Professor Amar Bhidé of Columbia University discusses his new book “Uncertainty and Enterprise”, published by Oxford University Press. It emphasizes the limitations of standard economic models that rely on probability distributions. He argues that entrepreneurship involves dealing with unique, non-quantifiable uncertainties, which require imagination and narrative skills. Bhidé critiques the over-reliance on incentives and statistical analysis, advocating for a more imaginative and contextual approach. He highlights the importance of routines and the need for accountability in expert decision-making, particularly in areas like public health and monetary policy. Bhidé also discusses the role of narratives in business success and the challenges posed by tech monopolies.
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About this episode’s guest Professor Amar Bhidé
Professor of Health Policy and Management at Columbia University Irving Medical Center
Bhidé has researched and taught about innovation, entrepreneurship, and finance for over three decades. He now focuses on teaching, developing, and disseminating case histories of transformational technological advances.
A member of the Council on Foreign Relations, a founding member of the Center on Capitalism and Society at Columbia – and a founding editor of Capitalism and Society, Bhidé is the author of the forthcoming book Uncertainty, Judgment, and Enterprise (Oxford). His earlier books include A Call for Judgment: Sensible Finance for a Dynamic Economy (Oxford, 2010), The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World (Princeton, 2008), The Origin and Evolution of New Businesses (Oxford, 2000) and Of Politics and Economic Reality (Basic Books, 1984). Starting in the early 1980s, he has written numerous articles for the Harvard Business Review, the Wall Street Journal, the New York Times, and The Financial Times. He has periodically appeared on Bloomberg TV and CNBC.
Bhidé was previously the Lawrence Glaubinger Professor of Business at Columbia University and the Thomas Schmidheiny Professor of Business at Tufts University. He has also taught at Harvard Business School (as an Assistant, Associate, and Visiting Professor)and at the University of Chicago’s Booth School of Business.
His professional experience includes directorship of a FTSE 100 company. In the 1980s, Bhidé was a Senior Engagement Manager at McKinsey & Company, a Proprietary Trader at E.F. Hutton, and served on the Brady Commission staff, investigating the 1987 stock market crash.
Bhidé earned a DBA and MBA from Harvard Business School with High Distinction and a B. Tech from the Indian Institute of Technology (Bombay).
LinkedIn: https://www.linkedin.com/in/amar-bhide-8202ba10/
Timestamps for EP264
- Uncertainty in Economic Theory and Practice (0:00)
- The Role of Imagination in Economic Decision-Making (6:44)
- Narrative and Storytelling in Entrepreneurship (15:01)
- The Impact of Narratives on Markets and Investment (25:29)
- Challenges of Regulating Tech Monopolies (32:34)
- Accountability and Expertise in Governance (41:04)
- Building Narrative Skills for Entrepreneurs (48:31)
- Final Thoughts (52:14)
Takeaways
- The Distinction Between Risk and Uncertainty: Frank Knight’s distinction highlights that risk is quantifiable, but uncertainty involves unknowns, requiring judgment and imagination.
- The Importance of Narrative in Business: Entrepreneurs use storytelling to make ventures plausible to investors and stakeholders, even when data is incomplete or speculative.
- Imagination is Key to Profit: Success in entrepreneurship often depends on the ability to imagine scenarios, adapt to setbacks, and create compelling business models.
- Challenges of Accountability in Modern Institutions: Bhidé critiques the lack of accountability among experts in fields like public health and monetary policy, advocating for more robust governance structures.
- The Role of Plausibility in Decision-Making: Investors and entrepreneurs alike rely on plausible, if not always precise, projections to guide business choices.
Links relevant to the conversation
Amar’s new book Uncertainty and Enterprise:
Corralling the Info-Monopolists (Project Syndicate Op-ed):
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Transcript: Uncertainty and Enterprise: Harnessing Imagination and Narrative w/ Prof. Amir Bhidé – EP264
N.B. This is a lightly edited version of a transcript originally created using the AI application otter.ai. This was then looked over by a human, Tim Hughes from Adept Economics, to check for clangers that may have been misheard by the otter. 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.
Amar Bhidé 00:03
Whoever gave you the right to turn price stability into inflation stability? That may be the right thing to do, but that is a political decision, and our politicians certainly did not give you that right. But it’s sort of too complicated. We don’t understand public health, we don’t understand monetary policy, you know. And either we can sort of go the way of abolish the Fed, or abolish the FDA, or we need to figure out mechanisms by which there is more accountability, both into what the or the actors of power do and how the these actors are held to account.
Gene Tunny 00:46
Amar Bhide. Welcome to the program.
Amar Bhidé 00:48
Thank you. Pleasure being here.
Gene Tunny 00:50
It’s good to be chatting. You’ve written a fascinating book on the topic of uncertainty and enterprise, and this is something that economists think about, you argue that they may not have been thinking about it the right way. So I’d like to chat with you about that. I’ve had John Kay on the program to talk about his book Radical Uncertainty before, so this is certainly a topic I want to want to explore. To begin with can you tell me please, what motivated you to write this book, please Amar?
Amar Bhidé 01:27
I was given Frank Knight’s book, Risk, Uncertainty and Profit by a very wise dean in 1990 so that’s approximately what, a long time ago shall we say, 34 years ago? I was teaching entrepreneurship at Harvard business school at the time, and I was utterly captivated by the construct, and I had not seen that in any of my doctoral studies. Mike Jensen was a very popular figure on campus at the time, and he and most of the other economists were emphasizing incentives, and entrepreneurship was beginning to get some traction, and it was being seen almost entirely through the frame of incentives and that frame assumed that people knew what was the right thing to do, and they might simply lie about it, or they would slack off, or they would cheat. And in my observation, the problem not just with entrepreneurship but with everyday life, is that we don’t know, even in the most mundane activities, we don’t know we don’t know, what tie to put on, we don’t know what to order in a restaurant, and yet we must act. In entrepreneurship this problem becomes much more acute because it’s typically a relatively new a new enterprise that we are attempting, and so we have even less knowledge the the evidence at hand might give us a clue. It might tell us whether it’s something seems worthwhile or not, but beyond the seems to be to the action, the there’s a big gap, and even more so when you cannot act unilaterally, you have to persuade somebody else to come along with you, and that somebody else may, of course, worry about your your honesty and your truthfulness, but equally, that person would worry about whether you’ve gotten it wrong, whether you’ve made a bad judgment. That seemed to be, to me, to be, to be an absolutely central problem of economic life, both in entrepreneurship and beyond. And Frank Knight’s book, the construct that he offered, seemed like an excellent way forward, but Knight’s construct never caught on. Ironically, the book became famous because of his analysis of an economy where there is no uncertainty. That was the bit that was assigned to economic students at the London School of Economics, and the main part of the book, which is the significance of fairly mundane activities, like a business person deciding whether to expand his or her factory or not, which are which are not novel per se, but they are unique. They are one offs. The consequence of these problems was never properly taken up. Knight himself did not carry it forward. And I think Knight did not do full justice, or even half justice, to his construct. And he was principally interested in trying to explain where profit arises from in a highly theoretical sort of way. And yes, it’s important to know what the underlying sources of profit are. And I frequently tell my students, who I teach entrepreneurship, that if you could have a statistical calculation of the profitability of an enterprise that you could rely on, there would be no profit in the enterprise. Fair enough. But there’s much, much more to it than that, and that’s been a preoccupation of mine since roughly 1990 so it’s been a long time, and it’s been pretty much in everything I’ve written since 1990 and so I have tried in this book to connect a large number of dots, and these dots are invisible to standard economics because they’re not part of the theory. And if it’s not part of the theory, then why would you observe those dots? And if you don’t observe those dots, why would you even attempt to connect them. So I offered a preliminary sketch of what some of the important dots are and a preliminary sketch of how they might be connected, in the hope that it would be taken up and this monomaniacal obsession with incentives can be put aside.
Gene Tunny 06:41
Right? Okay, so there are a few things I want to ask about there, so you talk about standard techniques, so are you thinking of, well, all you have to do is to you mentioned this statistical or probability distributions. Work out what’s the, like attach a percentage probability to different outcomes happening, and then work out what the expected value of your course of action is. Is that what you’re talking about? Okay.
Amar Bhidé 07:07
Yes and the only place where imagination comes in standard economics in this activity, is to imagine what the probability distribution would look like if you don’t have data, that is the only way in which imagination is kind of allowed in through the back door, but it is always in the service of imagining a statistical distribution.
Gene Tunny 07:33
Yeah, and so Frank Knight distinguished between, famously distinguished…. So Frank Knight professor at University of Chicago in the 30s and 40s, distinguished between risk and uncertainty where risk can be quantified, it’s odds, as in a casino. And then he also talked about uncertainty, which is what you’re, you’ve been following, you’ve been exploring what that all means. And then what economists ended up doing was relying on models, which took the risk part of it and tried to look at how businesses, how agents in the economy, households, how they function given these quantifiable risks that they face and their expectations of of the future. Yeah. Right okay.
Amar Bhidé 08:22
So they, so they, I mean Milton Friedman, who was Frank Knight’s doctoral student, famously said we saw no reason to distinguish between risk and uncertainty. And as long as you can imagine a probability distribution, what did it matter whether something was a one off or not,
Gene Tunny 08:43
yeah, yeah, gotcha. And can I ask you about this? Your, the class, so at, you’re teaching entrepreneurship at Harvard Business School, you were wondering about, well, the you know that you were thinking, well, there’s part of the story is being missed here, have you, how have you brought this into your teaching? How has and how do students receive it? So like, what guidance do you provide to students now about how they should be thinking about entrepreneurship? If there’s your are you arguing that you move away from the like, stop thinking about it so analytically and start thinking about it more imaginably. Is that? Is that the argument?
Amar Bhidé 09:25
Analysis or reasoning, let’s call it more broadly, is not antithetical to what I try to teach and, but reasoning or analysis is, is a compliment to imagination. It’s not a substitute for imagination. So I have used what is at the back of my mind very, very lightly in my classes, because I think my students rather instinctively understand that life is not about probability distribution. Most of us understand that life is not about probability distributions. We we don’t behave like that. And so it’s sort of like an interesting observation to the lay person, they sort of raise their eyebrows and say, so what? Of course, that’s true, and the teaching comes into play into trying to understand what one actually does when, what are the kinds of questions one asks when one does not have a probability distribution? So for example, one of my colleagues used to ask the question, what, how good could it be if things go right, right? That’s not, that’s not a probability. That’s that’s an imaginative exercise. Just to ask, how large is the pot of gold at potential? How potentially large is the pot of gold at the end of the rainbow? What do you have to lose if things don’t go right, what has to happen in in order for things to go right? What could go wrong? So these are so you try and spur your students to think imaginatively, but not fantastically. So if you say this is the size of the pot of the gold at the end of the rainbow, we say, why? I mean, how large is the market? How large could the market be? How have similar ventures panned out? So you give them a series of heuristics, which substitute for statistics. And I have never seen honestly a venture capitalist use a probability distribution to evaluate a new venture. This does not mean that they go in blind by by any means. They are extremely thorough. They are thorough to a fault. But what they are emphasizing contextual facts. What did so and so experts say about the prospects of this technology? What did the, what reservations did the three potential customers I talked to have about it and then putting it all together, do I think that what I can potentially make from this and the likelihood that I will outweigh the the loss that I would suffer. With enormous effort, one could, I suppose, map all this into a probability distribution but no one ever does, and it would be a phenomenal waste of time for people to to attempt to do it.
Gene Tunny 13:23
Yeah, yeah. Exactly.
Amar Bhidé 13:28
The other thing, which I which I emphasize in in the book which Herbert Simon was not remembered, neither for being the father of AI nor being for his Nobel in Economics, had, was really on the right track, where he says routines are vital and how things are decided has a profound influence on what is decided. And I’ve taken it further to say one can then ask, what makes routines more or less reasonable? When do they become pathological? And when given and given the challenges at hand, are they reasonable? And then I argue that the the reasonableness of a routine must depend on what the stakes are, that when the stakes are very large one wants strict routines. Be it in business, be it in criminal trials and complexity also requires rigorous routines so if you are planning a hit and run guerrilla attack, then your planning routine is going to be much more superficial, shall we say, than planning an attack on the, planning the invasion of Normandy. And then how novel things are so if things are truly novel, then your routines cannot, it’s again a waste of time to spend too much time and effort in trying to analyze what could or could not happen. So so we have not, in economics, given we haven’t given attention to all these things, which are a constellation of dots, routines, imagination, story-like discourse, uncertainty, incompleteness of information.
Gene Tunny 15:07
Yeah, yeah. Um, there’s that book by Robert Shiller on, I’m trying to remember, is it Narrative Economics?
Amar Bhidé 15:16
Yes.
Gene Tunny 15:17
I think Shiller is making the argument that you know, these stories, these narratives, can have macroeconomic consequences, so I’ll have to cover that on the show in the future.
Amar Bhidé 15:28
Bob is a dear friend. I’ve known him from the time since, again, the early 90s when, and curiously, Bob is a, is himself an entrepreneur. I don’t know if you knew that, but…
Gene Tunny 15:46
Yes, yeah, the Case-Shiller Index do you mean? Shiller Index?
Amar Bhidé 15:50
The Case-Shiller Index and he’s tried various things, and so he is a very forward-looking, optimistic person, when it when it comes to markets, however, he’s deeply pessimistic about the stability and and when, when one talks about financial markets, one is really talking about largely about aggregates and about collective behaviour and Bob’s, Bob’s emphasis in his narrative economics is about the dysfunctions of storytelling and how bad stories get around. They create irrational uncertainty or irrational exuberance, and then infectiousness causes booms and busts, and that may very well be true. I am much more interested in the more micro effects of stories, and the more micro stories that an entrepreneur might tell her potential customers or might tell her potential investors, and to some degree, these stories have a common base in the mythology of entrepreneurship, but nonetheless, each story is fairly individual in its in its details, and it is, one could imagine markets where people were reasonable and were not carried away by by crazy stories, but I cannot imagine an entrepreneurial world where there was not some kind of story-like discourse. They’re not actual stories. But let’s let’s not go there. And so I’m looking at the positive side of story-like discourses or narrative-mode discourse, Bob is looking at the pathological consequences.
Gene Tunny 18:03
yeah, yeah, yeah, no, that’s a that’s a fair distinction. Can I ask about, well, I’ve got a couple, I’ve got a few questions about these narratives. So I just want to understand what your your hypotheses or your contentions are. So I mean, can I take out of this that, given the uncertainty with any well, with many business ventures, then often the best guide is just, you know, you can do all the number crunching you like, but once you get in, you know you’re running the business, that’s not your forecast can be, I mean, we know they could just be way out. I mean, you may think it may take a few months before you make a profit, but it can take 12 months or you never make a profit or something. I mean, you could just be completely wrong. And so therefore, it’s, the number crunching with the spreadsheet may not be as useful as just trying to get an intuitive understanding of what the overall market is, what the trends are, having a, you know, telling the story, figuring out what the story is, and then with investors too. Is it, do you is there any evidence on what moves investors to people to invest in startups? Is it, is it more the story than the numbers?
Amar Bhidé 19:22
So I think there’s pretty good I think there’s pretty good evidence that they do not do not [inaudible] values to any meaningful degree, unless they are investing in real estate, which is a stable business where you can wherever you have some hope that you can predict the probabilities. They certainly don’t do probability distributions. But let me roll the tape back a bit to what you just said, about crunching spreadsheets, and I’ve taken that this is always an instinctive feeling of mine, but I was, it’s crystallized by reading a, a psychologist called Jerome Bruner, who draws a distinction between narrative mode discourse and logical scientific discourse. And where he says, in logical scientific discourse, what we, the ultimate yardstick is, is proof and truthfulness. And in narrative mode discourse, the criterion is plausibility. People are really looking not, not for something that is true, because you mean you don’t know what is true, you will not even know what is true, but you’re asking the question of whether something is plausible or not, given what the upside is and given what the potential downside is, and the kind of narrative mode discourse in its structure tends to vary depending on what the stakes are and what the novelty is. So if you are a venture capitalist who’s putting 10s of millions of dollars into, into a venture, you’re so you’re not simply, I mean, at least in normal times. I mean, we are not now, not necessarily living in normal times with AI, but in normal times you want a lot more evidence, with the understanding that that evidence has to be woven together through an imaginative process. So in my view, even a spreadsheet with made up numbers is an aid to this narrative mode discourse, because everybody knows the numbers are made up. And I mean, no serious investor believes that these numbers are going to be what they are, but what those numbers in the spreadsheet can give you a handle on is how deeply has the person who constructed the projections thought about the business. Are the assumptions of how many salesmen will be required to get $200 million in sales, and plausible or not? I mean, has he or she even thought about the need for salespeople? And then there’s sort of a very subtle aspect to this, which actually John Kay’s assistant pointed me to, which I thought was very clever indeed, that a very detailed, imaginative plan is a good indicator of when things go wrong, as they inevitably will, whether the person who proposing the plan has the imagination to adjust, because, again, you are going to need imagination, you will not, you will not be able to deduce in any logical way or in a evidence-based way what the right thing to do when you encounter a setback. And so there is a lot to be said for for made up numbers, for made up facts, and in many cases, without these made up numbers and made up facts, people just won’t believe you. So it’s the example I give is of historical documentaries. Why do they? Why do documentary filmmakers, or even Hollywood movies, why do they go to such trouble to have period costumes and period, you know, period sets and so forth, because people are more likely to suspend disbelief if they are taken to a place where they know that, you know, of course, you know that these are all actors, and that these costumes came out of some designers closet, but the fact that somebody went to so much trouble and that they that they resonate, gives a certain set of plausibility to the movie. And this is exactly the same situation, I believe, with with businesses, or, I don’t know if you’re a fan of of murder mysteries?
Gene Tunny. 24:36
Oh yeah, yeah, yes.
Amar Bhidé 24:38
So they usually comes a point at the end where the detective says, Well, let me tell you a story, Mr. So and So suspect, you know, and the so and so happened, and so and so else happened, and so and so else happened. And he’s making it up. And sometimes, if that story is approximately correct. The suspect crumbles, and then making it up also carries the audience along.
Gene Tunny 25:07
Yeah, yeah, absolutely. I think you made a good point about when you present the numbers or the business case, it shows to the what extent they’ve thought about how the business is going to operate, and then have they thought about what would happen if things go wrong? And you know, the potential to pivot? And I think there’s a like, there’s a lot of useful examples of businesses that have had to do that. I think even, I think YouTube originally started out as something different, didn’t it? Was it? Did it start out as a dating site or something like that. I know there are all sorts of examples like that, I might have to dig up a few…
Amar Bhidé 25:45
Well, I’m not sure about YouTube but the interesting thing about YouTube is that, was, that it was the first enterprise of its sort to have been launched, and the first to actually, and I think we’re both old enough to recall MySpace,
Gene Tunny 25:59
oh yeah,
Amar Bhidé 26:00
which was the the predecessor to Facebook and now called Meta and Meta’s, so we live in a world where no amount of evidence is going to provide us with a truly reliable guide to what is going to happen. A taste in business.
Gene Tunny 26:21
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Gene Tunny 26:56
Now, back to the show.
Now, beyond the obvious examples like Steve Jobs and Elon Musk, who do you think best exemplifies, or is a good example of what you’re talking about here, the the ability to use the imagination and to tell the story. Do you, are there examples that that you use with your students that you find valuable?
Amar Bhidé 27:20
Most of my cases are, I have not stopped teaching entrepreneurship, so I should make that clear as well. But most of my cases are about not celebrated entrepreneurs. The case studies themselves include examples of little, shall we say, tales that they tell to…, these, these are often extremely simple tales. And these are not the most famous entrepreneurs in the world. I mean, all their spreadsheets are tales. All you know, all the the description of of why, I have a case study about someone who started a restaurant in, in the then reviving area of Boston, which was urban reconstruction plan, and there was nothing that it was. It was a crime-ridden, blighted urban neighborhood, and the sale was to say, Oh, look at what happened in Station Square and in San Francisco. And there may be half a dozen reasons to to protect and say, Oh, San Boston is not San Francisco, you know, it’s and it’s different and but it can resonate with sufficient people’s imagination that they say, okay, you know, we understand it’s not San Francisco, but it worked. There’s a great deal of what one would call modest copycatting, which takes place in in business. And so you see something that has worked in place x or a=in application y, and then you say, well, we’re going to be the Uber of Rose delivery, you know? And so who knows whether you will or not, but by invoking the story of Uber, by invoking the story of Airbnb, that immediately gives the in the audience’s mind something to anchor their imaginations to. And so I mean, indeed, without imaginative analogy, I literally cannot imagine how you would, how you could sell anything to anybody. Likewise, if you say, This is my product, and the customer says, Well, why should I buy from you? Why don’t I just buy the old product? So because my product does this, this and this, and no one knows for sure whether it actually does this, this and this, if you can touch it and feel it, but, but you have seen the other, you see this, and your mind makes a bridge between these two things, and the bridge seems solid enough to warranty what could go wrong. You could try to walk over it.
Gene Tunny 30:50
Yeah, when you talked about, like, how businesses are saying this is the Airbnb of this, or it’s the Uber of that, I mean, one thing I remember, I thought in, well, I’ve heard that in Hollywood often. I mean films. I might have heard this on Tim Ferriss’s show or read it in one of his books. But he talks about how there’s like when Speed was pitched the movie Speed with Keanu Reeves and Sandra Bullock, they pitched that as Die Hard on a bus, if I remember correctly, just really it’s like that sold it, that’s quite clever.
Amar Bhidé 31:27
And the challenge in all these things is that if things are exactly identical, then people would say, Why do I need you? But if they are so different that the imagination, doesn’t go along, then you’re in trouble too. So for example, when I pitched this book, when you read a proposal for a book, you have to say, what other books in the market are there, which are like your book, and why is this different? So you have to answer two questions, what is what is the similarity, and what is the difference? And neither is actually quantified. When, when you write an economics article, you sort of say there is this and this and this literature before us, and I am going to do this, which is similar to, but somewhat novel, with, compared to what has come before, and, oh, by the way, nobody obviously knew any probability distribution of whether this is true or not. So…
Gene Tunny 32:39
Yeah, yeah, can I ask about you mentioned, how profit is the reward for dealing with uncertainty? Do you have any thoughts on a lot of the excess, I mean, there’s a lot of concerns about, well, monopolization, or, I guess, the concerns about techno feudalism and surveillance capitalism that are increasingly common concerns about the power of big tech and its ability to exploit, it’s the advantages it has, some degree of lock in, arguably, some degree of anti competitive practices. Do you have any thoughts on that? Whether, I mean, we should see the huge profits that they’ve earned as a reward to the entrepreneurs grappling with uncertainty?
Amar Bhidé 33:39
I tend to be a lean libertarian, shall we say, right? And my, my sort of pure libertarian answer would be, of course, these are just rewards for the risk that they took and but I don’t personally believe that, and I also, there’s a great deal of luck, but what bothers me so much is not the magnitude of the profit. I mean, I think that is a serious issue, but the distribution of labor, income and profits in the economy, and why it has gone in the direction it has gone, but that’s not my thing. I’m not a macro economist, but on, I’ve actually written a piece on corralling the techno monopolists, and I think there are very serious issues about the capacity of these very powerful companies to lock you in. Now I don’t happen, as I argue in this book, I don’t think nothing, I think nothing is forever. That, and that all monopolies eventually crumble under their own weight, because they keep trying to expand, and in the process of expanding, they lose their vitality and they become sclerotic. But I’m not sure I want to wait till they till they collapse under under their own weight. And I think there is, we live in a society we, property is again socially-defined properties, the rights that go with property, are also socially defined. We agree as society, what what is, and we argue about it. We argue about whether the oil rights underneath have lot, or off land are ours, they can be sold to somebody else. And whether air rights have value or not, whether my neighbor can put up a hideous eyesore, and whether I have the right to band together with my neighbors to prove it, there is no question that that even property rights, there’s nothing sacrosanct about them. One has to look at them in a pragmatic sort of way, and looking at them in a pragmatic sort of way I think the issues of privacy, and I worry as much about people having data which they make a mistake on, as much as they actually know what they’re doing and mess you up. And I mean, I I worry about my identity being not just stolen, but being lost somewhere and and so I think there are, there are issues about regulating business conduct which fall outside the standard problem, which monopolists and of the early 20th and late 19th and 20th century worried about, which is profit margins. I think profit margins are the least, least of it. I think acceptable conduct is, is something we need to discuss as a society. And I think again, there’s this problem is so new that we are there’s [inaudible] uncertainty involved, shall we say, in regulating this conduct. And I will again take my since I say in my book that routines are just absolutely crucial. In the reasonableness of routines are absolutely crucial, I don’t think we have developed a set of political or political economy routines to deal with issues of such conduct, and because profit is an easy construct for people to understand, and sort of it can sort of say well, but these issues of of privacy and uninformed consent, or, shall we say, sort of roughly forced consent, these are so complicated, and there are only a few people who can even understand them. And I fear that our politicians have just too much on their hands to engage their minds with what they should do, and then they delegate these issues to experts, and the experts pretty much take over. And when the experts take over this creates a backlash and and then we get to see the populist hatred of experts, which is, in some cases warranted, in some cases not warranted. So we are in the intersections of technology and its reasonable regulation thereof are vital. I mean, I teach at a school of public health. I mean, we have not come to terms with trying to figure out what, we don’t even have figured out what the appropriate goals for public health should be, because there’s a lot of uncertainty, both about means and ends, and we don’t know who we should delegate this, these issues to, and how we should delegate, we have failed in the regulation of monetary policy, we’ve basically given 12 of people extraordinary power. We have told them, in in in the law, that their goal is 0% inflation, and they merrily tell us, no, we’re going to we’re going to have a 2% inflation target. I’m just gobsmacked, if you would pardon the phrase that nobody calls them on it, whoever gave you the right to turn price stability into inflation stability. That may be the right thing to do, but that is a political decision, and our politicians certainly did not give you that right, but it’s sort of too complicated. We don’t understand public health. We don’t understand monetary policy, you know? And either we can sort of go the way of abolish the Fed, or abolish the FDA, or we need to figure out mechanisms by which there is more accountability, both into what the or the actors of power do and how the these actors are held to account.
Gene Tunny 41:13
Yeah, absolutely. I mean, I know it’s outside the scope of your book, so I better not open up a, we better not go down that, that rabbit hole. But it’s fascinating.
Amar Bhidé 41:24
Well I’ve actually discussed some of these things in my last show.
Gene Tunny 41:27
You do? Oh, good, okay, oh, sorry, yes. And what are your recommendations for, for how we deal with it? The, get this greater accountability?
Amar Bhidé 41:36
I think we need first of all, a conversation. I mean, the Federalist Papers were a grand and durable view of the world, which have done remarkably well in standing the test of time. But we need something, we need people like Hamilton and the founding fathers who were not experts, but who had a broad view of how how government should operate. Given that, as one of the Federalist Papers says, How does one have a government for people who are not angels, and how does I mean, the modern question is, how does one have I mean, when we have technology, we have uncertainty about its consequences. No one knows. We then delegate responsibility for managing that uncertainty to experts. But then we have ceded so much control to these experts that they, they become, they become a law unto themselves. And we desperately, badly need a conversation about, I mean, sort of, it’s all very well to say property rights and well maintained property rights lead to more prosperity. Then that’s fine, but there’s a Nobel prize which was given for that. But one needs to get to a much finer level of detail about property rights, about the rights of of experts and how they interact and how they’re held accountable, and the world were not such an uncertain places, would not be an issue. The only problem was incentives. Then we could in some way construct incentives for for experts to do the right thing, or for politicians to do the right thing. And no, do they make mistakes? And sometimes they make well meaning mistakes, sometimes they make self serving mistakes. Often, these two things interact.
Gene Tunny 43:56
Yep, yeah, absolutely. I mean, a colleague of mine, I don’t know if you’ve if you’ve come across this concept of sortition or citizens juries. A colleague of mine, Nicholas Gruen, and is a big advocate for those. He got a write up in, he got mentioned in Martin Walls book on the crisis of democratic capitalism, about that?
Amar Bhidé 44:16
No, I’m afraid I have not read that. What does he say?
Gene Tunny 44:19
Well he’s arguing that one of the ways that we get greater accountability or better decision-making is if we have randomly selected panels of citizens that provide advice or, I mean, maybe in some cases, make decisions, but certainly provide advice on recommended approaches to a legislative body or to an executive government. After they have, ah they go away for a few days, and they have different experts present to them the like the case for and against and they can, they’ve got their own sort of powers to to call in other experts and and ask for data and evidence. So it’s, it’s an interesting concept that where you’re trying to draw on that wisdom of crowds of of ordinary people, it’s that whole thing, you know Bill Buckley’s line about how he’d rather be governed by the first 1000 names out of the Boston phone book than the faculty at Harvard University.
Amar Bhidé 45:19
Yes, I think I mean, in some sense, town hall governance was, replicated the kind of juries that you described citizens juries, but they worked when your problems were confined to what happened in your town, and it’s, it’s and where the degree of technical complication was somewhat limited. When one gets beyond that, one, one has to think creatively. And I think perhaps one needs new institutions like the, like the citizens theories one may need, one may need think tanks that get their hands, shall we say, a little more grounded. The problem with think tanks and a lot of schools of policies that they deal at this very high level of abstraction, like economists, which is what is the most general principle that we can think of? Because the more general it is, the the more acclaim we will get as scholars. And they all want to be scholars, rather than how do we think about the plumbing?And the pump, the plumbing is enormously complicated, but there is very little reward or status for dealing with the plumbing. So it’s so you know, the the Fed has several 100 economists. They, many of them wish they were university economists, and they try to publish in, in journals which are respected academic journals, but the problem the Fed faces, as much as anything else, is the plumbing problem. And when nobody seems interested in that or this, there seems to be a lack of interest and accountability for the for these issues. So we have experts who are willing to go and deliver advice to third world countries by the World Bank and the IMF, but we don’t have solar experts who will look within and in a in a cool-headed sort of way, I hesitate to say objective, because I have already spoken at something about the need for imagination, but in a reasonable sort of way, shall we say, look at how one deals with these issues.
Gene Tunny 48:21
Yep, just finally, because we’re coming close to time, I really appreciate this conversation. This is, yeah, it’s all fascinating, because certainly given me a lot to think about. Can I ask about, like, storytelling, narrative? Do you give advice, or do you have thoughts on how people who aspire to be entrepreneurs or people in MBA classes, how can they build up their narrative skills? Is that something they should work on their storytelling skills? Do you have any thoughts on that?
Amar Bhidé 48:49
Let me distinguish between narrative and storytelling, because entrepreneurs do not, in the most part, tell stories. That’s what novelists do, because the story needs to have a surprise. A story needs to have an unexpected Reversal of Fortune. But narrative, like discourse, basically assumes, I mean, you at least have to pretend that you’ve thought of everything, and therefore there will be no surprises. Now both, both sides know that it isn’t true, no, but I think the the building blocks are fairly simple. It’s the it’s the degree of imagined detail. So detail helps. We cannot simply say, Oh, I’ll figure it out. In some cases, it may work, but and at that point, you need both detail that is imagined and yet plausible. Uh. You need good metaphor and good analogies. I mean, not necessarily flowery language, but very, you know, equivalent. And then you need sort of the old stuff that, Aristotle talked about, which is ordering of how you present your ideas and and I I often find that, forget storytelling, but simply describing what they what they expect to do and why in some kind of orderly, comprehensible way eludes many people. So either they get they get sunk in the swamp with so much detail that they lose their listener, or no detail, detail at all, in which case they’re implausible. So finding the balance and the rule of three, for example, is such a powerful rule in so many, I used to work at McKinsey’s, and we were thought, we made arguments, and, you know, and it was quote, unquote, fact based, but it was never entirely fact based. It could not be fact based, but there was, there’s a structure to what everybody did. And it was called the pyramid principle. And it was not far from the Aristotelian idea of the rule of three, the idea of a situation, a complication and a resolution. So there are templates, and increasingly, I think we have the the audio-visual tools that make our stories compelling, you know, and we sort of, it’s, this is now an old story, but this is when when the founder of Starbucks was pitching Starbucks, he had videotapes of of cafes and in Italy, and so you could imagine what a cafe might look like, even if you had not seen one. And and this was again, narrative-mode discourse. Story-like not necessarily, and it is so easy now. So that’s how I put pictures in my book. You’re not supposed to put pictures in in a in a scholarly book. But I said, why the hell not?. I mean, if it helps the reader along, and I do have a fairly complicated argument, why not help them all you can?
Gene Tunny 52:54
Yeah absolutely no, I agree. Well, this has been terrific. So your book, Uncertainty in Enterprise, it’s published by Oxford University Press. It’s got 2025 on here. So it’s coming out early next year is it?
Amar Bhidé 53:08
No, no, it was released on Friday.
Gene Tunny 53:12
Oh it’s already out. Oh, great. So it’s been released.
Amar Bhidé 53:15
So it was released on Friday you can go to Amazon, and you can download a Kindle version immediately, and you can order a hardback.
Gene Tunny 53:24
Oh, brilliant. Well, I’ll put a link in the show notes to that, and I’ll also put a link to, you mentioned you had an article on corralling the tech monopoly,
Amar Bhidé 53:35
Coralling the info monopolist. I don’t know whether that’s behind a paywall or not. That was in Project Syndicate.
Gene Tunny 53:42
Ah right, okay. I’ll put a link anyway. I’ll try to track it down, right?
Amar Bhidé 53:50
I think it was a couple of years ago. Are you based in Australia or here?
Gene Tunny 53:52
Yes, I’m in Australia. I’m in Brisbane, in Australia.
Amar Bhidé 53:57
So what time is it?
Gene Tunny 55:00
It’s 7:30am so I’ll probably go back. No, it’s not too bad. That’s why I generally, there’s a window when I can connect with people in the States, early morning here, afternoon, like East Coast can be hard sometimes, but generally, like West Coast, is a lot easier. But most of the people I end up talking to are in they’re either in New York City or DC.
Amar Bhidé 54:25
All the windbags are on the East Coast, on the west coast are the doers.
Gene Tunny 54:32
Well that’s very good. Well, however, I found this really fascinating. Good luck with the sales of the book. And I really, yeah, it’s good. We, I liked how you you’re able to connect or distinguish your contribution, like your thoughts, from, say, Mervyn King and John Kay and also from Robert Shiller. I thought that was a, that was interesting learning about that. And, yeah, you’re right about how…
Amar Bhidé 54:58
And they’re all friends of mine by the way, so it’s..
Gene Tunny 54:59
Very good.
Amar Bhidé 55:01
There’s no hostility at all involved in that so…
Gene Tunny 55:05
Very good. Okay. Well, thanks so much for your contribution. I really enjoyed the conversation.
Amar Bhidé 55:10
Pleasure.
Gene Tunny 55:12
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 contact@economicsexplored.com 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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