I mean, you mentioned it’s got a 4% growth rate, which is higher than, I don’t know, off the top my head what the average US growth rate is, but I imagine it’s lower than that. So they’ve got the Higher, higher growth rate, and there’s going to be a growing proportion Latinos in the population, the economy, do you have any thoughts on what it means for the broader society? Or the or for? I don’t, I don’t want to get into politics, necessarily, but what does it mean for, you know, the social makeup where America is heading? Yeah,

Paul Rivera  46:45

you know, I mean, you know, the, it’s not a, it’s not a new, new thing at all, you know, between it, you know, there’s, there’s a large South Asian population in the United States, there’s, there’s a large African American population, you know, it’s been a long time that the US has been, has been becoming a brown replace, you know, for, for, for lack of a better term, at least in terms of the Latino population. One side of it is that, you know, if you’re a business person, and in the United States, and you’re not somehow targeting the Latino population, you’re missing out on a huge, huge market, you know, so that, that part is, that part is super clear. But you know, as, as a Latino, myself, and somebody who’s concerned about about my community, I really love to see, see it go past that, you know, because that’s, that’s the consumer side of it, right? That’s, you know, marketing to Latinos is, is really sort of targeting them from as consumers, and I would love to see, the Latino population become much stronger in terms of them as a core of investment. And that, and that’s really, where a lot of the stress comes down, a lot of the sort of the problematics come down in a lot of ways, you know, if we continue to see, for example, this population expanding without really closing off the not just the income gaps, but the wealth gap, that’s there, you know, you’re you’re creating systemically in some way and a sort of permanent underclass. And I don’t particularly want to go into politics, either. But history shows that when you create a, a, an underclass, that that isn’t that doesn’t have that, that mobility and doesn’t have the wherewithal to, to move up, it’s bound to cause instability, it’s, it’s bound to cause all sorts of problems, you know, so I would love to see the country as a whole, but certainly, certainly the Latino community come to, you know, be a little more cohesive, focus more, as you know, as just I know, I’ve said it a couple of times, but it’s, it’s really important to us, you know, this idea of focusing on not just the the check marks of the American dream as we see it, but but really something that focuses more on, on valuing individuals valuing their purpose and our work, it sounds, it sounds a little bit dreamy, sometimes, but you know, it, make no mistake, Mark, our entire concept is that based on your purpose, based on your unique value, whether you’re an individual, an NGO, a team, small business, that if if you start from that core, that your financial position can be much stronger, right, that your wealth position can be much stronger and much more sustainable. And that’s, that’s sort of really what we’re going for, you know, something that that helps turn that tide a little bit and start making those inroads and, and building some of that, that wealth that gives the financial stability and the and I think ultimately the the economic stability, the macro stability that and there and the and the growth that we would like to see. Yeah, yeah, absolutely.

Gene Tunny  49:53

Absolutely. Can I ask you about, you mentioned businesses in the US I mean, You’ve got to you should be, you should recognise you got this growing market there, there’s large market businesses in the US. Is there advertising? Or there is? In Spanish? I mean, the advertising? are they preparing advertising materials and informational materials in Spanish? Sure,

Paul Rivera  50:19

sure. Yeah, for sure that they’re, you know, it’s sort of they’re sort of a bipolar situation, you go to you go to places like Los Angeles, New York, Miami, there’s, there’s billboards in Spanish, you know, and there’s, and there’s, you know, plenty of radio stations, and, and, you know, television things in, in completely in Spanish, and those are there. And then you see, sort of this growing core of smaller businesses in the US that are that are just sort of niche marketing, targeting, specifically the Latino, the Latino markets. There, you know, and a lot of it is, is really trying to bring some of the more authentic, culturally appropriate sorts of goods and products into into the market, but they have, you know, they have the same problem that small businesses have everywhere, but even multiplied, you know, because they’re because they’re Latinos, which is the access to credit. So the, you know, the, the growth potential there for a lot of these small businesses is really, really tough. The statistic is that less slightly less than 2% of venture capital in the US, goes to Latino entrepreneurs, you know, so it’s, it’s, that growth is is is slow and tough. But, but definitely, you know, the, the Latino population is, as I said, we’re, we’re, we’re, we’re almost 19 20% of the population. So there’s definitely, you know, advertising in that direction and products that are that are definitely targeted to that market.

Gene Tunny  51:46

Yeah, just occurred to me then. And then I mean, it makes sense that they’ve got Spanish language radio stations. Yes. Yeah, that that makes perfect sense. Okay. Paul Rivera, that’s been terrific. Any final thoughts? And please tell us where we can find out more about the work you’re doing?

Paul Rivera  52:03

No, this is this has been incredible. Thanks so much for, for having this conversation with me. I truly, truly appreciate it. You can find us we have our website, be act, you can find us also on Instagram on be dot Act dot change, you can find me on LinkedIn. I’m Dr. Paul Rivera. And we have also as I mentioned, my my wife and I asked her I said Alana and I are, are being changed together, we have a book that’s just been released called Creating your limitless life. It’s available on on Amazon. And there’s a there’s an accompanying workbook, at least for now, the Kindle versions are extremely, extremely low priced, I think it’s about 125. Australian. So it’s, it’s a really, really great book, it’s something that that’s really written from the heart and talks a lot about the personal experiences, and then translating that a little bit into, into what i’ve what I’ve at least, hinted at here a little bit, which is sort of our approach that’s based on purpose. Looking for alignment in your actions, finding the resilience, when things get tough, and, and, and really creating a legacy for yourself and seeing seeing your life or your business, your organisation as something that seeks to leave a positive legacy in this world and, and creating the pathways towards that. And, you know, you know, we wrote this from, from our perspective, as I said, you know, as Latinos, as people who’ve lived the immigrant experience, we’ve had so much tremendous feedback from all sorts of folks saying, you know, I’m a white male, and I really, I really, you know, resonate with, with the message is there and I’ve felt, you know, the imposter syndrome and the people pleasing and, you know, all of these things that, that sort of people feel they hold back and hold them back and from, from really carrying their life forward in a different way. So it’s, we’ve been really happy with the, with the success we’ve had, and our ability to get that message out. So if you get a chance, I highly recommend picking up the book, leave a review if you if you enjoyed it. And and that’s where we’re at, you can always find us as I said on the website, big Very

Gene Tunny  54:14

good, Paul, I’ll definitely have to get the Kindle edition. One of the this is this is not necessarily an ad for Kindle, but I would say that one of the things that’s changed my life the most in the last few years has been getting a Kindle. So I guess I was slow to get into the get into the Kindle. But since I’ve got out I mean, it’s you’re just able to, to get I just read so many more books or different books that I wouldn’t look as the price I was lower price and I’ll try it out. So I love the

Paul Rivera  54:43

I mean, the device itself has gotten so much better to Yes, you know, with the screen and the battery life and all of those things and now you can make notes on them and all of that they’re tremendous. Yeah, it’s, and we’ve, you know, we had the great fortune to work with with a really excellent Australian publisher and getting this book out. So we certainly feel like we’re we have a spiritual home in Australia to to thanks to them. So that’s been a great experience as well. Yeah. Excellent.

Gene Tunny  55:07

That’s what I want to hear for. Paul Rivera. Thanks so much for your time. It’s been a great conversation. Really enjoyed it.

Paul Rivera  55:14

Absolutely. Thanks so much Gene.

Gene Tunny  55:19

Righto, thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


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Podcast episode

Carbon as an emerging, liquid asset class w/ Michael Azlen, Carbon Cap Management – EP212

With carbon prices becoming more common globally, carbon is an emerging, liquid asset class, according to Michael Azlen, CEO and co-portfolio manager of Carbon Cap Management. Michael shares his insights into investing in carbon markets with show host Gene Tunny. Michael, an experienced investment professional and regular speaker at investment conferences, shares his research on the benefits of diversifying investments across multiple carbon markets. Tune in to learn more about the potential of carbon markets as an investment opportunity. Disclaimer: This is for general information only, and does not constitute investment or financial advice. 
Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple Podcasts and Spotify.

What’s covered in EP212

  • Carbon markets and investing in an emerging asset class. (0:03)
  • Carbon markets and their correlation with other asset classes. (2:57)
  • Carbon markets and impact investing. (9:20)
  • Carbon markets and emissions trading schemes. (13:42)
  • Carbon market mechanisms and their effectiveness. (20:52)
  • Carbon markets and their potential for investment. (28:19)
  • Climate change impact on asset management industry. (33:35)
  • Final thoughts on carbon markets and investing with Michael Azlen. (38:25)

Links relevant to the conversation

About Michael Azlen and Carbon Cap:

Michael’s article on “The Carbon Risk Premium”:

Transcript: Carbon as an emerging, liquid asset class w/ Michael Azlen, Carbon Cap Management – EP212

N.B. This is a lightly edited version of a transcript originally created using the AI application It was then checked over by a human, Tim Hughes from Adept Economics, to see if the otter had missed anything, and with all respect to otters they do miss quite a bit. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Michael Azlen  00:03

By investing across all five of these markets, your overall portfolio volatility really comes down of course because your your nicely diversified, while it doesn’t necessarily impede your return expectations so that’s that’s one of the key observations of our research paper was this this very low cross correlation between carbon markets.

Gene Tunny  00:27

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory, evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show.

Hello, thanks for tuning into the show. In this episode, you’ll learn about carbon as a liquid emerging asset class. Emissions of carbon dioxide are increasingly being priced globally through various emissions trading schemes, or through other mechanisms that impose carbon prices. To explore carbon markets I talk to a fund manager who is investing in carbon markets globally. My guest is Michael Azlen, CEO and Co-Portfolio Manager of Carbon Cap Management. Michael has 25 years of experience as an investment professional, and he’s a regular speaker at investment conferences worldwide. Also he’s been a guest lecturer in graduate programmes at London Business School for more than 15 years. I’m really pleased to have been able to interview Michael because he has some great insights into carbon markets. For instance, he explains how carbon markets are generally uncorrelated with equities, bonds and real estate, and hence they can help investors diversify in uncertain times. For the lawyers, this is for general information only and none of this should be interpreted as investment or financial advice. Okay, let’s get into the episode. I hope you enjoy my conversation with Michael Azlen on carbon markets.

Michael Azlen from Carbon Cap. Thanks for joining me on the programme.

Michael Azlen  02:20

Pleased to be here Gene, thanks for inviting me.

Gene Tunny  02:22

Oh, of course. I’ve covered climate change quite a bit on the show. But I haven’t had anyone who has the expertise in the carbon markets and investing in carbon as an emerging asset class or, or another way I’ve seen it expressed as a liquid asset class. So Michael, to start off with, could you tell us a bit about Carbon Cap, please, you’re the CEO and Co-Portfolio Manager there. What does Carbon Cap do exactly?

Michael Azlen  02:57

Sure. So So Carbon Cap runs the World Carbon Fund. It’s a climate change impact fund. And the Fund invests into the regulated compliance carbon markets around the world. The fund has two objectives. The first objective is to generate a positive return over any rolling 12 month period. So we don’t want to be up every month or every quarter. But over every rolling 12 month period, the objective is to be positive, regardless of the performance of carbon itself. And the second objective of the fund is to have an impact, a direct impact on climate change. And we do this in a number of ways. But the hardest impact is achieved through our commitment to take 20% of the performance fees that are generated. And we use those to purchase compliance carbon permits, again in the regulated market Gene. And we cancel those permits. And in the fund has been running for three and a half years, the total return net of fees to our clients is in excess of 100% now, so very strong returns over this three and a half year period. And therefore, you know, the nice thing about performing it is aligned with direct climate impact. So higher performance means more impact. And that creates a nice alignment of interest between between the investors ourselves as the manager and having an impact on climate change. The fund has grown significantly from the launch, we launched with only 10 million the fund is now $280 million in size. So we’re approaching 300 million and our client base is now moving much more institutional in nature. In terms of impact allocators. The fund holds Article Nine status here in Europe and that that status, Article Nine is the highest level of impact under the European taxonomy. So it’s an uncorrelated absolute return fund with climate impact. So it’s quite a quite a unique fund and I think you know, more and more clients are seeking uncorrelated returns as we’re, you know, the global macro situation is becoming quite difficult. I think the forecast from here out.

Gene Tunny  05:14

Okay, so yeah, I’ve got a few questions based on that. Michael uncorrelated, do you mean uncorrelated with the business cycle with the stock market? What do you mean by uncorrelated?

Michael Azlen  05:24

Yeah, so the background to to Carbon Cap Gene was after I built and sold my previous asset management business to a public company, I then became deeply involved in research onto the into the science of climate change, so nothing to do with carbon. And that led me to enrolling at the London School of Economics and their climate change programme. And this is where I learned about carbon markets. At that time, this was in 2018, carbon was trading in the different markets around the world about half a billion dollars daily. So it’s quite liquid. And I was quite surprised by that. And my first question as an investment professionals was, was your question. What are the what are the statistical properties of the asset class, you know, return and volatility and correlation. When I looked for the research Gene, there was no research on carbon. So I hired a PhD student from the LSE, myself, we collected the data, and we analysed and wrote that up as a full research paper. Now, it did take three years in the peer review process with academic papers. But I’m very pleased to tell you the paper was published last year in the Journal of Alternative Investments. So, so coming back to your question, when you’re asking, you know, what do we mean by correlation? In this sense, if you take the, you know, the daily, weekly or monthly returns of carbon, which is a liquid tradable asset class now, I should mention that, that that liquidity where it was trading half a billion a day, that was in 2018, now we’re trading 4 billion per day. So the liquidity has increased significantly. And and when you look at those correlation numbers over rolling periods, carbon just exhibits effectively no correlation at all to equities, to bonds to real estate to other commodities, it has very unique correlation properties

Gene Tunny  07:18

Right and what about the volatility is it much more volatile than those other asset classes?

Michael Azlen  07:24

So it varies between markets. So you know, today in the World Carbon Fund, we invest in five different liquid regulated carbon markets. And those volatilities vary from probably the lowest volatility market is between 10 to 15% volatility, and the highest volatility market maybe is about a 60% volatility. So there’s quite a difference in volatility in the different carbon markets.

Gene Tunny  07:48

Okay, so I might ask you about those different carbon markets in a moment, there are just a few other things to clear up. You talked about institutional investors, so you’re talking about, what investment banks, so the Goldman Sachs, or Morgan Stanley, you’re not okay, who are you talking about there? Pension funds, perhaps?

Michael Azlen  08:10

Yeah, exactly. So generally, you know, high net worth investors, and then retail investors would be non institutional, and then kind of in the middle ground, you would have family offices and multifamily offices in the middle ground. And then you would move into more institutional, which would be, as you say, professional investment management organisations. So this, these could be other investment management firms that have maybe a multi asset product, or they might run a fund of hedge funds product, and they would be an investor into our fund. And finally, the classic, you know, asset holders like in Australia, the super funds and other big pension funds. So we’re seeing also interest from the bigger pension funds now, because there’s an interesting aspect, not only the return and the low correlation, but the climate impact, and the potential for carbon exposure to give you somewhat of a climate hedge in your portfolio is another another interesting aspect. If you understand that climate change is now impacting equity and bond portfolios by having some carbon it’s somewhat of a hedge against some of those impacts.

Gene Tunny  09:19

Yeah, that makes sense. And can you explain, you mentioned this Article Nine, in the European taxonomy? I’m completely unfamiliar with that. Sorry. Could you explain what what that’s about?

Michael Azlen  09:32

So, Europe a couple of years ago, launched a new taxonomy to identify the level of transparency and impact for funds and they set minimum standards, reporting standards in order to achieve those different article levels and the highest level there of impact is Article Nine. So you know, in an in an effort to create an environment that kind of weeded out greenwashing, they said, let’s put some standards in here. Because you know, I mean, three years ago, every single fund was green in some aspect, right? Even if it really wasn’t green, it could be labelled green. And so Europe brought in this taxonomy and said, now, unless you meet these very strict reporting requirements, you can’t make a green claim. Or more importantly, you know, your fund will be ranked Article Six, Article Seven, Article eight, Article Nine. So there’s a varying degree of reporting, and you it to achieve Article Nine, you must demonstrate meaningful impact in terms of the activities of the fund have to be reported in detail, and you have to demonstrate impact. And so in our case, we have now a three year audit trail where we have purchased carbon permits with those performance fee amounts, and then we just cancel them. And that’s all audited and documented.

Gene Tunny  10:57

Okay, okay I’ll have to look more into that, that’s interesting. I mean, yeah, there have been a bit of concerns about greenwashing, or concerns about just how effective some of these carbon offsets are, whether they’re actually legitimately reducing greenhouse gas emissions. So I think that’s, that’s fair enough. Righto! I’ve got to ask you about this $4 billion a day of trading. And I mean, you’re involved in this sort of thing. And oh, can I ask first? Actually, you might have mentioned it before. Assets under management, are you do you disclose the assets under management of your of your fund?

Michael Azlen  11:36

Yeah so as I mentioned, we are currently running 280, two eight zero million dollars in the World Carbon Fund.

Gene Tunny  11:44

Gotcha. Because I latched on to that there’s that four billion dollars a day that’s being traded, who’s trading it, and who ultimately needs these carbon permits or these assets? So we’ve got, I mean, what is it that’s being traded? There’s the permit. So in Australia, we I think we call them Australian carbon credit units. So they represent what is it a tonne of co2 equivalent? And then there are also offsets. Can you tell us a bit about that market, who’s in it and what’s been traded, please, Michael?

Michael Azlen  12:13

So this, this is a real area of confusion Gene. So it’s really important that we clarify the difference between various carbon markets because there are actually three very distinct carbon markets. And they’re very, very different. So this is very, very important. So the first market that most people are actually familiar with, and let’s leave the Australian ACCU market. Let’s leave that to the side for a minute. I’m talking globally now. Most people are familiar with what’s called the voluntary carbon market, voluntary, because it means it’s a voluntary participation, a corporate can choose to buy these credits, can choose to buy these offsets. And here Gene terminology, we use the term credit and offset. In the voluntary market, it’s a carbon credit or a carbon offset. In the markets in which we invest, we invest in a completely separate market, the regulated market, the compliance carbon market, where companies must comply, and those are called carbon allowance permits. So in the voluntary market, most it’s called a carbon credit or offset. The normal project here Gene is planting trees, or trying to protect a forest or a mangrove swamp. It’s some type of project related activity. And then an independent party will calculate how much carbon is sequestered from the activity. They give it a rating, and they calculate the tonnes and they issue these credits and offsets. I’m going to give you five key bullet points about this voluntary market very, very important. Number one, it is completely unregulated. Number two, it’s illiquid, it’s it’s not a liquid asset. Number three it’s very small in size. I’ll come back to that. Number four, because it’s all of these different methodologies. It’s very opaque and complex to figure out, well, how did they calculate these credits, how many credits? And number five, I think very important, in the voluntary market, there is effectively an unlimited supply of these credits. This is where Gene you mentioned in the last ,just the last nine months, this year alone, there have been a number of investigative journalist articles that have uncovered practices in that market that have proven to show that some of the projects have not actually sequestered any carbon at all. And I think the key here Gene is that in any market as an economist, you’ll know this when you have a financial asset without any financial oversight, this brings moral hazard into the equation right? So if we can create more credits or offsets through a different methodology, we all benefit within that ecosystem. But there’s no independent oversight of that. So the problem of over crediting and sort of supply has become an issue. And so I think what we’re seeing is corporate buyers of wanting to make a climate impact are now somewhat shying away from that market, because they don’t want to be involved in these in these scandals. So that’s the voluntary market. If I move the lens to the regulated markets Gene, I want to give you five key bullet points about the regulated market. The first one, of course, it is highly regulated, because it is run by governments. Number two, it’s it’s very liquid, it now trades $4 billion every day. Number three, it’s large. So when we compare the size, this market is traded, last year, about 1 trillion with a T dollars, and the voluntary market did about 1 billion. So this is a 1000 times difference in size, not 10 times or 100 times this is huge. And number four, it’s very transparent. Of course, these these markets, because they’re run by the government, so they put all the rules on the website, it’s transparent. And number five and most important Gene, in the regulated market the supply of the permits is capped and every year that supply lower and lower and lower. So in one market, unlimited supply just keeps increasing, and in this market it’s capped and it keeps going down. So it’s quite, there’s quite a big difference between these two markets.

Gene Tunny  16:28

Yeah, gotcha. So you’re talking about the permits that are part of emissions trading schemes, or cap and trade schemes or whatever you want to call it. So what are the major markets, Michael, which economies have these schemes and which economies therefore have these regulated markets, there are these permits that you’re involved in investing in and trading?

Michael Azlen  16:53

So the good news here, Gene, is that not only is there, are there current, currently multiple countries and jurisdictions, but there are at least a dozen new countries that have announced they’re going to launch full Emission Trading Systems, cap and trade systems as you as you correctly identified, so the growth of the asset class is going to be tremendous in the next five years. The current markets that we invest into today are the European emission trading system. Number two is the UK emission trading system, which was established after Brexit more than two years ago. When the UK left Europe, they launched their own emission trading system. The third market is the California carbon market, which is in the state of California. Fourth market is the regional greenhouse gas cap and trade market, which is on the east coast of the United States. And it consists of 11 states together on the East Coast in one block carbon market. And the fifth market we invest in is the New Zealand carbon market, which has been around for a long time, it’s gone through transformations. It’s a small market, but it’s we think it’s quite a well run market and and that’s the fifth market. Um, one thing I want to point out, Europe has is the most liquid market, it trades probably half of that 4 billion daily, 2 billion a day is the European market. So very, very liquid and it was launched in 2005. From 2005 until today, emissions in Europe have dropped by 1 billion metric tonnes per year. That is a big success. And and for this reason, I think because of that success, obviously without impeding economic growth. I mean, that’s quite important, right? I think that is why we’ve had these big announcements in the last well, even the last three months, Brazil is moving legislation to launch a full cap and trade market, India and Japan, Japan, the third biggest emitter in the world. China, of course, launched after doing extensive research on the European market and the California, China launched the world’s biggest cap and trade market two years ago, covers 4.5 billion tonnes of carbon. So it’s massive. South Korea, Mexico should go live next year, they finished the two years of their pilot programme. So we’re expecting that may be the next fund that we could add into the fund. But there’s there’s many more countries I was recently in Singapore three weeks ago and Indonesia just launched their cap and trade market. Most of the Asian Tigers, Vietnam, Malaysia, Indonesia, they’re they’re all have plans at various stages, it’s taking time to, but they all have plans to launch cap and trade carbon markets, which is great news.

Gene Tunny  19:51

Right. The US is obviously a major omission from that list of countries. Do you think there’s any prospect of the the US, there are some states out there that you mentioned, is that right? But the whole US there’s no federal cap and trade scheme in the US is there?

Michael Azlen  20:09

No, and I think it’s unlikely we’re going to get a federal scheme, because of the, you know, the polarisation, you know, at the federal level, but but what we’re seeing Gene is, you have the state of California, and then you have 11 states on the east coast. So we already have those 12 states. Three months ago, the state of Washington, the 13th US state launched its own carbon market. That market launched three months ago. And in the last six months, New York State has announced it’s going to launch a full blown cap and trade carbon market probably within 18 months. So things are happening at the individual state level, but I think it’s unlikely we’re going to get federal carbon pricing.

Gene Tunny  20:52

Gotcha. And where’s Australia sit in this? So do you have any thoughts about these, these A double C Us or ACCUs that we have here? Is that something you’re not interested in investing in?

Michael Azlen  21:04

So in the fund, we have a market entry framework that has a number of criteria that a carbon market must pass in order for us to onboard that into the fund. And there’s very practical considerations like access to that market. But then there’s there’s other considerations such as, you know, transparency, country risk, policy risk, currency risk, and items like that. So, you know, on many of those, of course, Australia being a, you know, a Western democracy, there’s no issue, but the actual structure of the ACCU market in Australia is somewhat of a hybrid between the regulated market which has, you know, a cap which gets lowered every year, and the voluntary market, which is unlimited supply effectively. And, and therefore, when we apply those market, market entry, that market entry framework against the Australian market, it simply doesn’t pass it, it’s it doesn’t meet the stringency test, because of the fact that it allows voluntary project supply units to come in of very questionable calculation methodologies. And and really the other thing is Gene, durability. When you have a project that it I think we can measure that it may have sequestered carbon, but but it what is the risk of reversal? And how long will that carbon be stored, if it’s only stored for 10 years and then released back into the atmosphere, well, then you know, that that perhaps hasn’t been a very valid carbon credit. So durability and risk of reversal of the carbon then being re re emitted is very high. And so projects, such as soil carbon and whatnot, they do have this potential for risk of reversal and therefore low durability. Most projects now that I think more corporate buyers are looking at more permanent removal, such as, you know, direct air capture, and other strategies where you can prove long term, you’ve pulled the carbon out, you’ve injected it deep underground, you liquefy it, inject it into a storage well, for very long term durable storage, over 100 years, or maybe even over 1000 years. So you can really demonstrate storage.

Gene Tunny  23:21

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  23:26

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis studies and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, We’d love to hear from you.

Gene Tunny  23:55

Now back to the show.

Now, who ultimately needs these permits, it’s emitters isn’t it? It’s big companies that are polluting. So smelters and power generators, fossil fuel generators. Is that right? They’re the ones who ultimately need it. They’ve got the demand.

Michael Azlen  24:17

Yeah, so in a cap and trade programme, the government controls the total quantity of emissions. But because there’s a limited number of permits, exactly, as you said. And the way they decide who’s in is they normally set a threshold Gene. So in most markets, it’s a 25,000 tonne per year threshold. So any company that emits more than 25,000 tonnes per year they’re notified by the government they’re in, they don’t have a choice. So that’s why we we call it a compliance instead of a voluntary market because you must comply. It means that the government audits you every year, and you must give the government the permits based on the audit. So if you we audit you and you met 2 million tonnes by April of this year, you have to give the government 2 million permits and the government controls the supply of those permits. So that’s a cap and trade. Every year the government, in the case of Europe let’s say, we, we sell at auctions 1.3 billion permits, at the end of the year the companies are audited. And if the total emissions are also 1.3, the companies then give those permits back to the government who destroy them, they they destroy the permit, and that that compliance cycle for one year has now been completed. The second year now the government sells 1.2 billion, destroys those then 1.1, then a billion then 900. So every year the supply of permits is going down. So we know within the ecosystem 1000s of companies, someone must select themselves to stop emitting carbon. And that’s the beauty of the mechanism Gene, it allows the price, the market sets the price of carbon, and that price signal is taken by participants and internalised. What do I mean? They compare the market price of carbon to their internal cost of abatement. In other words, the CEO calls in his head of engineering and says, John, you know, we’re emitting 2 million tonnes a year, it’s $100, that’s costing us $200 million a year. Can you get her emissions down? He says to the head of engineering, right? He’s profit motivated. And the head of engineering then looks at the latest technologies for that industrial process, and comes back and says to the CEO, yeah, we can get it down. But it costs $160 a tonne. Well, that that CEO has a very clear decision, then he’ll he will simply buy the permit for 100. But there will be another company in the ecosystem, where the head of engineering says it’s $40, we can reduce our emissions for 40 bucks a tonne. That’s a no brainer. The CEO chooses then to invest in that low carbon technology and they choose to cut their emissions. So this is the power of the mechanism. It forces what we call the three magic words, least cost abatement. Right, that those are the three magic words, tap and lower the emissions. That’s good, but we want to achieve it at the lowest possible cost. As an economist you will appreciate this is you know, this is a parsimonious solution to to this quite difficult problem.

Gene Tunny  27:17

Oh, yeah, absolutely. I mean, I think, yeah, that’s that’s something that economists would would agree on. I mean, one of the things that’s happened in Australia is because we, we don’t have a carbon price, but yet the politicians have made commitments to try and get emissions down, we end up doing all sorts of things that may not end up being that that least, what is it the least cost of abatement?

Michael Azlen  27:41

Yeah to achieve least cost abatement. Yeah, yeah. So because we want to we all want to cut emissions of course, we’ve seen the terrible impact, but we don’t want to do it at any price, right, we want to do it at the lowest possible cost. And so in a carbon market, as we keep lowering the number of permits, the supply, we know we as long as we have liquidity and price discovery taking place in that market, that that is important. We can be quite confident it’s the companies with the lowest cost they self select themselves to choose to reduce their emissions. And the reason they do it is they make more profit. I mean, they they’re not being green or ESG. They simply are reducing their emissions because they make more profit.

Gene Tunny  28:19

Yeah. Okay. I’d like to ask you a couple of questions about the market some of the technical details. Is there a futures market in, in these permits, the derivatives? I mean, what’s the, what’s the market look like?

Michael Azlen  28:34

So in each market that we invest in is slightly different in four of the five markets Gene, there is exchange listed futures and exchange listed options that trade like many other commodities, like oil, or wheat, or corn or, you know, other commodities. And most of the liquidity is in that exchange listed futures market. Most of the trading activity in carbon, probably no one knows the exact number, but I would say 70, or 80% of the trading activity, is those big end users hedging their carbon obligation. And as you said, it’s the power sector. electric utilities, steel, cement, chemicals, glass, these high emitting sectors are the main participants in, in carbon markets.

Gene Tunny  29:18

Gotcha. Gotcha. But they’re not your investors are they or are they? Oh, you’ve got no, no, no. Okay. So, but you’re you are participating in the market, but they’re the ones who ultimately need the permits. Okay. Gotcha. That makes sense. What about foreign exchange risk you mentioned? I mean, what you’re saying there, it sounds really embarrassing for Australia for our ACCUs, those criteria that you set out and how we don’t meet them over here. That’s, yeah that’s quite embarrassing for us, I imagine. You mentioned foreign exchange risk, do you hedge that foreign exchange risk?

Michael Azlen  30:00

In the fund? We do yeah. So where we invest in, you know, in a carbon market and in another currency we hedge that out. That’s, you know, quite common in our industry.

Gene Tunny  30:11

Gotcha. Okay. So we’ve, we’ve talked about, you know, regulated and you’re in the regulated space versus voluntary. I was surprised just how much larger the regulated is than the the voluntary, I suppose it makes sense if it’s, if it’s compulsory. You talked about a euro, the European scheme, and then the UK scheme. To what extent are these markets connected? Can I buy permits in in one scheme and use them in another? I mean, how does that how does it all work? Are they are these markets connected in any way?

Michael Azlen  30:48

So the long term plan, Gene is for carbon markets all to link together. So to give you an example, you know, four or five years ago, Switzerland had its own separate carbon market, and then it chose to link with the EU carbon market. And that is the long term trajectory. I think if we look 10 or 15 years into the future, hopefully, we initially will have maybe regional carbon markets, Asia, North America, South America, that kind of thing. And then eventually, one would hope, one global carbon price and carbon market, and we believe the asset class, you know, now is trading about 70 billion a month, as I mentioned, we think that, you know, when when China, South Korea, Mexico, Brazil, Japan, when all these markets spin up in the next three to five years, we’ll be trading probably well over, you know, half a trillion a month, I mean, it’s going to be a huge asset class, probably overtaking crude oil as the most heavily traded commodity in the world, probably within five to 10 years. So strategically, I think it’s a very important asset class. One of the very unique things is Gene, they’re not linked yet. So even though the California market the permit covers one tonne, same same commodity as the one tonne in the European market, because there’s no fungibility you can’t bring the permit and hand it in, in Europe, from California. When you look at the cross correlation. It’s zero, effectively. So to give you an example, this year, year to date performance, the European market is about flat on the year, the UK market is down 40% on the year, the California market is up 20% on the year, and the RGGI market on the east coast of the US is up I don’t know about 5% on the year. So you can see just from these numbers, very diverse performance, there’s no cross correlation. So by investing across all five of these markets, your overall portfolio volatility really comes down of course, because you’re, you’re nicely diversified. While it doesn’t necessarily impede your return expectations. So that’s that’s one of the key observations of our research paper was this this very low cross correlation between carbon markets.

Gene Tunny  33:03

Gotcha. Okay. Yeah, I’ll have to, I’ll put a link in the show notes to that. Michael, yeah this has been fascinating. I’ve learned a lot about about these markets. And it’s, it’s, there’s a lot I’m gonna have to follow up on just to make sure I’m as across it as I can. Can I ask you about your, your story how you ended up at Carbon Cap? I mean, you’re you’re in the UK now, aren’t you? You’re, so you’re based in London, you’ve got an office in Mayfair. But you’re obviously, I mean, you don’t have a British accent do you so what, can you tell us a bit about your story?

Michael Azlen  33:35

Yeah, so I’m a Canadian, and worked, began my career with two of Canada’s banks as a proprietary trader. After, I then came to London to do my graduate degree at London Business School. And I’ve actually been teaching now for 18 years on the graduate degree programme at London Business School. The last five years, I’ve been teaching a segment on the impact of climate change on the asset management industry, which is a very, very interesting and fast moving area. I worked in the hedge fund industry here in London in a number of roles. And then I set up my first business, regulated investment management business in 2005. And I was very fortunate Gene to grow that business to a decent size. And we were approached, and I managed to sell the business to a Swiss public company. And it was after that sale, and my earn out period, I had a little bit of time off, but that’s when I became deeply involved in research into climate change itself, nothing to do with carbon, I was, I was quite sceptical of the whole area of climate change, you know, because, to me, the you know, the temperature and weather didn’t seem that bad. And I also had known that the climate had always changed prior to humans being on the planet, quite dramatically right? Humans have only been on the planet 250,000 years or so. And we’ve got paleo climate records way back before then showing great variability in weather and the climate system. So I just sort of wanted to bottom out those two questions. And I’ve now read more than 200 Peer Reviewed papers, I was I was in a fortunate position because I didn’t have to work, I could simply focus on that. And I’m a bit geeky, you know, I like to read these these peer reviewed academic papers, and I fairly quickly, over about two or three months became convinced that the problem is extremely acute. If you’re an empirical person, you just weigh evidence, you just base your decision on evidence. It’s, it’s, you know, the concentration of co2 now in the atmosphere at 425 parts per million. I mean, it’s increased by 50%. And it just keeps climbing higher and higher. And the impacts, I don’t know, if you, you saw the data that came out just a few days ago, on September, me, not only was the month of September, the hottest September on record, but the deviation above the previous record was enormous. So the impacts that we’re seeing now are becoming, you know, massive. I know, in Australia, in particular, there’s been, you know, some some very big impacts both in fires and flooding events. And those are unfortunately likely to continue. So hopefully, you know, we can address this so that, that, that spurred my passion to do something Gene and I was fortunate to be able to get a Swiss private bank to back me to launch my second business. And now we have a very interesting Climate Impact Fund.

Gene Tunny  36:26

Hmm, good one, good one. Can I ask you about this course you are teaching, the impact of climate change on the asset management industry, I mean, I mean, you’re a case study of that, I mean, yes, obviously, you know, carbon now is a liquid asset class or an emerging asset class, as you call it. But are there other impacts that you that you consider in that course? I’m just just interested in what the content of that is broadly and what you see is the, those impacts.

Michael Azlen  36:54

Well, I mean, it’s a, this is a massive area now for, for academic investigation. It began with things like, for instance, looking at a diversified equity portfolio and trying to calculate initially, you know, the carbon footprint of that portfolio as a proxy for you know, the emissions. And then academics began to research well, what is the difference in performance between a portfolio that has a bigger carbon footprint, they call that a brown portfolio, versus a portfolio with a with a less carbon foot a green, and this Brown versus green, if you just Google that, that spread of performance in equities, and in fixed income markets, has been an area of very great research. But things have moved on since then. And now, what the research is looking at is trying to really identify with the actual climate risks that individual corporates are exposed to, either insurance companies in their in their insurance portfolio right with regard to flooding risk, fire risk, things of this nature. You can imagine banks, their lending risk. So in terms of a kind of Basel three stress test, but, but instead of looking at credit quality, we’re now trying to assess are they lending money to companies where those companies have undue climate risk, and therefore, you should factor that in? So it really extends to a pretty wide range. It’s a really fast moving and interesting area.

Gene Tunny  38:25

Gotcha. Okay, I’ll have to have a look at that. I mean, that might be a topic for another episode, I won’t to go into it now because you’ve, you’ve given me, you know, lots of good stuff to think about already, Michael so that’s been that’s been terrific. Any final thoughts before we wrap up?

Michael Azlen  38:42

No, I would just like to say, you know, I think everything begins and ends with education and learning about a topic, if you’ve got questions, if this has interested you today, I would direct you to our website, we have an open access website with a research library and we have a section on the website of little educational videos, short snippets, to help people understand how does the, you know, what do you mean by voluntary carbon market? What do you mean by regulated carbon market? And we have information, of course, on the latest science on what’s happening on climate change. So I would encourage people to, if you found today interesting, to you know, do your research and and please use the resources that are available our research paper, I think it is not available on the website, but I would happy, anyone who emails me, I’d be happy to send it and for any, you know, Australian based investors that would be interested in thinking about our fund, you know be of course very happy to have that conversation too.

Gene Tunny  39:43

Yeah, absolutely. I mean, I imagine it could be of interest to with yeah, super funds. I mean, we’ve got some big, obviously some big super funds here and we’ve got, I mean, I’m in Queensland here we’ve got a Queensland Investment Corporation, which is owned by the state government. I know that they’ve got, they’re interested in alternative investments, I’m not sure to what extent they’re interested in the carbon market, but anyway, it’s uh, yeah, absolutely if there is a, if there is someone listening right now and investors in Australia or anywhere, yeah, I think I think definitely check out your website, Michael and you know, this is obviously not financial advice, I can’t, this is general information only. But, you know, certainly, this is, it, I think you’re right. It is an emerging liquid asset class, and it’s something that really has to be considered in future portfolios. So, Michael Azlen that’s been terrific. I’ve really enjoyed the conversation. So thanks so much for your time and for your insights really, really thought it was great.

Michael Azlen  40:46

Gene, thank you very happy to participate today. Thanks for inviting me.

Gene Tunny  40:50


Michael Azlen  40:51

Cheers. Bye bye

Gene Tunny  40:53

Righto, thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


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Podcast episode

Uncovering the Secrets of Valuing and Selling Businesses w/ Arthur Petropoulos, Hill View Partners – EP211

Show host Gene Tunny is joined by Arthur Petropoulos, founder and managing partner of Hill View Partners, a company specializing in mergers and acquisitions, business sales, and capital advisory services for middle market companies. They discuss how Arthur finds, values, and sells businesses, as well as the wider economic impacts of his work and the role of private equity. They also explore whether we should be concerned about modern-day Gordon Gekkos and how the business landscape has changed since the 1980s. 

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What’s covered in EP211

  • Business sales and capital raising with Hillview Partners. (1:22)
  • Business brokering process and outreach strategies. (5:18)
  • Business valuation and acquisition strategies. (8:10)
  • Buyers and sellers in mergers and acquisitions. (14:47)
  • Business sale process and foreign investment constraints. (17:34)
  • Selling a business, focusing on narrative and information sharing. (24:18)
  • Private company sales and legal risks. (28:00)
  • The role of capital markets in the economy. (38:05)
  • Private equity’s role in the economy, including pros and cons. (44:10)

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About this episode’s guest Arthur Petropoulos:

Arthur’s YouTube channel:

Hill View Partners social media:

Transcript: Uncovering the Secrets of Valuing and Selling Businesses w/ Arthur Petropoulos, Hill View Partners – EP211

N.B. This is a lightly edited version of a transcript originally created using the AI application It was then looked over by a human, Tim Hughes from Adept Economics, just in case the otters missed anything whilst they were munching on fish. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:01

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory, evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show.

Hello, thanks for tuning in to the show. I’m delighted to be joined this episode by Arthur Petropoulos, Founder and Managing Partner of Hill View Partners, which specialises in mergers and acquisitions, business sales and capital advisory services for middle market companies. We talk about how Arthur finds businesses to sell, how he values them and how he sells them. We also talk about the wider economic impacts of the work he does and the role of private equity. Should we be concerned about modern day Gordon Gekkos or were the 1980s different from today? Okay, let’s get into the episode. I hope you enjoy my conversation with Arthur Petropoulos.

Arthur Petropoulos from Hill View Partners, thanks for coming onto the show.

Arthur Petropoulos  01:22

Good to be here. Gene. I appreciate it. I like, contents great, listened to a bunch of it and happy to add to the archives.

Gene Tunny  01:30

Excellent Arthur, what I’m looking forward to is learning a bit more about what you do and in Hill View Partners and the broader community that you’re part of the broader industry. One of one of my favourite podcasts is David Bahnsen’s Capital Record. And David’s someone who’s always talking about the strength of American capital markets, and just what that contributes to the economy. So yeah, I’d be keen to explore that with you. To start off with, could you tell us a bit about what you do at Hill View Partners please?

Arthur Petropoulos  02:06

Sure. So fundamentally, our company helps companies do two things. We advise and assist companies in the sale of their business and we do the same for companies that are seeking to secure capital. So you can think of it investment banking business brokerage intermediary, but the simplest way to explain it is when you think of a real estate broker, or help people sell real estate, we do the same thing, but with businesses, and we’re helping people find capital for those businesses. And it’s a real area of specialisation and focus, privately held companies generating one to 10 million in pre tax profit, typically owned by families, entrepreneurs, small groups of investors. So in the broad scale of the economy, it’s kind of that line between the lower middle market and middle market, that’s our area of specialisation. And really where we focus.

Gene Tunny  02:53

Right and what sort of businesses would they be? I’m just trying to think I mean you’d have some professional services businesses, do you have bakeries or…

Arthur Petropoulos  03:02

So if you think of kind of the, and the reason why we started the business and folks in this space is I spent about 10 years in New York, doing this both on the investment banking side of helping companies as well as the private equity side of buying companies. And what we found is there’s this doughnut hole of sorts, where very large companies kind of work with the Wall Street investment banks, and then very small companies work with the local business brokers. But there’s a huge swath of stuff in between. So you might have a software company that it’s kind of it has a very specialised niche that generates a million or $2 million in profit a year. I think everybody thinks of software’s giant companies are just growth growth. There’s plenty of kind of very niche software’s dashboard, task force management, pricing tools for particular industries, whether it’s construction or satellite dish installation, it could be anything, right. And those companies are a lot of what we do a b2b and b2c services. So you could think of window cleaning companies we’ve sold or gutter cleaning or roofing companies or, you know, irrigation, those are broad Real Estate Services, then there’s just general kind of like specialty manufacturing or distribution companies. So we sold a company that sold cleanroom supplies into pharmaceutical companies. There’s another company that manufactured component parts that went into aeroplanes. And so what I will say the consistent theme for companies we represent so we really, we’re agnostic of industry, so so long as it fits the profitability criteria as well as kind of the complexion of ownership. But what you find after iterations and iterations is that companies in the size that we represent, are not competing on the cost of capital. They do not provide commodity products, and so whatever it’s b2b or b2c services products offering, where we’ll be is there will be something specialised about it, there’ll be something niche something proprietary, there’ll be something they do better than anybody whether they have just better economics, whether they have access to certain markets or customers, or whether they just have a capability or an aptitude that’s unique. There’s usually something so that’s, you know, that’s part of the fun. And part of the exercise is as we’re talking to new people, figuring out what kind of that secret element is to their, to their respective business.

Gene Tunny  05:18

Right? Can I ask you, how does it, how does it work? I mean, so say you’re in business broking. And you’re selling some of these businesses, you’re trying to get the best price for the the seller, and then you get obviously commission, I don’t need to know, you know, that’s probably proprietary and confidential, but I’m interested in, like, do they pick up the phone? Or do you go actively looking for these businesses? You’re in Rhode Island, are you driving around Providence, and you go up to New York City? I mean, how do you how do you do it?

Arthur Petropoulos  05:51

No, so I mean, look, we endeavoured to make this business a national and international business from the get go, because I think historically, it has been a hyper regional business where you have, you know, three guys sitting at the back of a bar, you know, drinking with the guy who owns a local lumberyard, right, or whatever the business may be. And I think as things have evolved, where middle market businesses have, now they’re doing much more national and international work, we find that there, it’s really about just having the dialogue with people and really understanding the objectives and facilitating the process. And so we work with companies all over the states, as well as international to a lesser degree, but Western, Eastern Europe, Southern Asia, then a small amount of Middle East, but it’s really about finding the business that meets kind of the size, ownership complexion, I think season and in the business lifecycle where they’re looking to accomplish one of these goals. But it’s a because it’s not, it’s not a hyperlocal business. Because there’s you can’t just drive up and down a main street or high street and find a lot of these things. They’re kind of, there’s more of them than you think in some places. And there’s less than you think in other places, right? It’s a it’s a quirky business, because you might not realise but there’s a large like, you know, pillow manufacturer down the street from you, or a software company that’s in just this nondescript building that does this thing. And so, our outreach, we do some direct outreach, whether it’s email, whether we’re chatting on LinkedIn, with people, we put out content that on LinkedIn, as well as YouTube, we have two videos going out every week, kind of just explaining different categories, we get a lot of inbound conversations from that. And then I think some of the best relationships and conversations you have are from other happy customers. And so every time a deal closes, and our client’s very happy, they do tell their friends and say, Hey, we know a firm that did a real good job for us and that and engenders some goodwill. So, you know, I think there’s this kind of direct outreach inbounds there’s some warm outreach from kind of relationships and referrals. And then there’s just kind of goodwill generated by I think, good results.

Gene Tunny  08:04

Good one, and in that process of the sale, like getting it ready for sale, are you, are you involved? Are you providing advice on business operations, governance, that sort of thing to try and improve the value of it at the sale?

Arthur Petropoulos  08:20

Yeah, I think there’s certain things that, that are malleable at that stage of the game. There’s other things where it’s a matter of characterization and kind of just understanding it and documenting because a lot of times the processes are there, the people are there. And it’s just a matter of kind of memorialising precisely what the different people do, how are they cross trained? What are their capabilities? What are the processes of the business relative to origination and sourcing of new business operations and the administration of the company as well as kind of the execution and fulfilment of the actual work? And so, most of these things are there. They just need to be crystallised as part of the narrative. And but look, there are time to time where as we’re having those dialogues, where there are things that, hey, you know, it would if this, we don’t want, we call kind of like single source reasons for failure, right? And so if there’s one employee that does this one very important thing, who else could do that if they couldn’t, right? Or if you’re getting certain raw goods from one particular source, what happens if you can’t get it from them? And so I do think it’s kind of parsing through each part of the business and trying to poke holes in it, that has a lot of good dialogue, because the more we can try to poke holes, the more we either get the answers as to why there’s a safeguard or, you know, it allows for the implementation and incorporation of a safeguard and mitigation means at that juncture.

Gene Tunny  09:46

And how would you know, if you’re getting a fair price, I mean, how do you know what sort of sort of price to to aim for there? Is it multiples of earnings or the how do you actually work that out? And also how do you do it across all these different industries you mentioned you’re industry agnostic. I mean, yeah, that you mean, you must have to get across a lot of new industries really quickly. How do you do that, Arthur?

Arthur Petropoulos  10:10

Sure. So by virtue of focusing, I think on the size of the profitability of the company, and by virtue of that it must be profitable. Capital tends to kind of work in different ecosystems. And what we find is that the delineation of ecosystems is much more predicated on the size of the company than necessarily the industry in terms of capital and in terms of acquirers, right. So you have, if it’s a not profitable business, but it’s growing fast, and it’s that venture capital world, or growth equity, right, that’s its own ecosystem, whereas private equity for the profitable companies that we work with, strategic acquirers in the middle market, that’s its own ecosystem. So it’s fascinating, but you’d be surprised at how many of the counterparties on the other side are looking kind of agnostic of industry as well. And more specific to size and complexion. And then kind of large private equity, and publicly traded companies have their own ecosystems as well. So we focus on our one ecosystem, which is important to do. And then but there is always kind of a specialised research that’s necessary for a particular industry, because there are quirks and idiosyncrasies with any industry as we’ve done, you know, 100 plus transactions as Hill View Partners, and I’ve done 100 plus transactions in my life before starting the company, you do learn kind of which, where to look and how to research different industries. And so it’s not so much that you need to know every industry, but you have to know what to look for in every particular industry. So as we kind of get into any particular new ones, and there’s not many that we have not been involved with, but we still take a fresh look towards it. You know, it’s a matter of finding who are the active parties, we have our own internal database, as well as some, we subscribe to external databases and Cap IQ, PitchBook Data, there’s a handful of them out there. And we do a lot of our own kind of proprietary research. I think the difference in largely what we do is, many intermediaries will just kind of gather all the information, puke it to the universe to 20,000 people and just wait for the phone ring. We are proactive, not reactive, we do a lot of research upfront. That way we’re pinpointing who to reach out to. And what that ultimately does, is A) it mitigates a lot of the kind of typical pain points. So shrinks the duration limits, distraction keeps the discretion generates better results. But also, it really fine tunes the conversation. So getting back to your question about multiples, that’s usually a good place to start, right? The fundamentals are the driver. So if we look at it, you’ll see like different stratas of size will usually have different multiple ranges. So a company that does a million dollars in EBITDA will generally trade at four to seven times EBITDA, a company that does 2 million will trade at five to seven, five to eight, maybe 3 million you probably see six to a four, 5 million, maybe you start getting towards nine, 5 million plus, can you get to 10 at 10 million, can you get to 12 times but there’s this multiples expansion. And candidly, I mean, that’s a lot of the private equity thesis, right is if you buy 10 $1 million companies for $6,000,000. Six times multiple for a million dollars of EBITDA for each acquisition, once you have 10 of those together, it’s worth 10 to 12 times EBITDA right? So that’s how you spend 60 and it’s worth 120. But our logic, our research is finding what the comps are, looking where it kind of falls in the strata. But then also, by doing research about finding where our client is the missing puzzle piece for someone’s bought a puzzle, right? So yes, well, you know, if we sold a company that made a certain type of widget, that mega widget company just doesn’t have this one thing to sell, right? We want to talk about that as a buy versus build opportunity for them. So yes, you have the fundamentals but the two other reasons why companies are bought are A) access to certain end markets, but B) proprietary capabilities. And so if it’s something special about what the company does, or if it has very unique access, then we can pivot the conversation to say, Well look, yes, you may think that there’s $1 million EBITDA company’s worth $6 million. However, it would cost you $15 million to start this company from scratch, to build, to take time the resources to allocate to try to build this. So maybe you can buy it for split the difference, right? And so what we say is we wanted to the fundamentals are the starting point. And then the access to capabilities and pivoting the dialogue to buy versus build. Those are the enhancing factors that hopefully we can get even better but to answer your question more simply a lot of research and a lot of conversations. That’s how we know we’re getting the best results.

Gene Tunny  14:46

Yeah, good one. Okay. And can I just clarify some things so you’re on the the sell side, you’re a business broker or an investment bank, or you’re similar, are you similar to an investment bank?

Arthur Petropoulos  15:00

Yeah, I mean, the key differentiator is investment banks deal with security. So they’re dealing with publicly traded companies for the most part, and we deal almost entirely with privately held companies. So that’s why we’re an M & A advisory firm would be the phrasing because we don’t deal with securities.

Gene Tunny  15:15

Yep. Gotcha. Okay. And private equity so they’re on the buy side. And is that companies like Carlyle Group, is it Carlyle is it?

Arthur Petropoulos  15:26

Yeah, so Carlyle, KKR, Blackstone are the really big ones. TPG, I mean, there’s a lot of them. And then there’s different stratas of them for size. There’s industry specialists. But yes, that’s generally the buy side are, so it used to be you’d have kind of two big buckets, you’d have private equity that were funded just to buy companies and sell them. And then you had strategic acquirers that were basically just large companies that would occasionally acquire smaller businesses or different capabilities. But now you have lots of strategic companies have have created corporate development and strategic acquisition groups. There’s private equity that buys strategic companies. And so it’s a bit more of a continuum. But yes, generally speaking, that is the buy side is companies and financial buyers and strategic buyers that are looking to make acquisitions. And we represent solely the sell side. So the companies that are looking to either sell or receive that capital.

Gene Tunny  16:22

Okay, so you mentioned your private equity, strategic acquirers. Could that include individuals or is it generally corporations at this or companies?

Arthur Petropoulos  16:34

So what’s interesting about the companies we work with, I was just telling someone, I believe we have the broadest swath of prospective acquirers for a company, right, like, if you were selling that bakery, you probably wouldn’t be selling it to a person or a few different people. Now, if you were selling a billion dollar company, you’re probably only selling it to private equity or a very large strategic company. But in our businesses say you’re selling a $2 million EBITDA company for $12 million, or $15 million, right? The buyers for that are going to be incredibly broad, it could be a publicly traded company, it could be a private equity firm, it could be a family office, it could be an independent sponsor, a search fund, a high net worth individual, right. So yes, it runs that whole spectrum. From of, of both size, and I wouldn’t, sophistication is not correlated entirely with size, right. So like sometimes the best buyer that knows something inside and out is just a person who’s obsessed with one particular field who really wants a company. And sometimes it’s the largest corporation. So the important part of our job is to just, you know, we say kiss a lot of frogs to find the prince, right or turn over, a lot of rocks to find gold, but it’s having all those dialogues, both within each category, and then across categories to make sure we’re finding the right the right home for a business.

Gene Tunny  17:54

Right and how long does it typically take to sell a business? Like once you get in touch, or once they get in touch or you find the business? You get the the contract to, to, you know, you’ve got the agreement to, I mean, I imagine you’re going to be an exclusive seller is that correct? You’re that…

Arthur Petropoulos  18:14


Gene Tunny  18:16

Gotcha. Okay, what what’s, how long would it typically take?

Arthur Petropoulos  18:19

This is not a shameless self promotion. But if you weren’t using Hill View Partners right, these processes can take, you know, 18 to 24 months. We want in the part of why that proactive versus reactive process is important is we want six month processes we want offers within 100 days. And then after the 100 day mark, it’s really the confirmatory diligence from an acquirer, but we have the process broken down and crystallised into different component parts. That way, the day we sign an engagement with a client, we are getting the information that we need, putting our materials together and doing the research about the acquirer so that we’re out there in the market within two to three weeks talking to people. We’ve pushed the dialogues through a process of asking people for follow up questions, having conversations, Zoom meetings, indications of interest, letters of intent, there’s, we have a lot of steps along the way to keep shaking the tree, if you will, right. And so that way, every time you shake the tree, things fall away, and things fall away, right. And that’s the fastest way to get to the conclusion, while not losing any of the substance cohesion or comprehensive approach to it. And so we find our processes we can run in a six month process, if sometimes it’ll slip a month or two, depending on if the diligence has taken too long, depending on negotiations, but largely speaking, six months start to finish. That’s the goal, and we stick to it.

Gene Tunny  19:44

Gotcha. And in the US, what are the rules around foreign investment like so if you’ve got a foreign company or or you know, high net worth individual wanting to buy a business in America, how does that is that a constraint is there, are there barriers there?

Arthur Petropoulos  20:01

I mean, not really because it doesn’t tend to be, you know, if you’re getting the foreign investors that will come and acquire businesses in the states are largely part of larger organisations that have a global business that’s doing something, right. Like the probability that someone’s going to want to move from Dubai to Oklahoma to buy a water hauling company is probably low. So, you know, candidly, we’ve had people I mean, look, I mean, it’s more likely, you know, that hey, someone’s moving it from, you know, from London and, and they want to buy a business in New England somewhere. I’ve seen those things. So Oh, no, it’s it hasn’t been an issue on our part. I guess there were a couple businesses that were a little sensitive relative to they sold into the aerospace and defence industry. So there was some prohibition against even then we were just told, like, don’t even bother talking to people in these countries, because couldn’t sell to them anyways. But that’s, that’s where we’ve seen so less about the individual or more if there’s kind of sensitive stuff that’s going into government agencies or something that they don’t want to have the exposure to foreign ownership.

Gene Tunny  21:09

Yeah, yeah. Just back on the sale process. So do you have a Expression of Interest process? And then you have a tender process? So how does that work?

Arthur Petropoulos  21:18

Yeah. So so we don’t we don’t go out there with an asking price on something, right? I mean, we can give some guidance in the sense that if someone says, Well, what are they looking for, this or that we can say well, you know, we’re seeing comps, we’re seeing transactions for companies like this falling in this range. Because we don’t want it to always just focus on the dollar amount too because the structure matters, the transition period for ownership matters, what happens to the stakeholders, the employees, the community, the buildings, that whatever it is, right, there’s a lot of variables. And so we’ll provide a little bit of guidance. But largely speaking, we let the process determine the price because the people we’re talking to are sophisticated parties, they know what these things trade for. And, and I think people know, we’re pretty communicative in the sense that we say, Look, if, if you’re looking to just kind of kick the tires and lob something in here, like don’t waste your time, like don’t waste our time either. And so we’re able to get down to the real bonafide parties quick. And in the process. Typically, there’ll be dialogue questions going back and forth, we have a data room that we populate, but we’re usually asked for an indication of interest, and then a letter of intent. So what that means is, send us an email tell us generally how you valuing this, how are you looking at structure this or that, because then we can have a constructive dialogue with the prospective acquirer so that when they finally put something forward on letterhead, they now have a good sense as to how probable it is that it’s gonna work. And it’s kind of had some dialogue, if you will, or discussion. So we like to have information sharing conversations, indication of interests, and more communication form a letter of intent. And a lot of that happens from day 60 to 90 of a process.

Gene Tunny  23:02

Okay, we’ll take a short break here for a word from our sponsor.

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Gene Tunny  23:37

Now back to the show.

Can I ask you about how you promote or advertise the businesses? I’m just thinking about real estate. And I mean, you look at some of the things that real estate agents are doing now particularly in, in capital cities in Australia, where people are mad about real estate, you know, they’ve got these cinematic type videos, they’ve got the the houses all dressed up, they’ve put a lot of work into it. And they’ve got these really impressive videos. I imagine you have a prospectus of some kind, like, how do you how do you promote it?

Arthur Petropoulos  24:14

Yeah, I would say there’s less style points in this business. Right? The because it’s less of an emotional acquisition for the most part, right? Like it has to make fundamental sense for companies to buy things. They’re buying capabilities. They’re buying access, like you know, it’s slightly a different sale than saying like, you know, imagine drinking you know, hot chocolate on the veranda on a Friday night, right? So, the product or if you will, or the thing that’s actually transacting has a slightly different approach. Now, that being said, must be professional must be crisp, clear, concise, but the substance of the narrative is more valuable than the form if you will. And so we communicate to the to the prospective acquirers. We have materials that we put together, it’s in our space, we found like the 100 page pitch book, you just everything gets drowned out in, in the one page thing is far too brief. So we have a happy medium that provides kind of the high level overviews of all the things that are important. We have data rooms that we support back, but we kind of sequence or phase the sharing of information. So that way we make sure people are focusing on the optimal or the key elements of it first. But yeah, so it’s it’s, it’s clean, it’s crisp, it’s direct. It’s not as not as razzle dazzle as some other things. But the goal being to communicate the narrative clearly, communicate the value proposition clearly to the prospective acquirer, and getting their attention. Because, you know, the trick in this business sometimes is that if we’re representing a small company to a very big company, the hardest part of that dialogue is getting the first part of their attention, right? If we can get their eyeballs on it, and they like it, well, then it just creates traction amongst themselves, right? Because now they’re saying, Well, this is interesting, want to look at it want to learn more, and they have their own momentum. And at a certain point, they don’t really care what I want to tell them, they care what they want to look at, right? And so they say, Well, I want to learn more about this and learn more about that. So you can’t drown them out with your own narrative. But you do have to make sure you’re giving them enough for not too much and get the attention. And then if the attention leads to interest, it kind of becomes self fulfilling at that point.

Gene Tunny  26:24

Gotcha. And what if, say, I’m looking at, I don’t know a plumbing supplies business in Milwaukee or something like that, could I actually, and I’m a prospective buyer, could I line up a visit to the, the company’s premises and talk to the management?

Arthur Petropoulos  26:41

Sure. At a certain point of the conversation. So we try to phase things out, right? Like, you should be able to, if you are the plumbing supply distributor guy, and you know, this business, right, so we have to kind of validate prospective buyers. So what’s your track record? What’s your history? What’s your industry knowledge? What’s your financial capability to do these things? And let’s say you check out on all these things, well, then you really should be able to give an offer, or at least a skeleton of an offer just based on numbers and conversations with ownership, right. And so there is a certain, so only when we get to like a high level structure, that you would, you can at least put the ? on the back of an envelope. And that ownership can get on board with that we then pivot to you know, whether it’s an in person meeting, facility review, I think the problem with a lot of intermediaries is they allow too much access too soon. And it’s like, you know, this isn’t a field trip, right? Like, we’re not looking to have like 25 people come around and kick the tires and things because it creates an environment of instability for the employees. It’s not good, right? And so you really don’t want to do that until, you know you have something and we try to push. And it’s a tug of war sometimes, but we really try to push things as far as we can. Before we’re doing anything, that could be a disruption.

Gene Tunny  28:00

Gotcha. And you mentioned so you’re trying to validate or vet the buyers, is that that’s a risk mitigation measure I it? Are you, I mean, you’re I guess you want to protect the legacy of the business for the person who sells it. Like, what’s the what’s the thinking there?

Arthur Petropoulos  28:19

It’s not so much from a, I guess it’s qualitative in a way, right? Like, we’re not gonna we don’t want to sell businesses to criminals, or people who have bad track records, you know, in terms of like treating employees and stuff. But, you know, we also don’t, you know, it’s not like, oh, I don’t want it to what’s the Aussie word, you know, a bug in some way, right? Like we don’t like so it doesn’t get to that level, where it’s like, I don’t want these kinds of people or those kinds of, it’s really about capability. It’s about, you know, it’s about industry experience knowledge, feeling comfortable, that they would be a good steward of the business from a fundamentals perspective. Because you’d be surprised. I mean, you know, we always joke and say it’s separating the prospects from the suspects. But it’s, you there’s, there’s a lot of people out there that I think are looking at businesses is like, you know, when you sell a house, right, like you ever sell a house and you put the house for sale, and take buyer, the neighbours show up? Yeah. And it’s like they’re not buying the house. And it’s like that same neighbour, it’s like their hobby is to go look at houses every weekend, right? And they just go in and they like, eat the food and kick around and like, take some paper towels. And so in business, you’d be surprised that a lot of the same names show up and so we want real buyers, but we don’t want to waste any time. There’s no value. There’s no style points to fluffing up the numbers of interested parties on the front end. It’s no good for anybody. So it’s more about capability and are they a bonafide prospect. And and you know, qualitatively, are they going to be the right steward. It’s less about, you know, did they go to a proper preparatory boarding school. It’s more about actual capabilities.

Gene Tunny  30:01

Yeah, yeah. And is this regulated Arthur? Like I imagine it’s not SEC, but are there state regulations around this? I mean, what’s the

Arthur Petropoulos  30:10

Yeah, and there are there are SEC regulations pertaining to private company sales, you know, relative to sizing and structure of deals in a way that does not kind of conflate with securities. And then state by state, there’s different considerations depending on on what it is, for the most part, though, this is it’s kind of free market, third party transactions to other people who are owning things. And, you know, not many of these transactions are going to be either, you know, pivotal to national defence, or, you know, under like, Hart Scott Rodino Act for like, antitrust and stuff like that. I mean, these tend to be, you know, if you said, What is kind of the typical situation, it’s a company that does a thing, either for a particular product or geography, there’s a giant company or bigger company that does it everywhere else, and wants to get access to their geography, and they kind of bolt them on. So. And that’s, you know, sometimes it’s merger of equals, sometimes it’s just one person, but a lot of times it’s kind of the aggregation strategy that’s looking to bolt something on. And so it is regulated, and there’s certainly laws and rules to it. But it’s not to the same level of securities, because not dealing with, you know, selling shares, small amounts of shares to large number of kind of passive investors.

Gene Tunny  31:31

Gotcha. Is there much legal risk on the seller side, I’m thinking, I mean, you know, with any sort of tender process or auction, there’s always, you know, there’ll always be a significant number of people where there’s the the winners curse, so to speak. How do you deal with that?

Arthur Petropoulos  31:47

Yeah, so part of the negotiation. And so once we have a deal, basically, under a letter of intent, you enter into the diligence phase, in which case, the buyer puts forward a purchase and sale agreement for the consummation of the transaction. So unlike real estate, where you have a purchase and sale agreement that you sign, and then you enter into diligence, in corporate transactions, you sign a letter of intent, you do the diligence, and then the purchase and sale agreement is signed, kind of coterminous with the closing of the transaction. But within that, within the purchase and sale agreement are representations and warranties both ways, right. There’s disclosure schedules, so that a seller would have to say, Are there any pending litigation? Is there any complaints? Or what are the customers you’ve lost? There’s things that have to be put in there. And from a buyer’s perspective, they have to say, what they are willing to take, you know, at face value. And so the way we an old, an old mentor of mine said, reps and warranties are there for, you know, fraud, willful misrepresentation, things like that, to protect buyers against, but it is not in what he called, he said, It’s not schmuck insurance, right? It’s not, it’s not insurance that you paid, you didn’t pay too much, or you didn’t know this and do that, right. Like, this is a business between sophisticated parties. And so if a seller sells a company, you know, without using a person like us, and they don’t get a good price and don’t get a good structure, they really don’t have any recourse to complain about it, because that’s the deal they agreed to. Buyers similarly if they, you know, if it’s not, if it’s not in the contract, then then it’s, it’s not part of it. So point is, it sounds more adversarial than it is. There’s just kind of customary reps and warranties that very clearly define what the post transaction risk or exposure is from both parties. They are negotiated pretty heavily by the attorneys. And, you know, as it pertains to the business elements, we get involved as well. But our general positioning on it is we want to protect the buyers from fraud from, you know, willful misrepresentation things we don’t know, which don’t happen with the clients that we work with. But what we don’t want is for anybody to just say, like, I bought the company, I mismanaged it. And now I want, you know, some money back because I didn’t do the right thing, right? That’s not That’s what we avoid. And nobody really asked for that. But we don’t want it to be grey.

Gene Tunny  34:15

Right. So do you engage the lawyer or does the seller engage the lawyer?

Arthur Petropoulos  34:21

It depends on the situation. And it depends on what kind of an attorney a seller’s using. And so sometimes, if a seller is using a corporate attorney for a lot of activities that they’re with they’ll say, hey, I really want our attorney in the mix here. And that’s perfectly fine. We work with lots of people’s attorneys and that usually when we get the letter of intent, negotiated but not signed, that’s typically when they come into the process review that and then we work alongside them shepherding diligence. But there are other times where people say like, you know, I you know, my attorney is a great guy. He’s a great friend. You know, he helped me buy my flat in Brisbane, but you you know, I have a $50 million business, maybe he will play a part in the process. But do you have someone that you can bring in that just does corporate transactions all day, in which case, we have a global network of people that we’ve worked with, that we can bring in, depending on the locale of the business. So it’s situational. And we can work with clients either way, depending on their preference, but we always keep a strong roster of, of attorneys. And I, what I’d say is the right types of attorneys, because you can have, you know, anybody can pick up the phone book and call up the most expensive law firm in the world. But it’s where do you find kind of that optimal mix of value and capability? And so whether it’s people that have spun off of the big law firms running smaller boutiques that are slightly off the radar, or are more tactical people, we like those kinds of relationships.

Gene Tunny  35:46

Yeah, very good. I should ask Arthur, how did you get in, how did you get into this? I mean, you mentioned you worked on Wall Street. Could you just tell us a bit about what you studied? And did that help you get into Wall Street and then your path to Hill View? Partners, please?

Arthur Petropoulos  36:03

Yeah, sure. So when I grew up, my father used to read, he had a very broad spectrum of books he was interested in, and ideas. And so I remember, you know, it was gonna be Plato’s Republic or Aesop’s Fables. But he read a lot of history books to us. And so I remember going through like, you know, Amerigo Vespucci, he was travelling the world selling pickles or the Dutch West Indies Company was fine, you know, whether it was silk or spices, but it felt like the history of the world was the history of business and war for other things, but business, right commerce, and, you know, the idea of a finite amount of resources and an infinite amount of want. And so when I studied more and I would get into like the industrialization of America, and, you know, Carnegie Steel turning into US Steel, and all of these aggregations, I found the combination of business transactions of finance of growth and in aggregation of industry to be fascinating. And when I grew up, the only people I knew that who really had their hands in these things were always attorneys, you hear like, oh, this attorney just helped this person sell this company. Because I do think particularly in days past, I think a lot of attorneys kind of served a dual role in these things. And they still are, you know, key advisors to companies. But so I went to law, I studied undergrad business, I actually wanted, I wanted to get a minor in music theory, I played the piano. But I remember my mom said, if you want to play the piano, you can just leave school and stay in the living room. But we, but anyway business was the key focus in undergrad, and I went to law school, and law school doesn’t have majors, but you can effectively create your own focus. And so we created or I focused on corporate transactions, both from a mergers and acquisitions and financing perspective. And it was when I was in law school that I was reading the case law, you’d have to study of your KKR and acquiring Nabisco and Philip Morris, and this and that. And when you started reading all of these cases, you’d say, well, who is that? And how do they work? And how does this work? And so once I figured out, what is an investment bank, what is a private equity firm? How does capital work, who are these lenders, that’s when I think the world kind of opened up and I said, Ah, like, there’s this whole ecosystem of corporate transactions and all these participants in it. And then I realised, you know, although I believe the law degree is phenomenal in terms of understanding the allocation of risk and structuring of things. I found that, you know, the investment banking was a bit more firmly in line with where my interest was. And so it’s not an atypical path in the sense that I think Lloyd Blankfein and Brian Moynihan and Sam Zell like they all actually had law degrees, because I think they went through a similar kind of learning exercise. And so even that’s, that’s how I was in law school. And then did whatever a young guy looking for a job, you know, picked up the phone and found lists of names and called and called and called and got a job helping middle market companies sell themselves and then went to the buying side and had a few jobs in New York and then said, Hey, we should start our own thing, came back to Rhode Island to do that. And here we are today a little wiser, and with a little more grey hair.

Gene Tunny  39:19

And I mean, there’s no disadvantage to being in Rhode Island I imagine is there?

Arthur Petropoulos  39:24

You know what, there was a time but I think it predated me a little bit where if you wanted to be in finance in the States, it was either really LA or New York. And then you saw outposts pop up in Houston for oil and gas businesses or, you know, Florida because of how many New Yorkers moved there. You know Boston for pharmaceutical businesses. But my notion when we started Hill View was it was already felt like no one really cared where anyone was, as long as A) you could get to where you need it to be, and B) you produce results and B was far more important than any other stuff. So, so no, I mean, I think like we sit right between Boston and New York. So it is a nice hub to kind of do stuff locally, but we’re doing things all over the world at this juncture. And, you know, again, so long as we produce the results, then, you know, it doesn’t matter if we’re in San Francisco or Saskatchewan.

Gene Tunny  40:05

Yeah, yeah. Because even if you did take a meeting in New York City, for example, what’s that a couple hours away is it at most?

Arthur Petropoulos  40:19

Yeah three hours.

Gene Tunny  40:21

Three hours. Gotcha. Okay. Righto. So before we wrap up, Arthur, I’d like to ask I mean, like what do you see as the value that you’re adding to the economy or the business brokers, then we might talk about the other side of it, the private equity, because there are a lot of there’s a lot of negativity out there about private equity, a lot of concerns about market concentration, and these leveraged buyouts and all of that. So could you just talk about what you see as the benefits to the economy of you’re, what you’re doing to start with please?

Arthur Petropoulos  41:04

Sure, I believe that, you know, capital and transactions are kind of the the oil that facilitates or greases the skids for the economy in the sense that transactions have always taken place. But if you read about, you know, John Rockefeller going through Standard Oil, I mean, he was just kind of bludgeoning people and buying things for nickels and in like, you know, there was a lot of unfair competitive practices. Whereas I think, as the capital markets, and as the M & A markets have evolved, it’s facilitated things so that they happen faster, so that they happen in fairer terms for the selling party. And ultimately, I think, allow for the evolution of industry on a quicker and more efficient basis. And also, I think bolster, economic, competitive positioning, you know, particularly for domestic companies, versus kind of international, you know, many times like you have US conglomerates, competing against, you know, state run organisations in other countries, right. So the only way you’re going to compete is on scale and is own size and is on innovation. You know, there’s always that joke about politics, they say, the number one rule of economics is the idea of scarcity, that there’s more want than there is stuff. And the number one rule of politics is to ignore the number one rule of economics. And so I forgot what economist said that but so in reality, right, there’s scarcity. And there’s, there’s scarcity of talent, there’s scarcity of stuff of services of goods. And so the further you can evolve any particular industry, it does allow for even as painful as it can be the reallocation of human capital, to things that are less efficient, right. And so it’s almost this, like, it does push things forward, like, you know, irrespective of how much anybody could complain about, you know, life in America in 2023. Like, it’s hard to argue that, like, your life is not just as good as like a mediaeval King, right, like you have. I mean, literally, I’m sitting in a chair right now, I’ve got the Library of Alexandria, in my pocket, I can have more pizzas show up at my door in a half an hour than then I can ever eat. I mean, it’s like, it’s amazing. But the only reason all of these things happened is because, you know, the guy said, Hey, I have one pizza place, I could own 10 pizza places, and we should do delivery. And then so, you know, Little Caesars and Pizza Hut and Domino’s. Right. And so it’s like, I think that there’s, there’s places and ways to kind of rein in just the pure animal spirits that can come out with that. But at the same time, I mean, that is why for all of our black eyes, you know, the, you know, the most capital, capitalist focused countries have been the most economically dominant because they allow for that. And I think that the part that we play as intermediaries in the capital, intermediaries is facilitating the efficiency of that exercise and allowing for innovation and consolidation on a quicker and effective basis and protect while protecting the interests of those who contributed to the evolution right to the sellers of companies.

Gene Tunny  44:10

Gotcha. And what about on the buyer side, the private equity, do you have any thoughts on on that side? There’s this caricature of Gordon Gekko going in and, you know, the concerns about loading companies up with debt and stripping money out of companies and, and sacking lots of workers. Do you have any thoughts on that? Do you think private equity adds value out there in the economy?

Arthur Petropoulos  44:37

Absolutely. Because I mean, I think that they very much are the facilitators of innovation and consolidation. Right? It’s capital. It’s looking for return on capital that’s doing that. But you know, taking a few steps back, you know, if you think of the United States economy, a lot of that kind of Gordon Gekko element was a bit of an idiosyncratic situation. So you had, you know, let’s say, we leave World War Two and all all of these conglomerate companies start to form, right? Because they basically apply like war learned processes and they just say, we’ll buy everything right and putting it together. And so you had, you know, CBS owned the Steinway Piano Company, and you had all these, like things that came together because they figured they could just run the same process. And so you hit the 1970s, you have huge inflation, because of too much money printing and we won’t get into that. And then Nixon takes the dollar off the gold standard, inflation goes through the roof values of companies go down. And so you start to see all of these companies where it’s like, you’ve got five different companies combined, that all do different things, and no one knows how to value any of it. Because it’s like, you know, the same company owns Jello pudding that owns like, you know a concrete company, or whatever it might be. So the initial premise of it was buying under, under, misunderstood assets that were put together incorrectly, and disaggregating them in a way that allowed for a better value of each constituent element. Secondly, there was a lot of, you remember the Gordon Gekko speech about, you know, tell their paper company when he’s saying like, all of the executives own 1% of the company, and they’re just pillaging it from cash. There was a certain glut of industry in that time period of inefficiency, that was losing kind of our competitive positioning on a global basis. So you can make the argument that and this is where it gets tricky it because, yes, there were a lot of layoffs. But truly it created efficiencies and companies that allowed them to be globally competitive reallocating the human capital to industries, you know, that made that were more ripe for innovation. Now, there’s pain that goes along with that. And then it’s not to be ignorant of the fact that there were a lot of greedy people involved, right, like all of that leverage was not necessary to accomplish these things, it was just a way of choosing the, you know, choosing the return. So the pendulum goes back and forth. And anytime it goes too far, it will pull back, what I would say is that the modern incarnation of private equity has largely been one of innovation and scale, right. And so buying up a lot of small companies and aggregating them, I think, the biggest myth in private equity in today’s environment. Now, I’m not saying if private equity goes out and buys a bloated software company and fires a bunch of people. But you know, that wasn’t making any profit. But I’m saying when private equity goes out there and buys an aggregation of distribution or manufacturing companies, they want to keep the people, the people are the valuable part. That’s where there’s scarcity. So in today’s environment, that notion of over levered like financial engineering and layoffs is really, I think, a relic in private equity in today’s environment does a lot more, I think, good than harm, and a lot of those excesses have been had been pulled in. That’s not to say, you know, there’s not exceptions to that. But in today’s environment, they are a accelerant of aggregation and innovation, I think in in industry as they consolidate different businesses.

Gene Tunny  47:59

Okay, very good. Arthur that’s been terrific, I’ve learned a lot I learned, I hope you don’t mind, I grilled you over the process and what you do exactly. And I mean I learned a lot about how this, these transactions occur. So thanks, heaps for that. That was great. Tell us about your, your outreach, or your YouTube and newsletter or whatever, please. That’d be great.

Arthur Petropoulos  48:23

Yeah, so I’d say check us out on YouTube at Hill View Partners, if you just typed in Arthur Petropoulos, you’d come up on and on LinkedIn our company page Hil View Partners both on YouTube and LinkedIn, we put out two videos a week, talking about just different topics in the mergers and acquisitions and capital world kind of recurring themes, almost like an FAQ of the things we’re always talking about. And then reach out to us, either on LinkedIn, myself, or the company page, or on our homepage, So hillview, P as in Peter, S as in sam .com, where you can reach out and set some time up as well. But that’s where to where to find us. And on a, you know, on a closing thought, not to get too philosophical, but I think I think anytime you kind of take a position, that something is just entirely wrong or entirely right, or you’re you’re missing a lot of the nuance, right? And so a lot of the economy has excess in both ways. Right? And so, there are, you know, have there been situations where, you know, companies have been too greedy? Yes. Have there been situations where, you know, look at the industrialization of what America had lots of greed there, right? Look at situations where the unions were too greedy and look at how the steel disappeared in the 1970s. Right, so like, so I think the key to being good at our job, and I won’t extrapolate it enough to say good at anything is like you must understand nuance, you must understand subtlety. There’s four sides to every story and the truth sits somewhere in between and so it’s our job to kind of see reality for what it is not necessarily what we wish it would be. And by virtue of taking that kind of sober yet realistic look on things you know, we’re not, we’re not people that are always cynical and say it’s bad. We’re not people that are always optimistic and it’s always good. But we say, life is hard. The world can be a nasty place. But there are glimpses of good and nice things along the way. And we, we, we like those. And so any event for what it’s worth, that’s our that’s our view of the universe that you didn’t ask for. But this is a this has been good Gene, I appreciate it.

Gene Tunny  50:22

Very good, Arthur. I’ve really enjoyed it. And yep, I like having rounding it out with that philosophical thought. So I think that’s terrific. So yep. Very good. Arthur Petropoulos from Hill View Partners. Thanks so much for the conversation. I really enjoyed it.

Arthur Petropoulos  50:37

Likewise Gene. Appreciate it.

Gene Tunny  50:41

Righto, thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


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Podcast episode

From Adelaide to Global Power: Young Rupert Murdoch w/ Walter Marsh – EP210

Journalist Walter Marsh talks about his new book “Young Rupert: The Making of the Murdoch Empire.” Walter and show host Gene Tunny discuss Rupert Murdoch’s early years in Adelaide, South Australia and how they shaped his later career. From challenging established systems to becoming a globally influential media mogul, Murdoch’s career has been highly controversial. 
Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple Podcasts and Spotify.

About this episode’s guest: Walter Marsh

Walter Marsh is a journalist based in Tarntanya/Adelaide with a background in history and culture. A former editor and staff writer at The Adelaide Review and Rip It Up, his writing has appeared in The Guardian, The Monthly, The Saturday Paper, and InDaily.

What’s covered in EP210

  • Rupert Murdoch’s career and the making of the Murdoch empire. (0:00)
  • Rupert Murdoch’s life and career. (3:09)
  • The origins of Rupert Murdoch’s media empire in Adelaide. (8:16)
  • Newspaper circulation wars in Adelaide. (14:01)
  • The business strategies of a successful entrepreneur. (20:28)
  • A controversial murder case and its aftermath in Australia. (23:35)
  • A historical libel trial involving Rupert Murdoch and his newspaper. (28:09)
  • Media, power, and ethics in the Rupert Murdoch era. (33:20)
  • Rupert Murdoch’s legacy. (38:15)

Links relevant to the conversation

You can purchase Young Rupert via Amazon:

Author’s website:

Transcript: From Adelaide to Global Power: Young Rupert Murdoch w/ Walter Marsh – EP210

N.B. This is a lightly edited version of a transcript originally created using the AI application It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Walter Marsh  00:00

I found it very telling that in this period where he is kind of the good guy challenging systems that were overdue for a challenge and these elite establishments that were kind of begging to be shaken up and undermined. You know, the variables were so different when he started but this kind of dynamic have always been the inside or outside of sticking it to these establishments kind of set the groundwork for everything that came afterwards.

Gene Tunny  00:32

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, thanks for tuning into the show. Last month in September 2023, it was announced that Rupert Murdoch would be stepping down as chairman of the Fox News corporations in November with the possible exception of William Knox, Darcy Murdoch’s been the Australian businessman who’s had the greatest impact on world affairs. He’s had an extraordinary and of course highly controversial career. And believe it or not at all began Adelaide, the city of churches in South Australia. Adelaide journalist Walter Marsh has written a great book about Murdoch’s defining years in Adelaide in the 1950s. The book is called Young Rupert, the making of the Murdoch empire. And I’m delighted to have been able to interview Walter for the show. You’ll learn about how the fear satellite newspaper circulation will set Murdoch on a path to domestic and then global expansion. And you’ll learn about how Murdoch figured out he needed to get close to the politically powerful if he was to succeed. Young Rupert’s a great book, so please consider buying it and supporting a really talented journalist. Details are in the shownotes Okay, let’s get into the episode. I hope you enjoy my conversation with Walter Marsh on young Rupert Walter Marsh, thanks for joining me on the programme.

Walter Marsh  02:18

Thanks for having me, Gene.

Gene Tunny  02:20

It’s a pleasure, Walter. I’ve really enjoyed reading your new book, young Rupert, the making of the Murdoch empire. So came out earlier this year, it’s become even more topical with with Rupert Murdoch stepping down as the head of News Corp the other week. So this is really good timing. So it’s good to have you on the show.

Walter Marsh  02:44

It’s been a pretty crazy to the books been out for two months, and it all the way through writing it. I you know, you’ve conscious when you’re writing a book about a 92 year old that there are certain inevitable deadlines, I guess that you’re on the playing in the back of your mind. But the fact that’s come out that this this resignation happened after the book came out, works pretty well. So I’ve been keeping very busy. So thanks for having me on.

Gene Tunny  03:09

Pleasure. Yeah, so just thinking he’s got good genes, I think because his mother lived until over 100 or nearly 200, if I remember correctly.

Walter Marsh  03:17

Yeah. And there’s a recurring thing in the book as well as people have observed and I didn’t want to, you know, body shame a young Rupert Murdoch. But a few people observed that he were on quite a bit of weight in his 20s. But then I was finding when I was researching the last chapter, which sort of takes the story full circle in the 80s. That these reports on these takeover attempts of the Hilda weekly times when he came back to to Australia in the 80s. And they often started with the sort of doorstop interviews that he was taking whilst going for his morning jog, in his, you know, running short shorts. And so clearly, either one of his co workers or one of his wives whispered in his ear, Hey, your dad died of a heart attack in his 60s and had many health problems got to really become a thing. Other people did describe him as a fitness freak later in life. So he got the memo.

Gene Tunny  04:12

Yes, yes. And his father, of course, was Keith Murdoch, the famous newspaperman. So we might talk about him a bit a bit later, before we get into it. Walter, would you be able to tell me a bit about your, your work as a journalist? Are you a freelancer or your independent journalist at the moment?

Walter Marsh  04:29

Yeah, I’m a bit of freelance for the past three years. Before that I was. I worked as the digital editor of the Adelaide review, which was a long running sort of arts culture magazine, here in Adelaide, that shut down in 2020, sort of as a result of the pandemic. So that kind of was the big push that it took to get cracking on this book project that I’ve been thinking about for a few years. So I’ve kind of come from that culture and arts reporting background, but also In history as well, I’ve been working in the history space and studied at uni. And there was at uni when maybe 10 years ago now that I first started looking into this area as my honours thesis, right. So I did that kind of saw a lot of the sources, a lot of the the narratives that later inform the book, but then happily put on a shelf for the best part of 10 years and tried to work as a journalist. But you know, the way the industry was going, it led me inevitably to go back and think about writing this book. Yeah.

Gene Tunny  05:30

And where was your Where did you do your thesis? Which university? The University of Adelaide? Good one. Okay. All right. And that’s on. Is that on North Terrace? Yeah. And is that near? I mean, Adelaide. So it’s quite compact, isn’t it? So you’d be close to where a lot of the events in you would have been close to where a lot of the events in this book took place, wouldn’t you?

Walter Marsh  05:51

Well, we so much of the events of this book, the Adelaide stuff at least happened? Yeah, on North Terrace. It’s a long street, but they really crafted cram a lot in there.

Gene Tunny  05:58

Yeah. And lots of old, you know, the famous buildings, the parliament, the railway station, if I remember correctly, grand old colonial buildings. So yes, yes. Very good. And can I ask have you ever worked for the Murdoch? Corporation for News Corp?

Walter Marsh  06:18

Yeah, it’s a great question. I did. And I kind of touched upon it in the book, just at the end. But I, when my first big job in the media, editing this sort of street press music, magazine website called rip it up that close down. And one of the things I’ve found about being made redundant in the media and the publication closing down is it’s a very public way of saying I’m unemployed and solid, please hire me. So someone reached out and I did probably the things a month that most in 2016 of, of copyediting work as a freelancer for a food guide that the advertiser were publishing. So that was my little experience inside Keith Murdoch house, which was the launch of that magazine after I’d finished working there. That is the informs the opening scene of the book, and this rooftop party. So that was my experience. Really. Yeah. And that was an interesting time as well, because it was 2016. And even though I was in this very kind of inoffensive corner of the Murdoch for the Empire, it was you know, Trump was in the background debating Hillary and the 2016 blackout happened while I was in the office. So it was an interesting time.

Gene Tunny  07:30

Yes, yeah. Remember that now? Now you mentioned it. And that’s the that’s quite a striking building out in Adelaide. Is that the Keith Murdock house, if I remember correctly? Yeah. So

Walter Marsh  07:39

yeah, way mastery. It’s this big, big glass building that they built less than 20 years ago, and before that, they had this big 1960s building, which really got opened just at the end of the events that are focused on in the book as well. But yeah, it’s definitely looms large over over Adelaide, even though in the last couple of years, because, you know, News Corp has shed a lot of workers lately that I think, as of when I published the book, multiple floors were actually rented out to SA Health, the government health department, so that an E News Corp doesn’t even fill it up anymore.

Gene Tunny  08:14

Right? Oh, yeah, exactly. Given what’s happened with with media. We can chat about that a bit later. So, Walter, I’d like to begin by reading from your summary. I think this is terrific. How you’ve, you’ve summarised this so this is one of your this is a note from the author. For as long as I can remember, my hometown Adelaide, has been a one paper town, a capital city, whose sole daily newspapers been owned by Rupert Murdoch’s use limited for the past 30 years. As I grew up, I realised the company behind this press monopoly extended far beyond my city, was a vast and controversial media empire with global reach. From the cartoons. I watched to the tabloids and cable news networks raising the temperature of Western democracies. And Adelaide wasn’t just a piece of that story. It was ground zero. Although, can you explain how Adelaide was ground zero for the Murdoch empire, please?

Walter Marsh  09:09

Yeah, I mean, it’s the sort of the starting point really, of the book. But in terms of the greater Murdoch story, it really, when piecing together the narrative, you can see that it could have gone a number of different ways. So it really the story starts. And the book starts with Rupert’s father, Sir Keith Murdock, who had spent his whole life his whole career building his name in journalism. He had started off as a freelancer as a reporter and sort of worked his way up over decades, to be the chairman of the Herald and weekly times and he really built that into a nation wide press Empire really. But he was sort of a manager really didn’t actually own that company. So the last few years of his life was spent really carefully trying to build stitch together this sort of separate Separate empire that he could hand over to his son Rupert. And sometimes that involves some, you know, some almost underhanded tactics of convincing the board of the Herald to sell off things like News Limited to him in a private capacity and used, I think it was there’s a, the British Parliament had a Royal Commission into monopoly. And he kind of used that as a as impetus to offload some of their Adelaide holdings. So they didn’t get accused of a press monopoly, but that played into a kid’s hands. So he had the Adelaide interests. He also had a magazine publisher Southdown press in Melbourne, which published new idea, this women’s magazine still going, I think, and there was also the Courier Mail and Queensland press, in Queensland, in Brisbane. And that was the kind of the crux of what Rupert was in line to inherit. But then, because the family itself, you know, Keith had been this a newspaper executive for his whole life. But he wasn’t necessarily a very rich, or at least a liquid sort of rich man himself. So it stretched himself very thin to build up this inheritance for Rupert took on a lot of debt. But when he died, quite suddenly, really, he had staged a border and coup at the Herald only, like 24 hours before he died. So he wasn’t expecting to die quite as suddenly as he did. But he left a lot of things hanging in the air with this inheritance. So Rupert, and his mother or Rupert’s Mother, you know, was very intent on not leaving the family in debt. So sold off a lot of the really key pieces of the furniture, the particularly the Brisbane papers, which left Rupert to basically go from Oxford, to Adelaide to sort of start start over again, you know, this wasn’t a small company, by any means. It had this afternoon newspaper. He also had the Sunday mail, which was the biggest circulation paper in Adelaide. So it was it was nothing to sneeze at. But it was, you know, if Keith had lived a little bit longer, and had managed to pull off what he was trying to work towards, maybe would have started off in Brisbane, maybe if Rupert had convinced his mother to hold on to Brisbane and get rid of News Limited, he would have started off in a different place. But it just so happened that in the circumstances, and this sort of economic pressures that were facing the family that he had to kind of bite the bullet and come to Adelaide, and I do think the circumstances in which he came to Adelaide and the environment he was working in, did have quite an impact in the kind of company that later became.

Gene Tunny  12:31

Yeah, absolutely. So Keith Murdoch had a really, I mean, even though he died in his 60s, I mean, he had a huge life, didn’t he? And he, he was a war correspondent. I think he was famous for highlighting just the some, you know, just the, you know, what was going on at Gallipoli and the Dardanelles campaign, just what a shambles. That was. I think he was famous for that, wasn’t he? If I remember correctly, yeah. Yeah. And so Murdoch, Rupert, Rupert Murdoch comes back to Adelaide. He’s from Oxford. And he was renowned as a Marxist at Oxford, wasn’t he? And he comes back, is he 22 years old, and he turns up in Adelaide is at 1953.

Walter Marsh  13:11

Yeah, 19, September 1953, is when he really touches down. So I’d been under a year after his father’s, his father died, he finished his studies at Oxford, you know, corresponded with his mother furiously, trying to convince her not to sell, unable to convince her at the end, but then eventually says, Yes, I’ll come to Adelaide and sort of start off, you know, take the reins of the company there. And the board in Adelaide of us limited were all much older men, and they were kind of content to let him have a go at it. And he had this very the title we have as publisher, which isn’t very common in Australian newspapers in the sort of hastily defined enough that he could get away with doing whatever he wanted, and poke his nose into a bit of everything and the money side, the editorial side and kind of ease himself into the company.

Gene Tunny  14:01

Yeah. And so what was the paper in Adelaide that he inherited? And its its rival was the advertiser is that right? That’s the famous paper in Adelaide. Is it? What’s that? Yeah, so

Walter Marsh  14:11

So the, the advertiser is the morning paper, and that was the biggest daily newspaper in the city. And it still is today, it’s the only one. But then it’s afternoon competitor in the time of afternoon newspapers when they still exist. It was the news, which was owned by this company News Limited, and actually the advertiser and these limited head since 1930, early 1930s. Keith Murdoch had actually come into Adelaide on behalf of the Herald and weekly times and sort of invaded and taken over both of these papers. So up for you know, the best part of 20 years the Herald weekly times had run Adelaide as a virtual press monopoly of their own it was only a few years before Keith’s death that he carved out the News Limited and the news as this sort of our sort of rival to the Herald and weekly times owned advertiser that was run by the chairman of the weekly time. So there’s a lot of conflicting interests. And then when Rupert comes into town, sort of the gloves are off and it’s just open competition between the two papers.

Gene Tunny  15:16

Okay, right. Oh, so he’s he’s got a newspaper and obviously it gives up any any ideas of socialism or Marxism. That interesting little aspect of Murdoch. Yeah. So I like how you describe this. So I might read this other passage out because I’ve got a question about this. So in the synopsis for the book, it says led by Rupert’s friend Ally and editor in chief Rowan rivet, the fledgling Murdoch press began a seven year campaign of circulation, wars, expansion and courtroom battles that divided the city and would lay the foundations for a global empire if Rupert and Rowan didn’t end up in custody first. So okay, well, you’ve got to tell me more about that. What? How nasty did this circulation wall get? What were the courtroom battles about? And were they really at risk of doing in doing jail time?

Walter Marsh  16:12

Well, the circulation matters really start from even before Rupert touches down in Adelaide. So in an in amongst the the sort of aftermath of case death, there’s this guy sort of trying to convey in the book, there’s a scramble for control of these assets that he’d been building up. And all of his former colleagues at the Herald, his rivals, as well. They’re all sort of competing to sort of carve up Rupert’s inheritance. And they’re all telling each other vastly different stories. And they’re all saying, you know, Keith told me he wants to do this. Keith told me he wanted to do that. Keith is always playing people off against each other. So no one really knew what he what his true plans were. And in amongst that, once it became clear that that Rupert would have to come to Adelaide, to start over, the chairman of the advertisers to Lloyd dumar, who had been installed by Keith Murdoch, you know, 20 years earlier, when they came into Adelaide. He made this overtures to Rupert’s mother, Elizabeth, and kind of said, look, the News Limited sort of financial security depends on having this Sunday paper, which is the only Sunday paper it has this huge circulation, there’s no competition in that kind of market. It’s got its own little monopoly. We’re going to come in and we’re going to launch a Sunday paper, and we’re going to really put up a huge fight, you guys have limited resources. And, you know, there’s every is every likelihood that we’re going to just completely crush, crush this fledgling Murdoch press as it was at the time. But the alternative, the ultimatum he gave her was that you can sell the mail, and he’s limited all back to the health and weekly times and sort of restoring sort of a reset to what the status quo was three years earlier, before, you know, three or four years early before Keith had started carving it away for Rupert’s inheritance. And when Rupert found about about this, he was outraged. He was absolutely incensed. There were some really colourful letters that I was very pleased to find in the National Library of Australia. And so as soon as he’s made the decision, and he makes it very quickly that they’re not going to sell out he does want to have a go at making his life in newspapers. They said about the news news and his team, Ron Rivera, they all start secretly making plans about sort of battening down the hatches and preparing for the competition that’s about to happen when they launched, the advertiser launches this Sunday advertiser. And meanwhile, across town, the Sunday advertisers, you know, they’re they’re all doing these big research trips and criss crossing the world to find out the most modern advances in in sort of circulation building and newspapers and building up audiences. And so in, I think it’s August or September, the advertising the Sunday advertiser launches, and it’s immediately it’s a big threat to use them to them Rupert’s inheritance, and it’s not long after Rupert touches down that the mail, the news, limited paper, fires back and puts on the front page, accuses the advertiser of making a bid for press monopoly, and makes public this story of this kind of overtures to his mother, you know, the newly recently widowed recently bereaved wife of Sir Keith and kind of trying to strong arm, the Murdochs into selling them out, and they fret and it was framed in these terms where it wasn’t just a story of a family business, or, you know, the inheritance of a 22 year old, but it was this big, you know, this was a question of freedom press freedom in South Australia. And, you know, the the male and US Limited was going to stand up against this attempt to have, I guess, what was the quote something along the lines of all the states press in the communities press in the hands of one click, or group or group of businessmen, which is, of course deeply ironic now because the advertiser is the only paper in town and it’s been owned by Murdoch since the 80s. But that was really the start where the You know, the gloves were off, and they were really launching into this fight. And they thought they both papers threw everything at it for about two years until they eventually reached a kind of stalemate, they were kind of both speaking to the same audience both using all the same techniques, and haemorrhaging money in an unsustainable way. And so eventually, they, the advertiser kind of Rupert viewed as a capitulation, where they said, Actually, let’s merge the papers and publish one Sunday paper that’s co owned by the two companies. So it was kind of a draw, I guess. But for Rupert, when he’s coming up against this much better resourced paper and company that has ties to the Herald and weekly times, but also internationally as well. Now to have survived to your Onslaught was a pretty huge achievement, but also drove home to him that to really compete and to beat them, I guess that he had to expand it and match them in terms of the resources. So that kind of led to this treadmill of never ending expansion, I think that we see intake all around the world. And because, as Keith was, you know, he didn’t have a lot of capital, the family’s own capital to draw from the way he funded that was by taking out loans, he didn’t want to dilute the family’s control of the company by bringing in extra investors or shareholders. So a lot of borrowed money from banks. But that led him to this sort of cycle where the expansion is funded by borrowed money, he has to pay off the borrowed money. So in every town that he acquires something, in order to expand, he has to make that as profitable as possible as quickly as possible, as quickly as possible. So I think that goes a long way to explaining how, in a structural way, those early competitions kind of set him on this path of this sort of fight back siege mentality, which set him on the on this path of never ending expansion. And in every place, he went to, kind of pushing, pushing the bar, and maybe lowering the tone and pursuit of profit in every place that he went all around the world. And when you do that on a kind of industrial scale, it has, I think, a cumulative effect. I don’t think anyone would deny that.

Gene Tunny  22:10

Okay, we’ll take a short break here for a word from our sponsor.

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Gene Tunny  22:45

Now back to the show. I was gonna ask you about that I was going to ask you about how his time in Adelaide set him up for later expansion. And I was wondering whether it was because he, it was super profitable. And then that gave them the capital, but it sounds like no, actually. I mean, it did provide some earnings, obviously. But they went and expanded. They needed, they needed to borrow the money. And then that set them on that on that growth path. And they just because

Walter Marsh  23:14

he and because he’s a real opportunist as well, like he worked, he didn’t have so much money and resources that he could pick and choose. He’d always just buy whatever was available, whatever got his foot in the door of the market, whatever he could convince someone to sell to him who whoever underestimated him enough to sell something to him. He took it and then turn it into something profitable, which you saw repeated. But to go back to your question about the whether they were going to end up in jail along the way. Alongside this, this sort of economic competitions, there was this political aspect as well where South Australia in the 1950s. And the decade before it had been run by this sort of conservative establishment, the liberal country league party had been in power for over two decades. And they were kept in power by a gerrymander where country voters had twice the electoral power of those in the city. And so even though they were losing the popular vote, this party kept getting returned to power and that party and that establishment was backed in hard by the advertiser. So So Rupert, and this comes back to the sort of left wing aspect of Rupert and rounder of it. They were both quite left wing at the start politically, their personal politics, but they also saw that there was, you know, if more than the the majority of voting for labour, but they’re not getting in. Clearly, that is a huge potential readership, if they made a concerted attempt to speak to this disenfranchised market that isn’t being spoken to by the advertiser, then they know they’ve got a lot of ground to gain and a lot of money to make. And I think that ties into this challenging of the establishment through legal challenges to the report. chewing through, you know, matters of good taste and things like that, that leads to them kind of raising the temperature in Adelaide and sort of pushing the boundaries of acceptability and challenging these systems in a way that over the seven year period, it gets to the point where when they get tied up in this case of ribbit, Max Stuart, and this royal commission, which is formed the crux of this book, and when they’re the libel trial, where the paper and Roland ribbit, the editor will on trial, that’s really the culmination of a lot of tensions that have been simmering and getting more tense over over a seven year period where it all comes, comes to bear.

Gene Tunny  25:38

Could you tell us a bit about that? Walter, what was the libel? What was the libel that it was about?

Walter Marsh  25:44

Yeah, so in in 19, December 1958. in Sedona, which is a town on the far west coast of South Australia, it’s a coastal town, a nine year old white girl, called Mary all of Hatton disappeared, she was later found murdered. And within a couple of days, the police arrested 2627 year old Aaron demand called Rupert next to it. Within a few hours of them arresting him, they emerged with this time confession in the early hours of the morning. And he was convicted of murder and sentenced to death. And the judge at the first trial basically said the all this other evidence they’ve got doesn’t really amount to much. It’s basically this confession or nothing. At the trial. Stuart and his lawyer said that the police choked him and beat the confession out of him. He was illiterate, didn’t speak particularly good English as well. He was signed, he signed the confession, which was typed by the police. But those to his name was the only thing he knew how to read or write really. And so there were appeals and appeals, nothing really worked. There was this growing community campaign, there were academics who became convinced that he was, you know, if not innocent, had certainly been wrongly convicted. Eventually, a Catholic priest called Tom Dixon goes to sort of attend to Stuart, in his cell, because he, you know, he’s facing death. And he, he speaks errand this priest does, because he’s worked in remote communities. And he becomes convinced that Stuart not only doesn’t really know anything about the day of the crime or the events, but doesn’t speak English in the way he doesn’t speak English competently enough that he would have been able to dictate this confession, which is very precise language, lays out how the crime, how he committed it, how he did so in a way that matched all the evidence that the police had put together. And so that kind of lit a fire under the campaign again, and people became convinced that he physically couldn’t have done this, given this confession, which the police at trial had sworn was verbatim. Anyway, so Dixon is introduced to Ron ribbit, this, the editor of the news, and he agrees to get behind the campaign and pay for Dixon to fly to Queensland to try and track down an alibi. But Stuart he does successfully. And then it just becomes this huge press campaign. Virtually, it’s reported all around the world and the Playford government facing this extraordinary pressure that they hadn’t in 20 years because they’ve enjoyed such a unchallenged power, eventually decided to hold a Royal Commission. And then it’s at the Royal Commission where this lawyer who’s come in to represent Stuart, he is questioning the police officer who first identified Stuart as a potential suspect. And he gets interrupted by one of the Royal commissioners who also happens to be the Chief Justice of the Supreme Court in South Australia, who had previously heard one of Stewart’s appeals. So there was a lot of in a very, very Adelaide, sort of incestuous With tensions right away. And this idea of he wasn’t getting a fair go. So the lawyer, he walked out, essentially, and flew back to Sydney. And it was the news. The news is reportage of this event. It was perfectly time for the afternoon papers. And they basically said they sort of paraphrased quoted him on the front page and of these news posters saying, you won’t give Stuart a fair go these commissioners can’t do the job. And it was this coverage that incensed the state government because they weren’t just criticising the commissioners, but this was the chief justice as well, because Playford the premier has installed the chief justice as the Commissioner. So it’s a real challenge to the legitimacy of the entire judicial system in South Australia and the plaque the premier Tom Playford stood up in Parliament and waved these headlines and said it was the gravest libel ever levelled judge in South Australia. And so the Royal Commission eventually wraps up the verdict is upheld, but he his life sentence is commuted his death sentence sorry is committed to life so the campaign has managed to save Stewart’s liked one way or another. But then a few months after that at the start of 1960, some police officers and this is where I start the book off with the scene, some police officers walk into US Women’s headquarters to interview round rivet and later Rupert sort of interrogate them about these these headlines. And then within a couple of months, the report is basically the whole of these limited in the organisation they run is put on the witness stand and really forensic ly pulled apart by Crown lawyers as they face these charges of libel, including seditious libel, which is sort of the headline charge, which is basically just bringing the state of South Australia into kind of disrepute, I suppose. And that was the really finding that that case, the Stuart case has been talked about a lot. There are three books that go into it in quite a lot of detail. There’s a movie made about it, but it was this libel trial afterwards, and what the libel trial tells us about how Rupert ran his company, at that point, the relationships and his role in this coverage that’s very kind of not sensationalist. But it definitely was provocative. They got them in a lot of trouble. That was, that was the kind of the climax of what I thought hadn’t really been looked at in the book before. And sort of in this, you know, writing it today, with the backdrop of, you know, the libel cases against crikey and dominion, and all this stuff, and the Sedition is a big word with January 6, and all that it just felt like a much different set of stakes, a totally different era, but felt like it resonated a lot with the era that we’re living through now at the end of Rupert’s, if not life, sort of his tenure in the news. So, yeah, I really dig into that a lot.

Gene Tunny  31:50

Yeah, that’s fascinating. And so Murdoch, he successfully defended himself against that libel, is that correct?

Walter Marsh  31:58

Yeah. So it was it was the company News Limited. And Ron Roman, the editor that were on trial, so not Rupert himself. But the as the trial progresses, it basically becomes clear that Rupert had written at least two, I think of the headlines that had gotten them in hot water. And in addition to that, there was an editorial that was published a week or so afterwards, when it became clear that, you know, the play for government was absolutely outraged by the coverage. And it was kind of trying to, I guess, calm the farm a little bit and set the record straight. But that this editorial was held up by the by the prosecution as admission of guilt, essentially, by the newspaper, by admitting that those headlines were not quite accurate and shouldn’t have been printed. And it’s revealed that Rupert wrote that headline himself. So it shows a lot about the kind of proprietor he is and how he’s, you know, never too far away from the action, but it’s particularly in relation to the more modern day cases that are happening where he’s kind of recognised that they, you know, pushed the Fox News, sort of Trumpian base a bit too far, is a sign that even Rupert sometimes recognised as when the company has gone a little bit too far and and flying too close to the sun.

Gene Tunny  33:20

Yes, exactly. Well, he had to sack Tucker Carlson, the noted commentator over there, which is one example of

Walter Marsh  33:28

an event and revenge gets sacked shortly after the final charges are dropped. So it’s, everything kind of comes to a head. And that’s a good way to bookend the book and wrong.

Gene Tunny  33:41

Yeah, it’s fascinating, because it sounds like he was probably on the right side in that on that issue. And yeah, years later, I mean, Murdoch would obviously come under intense criticism. And there have been some massive scandals that we don’t need to go into here. But what happened with News, News of the World and the UK and the phone hacking, just absolutely appalling stuff.

Walter Marsh  34:02

I mean, it’s all kind of sorry, it’s all it’s all very speculative when I’m just looking at this early period. But I do think that I found it very telling that in this period, where he is kind of the good guy challenging systems that were overdue for a challenge and these elite establishments that were kind of begging to be shaken up and undermined. And that’s kind of siege mentality. And, you know, he’s not the little guy by any means, because he’s still the inheritor of a newspaper company and the son of the press Baron that set up this whole empire, but it kind of shows what I’ve been discovered. This is sort of foundational contradictions that we see, you know, his his resignation letter, the other week, you know, he still tried to rail against the elite and collaborate and eliteserien co cahoots with the media whose you know, sacrifice truth for political agendas. I think it was in thing and it’s just that the cognitive dissonance on display when he talks about that kind of thing as the billionaire head of a hugely influential Empire that’s had a huge influence on politics. You know, how do you make sense of that, and then seeing it in the context of what he’s been fighting and fighting since day one. And when, you know, the variables were so different when he started, but this kind of dynamic have always been the inside or outside of sticking it to these establishments, kind of set the groundwork for everything that came afterwards.

Gene Tunny  35:27

Yeah, well, he’s no longer on the News Corp is no longer in its ascendancy, if that’s the right word. Because it’s been really battered by the internet and all social media, YouTube, etc. So it’s, it is struggling with Sky News, Australia seems to do it seems to do okay on YouTube. And I mean, there still is a, there’s a dedicated audience of some people out there for sky, but I know elsewhere around the world and the papers here, I mean, the Courier Mail in Queensland’s lead off a lot of people over the years, and they’re just not the force that they once were.

Walter Marsh  36:00

Well, even things like YouTube, like how Yes, Sky has found this huge, sort of secondary, you know, in Australia, it’s on pay TV, or it’s being beamed into airports or country TV free to air. But on YouTube, they found this quite lucrative secondary market where they put some insane videos, some rant on YouTube, and there’s gets 1000s and 1000s of views from America within minutes. And it just made me think that a lot of the things that I explored in this book in the 1950s, the media landscape today, and the one that I’ve navigated in my professional life, is in so many ways unrecognisable from the one Rupert inherited, you know, in, in Rupert’s days, you know, as a building, full of hundreds and hundreds of men and women and just hours and hours of labour. And it was a huge physical process to put together the news each day that everyone read, you know, on trains all at once in two distinct waves, completely. And today, it’s completely different in so many ways. But then at the same time, I kept being reminded that a lot of these arguments and questions that are being explored in that period, things like Monopoly, and ownership and the truth and sensationalism. They’re the same questions, the medium is completely different, the society looks a lot different, but they’re still the same questions. And to bring it back to what I was talking about with YouTube, and how that these algorithms, these online algorithms kind of favour content that provokes a strong reaction that kind of fuels conflict, and instead of moderation and sort of nuance, it’s in a lot of ways, it’s very similar to after the newspapers, because, you know, they had to, had to sell to sell papers, they had to put together headlines and stories that caught the eye and sort of captured the emotional feeling of just random communities passing by, that could be held out by newsboys on the corner, if they weren’t doing that they weren’t selling papers, and the company fell over. So is that these mediums, the mediums are totally different. But there again, and again, we see that they’re kind of structurally predisposed to things like sensationalism, which Yeah, is kind of defies the time period.

Gene Tunny  38:15

Yeah, yeah. Yeah, absolutely. Okay. And I think that’s a that’s a good point. I mean, he learned, I mean, Murdoch. I mean, he obviously cut his teeth in Adelaide, he, he learned a lot about what works in media, and then he managed to scale that up globally. So I think that’s and the other point about Adelaide, which I liked that you made in the book, is that in Adelaide, did he learn the importance of political influence, he learned that the, the people at the advertiser, they were politically connected, if I’m remembering this correctly, and he just learned how important that was. And then he called, he learned to cultivate politicians. And we saw that, you know, famously over the years, and he for a while he was making and breaking government’s Gough Whitlam in, in Australia. He backed him then he didn’t back in and then that was played some role. It wasn’t obviously the decisive factor, but it did play a role. So yeah, incredible. I just found I found that really interesting. I can see how his experience in Adelaide taught him that lesson.

Walter Marsh  39:15

Because he was kind of, even though he had this privileged upbringing in you know, I was raised, lived and breathed newspapers growing up the son of his father who was understood the power of influence in politics. But when he stopped when Rupert started out, he had Yeah, this six or seven year period when he was an outsider, and even though he was doing a lot to challenge the establishment, he also was finding really experiencing the limits of what you could achieve by just throwing rocks from the outside and I think yeah, by 1960 when we kind of leave Rupert it’s very clear that he you know, when he’s been hauled to court and you know, as editors sent him into custody and threatened with jail time is discovered the upper limits have that kind of approach and takes a different path?

Gene Tunny  40:04

Yeah, indeed. Okay, so just two quick questions for the just at the end. Because when you mentioned those a movie about the Stuart case, I wanted to know what that movie was. And then second, if your book is optioned, which it may well be given, it tells a it’s a riveting rollicking tale as Jenny hocking has described it, who do you think could play young Rupert in a Netflix series or a movie? You thought about that?

Walter Marsh  40:37

I haven’t know. But it’s a good question. I haven’t I should say I haven’t thought of anyone off the top of my head. It’s kind of a bit of a backhanded compliment. I think for any very young actors. We I think you could perfectly embody young Rupert Murdoch. But the movie is called black and white. It was made in I think, 2001 I think it’s on Netflix. It kind of comes in and out of the streaming services, but the young Rupert plays a small role in that story, and he’s actually played by a young Ben Mendelsohn. So maybe they can get Ben Ben back to play. Stick Keith Murdock.

Gene Tunny  41:17

Yeah, absolutely. I’m gonna have to watch that. That sounds fascinating. Okay, Walter Mosh well done and well done on the book. I hope it sells well. And I’m sure you’ll be getting lots of media in the future on Rupert Murdoch, his legacy. I mean, he’s still alive. He’s still chairman emeritus of News Corp. And I expect they will. Lachlan Murdoch. I mean, you’ll have a tough time, but I expect they’ll still be important in the media landscape for at least the next decade or so. If you have any final thoughts on that on the legacy where they’re going? Please let me know. Otherwise, you’re happier to wrap up.

Walter Marsh  41:57

Yeah, I mean, the one thing that, that reading that letter, and I mentioned this in a column I did for the guardian. But reading Rupert’s resignation letter did make me think of another resignation letter I’ve found in my research from his father, Keith Murdoch from 1949, where he was having some health issues. And he’d been sort of compelled in late 1949, to announce that he was handing over the day to day running of the Herald weekly times as managing director to his successor, Jack Willett, John Jack Williams, and Keith Hill to remain chairman. But clearly, this was intended as a kind of changing of the guard, you know, getting into semi retirement. Within the next three years, I was going through all these letters were keep spend all that time, you know, coming into the office whenever he could, just white anting Williams eroding his influence, asking all these questions at meetings. And then finally, the last six months, he’s incredible letters where, you know, he’s back and forth with executives that are on his side, about this disintegration across the company. And finally, 24 hours before Keith dies, he launches this, I guess, boardroom purge, where he gets gets Williams turfed out of the company and sort of reassert his control over the company in this really defined way. And then dies within 24 hours, which, you know, in the context of Rupert and whether or not he can really, you know, sit the out of office and go and relax while Lachlan takes over. I feel like the whole 70 year arc has been about control and the whole company being built around his decision making. So I think that that will you know, that would be a tough one to relinquish. But then interestingly, and this is just a little fun tidbit for you. But I was it was fascinating to read about in the aftermath of Keith’s death when they when the call came in, obviously, Williams went straight back into the office and got someone to drill open, keep safe, and they found all these papers which kind of expose his sort of all these tactics he had to build up Rupert’s inheritance. So by the time kids funeral had come around, on Thursday of that week before Robert had even gotten back to the country, the minutes had been the decision to get rid of Williams had been scrubbed from the minutes. He’d been reinstated, and he ended up one of the pallbearers for Keith, just a few less than a week after keep that down, tipped him out of the company. So it’s hard to relinquish control when you’re a Murdoch is my take home.

Gene Tunny  44:26

Yeah, yeah, absolutely. Okay. Well, Tomas, thanks so much for your time. I really enjoyed the conversation.

Walter Marsh  44:32

Thank you. Thanks for having me.

Gene Tunny  44:35

rato thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about The Show. Finally, if your podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week


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Podcast episode

Private vs public sector jobs, consulting scandals & economics as an ‘imperialist discipline’ w/ UQPPES – EP209

Show host Gene Tunny speaks with students from the University of Queensland Politics, Philosophy and Economics Society. They discuss topics such as private versus public sector jobs, the future of consulting, and the risks of outsourcing for government officials. Gene takes an historical perspective and goes back to the time of convict transportation to Australia. He also talks about, among other things, his time working in Treasury during the Rudd Government, and how psychology is relevant to economics. The students express concerns about the consulting sector in light of a recent scandal involving PwC partners misusing confidential government information.

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What’s covered in EP209

  • Economics career paths and differences between public service and consulting. (3:04)
  • Consulting industry challenges and scandals. (15:39)
  • Outsourcing in government and potential mitigation of risks. (17:50)
  • Greedflation. (28:30)
  • Limits of economics as a discipline. (33:59)
  • Public vs private sector work experiences. (38:22)
  • Government consulting and ethics. (43:48)

Links relevant to the conversation


On how badly designed outsourcing of convict transportation created the ‘death fleet’, see:

Transcript: Private vs public sector jobs, consulting scandals & economics as an ‘imperialist discipline’ w/ UQPPES – EP209

N.B. This is a lightly edited version of a transcript originally created using the AI application It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:03

I mean, I think economics is an incredibly powerful tool where it gets difficult is trying to predict behaviour and, and in in cases where people don’t act fully rationally, and that’s what you need to bring the psychology in. Right. So, I think any idea that economics is the imperialist discipline and we’ve got all the answers, I think that was destroyed by the financial crisis. Welcome to the economics explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, thanks for tuning into the show. If you’ve listened to my recent episode on degrowth, you would have heard a little bit of the recent event that I spoke at. The event was hosted by the University of Queensland PPE society where PPE stands for politics, philosophy and economics. This episode features the rest of the conversation that I had with the students. We talked about private versus public sector jobs, the future of consulting and the risks that government officials need to watch out for and outsourcing. In the conversation I picked up there many of the students appear especially concerned about the future of the consulting sector, which is a major employer of graduates. The context is that we’ve had this big scandal in Australia over some PwC partners allegedly misusing confidential information they received from the government. They allegedly used it for private gain. As you’ll hear the students were super interested in the differences between working in the private and public sector, and which was the better option for economics students, I gave the best advice that I could on this question among many others. As with many questions, there’s no easy answer. It says good things and bad things about private and public sector jobs. And a lot will depend on people’s individual preferences and personalities. As you’ll hear, I think that the public sector provides a better training ground for young economists. The work environment and training opportunities are generally much better. But there are challenges in the public sector. As the higher up you get, the more you get exposed to the political side of government, which brings new challenges. That said, there are some people who thrive on that. So it depends on just what you’re looking for. If you have your own thoughts on working in the private versus the public sector, or any of the other issues that we talked about this episode, then please reach out and share your thoughts. My contact details are in the show notes. Okay, let’s get into the episode. I hope you enjoy it.

Joe  03:04

Welcome, everybody. Thank you very much for coming. My name is Joseph. I’ll be your emcee for this evening. And I’d like to say a very, very warm welcome to esteemed economist gene Tunny. He is here with us tonight. He’s the Director of Adult economics, and a 1997 CIS liberty and society alumnus. He is a former Australian Treasury official, and has worked on a range of domestic and international consulting projects. So we’re very lucky to have someone with such expertise. Joining us tonight to answer some of our questions about economics. So I guess to start off with Jean, could you maybe tell us a little bit more about yourself about the work you’ve done and how you maybe came to work in consulting?

Gene Tunny  03:50

Yeah, so I’m an economist, done a broad range of things are taught at this university in the past. So in this very room, subjects such as cost benefit analysis, there’s probably macroeconomic policy that I taught in 2015 in this room here. So I’ve got a background in macro policy budget policy when I was in the Treasury in Canberra, so worked on a lot of issues there, industry policy issues to do with the car industry, the budget debt, so we had to borrow a lot of money again, during the financial crisis. So I was heavily involved in that. And yeah, around probably around 2009, I started thinking I’d be good to for a bit of a change. And a friend of mine, Tony, Hans, was heading Mars and Jacob up here, the consulting office, and he was doing a lot of good stuff, cost benefit studies of all the new water infrastructure we needed because we’re in a drought. And I thought I’d be great to come back to Queensland I think it might have been a wedding that was up at nursery or went up to a wedding, a friend’s wedding. And you know how magical nurseries and the reception was at sales and a probably had a couple of glasses of champagne and thought, what on earth? Why would I want to go back to Canberra when you’re on the beach here and beautiful? That was partly why I wanted to come, I came back. So I worked here at uni, I worked in state government, as a public servant do different analytical roles, workers compensation, industrial relations, then treasury. And since 2009, I’ve been doing consulting since 2014, my own firm and yeah, work for a huge different range of clients, agribusiness companies, some government agencies, industry bodies, major corporations, ANZ Bank, for example, say all sorts of clients,

Joe  05:39

you know, you said in, you know, you were thinking of wanting for a bit of a change up coming back up here and working in consulting what, because for us, consulting and public service are too so the main employment pathways, could you maybe give us some sort of insights into the differences between the two, the, you know, the positive sides of both, and perhaps some, some negative sides or things you didn’t like, as much from either?

Gene Tunny  06:06

Yeah, so the public service is a good training grounds, and there are a lot of a lot of opportunities. They look up to you. So I think if you’re beginning in particular, you’re studying PPE, places like treasury, productivity commission, Reserve Bank, de fat, foreign affairs, and trade, I think they’re excellent places to go to learn about the issues and potentially get training opportunities or international postings that they can be really great opportunities. And public sector. Yeah, it’s different. I mean, the different The obvious difference is that, in one, there’s a mission that set by the government of the day and there’s a, you know, there’s a bureaucratic national, you’ve got to achieve some tasks. So that could be improving the health of the population, running the health system, or the education system, educating people, or could be Treasury where it’s this broad concept of well being, and you’re overseeing a whole range of agencies, you got to make sure that the budget is in good shape. So that’s, that’s a bit more of a, like, every agency has got a different mission. And that’s, that’s what determines that. In the private sector. It’s about profit. So profit. I mean, that’s, that’s what Yep, you need to make money to be able to keep the operation going. So there’s a clear goal, and that ends up driving a lot of things and forcing efficiency. So when I think one of the challenges in the public sector is because you don’t have that, there’s not that focus on profit, things can become a little bit inefficient. Yeah, there’s not the same sort of laser focus on, on doing things efficiently. And going after profitable opportunities. Your mission is set by politicians. And that can be problematic, because sometimes they can change their mind. Sometimes the politicians, I mean, maybe some of the things that they that they’re aiming for aren’t necessarily sensible. But yeah, as a public servant, you do have to try and achieve the objectives of the government of the day. To me, those would be the major differences. But if you want to explore that any more feel free either. Because because I’m not sure about answer that question very well. But that’s just what occurred to me. And with the private sector, I mean, you’ve got like, I work for a whole range of clients. And it can be a different project, like one day, it can be looking at lb farms. So there’s a client of mine, who’s built a big lb farm out at Dundee windy, and he’s trying to extract Omega three rich oil from the the algae. So now he can make some money out of that. And so I’ve helped him get a grant from the state government to do the r&d. And that’s fascinating. But then another day, I might be looking at parcels and issues to do with freight transport. So there are a whole range of things that you study, whereas if you’re in a public service agency, one of the risks is you could what you want to avoid is staying in the one spot and just doing the day to day because there is a lot of day to day responding to emails or letters from the public and writing Minister replies writing speeches, writing question time briefs, you want to get into an area where you you’re not. You’re not doing that day to day public service stuff, but there are a lot of good places like treasuries, terrific. Reserve Bank, doing rigorous analysis trying to inform the monetary policy decision that that’d be a great place. Yeah.

Joe  09:32

Super interesting. Yeah. I mean, I would never have even sort of imagined that consulting firm would be working out in Gander windy.

Gene Tunny  09:40

Oh, well, I mean, I mean, in Queensland, Australia is huge in agriculture, okay. And you’d be blown away if you if you go out there and just see how advanced a lot of these operations are. Here. There’s a lot of work for consultants. I mean, economists are probably I mean, we would have only a very small part of the work I mean, this has worked for Engineers is work for agronomist experts in agriculture. Yeah, there’s all sorts of all sorts of work and in a lot of things are automated. Yeah, they’re increasingly used. I think they’re even using AI now to work out, you know, optimal irrigation and optimal spraying of pesticides and things like that. Yeah, right. Yeah.

Joe  10:21

Very cool. That’s a good point. I think that you said that, you know, economist consultants would be doing a small part of it. And I guess, for your firm, or just for consultants, in general, as you say that the jump between lots of very different projects from different clients? How do you sort of go about preparing for a new client or, you know, perhaps in an area that is not necessarily somebody that you’ve worked before, but still have to deliver services or help your your client in some way? Well, you’ve

Gene Tunny  10:54

got to be a quick study, you have to get across the issues as best you can. And it’s like, if you’re doing an assignment at uni, you want to start early, you want to get all the resources, do the reading, learn as much as you can ask questions. So I mean, when you’re doing consulting projects, the the client is they’re motivated to help you to assist and to provide all the information they can see, it’s about being a detective or a journalist, and asking questions, to get all the information you need. But you do have to be a quick study. Ultimately, the, the Principles of Economics are the same. And I guess you learn a process of gathering the information, you sort of get an idea of what they might have on hand, what you might, sometimes you might need someone else to help out, you might need an engineer to come in and, and help work out how to solve a particular problem like in, in on their farm or in their factory, and they might have an estimate of what that will cost. You might need an architect or a quantity surveyor to do lifecycle cost estimates for a building that you’re doing a cost benefit analysis on. So there are the experts that you might have to bring in. But yeah, you need to have a, you need to plan you need to think think with the end in mind, begin with the end in mind, which is one of the seven habits that Stephen Covey talks about, it’s so true, you got to think about what’s the ultimate thing I need? And where am I now? What needs to happen to get there, you got to figure out the most efficient route to get there. So a lot of problem solving.

Joe  12:26

Yeah. And that’s, I think, a really big, exciting thing about economics and about, like studying policy and things like that is that a lot of it is problem solving? Would you have any advice for any students studying economics, or PPE, or any sort of related discipline in sort of getting into the consulting world, post

Gene Tunny  12:46

graduation, I mean, I wouldn’t get into consulting unless you are super passionate about it. Or, I mean, there are some good places that are working to death. I mean, if you get a, if you get a really good GPA, I don’t know what you need to get now that if you can get into some or like McKinsey, or BCG or aubaine, they’re really good training grounds for getting into C suite or, or getting into a, you know, really top job. So I think if you if you could get into one of those coming out as a grad, that’d be great. Other places where signing, you’re probably better off going, you want somewhere that will give you I mean, it sounds silly. It sounds terrible. What’s the word I’m trying to think of the word, but you want something that looks good on your CV, right. And so you want something that is recognisable, and that’s why Treasury or productivity commission or RBA works so well. So I’d be applying for somewhere like that and get good training and, and learn how to and what’s good about those biases is that they have high standards, and they teach you how to write well and communicate. And I think that’s very important. And they can also give you international opportunities. So one of the things that I that blew me away when I went into treasury was just all the international opportunities there. You work on issues with OECD or G 20, or IMF, World Bank, and Treasury people get postings all over the place. Beijing, Tokyo, London, Jakarta, Washington, DC. So that’s, yeah, that’s, that’s a good way to get a national experience and D fat too, of course. But that’s what I’d be doing. I’d be trying to get into, you know, as you probably all know, this, you got to work hard, study hard, try and do extracurricular things that will impress people have a reasonably good interview performance. And yeah, that’s, that’s all I can recommend is just work hard. You’re probably doing all that already.

Joe  14:39

Some of us maybe not awesome. Thanks for the advice. Like it’s really helpful, especially from someone who’s working in the industry. Yeah.

Gene Tunny  14:49

I mean, why I’d say that I mean, I mean, I enjoy consulting but I always see it as something that I’ve sort of fallen into. I mean, it’s good for me because it allows me to do a lot of interesting things and work with different people. And you know, potentially develop a business and grow the business. So what you ultimately want to do is specialise create products. So that’s the path I’m on now. So you probably don’t want to be doing lots of different things. I mean, I’ve been opportunistic, I’ve been trying to, you know, get the contracts in. And to do that I need to work on a lot of different things. Because partly, it’s because I’ve got a wide range of experience. So I’ve dabbled in different areas, and I can do those for a wide range of things. But ultimately, I’d like to sort of niche down and develop products that, that provide that recurrent revenue, that’s what you ultimately want, I think. And I think consulting can be difficult when you’re at the beginning, I wouldn’t say the bottom. But you know, the Finder mind their grinder model? Have you heard of that? But they talk about it, like Deloitte and PwC. The big four? Well, the finders, the partners, they’re the ones who have the connections, they’ll have, they’ll know the CEOs, they’ll go cycling with him, or they’ll play golf with them. And the CEO will ring them up, and can you do this analysis for us? Can you crunch the numbers for us on this project, and then there’ll be no partner or go, Okay, that’s great. Well brought that in the Finder, they don’t want to do the work, they just want to go to the, you know, the soirees, they just want to do the networking, and bringing the projects ever mind who’s a senior person, and not necessarily that senior, just there a few years or five, five or 10 years, they’re the managers. And so they’ll manage the projects being done. And the people who are doing the projects are the grinders. And today, the analysts, and that’s where the grades come in. And they could just work ridiculous hours. And partly because it’s a tournament because everyone wants to get up to the next level and prove themselves. And to get into one of those firms, you have to be really good generally. And so you’ve got young, ambitious people, they’re all competing against each other. But it can be very difficult that people work ridiculous hours. So that’s why I wouldn’t necessarily recommend consulting to start off with you better coming in later on when you’ve got some experience. So you can come in as a manager, or you could come in or you can do freelance on your own or set up your own business. I think it’s much more enjoyable then.

Joe  17:16

And then you get to work on your golf skills as well.

Gene Tunny  17:20

Yeah, although cycling, I know, golf used to be the big thing. I think it’s more cycling now. Yeah, yeah.

Joe  17:27

Awesome. Well, I guess speaking about the Big Four, as someone who’s working in the consultancy industry at the moment, what’s your take on the ongoing scandals that have been happening involving PWC and other consulting firms at the moment? Do you think this may be raises questions or concerns about the efficacy of outsourcing public policy?

Gene Tunny  17:50

Oh, look, I think there’s always been concerns about the efficacy of outsourcing. And if you look at the history of contracting out, I forget which fleet it was, but was it the Third Fleet, there was one of some of the convicts ships are all put out to tender right by the by HM Treasury, or the Admiralty in in the UK, and the Admiralty or the the Treasury they want, they want the most people to get out, they want people to come to Australia, they don’t want to people to die on the ship. Right? They actually want people to survive the voyage. But the ship owners, the ones who are who when the contract, they want to fulfil the contract to just to the letter so they can get the payment from the Treasury. But they don’t really care much about the people who were the people survive unless you make that explicit in the contract. So and there was a scandal with one of the convict ships, if I remember correctly, I can look it up, and we can put it in the show notes. So yeah, there’s always been issues with government contracting, there’s always been concerns. And so I’m a great believer in outsourcing, because I think it does save money. But you’ve got to do it for specific things for specific jobs that you can keep a close eye on and where you trust the people to deliver those jobs. So I think the problem with PwC is you have too much trust was placed in people that they shouldn’t replace that trustee and given the incentives on their end their ability to make money out of it. Right. And so the, arguably the people in the government should have seen that as a risk and pay closer attention to it. At the same time, what the partners in PwC did, what they allegedly did for the lawyers appears unethical. And you know, just just terrible. I mean, I’d like to think that if I was in the same situation, I wouldn’t do the same thing because I’ve been on the I’ve been on the other side of that in the treasury, in government. And I know just, yeah, there are opportunities all the time to profit off information that the government has, and I don’t know if you’re aware There’s an insider trading scandal with the lad who was working in ABS and he had a maid in Melbourne, and he was leaking the inflation data to him. So yeah, you’ve guessed that’s the problem in the public sector, you’ve got to there’s what I’m trying to say is there’s information in the public sector has is valuable. If you’re giving outsiders access to that, you’re going to make sure that there’s controls on it, you keep an eye on it, at the same time, what the PwC partners allegedly did was unethical, really bad form. Will it stop outsourcing? No, because there’s a lot of benefits to it. There’s a lot of expertise out there, that people who can help government from time to time they’ll take on things that are really big, and they need the outside advice and the outside labour outside assistance. So I think we’ll still need it. But there are lessons. And but that’s outside, as I was saying those lessons, we’ve been learning them for 200 years, and we keep forgetting them.

Joe  20:56

Do you think I remember reading a few months ago, there was quite a bit of talk about this new in house consulting section of the Department of Premier Prime Minister and Cabinet that they were bringing in? Do you think that that might be sort of a potential solution to that sort of issue, or

Gene Tunny  21:14

I think it will, it’s worth trying, I just don’t know how well it will perform partly because of the role of the profit motive in motivating consultants. So consultants to get jobs done, because they know that if they don’t get the job done, the client won’t pay the money. And then that looks bad for them. And if they’re, if they’re the actual proprietor or if their partner, then their compensation is gonna directly depend on that. And even if they’re, they’re an employee, then that can affect their progression, or they could even get the sack if they really stuffed something up super badly. There’s a lot of incentive to get the job done and get it done efficiently work weekends work long hours. I mean, there are some times I’ve stayed up till God, yeah, I’ve done at least one or two all nighters. Some people will do multiple all nighters to get jobs done, but you will really push yourself. Is there the same incentive? And in that government body? I don’t know. And, and I don’t know to what extent they’re going to be constrained by the the APS pay structure, and to what extent bonuses can be paid. So I think that’ll be the test of that. Look, it’s worth trying out. Yeah, I’m a bit sceptical about whether it’ll work or not. Yeah, that you got to make sure you get the best people in there. And if I was in government, I’m not sure I’d want to go to that team. I’d probably rather be in PMC or Treasury if I was federal, yeah, yeah. Yeah. So the idea that it was in PMS? Yes. I think it’s supposed to be a subsection of, of the PMC, portfolio or whatever. But yeah, you’d want to, I’d be concerned, if I was in the public service, I’d want to be in one of the core areas where I was working on the really juicy policy issues. And yeah, where you got the potential to advise the ministers, often directly, some will sometimes directly up at Parliament House, that’s that they’re the really interesting things to do. Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  23:16

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Gene Tunny  23:46

Now back to the show.

Joe  23:51

I guess another sort of perspective that I was thinking about is having independent public institutions like the Productivity Commission, for example, or the RBA, that you mentioned before, that are not necessarily beholden to a particular department, but still part of the public service. How do you see the role for those sorts of institutions evolving?

Gene Tunny  24:15

Yeah, I think they’re terrific. I think that’s, that’s a good idea. I think the PC has done a lot of good stuff. But we’ll have to see how it goes under the new commission head. So Danielle wood, who’s an old friend of mine, we’ll see how it goes. And I think she should be she should be great. She might have a different focus, she might be more focused on social policy issues than than some of the previous Productivity Commission heads. But yeah, I think Productivity Commission is a great idea a lot depends on the terms of reference. It’s given by the government though. So it can be it can be effective if the government uses it right. But a lot depends on what the government gets us to do. Yeah. The other one that’s interesting is the parliamentary Budget Office, which is really good. So I’m not too familiar with that. So that’s That’s in, that’s based in the parliament itself on the hill, rather than in a public service agency. And what it is, is it’s an independent costing agency, and it estimates the cost of policies. So if you’re from the opposition or the grains, or your tail, you can go to the parliamentary budget office and say, Hey, I’ve got this policy idea. Can you produce a costing for us and tell us, you know, what, what do you think this would cost? And so that, that provides a service to the whole parliament. And it provides a service to the public, because we’re not just relying upon the Treasury, which works for the government of the day. And potentially, I mean, I’d like to think they wouldn’t be influenced by the government the day but there’s that perception that maybe they’re not independent? Well, they’d certainly not independent, but maybe they’re not. Yeah, there’s a perception that they could be influenced to extent by the government. So therefore, it is good to have something like parliamentary budget office. And it’s really, it’d be a really good place to work. They’ve got an amazing data set, they’ve got a 20% extract of the ATO is taxation data, right. So all data on all the taxpayers out there, the the PBO has got a 20% extract of that, and that helps them work out, you know, the impacts of policies is pretty impressive.

Joe  26:25

Yeah, very interesting. I’m surprised that it doesn’t come up more as sort of a, an option.

Gene Tunny  26:30

Yeah, it’s either that I think it’s a textbook tax, the tax database, or the census that’s linked to the tax database, I’ll have to, might look that up as well. But it’s impressive data set that they’ve got. And that enables them to do really detailed, precise estimates of the cost of policies, because there’s policy at the Commonwealth level is so complex, because of all of the rules around social security payments, superannuation and taxation. It’s everything so complicated. And so therefore, you need really fine, detailed data to be able to cause some of these policies.

Joe  27:06

Yes. super interesting. And I guess really, like sort of a dream for an economist or quantitative economist to have access to all that data? Yeah, yeah. Well, I

Gene Tunny  27:15

guess I mean, that’s one of the things that’s really changed. And just the the amount of data that is available now. All these big longitudinal or panel data sets, blade, the business longitudinal data set Hildur, household incomes, Labour dynamics, Australia. And you can do all really neat statistical methods with them lots of good econometrics. So if you’re into econometrics, and yet see if you can get somewhere like PbO, or there are some think tanks that are really good like Grattan Institute, or II 61, you would have heard of those places. So yeah, I’d, I’d highly recommend either of those. II 61, the research director, there is an old UK boy, Dan Andrews, who worked at Treasury OECD, he’s good value,

Joe  28:00

no relation to the Victorian

Gene Tunny  28:06

though he’s not a dictator, that’s a good guy. Wasn’t a political COVID.

Joe  28:20

Also, thank you for that sort of tour of the landscape of policy and consulting that was super interesting and hopefully informative for all of us going out there into the world. Moving sort of to another topic, I guess, there’s been obviously over the last year or so inflation has been one of the main policy points or issues, pretty much any sort of discussion about the economy is related to inflation. And a lot of there’s been a lot of media coverage talking about wage growth, particularly over the last six months and and how that might be contributing to inflation or might potentially contribute to inflation. So we have a question here asking, is it misleading for the media to highlight wage growth as a contributor to inflation? Given that, in Australia, we are experiencing negative real wage growth at the moment?

Gene Tunny  29:18

I don’t know to what extent the media has been blaming wages, I mean, that what we’ve seen is that the central banks that reserve bank is concerned about this concept of a wage price spiral that if wages take off, then that’ll feed into prices, and that’ll force up wages again. Now, we haven’t really seen that yet. Okay, so look, some of those concerns may be misplaced. There’s a bit of a debate about that. At the moment. The Australia Institute’s got a lot of press, arguing that it’s all because of greedy corporations. This greed inflation. I’m a bit sceptical of that I’m not sure whether to what extent corporations are any more greedy than they were previously and whether the markets more concentrated than it has been in the past. So I’m sceptical about about that story too. But essentially, we had, it’s the classic story of too much money chasing too few goods, right? We had this big COVID stimulus, additional hundreds of billions of dollars more in bank accounts, and, therefore, extra money, not enough supply prices a bit up the whole wage price spiral thing that central banks have been worried about. Yeah, that that actually hasn’t happened. So maybe you could say it’s misleading, but I’m not sure that’s been I think that’s been what some of the economists and central bank governors have been talking about. I don’t know, to what extent the media have been blaming them or talking about that. I think, if anything, it’s that great inflation story that that’s been dominant. Yeah, I think there’s problems with that, too. I mean, essentially, it’s just prices have been rising, because there’s been a lot more money, and there’s been the shortages and your businesses have, yeah, they’ve put up their prices. And that’s helped them, you know, that’s encouraged them to expand, supply where they can. Yeah,

Joe  31:08

I agree that it definitely has sort of picked up pace in the media over the last few months, this idea of, and often you see it linked to earnings calls or record profit margins. Oh, yeah. Do you think that profit margins should sort of receive more scrutiny from economists as a sort of concept, especially when we’re thinking about inflation?

Gene Tunny  31:32

Well, I guess, what you’re seeing is you’re seeing a correlation, right? Because we’ve had, we did have a very, very strong rebound, after the pandemic, okay, when we came out of lockdown. And so you’re going to expect high profits, okay, because the economy was really performing strong, it’s slowing down. Now, as we all know, and we’ve got this per capita recession that they’re talking about. So yeah, it was natural that profits would increase, because we had such strong economic conditions, that’s just the business cycle. And at the same time, we had inflation because we had all of this extra money chasing only so many goods that could be produced profits, I mean, we do want companies to be profitable, I think you should be looking at what’s causing the profits, if there is market power, or if there is concentration, if they’re abusing it, then we should be looking at that. And that’s what the a triple sees. Therefore, now you could argue that may be the a triple C isn’t as effective as it should be the a triple C’s, it’s looked at groceries in the past, it’s looked at all sorts of sectors in the past, and now we’ve got a competition policy review. And I think it’s looking at the airlines, that’s where we should get. So maybe there is a case for there’s possibly some restriction of competition, or in the airline sector, maybe weak that could be more competitive, it’s a lot better than it used to be when it was super regulated back in the 80s. And it was really expensive to fly around. But no one be jetting around to different cities, it was a certain it was very expensive. It’s because we deregulated it back in the 80s. And we allowed in a lot more competition. Now, this is why this whole issue of the Qatar decision not letting them in on those international routes. That’s why that’s become so politically difficult for this government, because that was something that could have helped reduce the cost of flights, particularly to Europe. And so so you could argue cornices was getting some protection from the government. And so we shouldn’t be thinking about what are their barriers? Are there? Is there a problem with an issue with the market structure? Is there too much oligopoly or monopolistic power? And are there levers that the government can can use to stop that? In cases where it’s where they’re clearly doing something anti competitive? Can we prosecute them under the age of the consumer and competition policy? I can remember the exact name off the top of my head. But yeah, we should. It’s definitely something we should be concerned about. And it is something that, that economists do study. Yeah.

Joe  33:59

Awesome. Thank you for that. Yeah. I mean, as a personal anecdote, I remember I wanted to catch a flight to Europe a little while ago, and I had to go fly with cuantas to first before I could even get a Qatar flight and it was so much better, that I’m going from Perth, Qatar Airways. I will. I think they’re really good. So yeah, it was an interesting decision. We’ve got another question here. Again, sort of taking another step. Russ Roberts, who is the host of econ talk a podcast. He refers to economics as an imperialistic discipline. This idea that, you know, being like, you know, economists often try to apply economics and economic thinking too broadly, to domains where the assumptions may no longer hold and its utility is questionable. I guess, someone that might come to mind is someone like Gary Becker, you know, bringing the idea of economics and supply and demand to the family and areas that typically it hadn’t been applied to before. And for you personally, what do you think the limits are of economics as a discipline? And are there things that economics can’t explain? And we might need other sort of perspectives to understand?

Gene Tunny  35:15

I think certainly, I mean, even economics requires other perspectives. So I think economics is an incredibly powerful tool. And, you know, it’s a science of the economy and studying the economy there. There’s some core economics, you need to know, where it gets difficult is trying to predict behaviour and, and in in cases where people don’t act fully rationally. And that’s what you need to bring the psychology and right. So I think any idea that a court economics is the imperialist discipline, and we’ve got all the answers, I think, that was destroyed by the financial crisis. I mean, maybe up until 2008, people could have believed that. But after 2008, I think there was a recognition that, okay, we haven’t really solved the business cycle, we thought we’ve solved the business cycle as this Great Moderation. markets aren’t always rational, you can’t, there are periods of irrationality in economics is not going to help you there. That’s where you need psychology to bring psychology. And that’s why behavioural economics is trying to bring in psychology with economics. So yeah, I think there are clearly limits to economics. And one of the one of the important limits or considerations, is that economics to the extent Well, if it’s, you could say it’s a science or it’s a study a field of study, it can answer questions of fact, or we can make predictions. Or we could argue, analyse what might be the most efficient course of action from a the perspective of consumers consumer welfare, from economic welfare, broadly construed. What we can’t necessarily answer is what’s the best thing to do for society? Because then you’ve got ethical issues, value judgments, how do we look if something is affecting the environment, for example, and that affects future generations? How do we, how do we analyse that, that those can be difficult issues? Or how do we make choices regarding health policy measures? So it’s not always they’re not always issues where economic considerations are the final determinant, you may need to bring in value judgments? Yeah, the whole distinction that thing was David Hume between isn’t board? Yeah, yeah. Yeah. Yeah. Could

Joe  37:34

all Hume who I guess himself was sort of an economist when he talked about Yeah, money and things like that? Yeah. Well,

Gene Tunny  37:42

anyway, he wrote a famous essay on the gold standard on price, the seaflo mechanism? I think it was, yeah, yeah. I

Joe  37:50

think the argument was that, yeah, it doesn’t matter if you if you have the money supply, and prices have as well, like, every, the welfare of everyone is the same, essentially, I think I only remember that because Polanyi then talked about it. Yeah. He was a pride our economist. Yeah, for sure. Yeah. So that’s all the pre prepared questions that we’ve got. I’m gonna go over to the lectern mic, and then we’ll be handing the handheld around to the members of the audience, if they want to ask gene any questions.


Just going back, I guess, to your discussion about public and private. And I guess, us as university students entering into the workforce, I just wrote a question down. So as university students, we are involved in Dubai, developing a variety of skills that, I guess were not explicitly taught in university, but that we hope to apply when we get into the workforce, from your experience, or what schools have surprised you from the recent generation of you know, incoming university graduates, and what do you think, you know, is missing from you know, they’re the skills that they’ve developed that they might not have been taught explicitly? Throughout University?

Gene Tunny  39:00

Okay. What’s most surprised me is just how savvy or how brilliant uni students are at producing PowerPoints, like slide deck, Oculus nowadays, we’re all competing in these case study competitions. I’ve been blown away. So yeah, that’s really impressive. Otherwise, yeah, just, I guess maybe I’ve been lucky. But yeah, I found the slide decks. The students type employed generally have good presentation skills, very good at research, good at getting across data and information. I think the skills you need to learn, like everyone needs to learn them, it’s it’s about writing as clearly as you can. Being proactive. It’s hard once you get out of uni because uni, you’ve got the targets to hit, you know, when the you’ve got to lodge your, your papers or when the exam is on, you got to turn up to it. It’s more structured work can be a bit unstructured at times. And so you got to, you’ve got to learn how to manage yourself, manage others get others to help you out a lot of those interpersonal skills, it’s just about building those up, you’ve probably been developed in developing them here at UNI. Anyway, that’s what I, I’d say, the I’ve been really impressed with UQ students in particular.


G’day, Gene, thanks for the talk. And for your time, I just want to go back to, again, back when you were talking about the distinctions between working in public and private sectors you mentioned as a downside, or a potential downside of working in the public sector was perhaps changing ministries disagreement with, I guess, the government of the day and, you know, a general sense of inefficiency about projects that you’re doing as a possibility. Did you find that your experience in the private sector was a bit more alleviated of those concerns? Or did you also have times where you disagreed with the direction of your projects,

Gene Tunny  40:54

I guess, you’ve got choices in the private sector. So you could actually refuse to do a job. But then you want to try and do a job if you can, if the client is going to pay you, that you have so many clients, you can move on and you can you can sack clients in a way and go okay, I’m not working with you again, if there if, if you didn’t enjoy it, or if it was just hard work. So that’s, that’s what I was getting out there. Whereas with, with government, if the government’s in for several years, and like, I think you’ve got to work for the government of the day, this isn’t a matter of politics. I’ve worked for both labour and coalition governments. And, and I don’t think the quality of the work, I actually think it’s more related to the people in charge at top, I think it relates a lot to their personal characteristics rather than their politics. So I don’t think there’s any correlation between the political strife of government and how good it is to work for, but yeah, you’ve got to be you’ve got to be flexible and realise, I mean, some people enjoy it. I can be challenging. Yes, Minister might be too old. But there was a show for two years, you know, yes, Minister, from the 70s and 80s with Nigel Hawthorne, and, and Jim Hakka. Do you remember he played Chewbacca, too? Anyway, it was a great show. But there’s a line in it where Bernard who was the principal Private Secretary to the Minister was talking to Humphrey says, I don’t understand why the minister wants to do this. How do we how do you cope with all of these changes in in policy direction and sound free says look, if I actually cared about what the policy direction the government was, I’d be stark raving mad because one minute, I’d be pro nationalism, nationalising steel, I’d be then Pro D nationalising steel, and then I’d be pro renationalising steel, because those things change. You’ve got to be flexible in government, that maybe that’s not for everyone. And politicians, I think can be difficult too. Because, you know, working for the government is can be challenging, because there’s a lot of media, there’s a lot of light on the government, and there are a lot of crises. And you can be called in at odd hours, particularly, like, the craziest time in Australian politics in the last 20 years was the Rudd Government. And I mean, it was just completely different from the previous government. But you know, a lot to his credit. I mean, Kevin Rudd wanted to do things, he he saw urgency, he had a great sense of urgency, he was an incredible hard worker himself. But that meant that there were requests coming in at odd hours, he’d he’d be flying back from a meeting a DC, he’d be there for the first time g 20. Meeting, and then he is playing with land in Hawaii. And then we get a call that the wants a paper on. So it’s such it’s such an issue by the time he lands in, in Canberra. And so this is might be on a Sunday or something. So it can be a bit crazy. But that’s what you get, if you want to be in that sort of environment, because there’s that political aspect to working in government. Some people really enjoy that they thrive on it. Others find that find it difficult. So yeah, that’s just Yeah, who knows? I mean, my experience could be a bit idiosyncratic. So that’s one thing to bear in mind to


sort of on that with the PwC scandal, they ended up selling all of their public sector work company, do you there’s been talk about whether all the big four companies are gonna end up having to do that. Do you think that that will happen and also just sort of see that as a good path forward

Gene Tunny  44:27

in terms of preventing corruption or in front of the think? Yeah, I think I mean, PwC has been forced to do it. The other firms, I think, would rather not do it. I’m trying to remember if v y looked at it and try remember where EY was trying to split its audit from its the rest of its business. And I don’t think it went ahead. I’ll have to look at the details of that. There are probably other ways to stop that, that conflict. I don’t know if that’s going to happen with the other firms, or not close enough to the people in those firms too. Uh, to make that judgement, but yeah, I don’t know to what extent it would look, if you got a job at one of those big four firms, then, you know, that’s, that’s going to be good, it’ll be good experience, even still at PwC is probably still good experience, despite the scandal, they’ll bounce back, they’ve got so many connections, they had a good reputation for a while, I’m sure they’ll be able to turn around eventually. Now, I’d have to wonder, like, as if you want to do consulting work, I’m not sure whether you’d want to go to a company just focused on public sector work. Because then why not just go into the public sector itself, if you like, if public sector is your thing, I’d go into government itself, because one of the things with consulting, I enjoy it, because I actually get to do a wide variety of things. I found personally, I found government difficult because I’m reasonably opinionated. And like, I wasn’t the Sir Humphrey cat character who could been just changed, not not care about the political, you know, the actual policy direction or, yeah, I thought I’d find that very difficult to do. So I actually quite enjoy being on my own or having freedom to, to write to comment. Whereas you can’t do that in government, you can’t say anything critical of the government. It’s difficult. There are advantages, because you can then get involved in, you know, in the policymaking and the decision making. You can work with the minister’s office, even the ministers. But if that’s what you want to do, you’re more likely to get that to do that in the public service, than if you did a public sector, in a public sector consulting organisation that consults to the to the government just depends on what you’re after.


This is kind of flowing on from that question a bit. Do you see any other consequences coming out of the PwC? Scandal? And I guess now, the KPMG scandal with defence contracts, I think, that kind of flow onto other consulting firms outside of the big fall? Or do you think that I guess, kind of trust in interpersonal relationships that might already exist? Kind of, I guess, being more important than that? Maybe?

Gene Tunny  47:09

Yeah, I think government public servants will be more conscious of the risks. And it may be harder as a consultant to work for, to work for government clients, because they may not automatically trust you. It may be harder to get access to information, you may have to sign more documents. It can be difficult, it’s difficult already working for the government agency. So projects I’ve done, Nicholas grown and I and another colleague did a job for services in Australia recently, looking at my gov and looking at the the investment in that and the benefits of of improving the Margao functionality. And I mean, we had to sign all’s we had to sign those documents that said we wouldn’t share this information. Of course, we wouldn’t. And you know, then PwC, they I think they probably their person who allegedly breached the trust signed documents to and they should have, they should have taken it seriously. And it looks like they didn’t. But what Services Australia did was they wouldn’t let us take documents away. We could only see some documents physically, in a Services Australia offers, because they’re highly confidential information relevant to the budget process. So they had the right controls in place. I think you’ll see more of that there. There’ll be less trusting. I think they’ll still be consulting opportunities. I think I think that they need the expertise from outside so much. They’re not going to cut back on that. But it’ll be more difficult. There’ll be more constraints in terms of access to information, they won’t automatically trust you. But I think they’ll still be, they’ll still be jobs that consolidate if you want to do that. Yeah.

Joe  48:44

Awesome. Well, if there’s no more questions, we just want to say thank you so much gene for coming along. And we’d like to offer you this gift. This is the statecraft which is our PPE society, student magazine. So lots of different articles from all sorts of students. Yeah, so thank you so much for coming and sharing your knowledge with us. It’s been really great and really appreciate you and hope to see you again in the future.

Gene Tunny  49:15

Righto, thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


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Podcast episode

Growth or Degrowth? w/ Oliver Hartwich, NZ Initiative – EP208

Show host Gene Tunny delves into the concept of Degrowth: the idea of deliberately shrinking economies to avoid the runaway climate change, ecological collapse, and societal breakdown that degrowth proponents are worried about. Gene first discusses degrowth with Oliver Hartwich from the New Zealand Initiative, and then responds to questions about degrowth at a recent University of Queensland Politics, Philosophy, and Economics student event. 

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple Podcasts and Spotify.

About this episode’s guest: Dr Oliver Hartwich, NZ Initiative

Dr Oliver Hartwich is the Executive Director of The New Zealand Initiative. Before joining the Initiative, he was a Research Fellow at the Centre for Independent Studies in Sydney, the Chief Economist at Policy Exchange in London, and an advisor in the UK House of Lords. Oliver holds a Master’s degree in Economics and Business administration and a PhD in Law from Bochum University in Germany.

What’s covered in EP208

  • [00:04:39] Degrowth to stop climate change? 
  • [00:08:00] Economic growth and adaptation to climate change? 
  • [00:11:53] How a threatened lungfish colony stopped a new dam in South East Queensland. 
  • [00:15:47] Are we rich enough already? 
  • [00:20:20] Democratization of wealth and prosperity. 
  • [00:24:05] Economic growth as a positive. 
  • [00:30:39] Carbon pricing. 
  • [00:34:10] Decreasing Antarctic sea ice extent.

Links relevant to the conversation

Gene’s September 2023 Centre for Independent Studies (CIS) paper on Degrowth:

NZ Initiative podcast from which part 1 of this episode was borrowed:

Transcript: Growth or Degrowth? w/ Oliver Hartwich, NZ Initiative – EP208

N.B. This is a lightly edited version of a transcript originally created using the AI application It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Oliver Hartwich  00:03

William Stanley Jevons in the 1860s actually predicted the word would run out of coal. This is general tendency to do linear thinking where everything is always continuing on a certain path. I mean, there was a letter right I believe, in the London Times in the early 20th century, predicting that London at some stage would be under six feet of bossman year from all the offices in the city. It is this tendency to always think we’re just continuing on the same path and it will never change.

Gene Tunny  00:41

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host, Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode. Please check out the show notes for relevant information now on to the show. To grow or not to grow, or indeed to D grow. That is the question. Do we need to rapidly shrink our economies to avoid runaway climate change, ecological collapse and societal breakdown? This episode features on my recent conversations on degrowth I speak with Oliver Hartwich from the New Zealand initiative. And thanks to Oliver for letting me reuse the recording from the New Zealand initiative podcasts that are recorded with him. This episode also includes a response that I gave to a question from Joe Christiansen at a recent event hosted by the University of Queensland politics, philosophy and economics society. Okay, let’s get into the episode. I hope you enjoy it. After you Listen, please reach out and let me know your own views on whether we should pursue D growth or not.

Oliver Hartwich  02:07

Hello, and welcome to the New Zealand initiatives podcast. My name is Oliver Hartwich, and today we are joined by our special guests from Australia we have gene Tunny, who is an adjunct Fellow at the Centre for independent studies, and also a director of ADAPT economics consultancy in Brisbane. Welcome to the podcast Gene.

Gene Tunny  02:24

Hello, Oliver, pleasure to be here.

Oliver Hartwich  02:26

Great to have you with us because we want to talk about a paper you just published last week with a centre for independent studies called debunking degrowth. Now, I thought we should start this conversation by just admitting freely that we are both economists. So degrowth is something that doesn’t come naturally to us usually, because normal economic theory, correct me if I’m wrong is all about trying to find better ways of combining factors to do more with less or to do more with the same, to find different combinations to create growth, to really find out what works and make an economy grow. And now suddenly, we’ve got a bunch of scholars turning this on its head telling us to actually try to not create so much wealth and not create so much prosperity, but really put the reverse gear in and go in the other direction. Is that a fair summary of what this movement is about?

Gene Tunny  03:16

Yes. I mean, they certainly want us to go in the other direction. I mean, the two steel man, their argument, I think, how I describe it is that they think we’re breaching these planetary constraints. So they think that we’re at a level of consumption, whereby we are essentially, you know, we’re sacrificing the well being of our children or grandchildren. So they’re concerned that we’re, we’re going to destroy the planet, some of this degrowth literature is it’s apocalyptic. It’s, I mean, I think it’s catastrophizing. But you know, they, they’re worried about climate change. They’re worried about ecological breakdown. They’re worried about resources being exhausted. So yeah, look, I largely agree with you, but to to steal man their argument, they think there’s evidence to support the view that we’re consuming too much if we want to have you know, sustainable living standards for future generations.

Oliver Hartwich  04:18

Right. And in your paper, you then produce a reproduce their claims, and you’re debunking them one after the other. And you’ve got five claims in your paper. So I thought what we might do so much is go through the list, and try to figure out what this movement wants and your response towards so the first unproven claim you talk about in your paper is one that you already alluded to. We need to de grow to stop climate change. Why do they say that and why do you think this is wrong?

Gene Tunny  04:46

Oh, well, essentially they’re they think that we’re on these tipping points. I mean, you’d know that it appears that the planet is warming I mean, there’s scientific support for for co2 We were warming the atmosphere to an extent. So that’s difficult to contest. But they claim that they believe these real these tipping points sort of scenarios. Whereby, I mean, the permafrost melts. There’s all this methane release, you know, we have the, what is it one of those ocean currents that shuts down? And I mean, all sorts of apocalyptic scenarios. And I mean, just looking at it. I mean, I think that the evidence for that is, I mean, a lot of it comes out of computer modelling, there are all these computer simulations, whereby if you look at what they’re doing a lot of the conclusions, the apocalyptic conclusions are essentially assumed or built into the model. So I mean, my feeling is that the evidence isn’t, isn’t strong enough to justify that apocalyptic thinking. Sure, there’s some warming going on. But there are policy measures been introduced to try to address that, or, I mean, none of the credible modelling on climate change mitigation has degrowth. in it. I mean, we can still grow, we’ll still be wealthier in per capita terms. Maybe the growth rates less or more if we respond to climate change. I mean, now we’ve got people saying that if we don’t address climate change, we’ll have lower growth. So look, I think they’re making big claims about how we’re going to, you know, have this unsustainable runaway global warming if we don’t do something radical and massively cut back our consumption. So that’s essentially their argument. And I just don’t think the evidence supports that.

Oliver Hartwich  06:43

But of course beyond that, because we’ve already decoupled economic growth to a degree from emissions. Yeah. So just because you’re growing doesn’t mean you’re necessarily growing your emissions.

Gene Tunny  06:53

Yeah, yeah, exactly. And I think they’re ignoring a lot of the technological change. They’re, they’re ignoring our capacity for innovation. Yeah, that’s absolutely correct. So I guess not to not to necessarily defend them, but they do address that decoupling argument. And they do acknowledge that that, you know, the emissions intensity of GDP is declining. But in their view, I mean, we’re still increasing co2 emissions, or sorry, we’re still, you know, the co2 in the atmosphere is still growing. So they’re a bit sceptical of that whole decoupling argument.

Oliver Hartwich  07:31

There’s another aspect to the whole climate change debate. And that’s adaptation, of course. So I mean, if we’re comparing countries like the Netherlands and Bangladesh, Bangladesh is subject to flooding, but so is the Netherlands because they are mainly under normal sea levels. And yet, the Dutch build dikes and all sorts of infrastructure to deal with that, because they could afford it. And then Bangladesh, and they’re still waiting for that to happen. So actually, isn’t actually economic growth, the thing that saved the Netherlands from flooding

Gene Tunny  07:58

out? Yeah, look, that’s, that’s a good point. I mean, you wouldn’t want to de grow and stop emerging economies from getting wealthier, because that will decrease their capacity to actually adapt to deal with it. I absolutely agree with you there. And look, that’s one of the things that the degrowth movement misses in my view. I mean, there’s all of this, you know, it’s a lot of the standard sort of criticism of, of capitalism and, and economists that you get from people on the left, and yeah, I mean, it ignores the fact that I mean, since countries such as China and India embrace the market, right, China in the 80s, and things are paying and then we had the, the end of the licence, Raj and in India, I mean, they’ve they’ve had, you know, much better growth than previously and we’ve had over a billion people lifted out of poverty. So yeah, absolutely agree with you there, Oliver.

Oliver Hartwich  08:52

Okay, then let’s move on to your second unproven claim, we need to de grow to stop resource depletion, environmental degradation and biodiversity loss. That leads us straight into the debate around Julian Simon, or if we want to go back a little bit further. Thomas Malthus. Yeah, absolutely.

Gene Tunny  09:08

And I think history shows that I mean, we are able to address these issues. And a lot of the concerns came best addressed through the market through clear delineation of property rights. A lot of the problems we have in Brazil, for example, that there was a recent economist article I’ve mentioned in the, in the paper, which is essentially saying a lot of the problem with the rainforest, destruction of the rainforest is lawlessness, it’s bad enforcement. Right. And look, you know, there are efforts all around the world to, to conserve to the off the common Exactly, exactly. So it’s really just, yeah, they just seem to ignore that. You know, what economists know about the people who own a resource are going to, you know, protect it and conservator. So yeah, absolutely. And look, I mean, look, you have to acknowledge that there has been a loss of biodiversity over over decades. And I mean, I think we’re starting to address that we’re starting to arrest that decline. And certainly the so I’ve got a there’s some evidence there about the decline in biomass globally or number of animals. And, you know, that’s, that’s been arrested that decline, which, which is good. So look, I think, you know, it’s a lot of just negativity, and isn’t capitalism awful. Whereas, really, I mean, we can address these issues, they’re within our ability to control and look, just look what we’re doing in Australia. I mean, we’re a wealthy country. So we, and this goes to your point before all over that the wealthier countries are going to be better able to address these issues. I mean, we’ve got things like biodiversity offsets. Anytime you want to do a development that impacts the environment, you have to prove about how you manage those impacts. And we’ve even stopped, we stopped the dam in southeast Queensland, even though we need the water. Right, it’s good. We’ve got a hugely growing population. And we stopped a dam because we were concerned about a lungfish. So yeah, I mean, we are trying to address these issues. And I think, yeah, that that argument really doesn’t, doesn’t hold up. And the other point too, as you know, as an adopt a dam over length, yep. Travis didn’t dam. That sounds like an episode straight out of utopia. Well, it happened. It was Peter Garrett, who was environment minister here. So um, yeah, it was a huge issue, because we had a water crisis in the 2000s here in southeast Queensland. And so we built a desalination plant, which is hugely expensive. We built a recycled water plant. And then we were looking at a dam north of Brisbane in the Murray Valley, the travesty and dam and it got right to the point where the federal government had got to the federal approvals process and it was blocked by the environment minister, Peter Garrett, former lead singer of Midnight Oil. Yes, I have this man. He was the environment minister. It’s a burning blocked it because the lungfish was threatened. So yeah, apparently there was no way of, of looking after the lungfish if you built the dam. So yeah, that’s that’s just an example of how we do care about the environment in this country. It’s not as if we’re sacrificing the environment for growth.

Oliver Hartwich  12:31

The other idea of course, in all of us resource depletion seems to be one of these ideas that you simply cannot ever refute, keeps coming back. Going back to Morpheus, of course, that’s the starting point. But William Stanley Jevons in the 1860s actually predicted the world would run out of coal. It’s this general tendency to linear thinking where everything is always continuing on a certain path. I mean, there was a letter right, I believe, in the London Times in the early 20th century, predicting that London at some stage would be under six feet of horse manure from all the horses in the city, it is this tendency to always think we’re just continuing on the same path, and it will never change.

Gene Tunny  13:11

Yeah, exactly. So and the thing with the scarcity of resources, I mean, we know that as they do become scarcer, the price is going to increase. And that’s going to encourage conservation, or it’s going to encourage people to switch to two alternatives. So and you mentioned, you alluded to the Julian Simon Paul Ehrlich bet, which ended up losing because he thought we were in the 70s, they thought we were on a path to, you know, massive resource scarcity. And that

Oliver Hartwich  13:41

perhaps, just for the benefit of listeners who may not be aware of that, so can you tell us briefly what this bench was about?

Gene Tunny  13:49

It was about prices of commodities, they selected, maybe a couple of dozen commodities, major commodities. And Ehrlich was betting that that increase in price over the the 80s by a certain percentage, amount across extreme people would run. Exactly because there was all of that modelling in the world. Ehrlich was infamous for that population bomb book in the late 60s, which forecast that you know, would, you know, even with, like, what was it 888 billion people which where we are now we’d end up with, you know, massive famines and the chaos and all of this. And

Oliver Hartwich  14:27

then we’ve got the Club of Rome, of growth and all of our

Gene Tunny  14:30

forests and meadows, and there was all of this apocalyptic thinking, you know, Doomsday was at hand. So I think what I found interesting looking at this old degrowth literature, is a lot of the a lot of the concerns or a lot of their arguments could could be questioned or rebutted, if you go back to just what sensible people like Robert Solow and then the Treasury here in Australia, what they were saying in response to the club Right, right. Yeah. So

Oliver Hartwich  15:03

we make made a very similar point in one of our publications. A few years ago, we had a little booklet published under the title The Case for economic growth. And we were talking about environmental Kuznets curve, where, first of all, when the economy grows, yet there is an impact on the environment, and it might be negative. But once you get past a certain point, people will demand action and clean it all up. Yeah. And actually, it gets better over time.

Gene Tunny  15:26

Yeah. And that’s one of the points that I made in the paper. Yeah, absolutely.

Oliver Hartwich  15:31

Your third point, your third unproven claim is perhaps even more interesting. We are rich enough already? Well, it would be harder to make that claim in New Zealand, because we’re 25% behind Australia. What’s the thinking behind that?

Gene Tunny  15:47

Oh, well, they make the argument that if you look at happiness, Carl, you know, correlations of happiness and GDP per capita beyond a certain level, it starts to flatten out. And so the argument is that countries such as Australia, and I mean, maybe New Zealand doesn’t qualify yet, but we’re wealthy enough already got a way to go. It’s all about you know, it’s it’s an issue of inequality. So there’s this sort of argument that I look, the West is rich enough already. It’s if you concern about the rest of the world, and it’s, you should redistribute that income. And you know, the people in the West were the ones who, of course, we’ve caused all the problems with climate change, et cetera, it’s all our fault, imperialism, and all of that. And so that we should redistribute our income and wealth, the problem is, that’s only going to go so far. Right? It’s not going to solve the problem. And it’s not good for, you know, incentives. Right. It’s not good for it’s not sustainable. So it’s just a really bad argument, I think. And, and it also, I mean, when you look at it, this, this is going to require authoritarian measures to introduce because at the moment here in Australia, we’re going to cost a living crisis, right? So you’re not going to be able to tell people, and we’ve got no shortage of housing, you’re not gonna be able to tell people, you’re rich enough already. Because a lot of people who don’t know when I’m What are you talking about this nonsense? You’d have to engage in really authoritarian measures to bring about D growth. So yeah, I think it’s a really bad argument of the D growth people.

Oliver Hartwich  17:20

Exactly. Right. I think there is another point actually, that we should consider. Sometimes it’s not so much the absolute wealth that you hold. It’s the direction of travel. So I’ve actually seen some really happy people and countries that are not that rich yet, but they’re travelling in the right direction, whereas you can be in a richer country that’s kind of stagnating, declining, and feel really miserable about it. So actually, people want to have hope they want to see that the future is better. And then it almost doesn’t matter from which starting point you come in just the direction of travel that actually determines how happy you are.

Gene Tunny  17:51

Yeah, that’s a good point. I mean, the the example of a country that was rich and started declining, everyone was miserable. It’s probably Britain in the 1970s. So yeah, I think that’s a that’s a good point. Yeah.

Oliver Hartwich  18:03

unproven claim number four, we need to de grow to reduce inequality. What about well,

Gene Tunny  18:11

yep, I mean, I guess this is this is related to that previous point. So and this is part of their whole critique of capitalism that capitalism makes the rich richer and the poor, poor? And look, I think that’s a really silly argument. And there’s not a lot of evidence for that. And, and if you look at just the huge gains we’ve had in living standards in emerging countries, emerging economies over the last 30 years, since we’ve opened up to the market, and it’s just extraordinary, over a billion people taken out of out of poverty, there are a few stats that I use, or that the World Bank’s produce, which shows that I think, around 1990, it might have been 70% of the world was living on $6 us a day or something like that. So not the diarist poverty of $2 a day, but And now that’s under 50%. Right. So if you look at the numbers living on $2 a day, then you have, you know, a big decline there, too. So we’ve got huge gains, so that in relative terms the world is becoming more equal, but we are seeing in some countries that, you know, there is an increase in inequality, particularly in the United States. But I think you don’t want to then conclude that our the market systems terrible isn’t, because a look I mean, that’s associated with new technology. I mean, we’ve gone through a period of, of huge technological disruption and I mean, America, America is the leader in that and so therefore, the people who are responsible for that are doing doing very well. And look, you probably you’re better off having a more productive a wealthier economy. And you know, having In the pie bigger and then sure you can then have a debate about the, the shares of that pie. But you want to have the biggest pie possible, I’d say,

Oliver Hartwich  20:09

because in the end, what capitalism and what economic growth? Does it actually share us? The wealth with more people, it’s the democratisation of luxury, if you like. Yeah, I remember actually speaking as an event, and quite a few years ago, under the headline, people with flat screen TVs should stop whinging about capitalism. One of the arguments I made was actually, if you teleport at someone who was really, really rich a few 100 years ago, so you take the Sun King Louis Catorze, and you kind of get do rica tours and visit 21st century Australia or New Zealand? What would Luca tours be really impressed about? Well, that you could switch on the light with a switch, or that you could read your newspaper from a foreign country on your phone, or that you could just call someone in a distant city. But I think what he would really be surprised about was that this was available not just to his modern day equivalent, but to everybody. And so we have actually completely democratised wealth and prosperity to a degree that we had never seen it before in the history of humankind. No, absolutely.

Gene Tunny  21:13

I mean, indoor plumbing is one of the great innovations and better sanitation. I mean, the world today is clearly much better, even even if you’re a king and seventh eighth 13th centuries, and yes, you’d much rather live today I’d say yeah.

Oliver Hartwich  21:30

Yeah. Even if you’re not a king. Which then leads us to the combination of all these unproven claims. Number five, we need to de grow to avoid economic and social collapse. So listening to you, it seems obvious, it is the opposite. If we want to avoid social and economic collapse, we need to grow.

Gene Tunny  21:50

Yeah, well, this is part of that whole, apocalyptic or catastrophic line of thinking. And you know, that there was that study a few years ago by she was a consultant. And she wrote this, I should have I’ve got the I’ve got the reference in the in the report, but she reproduced the the meadows analysis, or the the Limits to Growth analysis from the 1970s. And she’s saying, Oh, if you look at the data, we’re on track for societal economic and societal collapse, which is what the limits to growth model was predicted. So she had an update to limits of growth. Harrington is a surname. But I mean, it just, it’s part of this, you know, catastrophizing, when you look at these models, and this is a point that solo made back in the 70s, when he just tore apart the, the whole Limits to Growth analysis in his great challenge article he wrote is the is the end of the world at hand that are referenced in the paper. And I mean, they just build in the fact that we’re going to hit some point of no return, and then everything’s just going to collapse. So there’s a in their simulations, they have eventually population industrial output, reach some peak and then just collapse. But it’s just built into the model that programme that into it. And you can’t say that because we’re or maybe some variables are tracking with what the model forecast, you can’t then conclude, oh, here, well, then we’re gonna hit this peak, and then we’re going to suddenly collapse because there’s no evidence that that’s going to happen. And any person who does forecasting knows that these tipping points, these turning points are the most difficult things to actually forecast. So yeah, it’s just, again, it’s just catastrophizing.

Oliver Hartwich  23:42

Absolutely. So, in conclusion, you have saved conventional economics, you have actually demonstrated that what economists have been telling us all along is basically Correct. Actually, economic growth is a positive. And by finding better ways of combining economic factors of production, we are improving prosperity, we are making societies return that’s a good thing.

Gene Tunny  24:05

Look, yeah, I largely agree with that, Oliver. And what I would say is that, just as we degrowth, like targeting negative growth would be silly, or not, when I’m not necessarily advocating that we target a specific rate of economic growth, because ultimately, that’s going to be the product of, of the market of people making. Yeah, and I don’t want to be, I’m not saying that look, unfettered capitalism is what we want. I mean, we need some regulations, we, you know, there are some market failures we may need to address but what I’m saying is that, you know, this whole degrowth thing is rather silly and, and there’s no evidence to suggest that we can’t continue to grow and really, I mean, growth is a solution to a lot of problems. So particularly if you’ve got a shortage of housing, you know, if we want to lift living standards in emerging economies, where they’re still much lower than, than here in Australia and New Zealand,

Oliver Hartwich  24:58

and of course for the last few years we’ve had a movement, trying to make the case that actually it’s not about growth. It’s not about conventional economic measures, it should be something bit fuzzier, something like a well being budget. That’s what we pay on it here in New Zealand. And I think your minister of finance or whatever he’s called an Australian federal, Jim Sharma has has bought completely into that narrative. And, you know, also on to wellbeing budgets, but that’s not really compatible with and with a growth mind or growth. Focus.

Gene Tunny  25:27

Yeah, I mean, that’s, that’s a separate thing. I mean, I don’t necessarily have a problem with looking at a broader range of indicators than than GDP per capita, but you just don’t, I mean, look at a lot of that. The well being or to

Oliver Hartwich  25:42

me, it always sounded as if they were trying to find an excuse for not having to deliver GDP per capita increases. And so they’re looking for something fire and quality well being. Yeah,

Gene Tunny  25:51

quite possibly. And, yeah, I mean, it’s another thing that the treasurer couldn’t launch and, you know, makes them look like they care about different concerns of the community. So look, yeah, I think it’s a bit, you know, a bit of a waste of time, the whole well being budget, because, yeah, a bit of a distraction. But yeah, take your point. Maybe that is what they’re trying to do that it’s a, it’s a cover for not actually achieving a decent rate of economic growth.

Oliver Hartwich  26:19

Well, that could be a topic for your next paper. And if you’re looking for materials, you’ll find them all in New Zealand. Very good. Okay. Sounds good. But, but for now, can I just thank you for sharing your thoughts with us on the podcast. And just for all our listeners, genes paper is called debunking degrowth, you can find it on the Centre for Independent Studies website in Australia sets ci But for now, thank you, gene for being our guest. And good luck for your future papers, we look forward to seeing them.

Gene Tunny  26:50

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  26:55

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Gene Tunny  27:24

Now back to the show.

Joe  27:29

You mentioned the environment there and sort of political movements and value judgments obviously very, very important. For everyone alive, yeah. But especially with the sort of younger generation. And one idea that is sort of gained popularity in recent years has been this idea of D growth as a way to sort of solve the ongoing climate crisis. And you wrote an article, I think recently, the Centre for independent studies about about D growth. And you said that any attempt will like to sort of implement this idea that we need to have negative growth will greatly reduce the living standards and cause significant unemployment. We have a question here that says, if it is as severe as predictions suggest, then is not some form of dramatic economic structural change necessary to prevent continued pollution, mass production, carbon emissions, environmental degradation. So yeah, it seems that either this change will be voluntary, in that we will decide to do it, whether that be D growth or some other sort of economic restructuring, or it will be forced by the nature of the crisis in that our economic system will collapse?

Gene Tunny  28:46

Well, I hope that’s not the case. You talk about prediction. So well, this is where it’s difficult. Like this is a very difficult area to actually talk about, because there’s so much complexity going on there. And in terms of predictions, there are projects, some predictions that have catastrophe of permafrost melting all this methane being released to the atmosphere, this Supercharged global warming, ocean currents shutting down in Arctic melting. And I mean, horrible scenarios. Now, that’s not generally what we think is going to happen. I mean, that suppose look, there’s anything really could happen, right? I mean, I’m not a climate modeller or an expert on climate change. But if you look at what the IPCC has been, what it’s been modelling or projecting what our own governments have been doing, they do show that there is a path to get into net zero by 2050. There will be warming of one and a half to two degrees, probably two degrees Celsius on average. There seems to be an acceptance that by many that, okay, that that’s something we can adapt to it’s there will be a First consequences of that, but it’s not going to be catastrophic or lead to that Armageddon scenario. Now look, the question, if that is the case, if it is the case that we are in that situation where the worst predictions do come to come, you know that they do occur, then we will have to do something radical, it won’t be a matter of trying to get that change gradually over time. And the idea of having a carbon price is to send that signal to the market to, in an efficient way, reduce your emissions, invest in new technology to get to net zero. So that’s what the policy’s been now, governments are finding it very difficult to do that. Okay. So we’ve got an implicit carbon price in Australia, we’ve got these Australian carbon credit units, we’re going to market for that. We’ve got a safeguard mechanism, which is going to be requiring big emitters to reduce emissions. And so we’ve got an implicit carbon price. But you could, you know, there’s arguments about what that should be, are we are we doing it fast enough, there’s the how many we’re gonna have to keep coal going coal fired power stations going for a lot longer than we expect. We wanted to because we’re worried about the reliability of the energy grid. Unless we can get the hydropower stations on on schedule. And then that’s pretty difficult to see what’s happening with snowy 2.0. They’ve had one of the tunnel boring machines stuck. So it’s, it’s a big challenge. Now, I don’t know if you saw what Rishi Sunak has done in the UK, they’re delaying their transition to net zero. So Boris Johnson had committed to stopping the sales of petrol powered vehicles by 2030. Rishi Sunak, push that back to 2035. And there are a few other things to do with I think, gas in the home. So I think the push push that back when I have to stop having guests in the home, because these policies are they’re challenging to implement, or politically, they’re difficult. And as we we really need American leadership, we need China, America and China, the EU and Japan. They’re the major economies we need them to come up with a binding global agreement. And we go along with that. Yeah, it’s, it’s a big challenge. So we’ll get my opinion there. And I’m, I’ve got to admit, I’m not an expert on the climate. So for what for what it’s worth, my opinion is those predictions. There’s apocalyptic predictions, I like to think of them as catastrophizing. We’ve had predictions of doomsday for as long as I’ve been alive. And before then Malthus were Club of Rome. I mean, this is the latest. And in that sort of line of thinking, I’d like to think that there though, those horror stories, I mean, look, if that if we if it does come to be that that is the situation, we will have to change very rapidly. And that will require very strong measures. And it may be that yeah, there is a big hit to GDP. But at the moment I my sort of judgement, the judgement of I think practically all the people in governments around the world is that that’s not the situation we’re in. Could they be wrong? It’s very possible that I sit? I hope not. But look, I admit there, there are certainly concerning signs out there. I mean, and, you know, I’m a lot older than than you are. So you’d have to live with it more than I will. So maybe that’s something to that. I know that I understand why young people are concerned about it, for sure.

Joe  33:24

Yeah. Yeah. Awesome. Thank you. For that perspective, we have John Quiggin. Yes, he teaches still, he teaches one of the PPE courses, and that’s sort of his, like the the environmental economics perspective on climate change is very much up his alley way. So it’s, it’s good to hear your perspective as well. But not

Gene Tunny  33:45

having John here. So we can get you on the question, but I’m not. I don’t imagine John Wooden is there’ll be arguing for degrowth would eventually be arguing for a high carbon price to bring about that transition as rapidly as possible. And to try and encourage innovation. And the great thing about him is that we’re proven is that we are great innovators when there’s a challenge. So be maybe there’ll be people we did have to have that that radical policy shift because the Antarctic starts, you know, I mean, we know that the sea ice is the extent of that is not as great as it has been. It looks. You look at that chart. Okay, that’s a bit of a worry if that continues. And if we do have all of these record heat waves, I mean, we’re currently in El Nino at the moment here. So that’s driving as the lot of the heat. Yeah. If things get really bad, then yeah, sure. We may have to act rapidly. There may be a hit in the short term, but I expect we’ll solve it somehow. Humans are great innovators, loose. That’s the hope maybe that’s naive optimism.

Joe  34:48

No, definitely. Definitely something to cling on to at least with hope. Yeah. Awesome.

Gene Tunny  34:56

Righto, thanks for listening to this episode of Economics Explored If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


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Podcast episode

How Ben Bernanke can bring Superforecasting to the Bank of England w/ Nicholas Gruen – EP207

Host Gene Tunny chats with Dr. Nicholas Gruen about economic forecasting and what recommendations former US Fed Chair Ben Bernanke could make in his current review of forecasting at the Bank of England. Nicholas, the CEO of Lateral Economics, discusses the shortcomings of economic forecasting and shares his insights into how it can be improved. The conversation was inspired by Nicholas’s article in the Financial Times titled “How to Improve Economic Forecasting.” The episode is split into two parts, with the second part focusing on the feedback Nicholas received on his article. 

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple Podcasts and Spotify.

About this episode’s guest: Nicholas Gruen

Described by the Financial Times’ Chief Economic Writer Martin Wolf as “a brilliant man who deserves to be better known”, and by former Finance Minister Lindsay Tanner as “Australia’s foremost public intellectual”, Dr Nicholas Gruen is a policy economist, entrepreneur and commentator on our economy, society and innovation.

What’s covered in EP207

  • [00:02:13] Ben Bernanke’s review of economic forecasting at the Bank of England.
  • [00:05:23] Hedgehogs and foxes. 
  • [00:09:36] Long-term issues with economic forecasting. 
  • [00:13:18] Improving economic forecasting techniques. 
  • [00:19:29] Forecasting accuracy. 
  • [00:24:30] Open sourcing economic forecasting. 
  • [00:26:29] Developing a forecasting market. 
  • [00:34:21] Tetlockian forecasting tournaments. 
  • [00:48:37] Wind in the Willows author Kenneth Grahame at the Bank of England.

Links relevant to the conversation

Video versions of the conversations featured in this episode on Nicholas’s YouTube channel:

Information on the Bank of England’s Citizens’ Panels/Forums:

Mandarin column in which Nicholas declares former Bank of England Chief Economist Andy Haldane was “my favourite public servant in all the world”:

Transcript: How Ben Bernanke can bring Superforecasting to the Bank of England w/ Nicholas Gruen – EP207

N.B. This is a lightly edited version of a transcript originally created using the AI application It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, thanks for tuning in to the show. In this episode, I chat with Dr. Nicholas Gruen about economic forecasting. Nicholas is CEO of lateral economics. He’s been described by the Financial Times as Chief Economic writer Martin Wolf as a brilliant man who deserves to be better known, and by former Australian finance minister Lindsay Tanner, as Australia’s foremost public intellectual. This conversation was inspired by an article that Nicholas had published in late August in the Financial Times How to improve economic forecasting. The FTS one line summary of the article was myopia and groupthink mean this science is not as evolved as it could be. This episode is in two parts. The first was recorded prior to Nicholas’s article coming out, and in the second part, we reconvened to go over some of the feedback that he received on the article. The video version of the first part is available on Nicholas’s YouTube channel. I’ll include links in the show notes to the YouTube channel, and to material mentioned in the episode. Okay, let’s get into the conversation. I hope you enjoy my conversation with Nicholas Gruen. Nicolas, good to be catching up with you again on economic forecasting. Likewise, so Nicholas, last month, the Bank of England announced that Ben Bernanke, so the former chair of the Federal Reserve in the US, he is to lead a review into forecasting at the Bank of England. So the the court of the Bank of England’s pleased to announce Dr. Ben Bernanke has agreed to lead a review of the bank’s forecasting and related processes during times of significant uncertainty, or we’ve had plenty of those. And he’ll be supported by the bank’s Independent Evaluation Office. Now, Nicholas, you’ve had some thoughts on what Ben Bernanke could offer to the Bank of England regarding forecasting, haven’t you? So would you be able to give us an overview of what those thoughts are, please?

Nicholas Gruen  02:44

Sure. So their thoughts? I’m not terribly hopeful. And that’s an amazing thing to say about Ben Bernanke. I regard Ben Bernanke happens to have a Nobel Prize on his shelf. Ah, you’ll notice that I don’t. And I also think he’s a great guy. You know, he’s a very sensible, practical economist with a lot of understanding of empirical economics and happened to be a one of the world’s experts on the Great Depression at the time when boy, did we need an expert on the Great Depression in the Fed. So that’s all great. I fear that Ben Bernanke, like a really scandalously large proportion of economists are so caught up in their own discipline that they haven’t noticed what has happened in adjacent areas. And this is a little bit like, what’s been going on is something quite like what Daniel Kahneman and Danny and a must for Seversky. If I got that, right, we’re cooking up with behavioural economics. It’s happened a little since then. But a guy that many people will have heard of Philip Tetlock, he got tenure in about 1982 Or three. And he decided that he would now engage in a long term project that he always wanted to engage in, but you can’t if you don’t have tenure, because you get sacked before you could get a publication if there’s so long range thing. And what he wanted to measure was do geo political experts. You can call Tom Friedman. He certainly poses as a geopolitical expert, The New York Times columnist, but also intelligence analysts, academics, international relations academics. If you ask them to forecast events, do they add value? Do they the fact that it’s quite clear they know more than your average bear? Does that translate into actually having actionable better capacity to say what’s going to happen? And the answer was on average and barely. And then he divided that up into experts that did add something. And they didn’t add that much, and experts that actually were worse than ranked, or worse than a naive prediction, and he divided them up into hedgehogs and foxes, hedgehogs no one big thing. And that means that their forecasts are worse than yours or mine, Gene, because we’re just trying to doing our best, whereas the hedgehog will have one big thing, you’ll be anti communist or pro communist, or this or that. And that banks, their forecasts worse than a fox, I think of someone like the economist, John Maynard Keynes, or Paul Krugman, as a fox, someone who knows many things and is trying to balance all those things, and to work out how much this matters and how much that matters, and how much do I know and so on. Now, that’s pretty striking. But it doesn’t tell us exactly what to do. But there is one thing that the study showed us. And it didn’t, we didn’t actually need the study to show us. But it gives us a very concrete illustration of a problem, which is, and this goes on in economics, which is that if you don’t issue your forecasts in a form, that can be back tested, that we can revisit and say did was that a good forecast or a bad forecast? And how did it compare with your peers? You’re basically, you know, it’s a bit like fortune telling. And to do that. What Tetlock did was he forced analysts to say precisely what they were predicting would happen, or in fact, he would specify something like, my Mikhail Gorbachev will continue to be the secretary of the general Committee of the Communist Party, whatever it was called, then, by the end of 1988. What are the chances and then you would have to say, I think the chances are 88% or 23%? Not probably, which means somewhere between 51% and 100%. And not unlikely. And not you can’t rule this out the sort of things you read in a newspaper column. Now we need to do that with economic forecasts.

Gene Tunny  07:31

Yeah, yeah. So just for background, so Philip Tetlock is a Canadian American Political science professor at University of Pennsylvania. And yeah, he wrote that book, super forecasting, or super forecasters. I’m

Nicholas Gruen  07:46

just gonna get on to the talk about that’s the book for the people who can watch not the people who are listening. I’m holding it up to the microphone. Thank you.

Gene Tunny  07:54

Yeah, absolutely. And so he was looking at, you mentioned geopolitical forecasts. But we’re interested in economic forecasts. Now, we know and I guess the general public knows that economic forecasts have been had. there been some notable failures and Amin in Australia that they go way back. I mean, always remember the I mean, I guess I was young at the time was in high school with the Treasury. And was forecasting the soft landing during was it the 9091 recession? Yeah. And it was the worst recession since

Nicholas Gruen  08:30

then, you know, the problems. Yeah. And there are other notable examples. More recently, we’ve been expecting wages to pick up and abroad for about, well over a decade, it just goes on. And, and to their credit, the Treasury and the reserve, published these graphs, I might see if I can put one in the show notes or on screen, or the editor can put one on screen, where you see wage growth gradually trending down with every year, the forecast is to come back to the long term at what was the long term trend average, it’s no longer the long term trend average.

Gene Tunny  09:08

Yeah. And there are some charts like that in the latest intergenerational report that the Treasury has put out, Jim Chalmers launched today, which showed just how bad those long run projections have been. So you know, it’s a it’s a problem, both in the short term and the long term. With economics. Yes. So I suppose yeah, be good to sort of to diagnose I mean, what are the what’s the actual issue and the problem is that the the economy is fundamentally difficult to forecast but

Nicholas Gruen  09:41

no, but I mean, we’re not even trying so to try, we would nail economic forecast down to something that can be properly back tested so I we have a forecast. You may know what the Treasury’s forecast is for wages or growth. Next year, I don’t you just give us a number. Even if you don’t know, the sort of thing you think it should be around what for wages, wages or for growth it all for economic growth,

Gene Tunny  10:12

it’s probably around 2%, or two and a half percent or so and a

Nicholas Gruen  10:16

half, okay, two and a half percent. So first problem is that if the forecast is 2.5%, and it comes in at 2.62%, is that a success? Or is that a failure? So because 2.5%, we call it a point forecast, and the chances that it comes in exactly at that number are infinitesimally small, I just have to add decimal points. And eventually, it won’t won’t be 2.500000. It will be it will fall on one side or the other of 2.5. So we need if, if we’re going to back test, a forecast, we need a forecast that we can declare a success or a failure. And the next thing we need is we need the forecast to tell us how confident they are that it’s got that that event will happen. And that happens to be exactly how weather forecasters forecast. They give us an event it will rain which I’m sure has a media or logical definition of you know more than this amount of precipitation in 24 hours or in in an hour. It will rain and it will rain with this degree of probability. Now what’s beautiful about that is Daniel Kahneman says that there are places where he said this I think he’s a no doubt he’s been more circumspect in other places, but I’ve heard him say, all professions are overconfident? Well, weather forecasters are not overconfident. Because the confidence with which they express themselves becomes part of the metric by which we judge them. And so they make a point of being exactly the right degree of confidence. So I think of weather forecasting as one of the few Socratic areas of domain expertise, because it knows what it knows. And it knows the limits of that knowledge. So that’s what we need to start to try to do with economists. And I think it was you who sent me this thing in the last six months where some of the techniques that Philip Tetlock has perfected has developed, have started to show dividends in economic forecasting. Now, one thing we haven’t explained yet is that that in that book, super forecasting, Philip Tetlock took the ideas with which he demonstrated how little value was added, and how some types of people added more value than others. And he asked himself the question, could we identify the very best to the people who consistently add the most value? Can we understand more about how they do that? Could we get them together and get them to help each other? And the answer is that using these simple and common sensical techniques, you can actually start to get a lot better. Certainly, geopolitical forecasting. And now there’s some evidence that we may be able to get better at economic forecasting.

Gene Tunny  13:32

Right? So with weather forecasting, so in your you’ve been working on a, an article on this, and you’ve identified that weather forecasts are much better than they were 30 years ago. Yeah. Now, that’s because of an infant. My understanding is that’s because of the ingestion of so much new data. And I mean, we’ve seen with that integrated marine observing system, for example, the imass organisation that we’ve done some work for that there’s a whole bunch of data that comes from the ocean, and that helps with weather forecasts. They’ve got huge numerical models and their physical processes involved that they can actually model with economics is a lot, a lot more challenging. So yeah, weather I guess, it is embarrassing. How economic forecasting hasn’t hasn’t improved. And I suppose that does suggest we need to, we need to adopt a different approach is not necessarily going to be we’re not necessarily going to improve our forecast by building more complicated models or bringing in more data. Perhaps we do need to adopt a new approach along the lines of this super forecasting methodology. And you mentioned, yep, there was that evidence about how they’re forecasting the Fed rate decisions much more accurately than others their super forecasting approach. So I guess you are starting to unpack it. What do you see as the main elements of This super forecasting approach, Nicolas.

Nicholas Gruen  15:02

So one of the things that that I think is quite interesting and useful is that like Daniel Kahneman, who was the last person who really, I won’t say revolutionise because it’s not true, but he really he started a whole new way of thinking about things within economics and managed to get himself a Nobel Prize for his trouble. And he’s a psychologist. And so it was Philip Tetlock and Philip Tetlock is drawing our attention to something that’s incredibly important. But because it lies outside of economics, economists just ignore it. And what he’s saying is that if you want to be a good forecaster, you must forecast in a particular way, I’ll say you must have a certain kind of psychology. Now. In fact, in philosophy, there is a term for this, I don’t much fancy it, but the term is Virtue Epistemology. That is if you want to, if you want to be good at knowing if you want to be a good scientist, if you want to be good at mastering a domain and being useful to other people by not being overconfident. By actually knowing how much you know and making it count. Then you have to exhibit virtues, you have to exhibit actual virtues, you have to have the courage of your convictions, you have to have the humility to know when other people or events might be, make it time for you to revise your opinion. Is this reminding you of lots of economists? You’ve talked to Jim? And perhaps not so so the list that I put in this op ed that I’ve written for the Financial Times and may have been published by the time you people get to listen to this conversation? What qualities does he see in Super forecasters, as well as mastering the mesh necessary formal techniques, which we economists are very strong on. They’re open minded, careful, curious, and so critical. away like Socrates, of how little they know, they’re constantly seeking to learn from unfolding events, and from respected colleagues. So that’s how you forecast I would argue, that is how you do anything that is expert. And there’s a really important thing here. Because even if we can’t improve forecasting much, and one thing I do want to throw in, parenthetically on that question, is that when economists make for when a central bank or a treasury makes forecasts, this is a forecast of how certain economic aggregates are going to move that they plan to try to manipulate on on the way through. So it’s a very, it’s a very different kind of forecast, the, the forecasters of the weather don’t say, well, it’s going to be a 30% chance of rain on Tuesday, and we’re going to be trying to make it a 30% chance of rain on or we’re going to be making trying to make it a 20% chance of rain. So so it’s it’s a lot more complicated. But one of the things that are super forecaster might do person have that kind of temperament might do is they might say, well, our point forecasts much used to us. And the answer is I don’t think they I mean, quite apart from the fact that we can’t back test them. I think the most important thing I want to know as a business person doing planning of for something or as an employee, and I’m thinking should I buy a house or buy an investment property or whatever? Seen, I think the most important metric I want the most important thing I want forecast is what is the chance of a recession in the next six months or 12 months or two years? So I think we should be trying to forecast a lot more along those lines. Now there’s a problem and that is that well, firstly, let’s talk about the problem of forecasting at the moment. Because economists forecasts are not probabilistic because we don’t test an economist according to they don’t issue those forecasts like there is a 40% chance of recession or whatever. Almost all the time, even when a recession is more likely than most other times, it’s still unlikely that there will be a recession. And so now what we’ve got is we’ve got all the forecasters in the same situation as 40 tippers, which is I might want to say that the backmarker What do you call it the last of the non favourite in a horse race or a football am, I might want to say that I think the favourite has got an unusually large chance of losing. But I still think it’s more than 50%. So if people are just saying, How many times did you tip the right answer, then we’re not going hunting for who knows that this is the who’s got some extra information, which is that for some reason or other some some particular players not inform or something rather, that there’s a lower chance of the favourite winning than usual, no one has an incentive to do that if we’re going to give a prize out to the person at the end of the year, who tipped more winners than anyone else. And that’s real. And that’s what happens in economics. So of the last 18 recessions, economists pick, tipped about one or two of them. And if you’re competing with other economists, with how often you got it right or wrong, that’s actually quite a rational strategy. So what we need is, we need to find a way for economists to put their hand up and say, I think the chance of recession have gone from, let’s say, 10% per year or something like that, maybe a bit more, I think to the next year, it’s 35%, or whatever, and then at least you get an effective, you know, a number.

Gene Tunny  21:24

Right. So is this what Ben Bernanke should be recommending he should be recommending that the Bank of England provides percentage estimates of regarding its forecast, so how confident it is? I mean, to an extent it does that, I think, doesn’t it? It has Fein charts. It has fan

Nicholas Gruen  21:41

charts, it has fan charts. And I think, yeah, once you try to operationalize this in economics, you end up with a lot of fan charts. Now fan charts, we may or may be able to show those on the screen. And in the show notes, fan charts show you the point forecast through time, and then they say this, the 70% confidence interval is this fat. And the 90% confidence interval is this fat. In other words, if you want to know what were the the range within which we’re 90% Sure, that’s the range. Now the problem is that range isn’t helpful doing because the 90% range usually takes you from somewhat one of the most savage recessions you can possibly imagine through to boom conditions. So we do need to think about that. But what really, I think that there’s a few things here. One of the things is that we need to get, this is a good way to get different teams and different forecasters to compete with each other. It’s a good way to compare forecasters, so that you’re constantly getting feedback on who’s good and who’s not. The other thing that I think it does, well, it also enables us to surface you can have a different series, which is not in any central bank or Treasury that I know of, which is the chances of recession, you can have that series and you can have people trying to forecast that. Now there’s a further problem. And the problem is that we get feedback on what growth was every time we forecast it, because we can’t we get a growth number. We don’t get feedback on what the question was there a session will accept that the answer is no. It only varies once a decade or so. That’s a really big problem. Because if you want to ask who’s the best person at forecasting recessions, then you’ve got to wait 20 or 30 years to even start to short sort the sheep from the goats. Yeah. So Philip Tetlock has actually been working on this on a problem. It’s not in economics. It’s in his his the area that he manages to get the most funding from, which is in intelligence organisations and so on. But what he’s trying to ask is, can we leverage the credibility of forecasters of things we do get a lot of feedback from for these other areas where we get less feedback? And I think the answer is yes, we should be able to do that. And we must be able to do that in some areas, and maybe not in others. And then we don’t know about this area, but that’s the sort of thing that we should

Gene Tunny  24:28

be exploring. Okay, so for economics, so just to summarise, are you arguing for open sourcing for coal, that’s

Nicholas Gruen  24:36

a separate thing. That was what I was going to get to, which is that so what I want to see is that this is one area that given that we’ve outsourced all kinds of things in government that we shouldn’t have outsourced. Maybe we could outsource some of the things we should and we this is the sort of thing that we can outsource on I don’t even mean outsource we can’t what we should do the best Bank of England, the Reserve Bank of Australia can get with the programme and the programme is the smartest person is always outside the room. And in some areas, you can, in some sense, bring them in. And in other areas you can’t. But in the area of forecasting, you can and you can hold a Tetlock like forecasting competition, you can say, we’re trying to get forecast for this, and this and this and chances of recession in six months, one year and two years, and then everyone can participate. Now, the world or certainly the markets and the people in the different national countries, they want to know, what’s the reserve, what’s the central bank forecast, so that central bank has its own, I think that central bank should have its own teams, team or teams in these forecasts. But they should separate out the teams from the bank itself, and the bank should observe the forecast should observe the forecasting competition. And from that forecasting competition, say what it thinks is its best forecasts and those become signed with the imprimatur of the central bank. They might be produced by the central bank team, or one of them, they might be produced by somebody completely outside, they might be produced by some kind of hybrid. And all of this is visible to everyone. And so we’re starting to develop a market in which we can start to see who’s really good at this. And some people are going to surprise us on both the upside and the downside, by the way. So that’s what I’m suggesting.

Gene Tunny  26:46

Yeah, I mean, what, what I’d like to understand is, to what extent will it be teams, interdisciplinary teams of economists, and then some other non economists, may be busy people who are expert in business or maybe not even expert in business people who are just good forecasters. And when I was chatting with Warren hatch from good judgement, this is a organisation he set up with Philip Tetlock, he was telling me that it’s people with good pattern recognition skills, and then be in any discipline and people who are cognitively flexible, or they’re there. As you were saying before they actually they’re not caught up with their particular theory. They’re actually yeah, they’re evaluating everything. Yeah, that’s right. That’s

Nicholas Gruen  27:33

right. So the answer is, we don’t have to know the answer to that. But we Yes, you would expect that the teams that are going to perform best will be hybrid teams will have economists Well, technically excellent economists in them. They’ll have people who look at other kinds of things. And there will certainly be some surprises. And some people who’ve always had a fascination with, you know, certain kinds of things which turn out to be relevant to how you forecast. So that’s where I would expect it to, to end up. But maybe it’ll just be economic experts. If they win the if they win the competitions. All this Tetlock stuff will have proven itself to be relevant for economics, but both common sense and the evidence suggests that that that’s not the way it will turn out. And there aren’t that many areas where at the centre of government, you can improve performance and improve. And through that improve economic performance someone. This is this is one of those billion dollar bills on the pavement that we find ourselves talking about from time to time, Gene,

Gene Tunny  28:46

absolutely. Yeah. And I misremembered. What Treasury’s forecast is 2023 24 GDP forecasts for Australia at one and a half percent. So not Oh, is there any

Nicholas Gruen  29:01

memorable number or perhaps it is memorable, but not in a good

Gene Tunny  29:04

way? Just so many numbers out there? Harada? Yeah, exactly. Exactly. I feel sorry for these politicians, they get put on the spot about these different numbers from toe to toe? Oh, absolutely. Yeah, absolutely. fully on board with that suggestion. At the very least it’d be a good trial, a good pilot. Exactly that out, see how it will works?

Nicholas Gruen  29:23

Well, I’ll just say one other thing, which is that this is again, what we’re talking about here is convening power, not executive power. So anyone can run this. The Business Council could run this. It’s not it won’t be cheap, but it’s not very expensive. Having worked at the Business Council, I can tell you, their budget easily would easily accommodate this. You could do it for a few $100,000. Anyone can do this. So it’s it’s kind of extraordinary and pretty outrageous that we’ve really known this, that there are benefits here. We can do this better. And it just gets ignored again. And again, it got ignored in the review of the RBA that we had here. It’s pretty terrible that we’re not looking around and trying to grab hold of things that are in the ether, that it’s starting to work, and that we can benefit from.

Gene Tunny  30:21

Yeah, I suppose there’s a public benefit to it. It’s not necessarily in the interest of the people in the Treasury or the Reserve Bank or the Bank of England or their ministers. I think that’s one of the the issues.

Nicholas Gruen  30:32

Yes, but economists are pretty impatient with policy makers who don’t do the right thing, but that the economists have to figure this out themselves. And I would, I would have thought that it’s Well, time for this to be standard economic advice, and it’s very, very left field and economic advice at this stage.

Gene Tunny  30:55

Okay, we’ll see how your Financial Times I bet is received?


Well, let’s see. Let’s see what Ben says. Very good, he might be giving you a call. Let’s hope.

Gene Tunny  31:09

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  31:15

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Gene Tunny  31:44

Now back to the show. So Nicholas, it’s been a few weeks now since your article was published in the Financial Times. So your article, how do we improve economic forecasting? And we chatted about that, in the previous conversation, the in the lead up to that coming out. So your ideas about how the Bank of England and other central banks or treasuries or finance ministers can improve economic forecasting? So it’s been a few weeks and says come out, you’ve had a bit of feedback. Yeah. How would you describe the reaction to your article?

Nicholas Gruen  32:22

I think it’s been the best reaction. I’ve published three pieces in the Financial Times of this kind, which is a sort of, hey, why don’t we do this? It’s reasonably out there kind of proposal and my judgement of the comments, and you’ve looked at them slightly more carefully than me that I looked at them, you know, in the first 24 or 48 hours, I thought they were more positive, and more constructive than most than is mostly the case in comment sections. It’s a pretty sad state of affairs. And nevertheless, the case that even in a really high quality newspaper, like the Financial Times, a lot of the people they’re not super ignorant, and, and just just totally dumb, but what they do is they sort of come on and they make a point. And the point is a perfectly okay, point, one of the points for instances, well, weather forecasting, which was full of praise for is different to economic forecasting, because the weather doesn’t decide to change its mind when it sees a forecast. And human beings do. It’s a very good point. It doesn’t completely obliterate all the points I was making. So if someone wants to come on and say that, that’s fine, I know that, but they’re not really participating in the spirit of things. Another person who wrote a letter to the Financial Times I think his name’s Tim Connington, or Contin, you might know his name. He said that really what mattered was having models that have proper allowance for monetary policy in them well, I’m not against having models that have the proper allowance for monetary policy in them, but it doesn’t really address the point. And then, and then there was some really quite good criticisms. The other thing was really good was that I was approached by a number of people, some of them well, one was a large corporate, which is doing Tetlock in forecasting tournaments internally. That was an interesting exercise. And I’ve been engaged with them. I’ve been they haven’t been paying me or anything, but I’ve been suggesting that they look further afield to the services of people like Warren hatch who you interviewed. On your podcast, he runs a thing called Well, it’s called good judgement. I don’t know whether it’s good judgement Inc. Or, anyway, it’s not the Philip Tetlock project which is run with inside University But it’s an offshoot of it, which is a commercial project. That was interesting. There was another economist, who was really quite pissed off, if I might say this, about the fact that forecasting prowess is not a very strong criterion of promotion inside government agencies that deal with economics include, including government agencies, in which forecasting is a very important matter. And he’s right. And I talked to him about Kaggle. And how Kaggle, the data science forecasting platform that I was involved in, when it started up, has changed the market to a substantial extent because people want data scientists who actually perform well. And you can see whether they performed well or not on Kaggle. And then another person who contacted me was actually from the Bank of England. Now, I’ve not had that experience in Australia, where someone from inside government you publish something. I mean, it wasn’t directly critical of the bank, I suppose you could say it was in a way. Anyway, he engaged me. And he said, Well, actually, we do, too, a little bit of what you’re suggesting. And it’s true, that the Bank of England, which is about my favourite Central Bank, I think they’ve done better than any other central bank in terms of their thinking. Not it turns out in terms of all the judgments about the about inflation, and so on, because we do we require a degree of clairvoyance for that. And they’ve had a recent spate of arguably bad luck in terms of working out the future. But he pointed out that the Bank of England does have a very, very simple in the form of seeking feedback from the community. It asks people for their own forecasts. Well, that’s a good beginning. And it’s better than any other bank that I know. I thought it was a terrific reaction.

Gene Tunny  37:06

Oh, that’s good. Yeah. Citizens panels, I think they call them so I’ll put a link in the show notes. I thought that was really good. And, and it really is heartening to see how open they are. And you’re right. I mean, I can’t remember anyone from a Australian government agency getting in touch or if they did get in touch, it would be all this has to be confidential, and it wouldn’t be an official email. So I think that’s good about the Bank of England. So that was great to see that. Now, just on some of those points, you raise you mentioned about modelling and that was it one comment that said I Okay, the issue was just the specification of the model. And I think you the way you reacted to that was, was was right. And one of the some of the comments I took out of the ft. Like there was some positive really positive comments in the comment section of the Financial Times. It was one about, ah, this sort of approach could have helped us in the early days of COVID. It could have avoided us from having some of your apocalyptic or Yeah, ridiculous, for ridiculous, and I think there was some criticism of the forecast room from his sage. I think they were sage forecasters. Yeah. That’s right,

Nicholas Gruen  38:20

sage, and was a guy who got himself briefly famous. And then arguably infamous. You put his name in these notes we have in front of us, Ferguson. Yeah, yeah. Yeah. Neil Ferguson. That’s it. And that, and you just had to look into that for a while to see that. The model was an immensely complex model. It wasn’t clear what it was useful for. But it wasn’t useful for quickly trying to understand, you know, ask quick, what if questions, it was an ornery monster of a model that produced a different result every time he ran it, because it was so common. Yeah. Just just not not built to certainly not in that situation. It was not built to help people make quick probabilistic decisions. But because it was a model, and because he was at a university Imperial College, as I recall, I hope correctly, then he had the stamp, you know, you had the brand. And so we spent a fair bit of our time with his model. It was pretty low grade stuff.

Gene Tunny  39:31

And so some of the negative comments or there were some people who are saying, Oh, well, look, you’re not you haven’t taken to account the fact that we’ve made all these advances in economic forecasting, and there are these new techniques and you’re unaware of them. I’m not sure that that’s true. And when I didn’t

Nicholas Gruen  39:47

mention any No, I didn’t mention any. So I mean, I’m sure I’m unaware of some of them, but he had no evidence that I was because what he’s or she is criticising me for is St. totally irrelevant. There is a state of the art of forecasting, the Bank of England or anyone else is either at the forefront or a bit back from the forefront. And the way to get to the forefront is to have a process of integrity, where people who are good at forecasting end up with better reputations than people who are not so good at

Gene Tunny  40:21

forecast. Yeah, yeah, exactly. And the point I would make, like when I read those comments, they were almost as I think they are assuming that it’s the model that gives the forecast that’s published in the Bank of England monetary policy statement or, or in any of these statements from economic agencies, it’s actually a forecast directly from a model. And it almost never is, there’s always an element of judgement, the model is one input into the the actual official forecast. And if you read the bank, the publication’s of the Bank of England, that’s very clear. And so your approach is about taking all of the the evidence out there or different views. I mean, you know, it could be in I think there’s something I was chatting with Warren hatch about, if I remember correctly, Warren was saying that, look, there can be value from having people in teams, like some people, someone has a model than there’s others who are more qualitative. And there are others who are looking at different bits of data you want. You don’t want a variety of approaches, I think and perspectives to get better forecasts.

Nicholas Gruen  41:27

I’d say some, I think that’s absolutely right. But I think you can say something more than that. We exist in a society in which governments and agents and organisations are performing for our entertainment, if I can put it that way, at least under the guise of the media, they’re doing stuff, they’re justifying them stuff. They’re got comms people coming out, saying, This is what we’re doing, and they’re putting over a plausible story. And then you get pundits, I would say, like us, except I try not to do this. But almost all pundits and almost all Twitter pundits, almost all instant experts, they come out. And they say what, really what you should do is x or y. But in fact, what you should do is a very complex and acculturated performance. So it will involve technical understanding and modelling. It will then involve judgments, as you say, but then how do you get the people with the best judgement to make the judgments? Well, we haven’t really solved that problem, we just get the most senior people to make those judgments. So it’s like me saying, I want a good COVID vaccine. And this is the process that we should go through to get the COVID vaccine. What I want is a process that has legitimacy, because I believe that if I looked into what that process was, it would add up it would have integrity. In the words of Charlie Munger, the highest form of civilization is a seamless web of deserved trust. In other words, there isn’t a clear line between the pundit class and what you do. If you’re doing anything difficult building a bridge or dare I say, a nuclear submarine pundits can can’t actually say very much, they can say a few things about what would be really dumb. But there’s so much that goes into this. And the public discussion isn’t had in that kind of way. But that, ultimately, is one of the reasons that I’m such a fan of Philip Tetlock stuff on forecasting and creating forecasting tournaments, because it’s one of the few areas where you can start to build some objective relation between reality. And as poor munchkins working away trying to work out what that reality is, and our social and political institutions have done? Well, the job they’ve done might be the best in history, but when you look at it, it’s not all that great, there are plenty of things wrong with it. So, this is a rare case where there is a better way you can see what it is you can understand its principles and we should really try to implement it and also learn from it how how we could extend that since making reality contacting function.

Gene Tunny  44:31

Yeah, absolutely, fully agree there. So, I mean, one other point I just wanted to make is on that, the forecasting the the whatever the you know, best practice or the in terms of technical forecasting. One of the articles there was, it was linked to in the in the comment section, the Financial Times it was an article that was by a number of forecasting experts and one of them was Jennifer Castle’s, who works with David Hendry. And Henry has been on the show. And if you’re interested in these issues, that would be a good conversation to go back to because David talks a lot about the ways that he tries to get his model based forecast as best as possible. Now, that’s, that can be an input into this a super forecasting approach. It’s not, these things aren’t mutually exclusive. But what he’s doing, he’s trying to build an econometric model that can be an input into the forecasting. For the point I’d like to emphasise is that the forecasts that end up in the reports and then end up influencing budget, so they’re never just the outcome of models, because we know that a model is useful. But you there’s always a judgement involved, you’re always going to be tweaking things to make it because there’ll be things in the model you go hang on that may not be realistic in the current circumstances. Yeah, exactly. Yeah, exactly. Right. Oh, so Nicholas. I just wanted that quick catch up. Because I thought, yeah, that was a great article of yours. And it’s got some excellent feedback. And I think it’s, it’s probably achieved what you wanted to achieve, I imagine.

Nicholas Gruen  46:08

Yeah, absolutely. Even though they told me I only had 650 words, and then they only allowed me 570 words. So my nice paragraphs about what a big fan I was of Andy Haldane, who was no longer at the Bank of England, they were all taken out the likes of fanboy helding while he was a civil servant, was my favourite civil servant in all the world. Very good. Yes.

Gene Tunny  46:36

I’ll put some links in to about Andy Hill died. Did you? Have you written this on your club dropout? Or Nicholas? Your? Um, I’m

Nicholas Gruen  46:44

not sure I have I’ve. Yeah, maybe I should. But But no, I have because I published some articles in the Mandarin, which is an Australian Public Policy Magazine, if you like, which is and they’re always backed up onto my blog, and one compared the Australian Reserve Bank, with the Bank of England and the and particularly the blog notes underground. I think it’s called always good to quote Dostoevsky. I suppose when Greg Clark isn’t quoting, isn’t quoting titles from Hemingway, the Bank of England can be can be paraphrasing Dostoevsky in the name of its blog notes underground, I think it’s called. And it has lots of really interesting think pieces. It’s not very standard academic stuff, although there’s some of that as well. I think it’s a very sad thing that government, certainly independent agent, government agencies around the world don’t do that a great deal more. I may be fondly imagined that Andy was one of the movers and shakers behind that. But certainly he did lead a lot of research showing the costs of too big to fail implicit subsidies for large banks and just did lots of use the, the US the independence of the central bank in a way that was very, very helpful in difficult times during the global financial crisis. And in the years after the financial crisis is people trying to work out what had gone wrong and how to fix things. Yeah, absolutely.

Gene Tunny  48:23

It’s, it’s interesting that Yeah, I agree about the Bank of England, probably being the best central bank certainly has the best museum. I guess there’s that literary connection. Yes. And I only learned about this when I went to the museum, Kenneth Graham work there, the author with the willows. Hmm, yeah, I work there. I mean, I have relatively senior position there in the Bank of England because they’ve got a little display about Kenneth grime in there.

Nicholas Gruen  48:53

I missed it. I missed it. I’m sorry that I missed it. Because I have seen that museum. It’s quite small. It’s just a few artefacts as I recall a room or 2am I

Gene Tunny  49:02

wrong. Yeah, it’s a maybe a few rooms, but there’s that great display where you can lift up a bar of gold, you stick your hand in a glass glass box, and you’re gonna lift up an actual gold bar, which I thought was pretty cool. And you know, they’ve got all the currency. Yeah, he got up to the rank of Secretary in 1908. So I don’t think he was he wasn’t the governor, but he got up to a senior position. Excellent. Very good. Okay, Nicholas, thanks. Again. That was such a it was good to catch up because, yeah, good. always interested in economic forecasting, because we’ve had such a, unfortunately a mixed record of it in Australia and around the world. So it’s, it’s good to talk about a new approach and well done for doing your best to advance one.

Nicholas Gruen  49:50

Thanks very much

Gene Tunny  49:53

rato thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch match, I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if you’re podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


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Podcast episode

Business as Unusual: No such thing as Business as Usual anymore? w/ Rick Yvanovich – EP204

Serial entrepreneur and executive coach Rick Yvanovich talks about his new book “Business as Unusual: How to Thrive in the New Renaissance.” Rick argues that the world is continuing to undergo a massive shift and that there is no going back to normal. He shares his insights on the mindsets, habits, and skills necessary to succeed in this new era. The conversation also touches on Rick’s journey to Vietnam, where he currently resides, and what it was like living in Saigon during the pandemic. 
Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple Podcasts and Spotify.

About this episode’s guest:  Rick Yvanovich

Entrepreneur, Techie, Brit, baby boomer, bean counter in: supermarkets, accounting profession, breweries, newsagents, defence manufacturing, IT, Talent, F&B, property development and BP, in the UK, China, Singapore, Switzerland and Vietnam. Posted to BP China as Finance Manager, then to BP Vietnam in 1990 making him likely the longest Brit and one of the most seasoned expats in Vietnam.

Fellow Chartered Institute of Management Accountants (CIMA), Chartered Global Management Accountant (CGMA), Fellow CPA Australia, MSc Strategic Business Management (Manchester Metropolitan University, UK), Certified Coaching and Mentoring Professional (CCMP), Certified Master Coach (CMC).

Treasurer & Board Member BritCham Vietnam, Vice-Chair AMCHAM HCMC DEC (Digital Economy) Group, Chairman Industry Advisory Committee RMIT Vietnam, founder/co-founder/investor/advisor of multiple start-ups.

Regular speaker for Talent, Coaching, Accounting, Digital Transformation, Project Management, Doing Business in Vietnam.

For further info about Rick, check out:

What’s covered in EP204

  • [00:01:45] Rick’s career and journey to Vietnam
  • [00:08:00] Business as Unusual. 
  • [00:13:27] The great reshuffle. 
  • [00:16:29] The impact of lockdowns in Saigon. 
  • [00:25:01] Technological advancement. 
  • [00:29:19] Climate change and AI. 
  • [00:33:24] How to Thrive in the New Renaissance. 
  • [00:36:11] How AI helps you overcome the tyranny of the blank page. 
  • [00:41:06] Reflecting on life during COVID. 
  • [00:46:19] Zoom calls as a lifeline during COVID. 

Links relevant to the conversation

Rick’s book Business as Unusual:

Article on “How AI is helping airlines mitigate the climate impact of contrails”:

Transcript: Business as Unusual: No such thing as Business as Usual anymore? w/ Rick Yvanovich – EP204

N.B. This is a lightly edited version of a transcript originally created using the AI application It was then checked over by a human being, Tim Hughes from Adept Economics, to pick up any clangers that potters… sorry, otters might have missed. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory, evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show.

Hello, thanks for tuning into the show. In this episode, I chat with entrepreneur Rick Yvanovic about his new book “Business as Unusual How to Thrive in the New Renaissance”. Rick argues that nothing is going back to normal and in Business as Unusual, he gives us his thoughts on the mindsets, habits and skills we need in a world in which there’s no more business as usual. Okay, let’s get into it. I hope you enjoy my conversation with Rick Yvanovich.

Rick Yvanovich, welcome to the programme.

Rick Yvanovich  01:17

Thanks for having me, Gene.

Gene Tunny  01:19

That’s terrific. Rick, keen to chat with you about your new book. “Business as Unusual, How to Thrive in the New Renaissance”. So very interested in that. To start off with I understand you’re coming to us from Vietnam. Could you tell us a bit about your journey to Vietnam, please, Rick, how did you end up there? In terms of your career trajectory?

Rick Yvanovich  01:47

Oh, great question. Gene. Yes, I am calling in today from Vietnam from Saigon or Ho Chi Minh City, as it’s known as today, you might be detecting from my accent that it’s from Britain. So I’m a Brit, although people do accuse me of having an Australian twang, but maybe your listeners would dispute that. How do I get here? How do I how do I get from where I actually started off with which was in a supermarket in the UK, I used to work in as a as a as a management trainee in a supermarket chain. When I left school and didn’t quite make the grades to go to university. And having worked in a supermarket for some months, after about six months, I realised I sort of felt brain dead. As in, I wasn’t applying my brain. Because I’m a numbers person. And, you know, I was a good student at school apart from when it came to those last exams. And for some reason, I suddenly decided, you know, work in a supermarket wasn’t for me, working with people wasn’t for me. I want to become an accountant. Okay, I don’t know where that came from. Maybe the numbers, or maybe it was a careers advisor at school who told me Oh, you’re a numbers guy, Rick you should become an accountant. So I went back to accounting school, became an accountant, joined an audit accounting firm, which I really didn’t like. So switch to management accounting and worked for a brewery, which was far more exciting. I think it’s the only company I’ve ever worked with where they, they gave you free beer and wine at lunch, and encouraged you to drink it. And then that led me on to other things. You know, I moved to defence, manufacturing, defence electronics, and then Facilities Management, or an IT Bureau, which is today known as cloud and cloud computing. And then I moved to real estate. And then I moved to oil. And when I was working for that oil company, they moved me to China. And then they moved me to Vietnam. So that was all the way back in 1990. So I’ve been here for a while. It’s been a it’s been a long and and unusual journey.

Gene Tunny  04:21

Right. Yeah. So you’ve worked across a diverse range of industries and you were in oil, but you no longer in in oil. You’ve been doing your own thing or running your own business. Is that right? And that’s what you’re doing now?

Rick Yvanovich  04:33

Yeah, that’s right. I mean, back in. In 94, I was gonna get shipped back to London, oil price was running at about $15 which was ridiculously low compared to today, and it was going even lower. So that obviously changed all the economics of those companies. And having been in Vietnam for some years, I hadn’t met my previous five bosses. So it would be very dangerous to step onto that plane and step off the plane in London and walk into the office because that will be a very short journey, I think. So I found out about a voluntary redundancy package and I retired. So I actually retired back in 1994. I am a workaholic, though. So that lasted for about five seconds. And I started up an IT company. And we’re still doing what we started literally 30 years ago or 29 years ago, so 30 years next year, which is to implement accounting systems, I’m an accountant, implement accounting systems, seems a bit obvious. And we do it in about 80 different countries around the world today.

Gene Tunny  05:39

Very good. Okay. As an economist, yes, I could, I’m very supportive of my cousins, or my fellow people in the accounting profession, and I understand the value of it. So that’s, that’s good stuff. Righto, well Rick I’d better ask you about your new book Business as Unusual. So with the title Business as Unusual, what are you driving at there? What is the, the genesis of that title? Could you explain that, please?

Rick Yvanovich  06:09

Well the genesis of of that was, you know, the book was birthed, as it were, in about 2020. I’ve always had this, you know, on my life goals list, you know, might be or could, may have been a life fantasy list, you know, go write a book. And it’s been that for years. But if we go back, you know, some years if we can all remember, not pretty sure if everybody listening can remember, 2020 is when we had that COVID pandemic sort of sprung upon us by surprise. And it was during that that period, that I actually, because I had time on my hands, funnily enough, I started writing a book, and got it actually published earlier this year. But you know, as, as we were locked down, and I know in Australia, you know, you locked down the country for some years. And here in Vietnam, we effectively locked down the country for some years as well. So as an expat here, as a foreigner, I could leave, but I couldn’t come back, necessarily. So that was not a good idea to leave. And so therefore, I actually worked out from the start of the pandemic, when they started the lock downs, which is tail end of the first quarter of 2020, I didn’t move more than about 10 or 15 kilometres away from where I live for two years, literally for two years. As this is was all happening. And as things started falling apart, and all the wheels fell off everything people kept saying, when this is over, when we you know, go back into the offices, and it goes back to business as usual, when you know, this is just the new normal, you know, we’ll get over this and everything can just go back to the way it was before. And this just sort of annoyed me more than anything else, but there’s nothing remotely normal about any of this, there is no business as usual. And especially here in Vietnam, you know, where the clamp downs were pretty tough, you know, confined to apartment, you know, you need a permit to literally walk out your front door and go down to go down to the shop once a week or twice. So we really, really, really tightly controlled and it was open, close, open, close, open, close. And this went on for a while. And each time people thought it’s over, and we can go back to the office. Something else happened, oh, we got another lockdown or another another. And I said, there is nothing usual about this. This is all unusual. And that’s where the where the title came from business as unusual. Because shock after shock or surprise after surprise kept hitting us whether it is another lockdown, or, you know, other things we’ve experienced. There’s a bit of a war going on and you know, in Europe isn’t there. You know, we have the economic turmoil that’s hitting some countries, we’ve had the great resignation or great insert word that you want. All these things are happening and have been happening. And, and it’s not over yet. This is just unusual.

Gene Tunny  09:34

Yeah, yeah. Yeah. Certainly since 2020. I fully agree with you. I’ve got a couple of questions and a few things I want to explore. So Rick, you said you know things aren’t going back to normal? I mean, what have you noticed what things have you noticed haven’t really settled down in in say, the way we work or the way we live? So the economy society, what have you really noticed that hasn’t gone back to normal?

Rick Yvanovich  10:03

There are a few things. So when we look at normal, and what do we really mean by that? So you could say that’s linked to a bit business as usual. So that business as usual doesn’t have to be in a work context. It can just be an a non-work or a life context. And I think this is all very much linked to this, this great resignation or reshuffle or whatever you want to want to call it. Pre-pandemic, pre all of this happening. Normal, one could argue, was the, you know, we get up, we go the office, we sit in our cube, you know, we go home, we get on with life. So married with our job, married to our job, maybe married to our mortgage, got bills to pay, right? Kids in school, all that kind of stuff. And I feel that there was a as an acceptance that we might be a bit bit like that hamster on a wheel at work, and we’re in a cube, we’re in a cage and we’re not going anywhere. COVID comes along, and they took the office away, they threw the cube away, and they threw that wheel away, you know, are we any better off? Well, we don’t even have a wheel to run around. And you know, we’re not even in that cube anymore. We’re just somewhere else which might be your home, or whatever you ended up being. Because at the end of the day, when the lock downs happen, it’s like musical chairs, isn’t it. And I know people who were on a business trip, and they couldn’t get back into Vietnam. They also couldn’t get back into their country of origin either. And they were just stuck wherever they were stuck. And you know, it’s crazy. I know some people who are stuck literally for six months or 10 months in a third country where they didn’t want to be in in the first place, but they couldn’t move. Anyway. So I liken it to they’ve, you know, we’re no longer that hamster or whatever, running in circles in a wheel going nowhere. I feel that people feel that they’re not too sure what direction to go in anymore. And so it’s more like, we’re still that hamster, or any other animal you want to call yourself. But we’re trapped in a maze. You know, there are lots of different directions we can go in. But they’re not necessarily leading anywhere. And it’s a bit like the, the Cheshire Cat in you know, Alice in Wonderland. And Alice comes to the crossroads and sees the cat and says, you know, which way should I go? And the cat’s sort of saying, well, it really depends where you want to go. And Alice is replying well, I really don’t know, the cat’s saying, well, it really doesn’t matter where you’re gonna go? Because you’re not going to go anywhere. And I feel that’s what the great resignation is all about. You know, some people have been forced to resign because their industry has collapsed, or the company they’re working for has gone bankrupt, and it’s collapsed. Or they didn’t like how they’re being treated when all this was happening, and so they’ve been, they’ve had to resign, or they were terminated, or they walked with their feet, because the grass is always greener. The only problem is, is people have found that the grass isn’t greener. And they’re still moving around. And so the ripple effects of the Great reshuffle as it’s, you know, as it morphed into, a still happening and is, you know, it’s happening across the world. So the way that we look at work has changed. And we can see this by the yo yo that we had, maybe it’s less this year, but especially last year, when companies opened up again, hey, you can come back to the office. Yeah but we’ve been working remotely for a year and I like working remotely, and I don’t want to come back to the office. So you know, if your company allows you to work 100% remotely and you like it, you know, you’re quids in right? But no worries. However, what happens if you know, you’re forced to come back to the office and you’re told you must come back to the office? Or you must be in the office for X days, when you want to not be in the office? Conversely, what are those? What about those people who really, really miss the office, they missed all that collaboration, all their friends and they want to go back to the office, okay, but they’re told no, no, we got rid of the offices we worked out we can save loads of money by having no offices, go work from home or wherever you want. So the whole way of working is changing and some companies are enforcing it. Some people are sitting on the fence, you know, and that’s really confusing. Okay, it’s really, really confusing. And so not only does that affect each one of our citizens as an individual, Hey, what is our company doing in which we may agree or disagree with? Working within that? Okay? Because I’m I’m seeing that more and more or I don’t know what the percentage is, but I feel it’s very high, very high percentage of companies have some form of remote work now or hybrid work. And the way that you work in a hybrid situation is new to a lot of us, okay? Like, hey, we went to the office and like we sit around the watercooler, we go out for lunch, we have a coffee, we go for a beer or whatever. That’s how it works. But how do you do that when half the people aren’t there? So how do we communicate? And today we’re on we’re on a zoom call, which maybe two years ago, and we weren’t that expert zoom. Whereas today, well come on it’s a basic skill to be expert on Zoom and Teams and all the other video conferencing platforms, it’s just a new tool the you absolutely must know. So all how do we work? Well, that’s a tricky one. What’s the best practice for companies? Oh, that’s a tricky one as well. How can there be a best practice when we’re still trying to work it out? And that’s just work. Now, if we look at, but from another point of view, how about our lives, okay, in the year or so, depending on what country you are in, and whatever restrictions that you experience, you know, if your work, the way you work has changed. How has the way you live changed? You know in a lot of countries is especially what I found here in Vietnam, having been locked down for so much. There’s some really basic things that I started missing. You know, I’m not a tree hugger. Okay. However, once them doors were open, you could actually go outside. Hello, gosh, there’s a tree. Let me touch it. I haven’t seen haven’t touched one of these for literally months. Okay, and then you know, what, when things are taken away, maybe we, we start appreciating, and we start noticing things that that we actually missed, going for a walk in the woods, silly thing like that. Or, you know, walking on the grass in bare feet or going down the beach, you know, strike going down the beach and striking up a Barbie. You know, all of these things were taken away.

Gene Tunny  17:35

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  17:41

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Gene Tunny  18:10

Now back to the show.

As a matter of interest Rick, can I ask you about Saigon? Because I don’t know a lot about it. I mean, other than I mean, it’s a large city. So if it’s like other Southeast Asian cities, then it could be very difficult to go outside and just walk around and go on a nice relaxing walk. But what is it like? I mean, is it? Are there places you can go? Are there parks? If you do get outside? Or do you have to travel further afield.

Rick Yvanovich  18:39

Ho Chi Minh city, officially then 9 million people, okay 10 million people in a place with 10 million people. There’s one thing you’re guaranteed. They’re always people about? Ok? And the weird thing during COVID was the the city turned into arguably a ghost town. Okay, because like any other sort of urbanised city, where are the people really from? Are they native to the city? Or do they come from outside the city? So the big challenge that that I feel the Ho Chi Minh city face and its impact on people, was that yes, it’s you know, the bustling, the biggest Metropolis there is in the country. And it’s also the employer of an awful lot of people in in in the whole province of Ho Chi Minh city because the city itself is a province is so big. There are multiple industrial zones, and there are hundreds of 1000s if not millions of workers there. Those are not native to the province. They come from elsewhere. So when the pandemic hit, and they say stay at home. And if you’re a factory worker, and a home is the room that you’re sharing that you happen to live in, because you work in a factory. Okay, home is miles away. And as as they tighten down restrictions. And you know, we had things like tent cities emerge as an Yeah, if your company can provide you a place of sleeping a tent, literally, which could be set up in a factory or even in your office, then you can stay there, you don’t actually have to leave that office or building. And that happened for a while. But what what happens if you employ 50,000 people? It’s been tricky, right? So there was mass migration, when they shut it down. And hundreds of 1000s of people were fleeing the city. Okay, so the city sort of shrunk because a lot of people left. And it was literally a ghost city. And whereas on a normal day, you have to look both ways very, very carefully to cross the road. And, and if you go into the busy streets, you might even learned, need to learn how to cross the road, because there’s so much traffic, at this ghost home, you can do what I used to do back in the early 90s when I first arrived here, you could lie down in the middle of the street, and nothing would happen because there was nobody there. So it’s weird. So for me, it was like Oh nostalgia. There’s no one around this is wonderful. There’s an I can’t hear anything. There. No, no, guys, there’s no toot toot there. No, no, there’s no noise control here, either. And so there’s constant noise all the time. And it was like, it was wonderful. I loved it. So it also remind me what I miss what I missed what I’ve been missing.

Gene Tunny  22:00

I mean, it’s good that we’re out of lockdown and restrictions and even if we’re not getting back to normal, even if we’re in this business as unusual. I think it’s still preferable to, to what we had during the pandemic with all the restrictions. Right. Can I ask Rick about a are you arguing or your you think that we’re in a phase now we’ve we’ve left the pre COVID world, and we’ve just got to get used to this unusual, you know, unusual things happen? Or maybe we were deluding ourselves pre COVID. And we forgot that things unusual things can happen. What’s your take on that? Should that just be our basic operating principle, you should be careful assuming things are going to be business as usual. There’s a debate about whether in the past we ever it ever made sense to do that. We should expect volatility, we should expect shocks, so to speak. What’s your take on that, Rick?

Rick Yvanovich  22:57

Yeah, I agree with you. It’s the VUCA mindset, isn’t it? Which was penned a long time ago? Yeah, the VUCA as in volatile, uncertain, complex and ambiguous, so that VUCA mindset. Now, if we had a VUCA mindset with COVID, you know, we’d be highly resilient and agile to it and like whatever, we’d be able to cope with it. But not many of us knew that mindset. And therefore, like, you know, somebody moved all the goalposts. And you know, what do you mean, I can’t go in or out of the country? What do you mean, I can’t walk down the road? Can’t walk my dog or whatever? I mean, this is ridiculous. Yeah. So all of those personal freedoms that we have taken for granted. I think we have got a rude awakening that will okay, this is an unusual situation with we’re taking them away. And there’s huge backlash to that. So anyway, I believe that there is no going back to normal. Okay. That’s why I call it business as unusual. I think we need to embrace the unusual no matter what anybody says COVID is overall whatever you want to class it. Look at what’s happened just this year with a generative AI. Yeah, you know, that took people by surprise. Like, where did this come from? Well, okay, it’s been brewing for more than a decade, guys. But you know, it that that has hit the world by storm. So that’s yet another you could say it’s another shock. Okay. It’s another huge shock on top of all the other shocks that we’ve had. So do you want to call it a shock? Do we want to talk call it technological advancement, okay, because that’s what it is, is just some bright sparks dreaming up some more great, innovative ideas, and it’s called generative AI and the world is embracing it in fits and starts. Okay, so some people are advocating oh this is terrible legislate against it. And other people are, you know, the first movers are embracing it and racing ahead. That’s just version one you could say of generative AI, what’s next? It’s going to keep on coming and coming at us. So how we live, okay? And how we work needs to be adaptive to that. Because we’re either going to get steamrollered and squashed by it, or we are going to be resilient to it, we’re going to be agile to it. And we’re going to embrace it and use it to keep moving forward.

Gene Tunny  25:43

Yeah, well, the take up of it is, is extraordinary. And I mean, all sorts of people are finding uses for it. And I mean, I find, I find it’s helpful, you have to bear in mind that it’s a not very good intern, I think, as Kevin Kelly described it, so you do have to be careful what it gives you, and it says that all you look at it, it doesn’t necessarily give you factual information, if it’s if we’re talking about Chat GPT. And sometimes the images that things is it mid journey, the the generative AI, image creator, but whatever it is, they can do quirky things like creative, you know, give people extra fingers and things like that. So you have to be careful with that as a first start on things. It’s just extraordinary. And I mean, the risk is if you know, we, AI guess you know, if it’s, if it makes it easier for people to commit scams to hack to and then you know, if you think of all of these nefarious or these worst case scenarios where the AI becomes what did Skynet become in Terminator 2 become sentient or became conscious. Takes over a bit. I think that’s probably a bit outlandish. But yeah, I agree with you AI is one of the things we need to that’s a huge, huge development. And yeah, we’ll have we’ll have to see how it all develops. And I mean, potentially, we will need some regulation around it. Anyway, that’s just a comment rather than a question, Rick, but if you did want to respond in any way,

Rick Yvanovich  27:15

It’s true. At the end of the day, AI is a tool. And like any tool, it can be used for different things, you can use it use it for good. And you can use it for not so good. And then unfortunately, there will always be not so good folks around doing not so good things. But we shouldn’t let that overshadow all the wonderful things that AI can actually do. I mean, there’s so many positive applications to it today. And I think as people become more aware of it, and it becomes more readily available and more cheaply available, not just for individuals, but for organisations as well. It can really, really, really help. And at the end of the day, you know, I like your comment that I agree, it’s like a not a very good intern, I would reframe that, I think it’s good to treat it like an intern in that doesn’t know what to do. Okay. So it’s not going to proactively do something until you prompt it. So it really is linked to how good are we in asking it to do what we want it to do? And I think that’s how most people are using the typical AIs that the moment? The next level is already? How do you teach it? And this is even Chat GPT? How do you teach it to respond better? So again, take that intern analogy. How would we teach it to do things better? And if you know how to do that, then it will.

Gene Tunny  29:02

Yeah, absolutely. I mean, we’re, it’s just early days. And already, I mean, it’s helpful. I use it to generate the first drafts of shownotes. episode titles and episode descriptions. And yeah, it gives you somewhere to start. So it’s terrific in that regard. Righto, Rick, what about some other things that could be coming at us? Or that could make things unusual? Have you thought about anything? What other possibilities? There are? I mean, climate change. I mean, if you think about some of the extreme scenarios around that, is that something that concerns you anything else?

Rick Yvanovich  29:39

Oh, yes, climate change should concern all of us. And maybe this is something where AI can actually help us. You know, arguably AI is collective wisdom, isn’t it? It’s all our knowledge. We just have to ask it in the right way. So again, it’s it’s a tool and how we use the tool. So for climate change, there are a couple of things. I read an article the other day about what Google is doing with AI and the airlines, one of the biggest contributors to climate change is air travel. And one of the things that causes a negative climate effect is the vapour trails that an aeroplane creates when it’s flying. Okay? And that contributes, I can’t remember the number but it’s some horrendously high number 30 40% of the pollution that it’s creating. So the challenge was, can we use AI to do something about the aeroplanes trajectory to minimise that, okay? Because it’s the aeroplane going through the different, going through the air, and what you know, what type of air is it, you know, how saturated that air is, how warm it is, how cool it is, and it can cause more or less vapour traps. Keep a long story short anyway, they worked it out, okay? And are trialling getting the air, when when they’re flying the plane is to do some minor adjustments to go a little bit higher or a little bit lower to reduce the vapour trail. And in trials, they reduced it by even as much as 50%. And that’s just a little tweak. You know, that’s not very much. Now other things as well. I mean, we know with the Earth getting a lot hotter. Yes, we all want to whack up that aircon and we’re whacking up the aircon to make our environment cooler. But we’re making our environment cooler because it’s hot. Okay, so there’s other tech out there already to try and reduce the heat. Okay, that a building has. And again, using some AI in their analysis of this. So it’s a bit like the paints that they have created. All right, which will help reflect the right type of rays. Okay, the sunlight, which will, they’ve actually worked out that if they use these panels that they’ve created, which reflects the sun, okay, but only certain wavelengths, it actually cools, it’s cooling. Okay, but it doesn’t block out the sun. It’s only certain rays. And again, AI is being used for for things like this. So there’s an awful lot of good that we can use AI but AI sensibly, and obviously, you know, certain industries like the health industry. And I would expect to see huge, huge inroads in that. Things will carry on changing. And I think with advanced tools like AI coming in and becoming more mainstream, I think the pace of especially technological change is going to accelerate. Yeah, now, going back to the business as unusual. And so without that, that’s unusual. You know, technology is all very well and good. And we all have our attitudes on whether technology is for good or not so good. The second part of the book, or the second part of the title, and our business as unusual how to thrive in the new renaissance. Yes, thank you, you have got a book. And in this business, that’s unusual. Well, you got one, and I still have yet to actually physically touch one. That was another usual thing. But the second half of the, you know, the subtitle, how to thrive in the new renaissance? What’s the renaissance got to do with it? Well, I already touched on technology, in the original Renaissance technology was the printing press, arguably today the new renaissance is technology advancement is Yeah, around the internet, the power of that all the apps we have and now generative AI, you know, the original Renaissance was all about exploration, you know, finding new countries, new lands, these days, it’s find the other things. It’s like going deep inside humans and seeing more inside the brain or whatever is going on inside us. Going into the depths of the oceans, but it’s going beyond the Earth, you know, going to the stars. The other thing, the other Biggie was the challenging of authority. So back on the original Renaissance that was the challenging of the church and the power of the church, in today’s Renaissance is the challenging of political structures and countries and how countries are governed. Okay, Okay. And finally, I think this is the most important thing. And but I left it to last even though I should have said at first, the original Renaissance was about humanism, it was about humanism. And the new Renaissance is all still about humans. And it’s about human potential in the light of all these technological advancements that we have. So that’s why I really believe that the human side is super important. And AI is not a human. And there are quirks about humans that make us human that the AI doesn’t have. So I see AI and other technologies it’s a way to augment our potential, we can do a lot more using AI, for example, you yourself said, Hey, you use AI. And it can dream up a couple of topics for you. That’s wonderful. Yeah. Okay. And it saves you a load of time. Yeah. Which makes you more productive, and you have more time to do some other stuff. That’s wonderful.

Gene Tunny  36:01

It takes you away from what do they call the tyranny of the blank page? Which which can make you procrastinate, so it’s good in that regard. I want to ask you a couple of things about what you said there Rick that, that was all, all fascinating. So one of the things you you talked about was government and so that we’re in this new Renaissance , what are you thinking about with with government? I mean, clearly, there are all sorts of people seem to be more unhappy with government than ever before, there are concerns about? Yeah, I mean, the US in particular is, you know, really problematic. And just looking at it from the outside. It doesn’t look good. What’s going on there. Looks like it’s, it’s cooked. It’s very volatile. I mean, what are you thinking with, with government? I mean, do you see changes in the way we we govern ourselves? Is technology part of that story? What are you thinking? What are you thinking there Rick?

Rick Yvanovich  37:05

That’s a big question. Yeah, I’ll put a caveat around that I’m not political in the slightest. Don’t like talking about politics. It’s always going to upset people. But if we go around the world, and we just look at COVID, I guess the jury’s still out, we can say, on which countries handled it better than others. Okay. And who’s making that opinion, anyway, is that us as individuals? I feel that it really doesn’t matter where we were on the planet during COVID. Each of us experienced, whatever we experienced. And the question is, is, were we expecting some kind of benevolent government to know better, and help and support us? Or should we be more independent, and be able to look after ourselves? That’s a big questions and a loaded question as well. My feeling, my feeling is, a lot of people feel that they need to look after themselves better. Because if no one was looking after them during that period, what are they going to do when it happens again? Because at the end of the day, if we go back to the earlier days of the pandemic, there’s some people saying, well, we knew this was going to happen. Okay, it was inevitable. Yeah, the some kind of pandemic of this scale would happen. All right. And maybe the voices have gone silent, or they’ve been drowned in the noise of everything else that is going on in the world. That, okay, we told you so, we told you, it could happen. And it can also happen again, because we’ve really proven that it can happen. So how prepared are we, for the shock? Or the the new challenge of something similar but different happens again? Yeah, you know, how’s that, you know, how are we going to cope with it? So, going back to the business as unusual, so, how is business as unusual, which is the first in a trilogy is written from an owner an owner leader perspective of an organisation. So how can you make your your organisation more resilient to this kind of shock? You know if you were in the hospitality business, tourism business, you got pretty well beaten up during during COVID. There are certain industries which got absolutely flattened. So how can you be more resilient to that in the future? Now the other two books just so you know, that are in the series? The next one I’m I’m writing is the life as unusual, so I’m looking at the individual, you know how that that needs to change, how we view life needs to change. And it’s all of this, the next two books it’s all already in there in the first book, we’re just going into into more detail and taking a different perspective. Okay? Because on the life one, because you know people used to talk about work life balance, and too many hours at work your’e a workaholic, not spending enough time at home. And some people say it’s not a work life balance it’s a life work balance. I argue it’s neither. Balance is balance, balance is balance, you know, who said life and work are the two sides of the balance there, many aspects of the balance that need to be considered. And this is, I think, the the awakening that I sense has happened during the last few years, is people are reflecting on because they had nothing else better to do maybe, or they were forced to do it on what are they doing with their life? Yeah, so the fact that maybe you couldn’t go out, you couldn’t go for your walk, you couldn’t go down the beach, you couldn’t travel, you couldn’t do the things that you wanted to do. And that was taken away for you for a period of time. How important are those things to you? Some of them, you may realise that, oh, it was irrelevant. Others like ah, I really actually need that. Okay, now as those realisations happen, whether it’s what you do, when you’re not working, the past times, and the hobbies that you have, because you might have had to change them to something that is restricted to where you live, the four walls of where you live, rather than being able to go outside, if he had to go outside to do it. I think we’re having to reevaluate it, what the importance of these things are, because that’s for us as individuals. The other thing that happen, that is, is really acute, I find over the pandemic is relationships. Okay, so how was it? You know, I think what, I can’t remember what the statistic was in the US, but I think the number of divorces went through the roof. Okay, because you’re actually stuck with your partner or your family for a prolonged period of time in a restricted space. So in a lot of cases, it didn’t go so well. And in other cases, it went wonderfully. Okay. But another scenario could be, well, what if you were separated from your family? There are many people who have moved, they might have siblings, they might have parents, they may have their own kids in other countries, and they didn’t see them for a long period of time. Now, what does that do to the relationship? I mean, during COVID, I lost my wife for 10 months. You know some people might be going “Yeah, lucky you!” But she was medivacced in early sort of around March 2020. And then they close the borders in Vietnam, so she couldn’t return. Okay, so I had medivacced her to to a third country, which was Singapore. And she was on rehab, because it was a back operation, they were teaching her how to walk again. And, and so she was in the hotel across the road and just had to go in for to see the doctors and all of that to teach her stuff. And then, as things tightened in Singapore, they commandeered the hotel as a quarantine location and kicked her out of the hotel, to another hotel that happened three times. Also, since to learn how to walk again, they used to take her out outside to walk. They had to stop doing that she wasn’t allowed to go into the hospital because she, she’s an outpatient, she’s not allowed to do that. So she was stuck there for about four months before I managed to move her to her country of origin, which happens to be Switzerland. So she managed to get in there. So for it took me several months to get the right permits when they allow people with the right permits to return to Vietnam. So it took me 10 months to get her back. And my daughter was at University at the time, and yet another country. So for for a long period of time, I had my daughter and my wife in two other countries and I was here with my with my son. And by the time I connected my son and my daughter again, we’ve got got us all back in the same country. They hadn’t seen each other for two years. That’s pretty unusual. And I guess in that case, well, our whole idea of the relationship changes the whole idea. I mean, this Zoom. I remember we had a bunch of interns, because we’re big on internships. And our interns come from overseas. So we brought them over from overseas, and they will work in Ho Chi Minh City. And we used to take interns with a big cohort from Denmark. So we had about anything from about 10 to 15 of them at any point in time. And their government recalled them all. You know, they gave them advice, hey, come back home, come back to Denmark, okay. And they were arranging, like other governments, Australia did the same. You know, they’re arranging flights to bring their country people back home. And we did have some went and some didn’t. But going back to the, to the interns, in this period of time, where some of them moved back, and some of them didn’t, there were there were some quarantines as well, because some of them happened to have got COVID. So they’re put into quarantine. And, and we started doing these zoom calls, to check in on people on a regular basis. And the thing that really hammered it home into me is one day, one session we were having, an intern, turned around and said, these calls are my lifeline, do you realise you were the first people outside of quarantine, that I’ve spoken to this week. You know, it’s, you know, things that we can’t imagine, things that we might get from the history books, or, you know, our great great great grandma parents or whatever, who tell us them old stories of the hardships when they were young, things that that we would think would never ever happen to anyone we would ever know, in this day and age, especially in the more developed worlds that we live in, can actually happen to us.

Gene Tunny  46:57

Very true. Very true.

Rick Yvanovich  46:59

Things will remain unusual.

Gene Tunny  47:01

Yes, Rick. So that was the second book. So you said so your first is business as unusual, then life as unusual. What’s the third one going to be?

Rick Yvanovich  47:09

Work as unusual.

Gene Tunny  47:11

Work as unusual? Got it.

Rick Yvanovich  47:12

I’m leaving that to last because the jury’s out and I’m not really too sure where the dust will settle? Because it hasn’t settled yet. It really hasn’t settled yet.

Gene Tunny  47:21

Yeah, I agree with you on that. Now, before we wrap up, I’d just like to ask, What do you think of the key takeaways for organisations or for CEOs or, you know, managers reading business as unusual? What are you think of the major takeaways for them? Top two or three. Are you able to summarise it in that way, however many you think are the most important.

Rick Yvanovich  47:51

Yeah, I think it’s really around a core belief that I hold really dear, is, I believe that every one of us has the potential to be the architect of change. Now, we live by all these weird technological, and non technological transformations that are happening. And our task, our challenge is not just to keep up and exist, but to actively shape the path forward. Okay. And every single day, our actions, whether they’re big or small, shape our future, because our action is a choice we choose to do, or choose to not do. And therefore each one of us needs to remember, we are our own brand. And every single one of these choices, every single one of these decisions we make is part of the unique story that makes us human, that makes us us, or makes me me and makes youyou, okay, how we react, how we adapt, and how we innovate in the face of change will define not only your story, but your legacy. So that’s, that’s the background to it. So to reflect on the takeaways that I believe that are in the book, because the book is it gives you a framework. So you can shape your life in any way that you wish. But I give you a framework. And within that framework, you know, the framework uses the metaphor of a castle. And within the framework, I’m just hitting you with a shedload of tools. These are all the tools that I use myself. But a lot of the tools that I use are a synthesis and multiple other tools. So I just say here all the tools are a bunch of tools, you know, yeah, five tools, try them all and find out which one resonates. So going back to your original question, you know, I want people to remember that we’re not just a participant in today’s ever changing world, we’re the architect. And as architects, we are shaping the course of our own lives, our own careers, and the world around us. So I encourage all of us as individuals. And if you, you know, if you have more impact, like you’re the business owner or a business leader, I encourage you all to embrace the change, but define it, rather than just adapt to it. So be that catalyst in this in your own business as unusual world.

Gene Tunny  50:39

Yeah, absolutely. And, yeah, expect the unusual, I think I mean, that’s what I would be. I would be saying, Yeah, you’ve got to get across the new technology, so you don’t get left behind. You’ve got to stay as alert and as healthy and fit as possible to be able to make sure you’re, you can play the game as best you can. Yeah. Because I think you’re right. I mean, I think we are in this business as unusual world, just the extraordinary amount of change we’ve been seeing. It’s absolutely. Rick this has been great. Any final thoughts before we conclude?

Rick Yvanovich  51:18

Yeah, I, I, of course, encourage the people to go out, go out and get the book.

Gene Tunny  51:27

Absolutely I’ll put a link in the show notes. Yeah.

Rick Yvanovich  51:30

And, but more important to that is, you know, change transformation starts with each of us. As individuals, it’s, it’s ourselves that has to decide to change, or not, okay. And as we change, we transform because that’s what transformation is, that’s change, you can’t go back after you’ve changed and once the, once the caterpillar is a butterfly, it can’t become a caterpillar again, it has transformed, okay. And this is really important. And I think the journey is only beginning. So I’m really, really curious to hear about your journeys. So as as your listeners embrace this, they try it out. I really encourage them to, you know let Gene know, let me know, reach out to us. And tell us about your journey, because I’m sure they’re going to be absolutely fascinating.

Gene Tunny  52:21

Yeah, that’s, that’s good. That’s a good point recommend. I’d be interested. If you’re listening, and you’ve got thoughts on or how things have become unusual for you and how you’re responding that would be that would be very useful and yeah to the extent that you are that you have adjusted, you’re adapting then. Yes. And some thoughts on that would be great. So yeah, Rick, I think that’s a really good spot to conclude. And I’d like to thank you for, for your time for your, your thoughts on business as unusual. And for the book, which does Yeah, it. I think you’re onto something here with business as unusual. And you’ve got some good, good tips and good tricks, good bits of advice in that that book. So good work on that. And I think yeah, I think the idea of doing a trilogy is terrific. And yeah, I learned a lot from the conversation, learned about your experience in Vietnam, during the pandemic, and just how disruptive that was. And also, that’s the info about Google and AI with the flights and reducing the greenhouse gas emissions. I’ll find that online and I’ll put a link in the show notes below. That was really, really neat. So, again, Rick Yvanovich, thanks so much for your time. I really enjoyed the conversation.

Rick Yvanovich  53:42

Gene thank you, too. I’d like to express my gratitude for for allowing me on your podcast today. It’s it’s been a fascinating conversation, some great questions. I hope our listeners have enjoyed it as much as I have. And to all your listeners, all our listeners, I really appreciate your time and attention. And just like Gene, I look forward to hearing from some of you from learning from your experience, and perhaps giving us the opportunity to share more in depth future discussions. Thank you again, Gene, and to all our listeners for this wonderful exchange. Until next time, goodbye

Gene Tunny  54:22

Righto thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


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