John Arnold on Trading, Energy, and Evidence-Based Philanthropy

John Arnold built his fortune in energy trading by surrounding himself with smart people, maintaining emotional detachment, sensing market imbalances through first-principles analysis, and focusing with laser intensity on a single niche until he dominated it completely. Now he's applying that same analytical rigor to philanthropy, where he's discovered that changing human behavior for the long term proves far more challenging than predicting natural gas prices, and that the academic research meant to guide social policy is often riddled with perverse incentives and poor methodology. Tyler and John discuss his shift from trading to philanthropy and more, including the specific traits that separate great traders from good ones, the tradeoffs of following an "inch wide, mile deep" trading philosophy, why he attended Vanderbilt, the talent culture at Enron, the growth in solar, the problem with Mexico's energy system, where Canada's energy exports will go, the hurdles to next-gen nuclear, how to fix America's tripartite energy grid, how we'll power new data centers, what's best about living in Houston, his approach to collecting art, why trading's easier than philanthropy, how he'd fix tax the US tax code and primary system, and what Arnold Ventures is focusing on next. Read a full transcript https://conversationswithtyler.com/episodes/john-arnold/ enhanced with helpful links, or watch the full video https://youtu.be/rml8ZaP8XpQ. Recorded April 28th, 2025. Help keep the show ad free by donating https://mercatus.donorsupport.co/page/podcastgift?utm_source=cwt+podcast&utm_medium=podcast&utm_campaign=shownotes today! Other ways to connect Follow us on X https://twitter.com/cowenconvos and Instagram https://www.instagram.com/cowenconvos/?hl=en Follow Tyler https://twitter.com/tylercowen on X Follow John https://x.com/JohnArnoldFndtn on X Sign up for our newsletter https://mercatus.tfaforms.net/5060931 Join our Discord https://discord.gg/JAVWP7vTxt Email us: [email protected] mailto:[email protected] Learn more about Conversations with Tyler and other Mercatus Center podcasts here https://www.mercatus.org/podcasts.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:04Tyler Cowen?

  Conversations with Tyler is produced by the Mercatus Center at George Mason University, bridging the gap between academic ideas and real-world problems. Learn more at mercatus.org. For a full transcript of every conversation, enhanced with helpful links, visit conversationswithtyler.com.

• 0:26Tyler Cowen?

  Hello, everyone, and welcome back to Conversations with Tyler. Today, I'm here with John Arnold. John is arguably the greatest energy trader in all of world history. In 2007, he became known as America's youngest billionaire. These days, working with his wife Laura, he does Arnold Ventures, where we're sitting right now. And Arnold Ventures is one of the most important and influential voices and actors in philanthropy. John has done much more. That's just a brief outline. John, welcome.

• 0:56Speaker 01

  Thank you for that intro, and great to be here.

• 0:59Tyler Cowen?

  Your days as an energy trader, do you think you were especially good at trading at the close, or you didn't like doing that?

• 1:06Speaker 01

  There was always an imbalance on the close. And so if you could sense what it was, whether it was imbalance for buyers or imbalance for sellers, it definitely offered an opportunity. And the close kind of set the index for the day as to the starting point for the next day. So it was particularly important, but I don't think there was anything necessarily profitable about it, besides a little bit around the edges.

• 1:31Tyler Cowen?

  But sensing that imbalance, what do you feel is the skill you had that your other traders didn't have to the same degree?

• 1:37Speaker 01

  Yeah, I've always had a difficult time answering this question. I think, you know, part of it is, trading is a team sport, for sure. And I always took the view, and my personality is kind of either be around or get around smarter people, and listen more than talk. And that's certainly my personality. But in terms of traits, you know, here's what I would offer as my traits.

• 1:59Tyler Cowen?

  Yeah.

• 2:00Speaker 01

  Number one is this detachment from emotion. So there's a lot of talk about fear and greed drive markets. And to the extent that fear and greed change your process... The more you can remove those emotions, I think the better. I think there is a component of first principles trading or first principles of how you look at information. So don't accept the information as is, but you really test all assumptions that go into it. I think there is a component of being on the perfect point of the confidence spectrum. So you have to be confident in order to say the market is wrong and I'm right, that other people are wrong. Because I think the Fisher market hypothesis is fairly true. But if you're overconfident, you know, you'll blow up quickly.

• 2:45Speaker 01

  There is, you know, this notion of being quantitative enough to build the long-term models, but being quick with numbers in order to jump on the trades as they happen. There's this aspect of, I think a chip on my shoulder.

• 2:58Tyler Cowen?

  Yeah.

• 2:58Speaker 01

  Kind of goes back to-

• 2:59Tyler Cowen?

  Feeling you can do it better.

• 3:00Speaker 01

  You like, actually it goes back to kind of my life before my professional life. And, you know, I always had this chip on my shoulder. And then really having this passion for it, like you have to have the love of it, that this is the most important thing. And I ate, breathed and slept it. And I would be thinking about it, the first thing in the shower in the morning, I would be dreaming about it. After work, I'd go out with people in the industry and talking about it. It was that real devotion to the markets. I think there was a timing component that I always had great timing in my career. And then certainly luck's a part of it.

• 3:36Tyler Cowen?

  But an interesting feature of your career is you walked away from all of this, more or less at the top of your performance, right? And if you're so wrapped up in it, what's your own model of yourself? For how you could both walk away from it and be so wrapped up in it?

• 3:51Speaker 01

  So but part of it was I started to become less wrapped up in it. So I started in, in energy trading at age 21 and did it for 17 years. And first 14 years of that.

• 4:02Tyler Cowen?

  Yeah.

• 4:03Speaker 01

  It was just, that was the eating, sleeping, breathing it. And then kind of years 15 and 16, I started to feel myself like that the end is coming at some point. And by year 17, I didn't enjoy the game anymore. And I could feel like if, if your drive, if your passion isn't there, that you weren't going to be successful. And so that was part of the reason of stepping away. It coincided with kind of a time when I'd gotten married, had kids, so started to get more love over for family and the spouse. The markets had changed. So the shale revolution had come in and you had a market that was by its nature extremely volatile, that go to one that was bouncing

• 4:47Speaker 01

  around marginal cost to produce as the natural gas became oversupplied. And so the opportunity was very different. And then I think I was starting to spend an hour or two in the afternoons with our foundation work. And that started to suck some of my energy out. And I started to become more interested in those questions rather than of energy trading. And part of my career and part of the success, I think, was the business plan I developed was be an inch wide and a mile deep in this. It was find this niche and try to be best in the world at it and don't expand the focus.

• 5:27Tyler Cowen?

  Yeah.

• 5:27Speaker 01

  And so it was North American Gas and Power. At some point, LNG started to become relevant and put a small team in Europe, but mostly for information flow for the North American Gas and Power Group. There were numerous opportunities to get into oil, to get into metals or agriculture, or start trading energy equities, for instance. And every time considered it, thought, stick with, stick with the niche and just focus here. And I think the upside was, if we were successful, if that plan worked and we were best in the world, it was going to be enormously profitable. The downside is that the intellectual curiosity starts to sag.

• 6:07Tyler Cowen?

  After 17 years, not in year 13.

• 6:10Speaker 01

  Yeah, it was, you know, again, it was like, part of it was like the market opportunity. Part of it was my financial situation had changed so much, the personal situation. I think this whole combination thing, the regulatory situation had changed.

• 6:22Tyler Cowen?

  And in your niche, do you think the skills needed to be a commodities trader in particular are different from other kinds of trading? Or it's just the same?

• 6:30Speaker 01

  I think it's pretty similar. You know, one of the great things about the natural gas industry for a long time, and it's still largely true now, is it was a closed system. And you could kind of figure it out. And it also had this forcing mechanism twice a year that the fundamentals had to align with price more or less twice a year at the end of the injection season and end of the withdrawal season of gas. And so where price could deviate away from fundamentals for a time period, it had to come back at a certain time. And so it was a system that was conducive to being modeled. Apply smart trading on top of that and it created a lot of opportunity. Why did you go to Vanderbilt? I was always smart, but not motivated in school. I was interested in other things. And so my

• 7:15Speaker 01

  Like sports? Like sports, like business. Yeah. And so I had this baseball card business from an early age that was pretty successful and was just interested in different things and wasn't interested in academics. And so I always did enough work to get the A minus in school. And but I thought I was really smart. And so I was winning in math competitions, but I met the school, my grade in math class wasn't the best, right? And so schools don't like that. Yeah.

• 7:46Speaker 01

  And when I applied to a number of Ivy League schools and thinking that that was the right fit for me and got rejected from all of them. And, you know, then it was like, oh, what do I do? I really wanted to go to the Northeast. This kind of had its origins in my interest in business, my interest in really making money. I remember telling my parents that when they would ask, what do you want to be? And I'd say, I want to be a millionaire. And they, that's not a job, right? You got to go learn a business, learn a skill set to become a millionaire. Like, no, I want to be a millionaire. And, you know, in 1989, the book Liar's Poker comes out. Yes. And And you read the book and you love it. And I read the book and I love it. And, you know, the famous phrase, and there

• 8:28Speaker 01

  was equities in Dallas, right? That's Siberia in the finance industry, right? And here I am, I'm growing up in Dallas. So like, the two things were, like, I got to get in this game. This is where the most competitive, the most fun game is. And it's New York, it's not in Dallas, right? So I got to head up to the Northeast and I wanted to do that going into college. It didn't have that opportunity. And Vanderbilt ended up being the best place I got into. And at the time, it was, you know, a very different school. It was much more of a regional college at the time. I remember when I applied, I think the acceptance rate was 44%.

• 9:04Tyler Cowen?

  Incredible. Now, Ken Rogoff, who's now an economist, he still misses playing chess, though that was decades ago for him. Do you still miss trading? And sometimes you'll wake up and you'll be thinking, what's my trade? Or it's just over?

• 9:17Speaker 01

  So my big fear when I stepped away was, will I find something else? Or will I, you know,

• 9:22Tyler Cowen?

  But you have.

• 9:23Speaker 01

  And I have. And so that was the very pleasant surprise, because I had seen a number of people who stepped away because they were burnt out, because they, you know, wanted to go do something else and not find, you know, something of passion, you know, outside of trading and go back to it. And so that was my big fear almost, was that I would get pulled back into it. I still trade a little bit for my own account, but I've never, for one moment, since I stepped away, thought that that was the wrong decision and that I wanted to go back to managing other people's money and doing it as a full-time job.

• 9:54Tyler Cowen?

  If you think about the culture of a successful trading organization, and you've been in several, what is unique or striking about those cultures?

• 10:04Speaker 01

  You know, the irony is, the trading floors are known, especially in the 90s and 2000s, kind of known for this very boisterous atmosphere and boys' club, kind of with an bordering on sexual harassment for females and people throwing phones, whatever. And that came from these New York trading floors with the Ivy League educated people in probably a more conservative workplace-type environment in the Northeast than one would think of Texas being.

• 10:36Tyler Cowen?

  Yeah.

• 10:37Speaker 01

  And what I found was that the trading floors in Texas, in the energy business, that was largely a male-dominated industry, were all very calm. And it was much more cerebral than what this image had been.

• 10:54Tyler Cowen?

  So like chess, in a way?

• 10:56Speaker 01

  Yeah, it was, especially as trading went from open outcry on the exchanges in New York to electronic, then trading floors just became silent. Everybody's sitting there, just working on their computers, as if you're going into a tech company and just seeing everybody coding. Everybody's just sitting there staring at your computer all day long, and all interactions ended up being, you know, over the computer and virtual rather than oral.

• 11:21Tyler Cowen?

  Yeah. And one of the places where you traded was Enron. What was Enron like as a talent culture? Obviously, it later became much more controversial, but how did it feel being there? The traders it attracted, or?

• 11:33Speaker 01

  Yeah, I think it realized that it wasn't going to be able to recruit the the good graduates from the top 10 schools. All right, so it went for that next tier and tried to find, you know, the the best people out of that next tier of schools. From Dallas, say. Right, so like schools like the Vanderbilt and Rice and Emory, University of Texas, etc. And you kind of would bring them in. And I think everybody kind of had a bit of chip on their shoulder when they came in. But it kind of brought in this collection of people. And they put them through the traditional Wall Street training and analyst program. But I think what was different about Enron versus, you know,

• 12:16Speaker 01

  the more mature investment banks was Enron was growing so quickly and the industry was growing so quickly. That if you showed any modicum of talent or ability to take responsibility, that you would either get promoted or you would get hired away by another firm that was trying to copy the Enron business model. And so as a 21 year old going in there, my career escalated much quicker than it would have somewhere else. Now, I think there was, you know, a lot of benefits for the employee. I think this ended up, you know, maybe, you know, being part of the downfall of Enron was that your responsibility was given to people too early in their career without the necessary controls being in there. And so I think there was this balance of it was the fantastic place to work

• 12:59Speaker 01

  as a young person, especially if you showed that you could handle the responsibility. Because, you know, I went from, you know, age 21, kind of the most junior guy on the trading desk to age 25. And I was the head trader at the biggest trading firm in the industry.

• 13:17Tyler Cowen?

  Questions about energy markets. How much conventional capacity in the US has solar really replaced?

• 13:25Speaker 01

  So it's replaced a significant part of coal-fired generation. So the transition, to the extent you think that we need to transition away from carbon fuels, has two components. Number one, it's the component of replacing the existing stock. And second is fueling the growth in energy demand, which is expected to double between 2020 and 2050 globally. And so those are two enormous challenges on their own, and combined, they become very significant. So the growth in solar, as has happened in the US, has very much replaced the decline in coal, which is down 75% from its peak.

• 14:08Speaker 01

  Now, it hasn't met the growth in electricity demand. And so you see, at the same time where coal's going down and wind and solar, primarily solar at this point, are going up, you see natural gas still going up. And so the replacement of the existing energy stock is happening. It's happening at a slow pace, but the ability to meet the future demand growth isn't been proven yet. And how green do you think natural gas is? From a carbon standpoint, it's relatively clean. I think the problem with with natural gas is the methane leaks. And it's a problem that the industry has really avoided to date.

• 14:52Speaker 01

  I think that a lot of the focus in the environmental movement for a long time was just on carbon and either didn't recognize or didn't address the methane leaks that are happening in the industry. And so there's a lot of debate about what is the true footprint, environmental footprint of natural gas. I think it's bigger than, certainly what the industry is willing to admit, bigger than what was commonly held. And it's a tricky problem. There are some components of it that are easy to address. There are some components of it that require an enormous amount of resources in order to plug old wells. And the question is, how do we go about dealing with this legacy problem of old wells that are leaking?

• 15:37Speaker 01

  And then, that's the expensive part. The easier part is making sure that the new supplies are as clean as possible. And I think industry's broadly done a good job with that. And which country does that best? It may be the US. We were part of putting methane sat as project the EDF led to survey the methane leaks globally. So there's a fair amount of activity today on measuring methane leaks in the US where you have access to, you know, the property near fields and companies themselves are starting to do it. And there were some regs about it, you know, trying to figure out what is the methane leaks in Russia? What's the methane leaks in the Middle East, in South America? Has always been a big question.

• 16:22Speaker 01

  And I think as that data is coming in, we're seeing more and more there are very significant problems in those countries.

• 16:27Tyler Cowen?

  How are the land requirements for solar going to work out? Like what percent of the country ends up being paved over with panels? Are there only on rooftops or how does this work?

• 16:37Speaker 01

  Yeah, it's probably utility scale. So it's probably on the ground in places where the value of land is low. You know, there's an-

• 16:45Tyler Cowen?

  So rural Arizona will be covered?

• 16:47Speaker 01

  Yeah, well, so there's the issue of, yeah, the first megawatt of solar you bring on the system is very easy to bring on. You can do it right outside of Phoenix, right next to an existing transmission line. And you're just displacing a little bit of natural gas gen during the day. Right. And as you build more and more, you start to have the duck curve and you start to have hours when solar is producing all of the electricity during a certain hour. And the value of power during that time is zero. And so question is, if you're going to build more solar in those areas, you either need to add battery to take that from daytime to nighttime,

• 17:31Speaker 01

  or you need to build transmissions so you can move that energy someplace else.

• 17:35Tyler Cowen?

  Say there's a major volcanic event, there's a lot of ash in the sky for two or three years. So solar needs a backup. In the meantime, before the volcanic event happens, and of course, that's quite rare. How much do we need to be up and running with the backup energy infrastructure? Like, what do we need for a reserve capacity in case the solar goes down?

• 17:56Speaker 01

  Good question. It would be difficult. It's doable today. I think as solar continues to grow in market share, both in the US and globally, it will have to be met with some type of battery or significant battery resource. And that's part of the economics of solar now is that it's not just sticking it right outside of Phoenix, but it's solar plus transmission or solar plus battery. You know, the question of what happens in that type of event, it would be difficult. Now, we have, you know, the existing energy infrastructure is still largely around.

• 18:32Tyler Cowen?

  But it will dwindle over time.

• 18:34Speaker 01

  It will dwindle over time.

• 18:35Tyler Cowen?

  There's some market issue. So say the volcanic event is only once every 150 years, but sooner or later one happens. And in the meantime, you need economic incentives for the gas or the nuclear to be ready. And does our government just keep on paying for those for 149 years in a row until the catastrophe comes?

• 18:52Speaker 01

  No, it's a great question, and I think this is why nuclear, and particularly next gen nuclear, is considered the holy grail, right? You're not constrained by location. You're not constrained by, you know, is the wind blowing? Is the sun shining? And it's a clean resource. The problem today is just economics, that in order to develop, you know, the kind of current generation of nuclear, it's extraordinarily expensive. And next generation, either small modular fission or fusion or both have a number of both technological as well as unclear economics in how they compete. And so I do think this question of, you know, how do you do this transition in a manner

• 19:33Speaker 01

  that maintains affordability, but continues to get cleaner and lower emissions over time is a complex one. And I think it's one that the environmentalists probably oversold five years ago and said that this was going to be an easy transition. And it's certainly not just the scale and scope of the energy system is enormous, right, as you're pointing to in your question. And the need for backup, the need for a diversity of fuels and how they complement each other is real. And you can't replace that just with the intermittent resources we have today plus battery.

• 20:09Tyler Cowen?

  Did Mexico make a mistake letting itself become so dependent on the United States for gas?

• 20:15Speaker 01

  Mexico made a mistake by having their energy system be state owned and state controlled. And that's part of the Mexican constitution. And one of the problems that they've had is that there's this natural tension between, do you take some of the cash flow from Pemex and reinvest it in the business? Or do you take it and fund your favorite government program? And you know, government as the decider of that question will naturally over time, take more and more of that money into the government coffers. And so the Mexican oil and gas industry has just been in steady decline over time because of lack of capex. And I think, yeah, this is a fundamental problem of the industry.

• 20:59Speaker 01

  In 2013, Mexico proposed and passed a law to allow foreign investment into their energy system that was beyond just services for the first time, but allow actual kind of ownership or pseudo ownership of the resource.

• 21:17Tyler Cowen?

  But it may not be credible, right?

• 21:18Speaker 01

  And then it wasn't credible and then it gets revoked. And so the US industry, which at for a time was very excited about this opportunity and ran in there, like now is like, you know, hands off. And so that's why the Mexico is deteriorating as in, you know, although they have enormous resource, you know, they're not using it to their ability and they're becoming more and more dependent on places like the US.

• 21:40Tyler Cowen?

  And what should Canada do better?

• 21:43Speaker 01

  Canada has, you know, viewed itself as having a permanent ally in the United States.

• 21:49Tyler Cowen?

  Yeah. Yes and no.

• 21:52Speaker 01

  And, you know, has become dependent upon exports into the United States and access to the United States market for its surplus energy. And that creates, you know, a lot of risk as you're seeing today. It created risk during the Obama administration, whenever that administration kind of rejected the Keystone Pipeline. And so you had trapped resource in Canada and it's hard to get it to the West Coast and kind of go over the Rocky Mountains. And so they're.

• 22:19Tyler Cowen?

  And the problem there is the mountains or it's the governments or the provincial barriers to trade or what stops them from having their own pipelines to their own coasts?

• 22:28Speaker 01

  You know, there's, there's been proposals to do so. I think part of it is the mountains. Part of it is, you know, the provinces have very different views of oil and gas.

• 22:38Tyler Cowen?

  And B C wants to be more green.

• 22:40Speaker 01

  B C wants to be more green and they're the coast. Right. And Calgary is very much kind of a mini Houston and has similar values as Texas and Houston. So kind of the, the energy producers and the energy consumers often end up on, with different ideologies on this. And so part of it has been government, part of it's been logistics.

• 22:59Tyler Cowen?

  And are they going to solve that problem after, you know, the Trump shock? Are they just going to stay put and suffer?

• 23:04Speaker 01

  I would think that they're going to try to solve the problem.

• 23:07Tyler Cowen?

  And what's the, what does the solution look like? You go to the Atlantic coast or you browbeat the British Canadians or Colombians rather?

• 23:16Speaker 01

  I think the difference between the environmentalists and the energy producers has shrunk over time. I think there's a realization from the energy producers that cleaning the system over time and trying to minimize emissions is a positive. And, and that there's a business around it. I think the environmentalists have realized that this is a more difficult problem and that natural gas in particular is going to be part of the electricity sector for a long time. It's hard to see how you transition off of that in anything but the very long term. And that oil has a very large component of the broader energy system on, as a transport fuel and as a industrial fuel for a very long time.

• 24:01Tyler Cowen?

  Is carbon sequestration going to work or it will just always cost too much?

• 24:05Speaker 01

  It's probably going to always cost too much.

• 24:06Tyler Cowen?

  With advanced market commitment, does that help at all or it doesn't really matter?

• 24:11Speaker 01

  I think the question is, does society want to allocate those resources for that? And, and the problem of who pays for it, given that the benefit is global?

• 24:22Tyler Cowen?

  What's your most optimistic scenario for the U S energy future from an environmental point of view?

• 24:29Tyler Cowen?

  Something that could plausibly happen.

• 24:32Speaker 01

  I think next gen nuclear, if we can overcome the technical hurdles, if we can overcome the economic hurdles.

• 24:39Tyler Cowen?

  But isn't the nimbyism the biggest hurdle? The others I could imagine overcoming pretty readily, but I live in Fairfax County, it's still a fair amount. People there just don't want nuclear. It's irrational, but I'm not sure they'll change their minds. It could be called fusion. It's still nuclear to them.

• 24:55Speaker 01

  Yeah, I've been surprised. That was my prior five years ago. I've been surprised at the number of jurisdictions that are inviting these next gen nuclear companies to come. Texas, for instance, just passed a bill creating new incentives for nuclear companies to come and build their first plants and pilot projects in Texas. So you see jurisdictions that are choosing to take kind of the economic growth associated with it and that have more of a building culture and say, come here. And then I think as things get proven out, then the question is, will the Fairfax counties of the world, you know, see what's going on and become more agreeable to

• 25:40Speaker 01

  having that. I think it's very similar to self-driving cars, right? There's some jurisdictions that say, come here. We want you to come test. And this is what's happening in Texas, right? These companies, we want you to come pilot your projects here. And some jurisdictions are saying, no, like prove it out and then we'll talk.

• 25:59Tyler Cowen?

  My nightmare is that even Texas becomes nimby. You see this in Austin already, right? Houston, Dallas will become more like the rest of America over time. Maybe even San Antonio someday, El Paso with more time.

• 26:12Speaker 01

  I think you're right. I think you are seeing more nimby that's happening today. It is getting harder to build a intrastate natural gas pipeline in Texas than it was 10 years ago. You're having more debates about kind of transportation infrastructure. There's been this line proposed from Houston to Dallas with private money that ended up with this big nimby debate and farmers complaining about eminent domain on their property. And so I think. On certainly on linear infrastructure, that's true. We haven't seen it yet on things like housing and the NIMBYism on economic plants or industrial plants coming to Texas.

• 26:54Speaker 01

  Texas has has the door open and is welcoming of that today. What do we need to do to fix the grid? And is that just impossible?

• 27:03Speaker 01

  It's not impossible. Problem with the grid is that by a nature of history, US ended up with three grids. Our first grid was in New York City in 1882, and it kind of followed the population and started to spider web out from there. You also had a grid start on the West Coast and, you know, a few years later. But nobody really lived in the plains. The weather's bad. It's hot summers and cold winters and windy and the soil is not great in parts of it. And so you had these two grids that started East Coast, West Coast and started to come in and they never really met. And then you had, you know, this third grid that started in Texas and Texas has always had this libertarian nature to it and federal government stay away.

• 27:47Speaker 01

  So in the Federal Power Act in 1935, where the government came in and said, we're going to start regulating the industry, Texas said, you know what, we're going to disconnect or interconnects to Oklahoma and Louisiana and we're going to stay interstate and be independent. And so now you have these three grids. Texas is DC, the other two are AC. The two that are AC are essentially on a different heartbeat. And so there's virtually no linkage across those. And I think what's happened is that as the nature both of load and generation has changed over time, you're starting to see more discrepancies in pricing across regions. And so what really needs to happen is that these three grids that have been independent

• 28:30Speaker 01

  have different mix and portfolio of generation and that their load has different profiles. There's a lot of value to be created by linking those. And so in the summer, you want to move resource generally north to south, you know, vice versa in the winter, you get the benefits of time as the sun starts setting, you know, the five o'clock hour, people start getting home from work. It was obviously different in different parts of the US and you can take advantage of that difference. And then the difference in. Weather patterns as they move from west to east. And so the more linkage you have, the better benefit you get.

• 29:04Tyler Cowen?

  And in terms of governance, would you keep them independent? Or just have them economically more interconnected for better arbitrage?

• 29:11Speaker 01

  I think the nature of, yeah, nature of history is that these things are going to stay relatively independent. You're going to have the RTOs and ISOs that you have today generally. The Northwest is talking about creating a new regional transmission organization. And so there, there is more integration amongst states, but I think each of the RTOs probably stays independent over the long term.

• 29:35Tyler Cowen?

  And the long-term energy and electricity outlook, as you know, the demand for data centers is way up. AI has been arriving. How are we going to accommodate all that? You know, I, I live near Loudoun County, they're putting restrictions on data centers. How are we going to do 3X, say, on the grid?

• 29:51Speaker 01

  Yeah, it's an enormously difficult challenge. I think for a long time, communities welcomed in data centers. And they viewed them as not many jobs, but it was tax revenue that was being brought in. And so there was, you know, competition amongst jurisdictions about who was going to win the data center and bring that tax revenue. And so jurisdictions would give a rebate of tax revenue back to the developer. I think there was a realization just in the past couple of years that, wait a minute, these things are, don't bring that many jobs. And they use a lot of power. And the marginal cost of new power is greater than the average cost of power. And so as you bring new load in, it's raising the cost of power to everybody.

• 30:34Speaker 01

  And so you see jurisdictions now starting to fight it and say, we don't want these things. Or when they're a bit of an ISO, not many jobs, and they're raising the cost of power for everybody. Now, there's ways you can do a large load tariff that's starting to happen to try to isolate the effect on, on individuals. That leaves the problem of how do you get one gigawatts or two or three gigawatts? And some people are talking about more into a particular location on the grid. And that's as much of a challenge as anything today. You can build the resource, but building the infrastructure to get it to one point is very difficult in much of the country.

• 31:11Tyler Cowen?

  So when people say, well, we need all this AI compute. We need it rapidly to beat China. So we need to set up something quite soon in UAE or Saudi Arabia. Does that make sense to you? Or do you think they're just barking up the wrong tree?

• 31:24Speaker 01

  I think it's true that you can build. Quicker in some other countries. It's also true that you can get as cheap, if not cheaper, power in some of those same countries. What's not true is that the faith in the political system, that I think there's grave concern about as AI is becoming, talked about more and more about strategic national interest and national security. Question is, do we want the most important data centers to be located outside of the United States jurisdiction? And I think both at a national level as well as at a company level, that answer has largely been no.

• 32:03Tyler Cowen?

  But say if we don't do it, that one, especially UAE, might cut its own deal with China and China just does it. And China's way ahead of us on AI, which has military cyber implications. And we just lose out because we're still fiddling around with lobbying the citizens of Loudoun County or something. I mean, do we need to preempt them even though we don't have full trust in those governments?

• 32:24Speaker 01

  Yeah, it's one of the things that the Energy Dominance Council at the White House is considering right now. And there are places in the US where you can build. Again, like trying to bring this into the AI, the historical AI or historical data center development corridors like Virginia is increasingly hard. Bringing it into Texas is still very doable. And so you see many of the announcements of the gigawatt plus data centers are now happening in Texas. But they're also happening some random places across the United States that have, you know, a good point that are at the intersection of many high voltage electrical lines and can

• 33:07Speaker 01

  bring in resource from a number of different areas and get that portfolio approach for resource at, for that particular plant.

• 33:15Tyler Cowen?

  Do you have a favorite so-called weird idea for energy supply? Like generalized geothermal or solar powered space stations? Does any of that have a chance or it's just science fiction?

• 33:25Speaker 01

  I think it's science fiction. You know, I've heard a lot of these, these proposals. It's hard. It's hard to figure it out.

• 33:33Tyler Cowen?

  How good or bad, putting aside the national moves away from nuclear, but how good or bad is EU energy regulation?

• 33:42Speaker 01

  Look, it's hard to isolate the shutdown of Russian supplies into the EU in terms of, what would their their energy system have looked like absent that? And so, yeah, I think one question is, do you want to have an N minus one? That is, like, your largest supplier goes away and have that risk have that type of effect on the system? And was that a foreseeable possibility that they should have planned for? I think that's a reasonable proposal or hypothesis. I think the question is, the more backup and redundancy you build into the system, the higher cost it is. And so there's frequently this trade off between reliability and cost.

• 34:27Speaker 01

  Like, we have it in Texas. You saw after Storm Uri and the Texas legislature still is debating about, you know, what reliability do we add? And what's the cost of it? And how do we find the perfect balance of it? And the answer in Texas is different than the answer in Virginia, right? Or the answer in Europe. And so I think it's easy in retrospect to say, you know, Europe regulations failed. I think it's harder to say that, you know, had you gone to Europe five years ago and said, do you want to build redundancy in case Russia supplies completely cease? Or, you know, or down very significantly? And do you want to pay for that? I'm not sure what the answer would have been. Yeah. What do you like best about living in Houston?

• 35:13Speaker 01

  You know, there's something dynamic about being in a growing area. And, you know, I have a house in Colorado mountain town and it's fantastic and it's beautiful and the weather is great. And it's a bit stagnant as well, right? And you have the growth and dynamism in Houston. And Houston doesn't have the natural beauty. It doesn't have great weather, but it's a place that Is only going to succeed if it works. And so governments responsive and people go there because of the opportunity. I think it's been easy to build. Texas has had this libertarian culture and low tax culture.

• 35:54Speaker 01

  That's encouraged businesses to come, which then encourages people in their productive years to come. And so many of the first generation professionally, both blue collar and white collar, have chosen to come to Houston for the opportunity. I was at a dinner with friends the other day. I think there were 10 of us around the table. Every one of us was first generation to Houston that had come for the opportunity. And so none of us had our high school friend networks that we were hanging out with. It's a very welcoming city. I think the ethnic diversity and the fact that the diversity is intertwined throughout the city.

• 36:33Speaker 01

  If you look at the ethnic maps of many northern cities and you take Chicago for one, right? You kind of have everything south of downtown is black and north of downtown is white. And you just have this dividing line and these cities are very separate. The ethnic makeup of Houston is very interspersed. And so you have these little pockets of Hispanic neighborhoods and black neighborhoods and white neighborhoods. But it's more of a checkerboard throughout the city. And I think the city is better for it.

• 37:03Tyler Cowen?

  At least superficially, I have the impression that there aren't so many externally influential institutions or movements coming out of Houston. Arnold Ventures aside, but do you think that's true? Or why is that? It's a large city. It has a lot of wealth, a lot of civic spirit. This thing, great art, two great art museums, plus the Rothko Chapel. But it seems fairly self-contained in a way.

• 37:26Speaker 01

  Yeah, I think Houston is an execution city. It is a place that people go to, to do this stuff, to build the things. Its core business has been energy. And then kind of all the things associated with energy and chemicals and manufacturing. And so it kind of has the blue collar roots to it. But then also has become the magnet for corporate headquarters in this space. And so even a generation ago, 20, 25 years ago. The energy industry was much more dispersed than it is today. You had parts of it in Dallas and Tulsa and Oklahoma City and Denver and New Orleans and a little bit in LA and New York.

• 38:10Speaker 01

  And much of that has congregated to Houston. And so, you know, I agree, like Houston has not been on the forefront of movements. It hasn't been historically an inventing city. It's been a manufacturing and execution city and more of evolutionary improvements rather than revolutionary improvements.

• 38:33Tyler Cowen?

  Now, you live in an Alexander Garland-designed modernist house. And he once said in an interview, and I quote, "To live in a modern space requires discipline. If one or two things are out of place, it just destroys the whole balance." And then someone said, "Well, this is why people don't want to live in modernist homes, because they're messy." And then he said, quote, "Not all lives are messy." How do you feel about this, living in one of his houses?

• 38:59Speaker 01

  You know, it takes a little bit of work, for sure. It takes a lot of work. I love it. My wife loves it. Our kids, I think, would prefer the messy house and would prefer things not to feel like you can't touch them. We have parts of the house that are more formal and parts of the house that are more informal. There is a component to that of if a house looks worn in, if a modernist house looks worn in, it starts to degrade quickly and the aesthetic value of it starts to degrade much quicker than a normal house. And so it just requires a lot of maintenance and upkeep.

• 39:33Tyler Cowen?

  And can you do Houston hurricane protection with a modernist house? Is that a contradiction or it just works?

• 39:39Speaker 01

  No, it works. It works. I think building materials today are extraordinarily good. And so, you know, any house that was built in the 21st century can withstand, you know, the vast majority of any type of windstorm.

• 39:52Tyler Cowen?

  What makes a really good Picasso better than a middling Picasso?

• 39:56Speaker 01

  I think the amount of work and effort he put into it. You know, there were some paintings he did where he worked on them for two years. And there are some that he did in a day and that he would just wake up and, you know, pump something out. And this, you know, it was especially true later in life. I think, you know, as artists get more successful and kind of get lazy and get wealthier. And the market starts to take anything that they pump out. The, the quality of work will tend to decline.

• 40:26Tyler Cowen?

  And what's peak Picasso for you?

• 40:28Speaker 01

  His Cubist period. You know, where it was, you know, kind of mirroring, kind of abstraction with figuration oftentimes. And that's very much a kind of a core thread throughout Laura and my collection is how that intersection. And I think just the revolutionary components of Cubism is one that's, that I very, very much appreciate.

• 40:53Tyler Cowen?

  A lot of our Silicon Valley friends, they strongly dislike modernism and they think it's a kind of corruption or even perversion, or it represents decline of the modern or contemporary world. What is it you think they're missing?

• 41:08Speaker 01

  I've always been drawn to things that are timeless, that were created at a moment in time. And I think that's what great art is, is doing something that's relevant to the moment. And then there's only a very limited subset of those things that become timeless, that are still relevant, you know, in a different moment, in a different generation or a different century. And I think those are the truly great objects. And I think there are components of modernism that fit that, that mold. And there are components that you look at and like, yeah, that was, that's dated today. And, you know, is no longer, you know, appreciated by somebody like me or by many people.

• 41:45Tyler Cowen?

  What attracted you to buying 17th century Baroque? Cause it seems like an outlier from a lot of the rest of your art collection. And Baroque is sometimes seen as the kind of opposite of modernism.

• 41:56Speaker 01

  Again, so we have one painting of 17th century Baroque.

• 41:59Tyler Cowen?

  But one's a lot.

• 41:59Speaker 01

  One's a lot.

• 42:00Tyler Cowen?

  In the modernist tone, most of all.

• 42:02Speaker 01

  You know, I think the collection Laura and I have built has really tried to look at and the history of art and especially figuration over time. And from the birth of art until maybe 1500, there was this trend of how do we, we, the art community, we artists, try to create representation of the figure more and more realistically. And this probably peaked with Leonardo, right, who then masters even musculoskeletal components of the body. And then, you know, once he's mastered it, then there's a big question about where do we go from here? Right. And it's now you have to tell a different story. You have to bring emotion into art.

• 42:43Speaker 01

  You have to start doing abstraction or, or bring a new voice or style into the body. And so I love that arc of art history of, you know, trying to perfect the body and then trying to move forward. And so we've built this collection of objects that are largely around kind of the figuration. Then like, you know, as you go from the perfection of it and then to the abstraction of it. And so the 17th century Baroque is again, kind of a moment in time that's part of that arc that then kind of helps tell the story of the collection. And I think the great challenge we have is we need pieces that talk to each other. Right. You can very much end up with clutter by putting together pieces from different cultures,

• 43:28Speaker 01

  different time periods, different media that don't speak to each other.

• 43:32Tyler Cowen?

  And how does African sculpture fit into this picture?

• 43:35Speaker 01

  So African sculpture, of course, you know, was very inspirational to a number of modernists. You know, Picasso, number one, right? And, and so number one, I think it's, you know, I love them as art objects. Many of them were used for, almost all of them were used for some type of ritual.

• 43:50Tyler Cowen?

  These would be like Congo pieces or what, what in African sculpture is attracting you?

• 43:54Speaker 01

  Exactly. So, you know, there was a lot of it that was developed as kind of for pagan rituals. And it was either celebrating birth or death, or the transition to adulthood, weddings and.

• 44:09Speaker 01

  It's this isolated culture that still comes up with these objects that are beautiful, and had no idea what other people around the world were doing at the time. And the Westerners came there and kind of quickly and have saw these and were fascinated by these objects and started bringing them back to Europe. And Europeans fell in love with them and there started to be even an export market that developed over time where Africans were developing pieces specifically for Europeans. And then as African cultures went from pagan religions to Christianity, they started kind of discarding many of those objects. There's the flip side of it, which is kind of best represented by the Benin bronzes,

• 44:54Speaker 01

  where a British expedition in 1897 comes in and conquers the royal palace in Benin and steals all those objects and brings them back to Europe. And I think there's still this kind of struggle in the West of, you know, how to deal with these. Because you give them back, you're not sure they'll be treated well, right? Correct. And it's also theft of cultural objects has been happening forever. And I think there's the question of, yeah, how exactly did the theft occur? How important were those objects to the culture? And I think, you know, in the case of these Benin bronzes, you know, I've never acquired one because I've never been comfortable with that story.

• 45:36Speaker 01

  And I think there's a spectrum here and there's a lot of gray area and the art markets and art academics and museums have been struggling with many of these questions about where do you draw the line on cultural appropriation? And when do you start giving back objects? Because that's a slippery slope for many cultures across many time. The Mona Lisa, you'd have to return, right? Exactly. The late period Alzheimer's to Kooning's, underrated or overrated? I think overrated. I think if you didn't have the de Kooning name on it and it was just an object that people would look at it and would say, yeah, it's somewhat interesting,

• 46:19Speaker 01

  but we're not going to ascribe the same, certainly evaluation and art historical importance to it.

• 46:26Tyler Cowen?

  Now, in energy, you had to make a lot of trades and you hope to win on average. In art, it seems you make a relatively small number of buys, but you know, each one is a very good decision. What's your overall model of yourself that ties together those two facets of decision making?

• 46:43Speaker 01

  Your art's hard once your walls are full because then not only is the question, do I love this piece, but do I love this piece more than the piece I love least in my collection today? And that's a higher hurdle sometimes, all the time. Trading was and is a great industry because of the immediate feedback loops associated with it that are very rare in most industries. And probably I'm the opposite one today in terms of philanthropy where you have extraordinarily long feedback loops. And those feedback loops, I think, drive improvement because you can see what's working, what's not. It also creates much higher stress. And so I've appreciated

• 47:28Speaker 01

  that I had that moment of my career where I had that strong feedback loop and high stress level. It's not something that I thought was sustainable for my entire life.

• 47:39Tyler Cowen?

  And your skill and decision making at philanthropy, which is done with your wife, Flora, how does that fit into the schema?

• 47:47Tyler Cowen?

  It's more like trading, more like buying art, something else?

• 47:50Speaker 01

  I think there's a lot of similarities to private equity or venture capital. This is mostly a money allocation. Venture, we have some components of being an operating foundation and a lot of internal expertise on areas and we do a lot of consulting with policymakers internally. But the majority of the effort is in making grants. And so the question on making grants is very similar to the questions of making investments. It's what field do I want to be in? What team do I want to back? What's their theory of change? Do I believe it? What components of their organization do they need help in?

• 48:32Speaker 01

  And do we need to supplement or require them to supplement with our resources in order to maximize the chance of success?

• 48:40Tyler Cowen?

  What do you think is the key skill behind a good philanthropist?

• 48:48Speaker 01

  It's hard. I think it's

• 48:52Tyler Cowen?

  Trading's easier.

• 48:53Speaker 01

  Trading's easier. I think that question is almost like, what's the key skill to be a good businessman? All right, there are so many different types of businesses. There are so many different types of philanthropies and theories of giving and and types of giving that one can do. That I think you have to find something that suits your own personal passions and your own personal strengths and traits and go from there.

• 49:19Tyler Cowen?

  A lot of your philanthropy, it seems quite evidence-based and you would say rational. Has your belief in that approach strengthened or weakened over time?

• 49:30Speaker 01

  I think it's maintained. I think when we first decided to start giving away very significant sums, we had no vision that it would turn into what is today Arnold Ventures, right? With 150 people and three offices and the number of areas that we're working in. We thought it was, let's find five or six really good social programs that we think can ramp with resources and just go fund those and do this rather passively. And I had enough training to be able to read the academic research. And so I started pulling up many of those studies. And it felt like the more I read, the less I knew about what worked in the world.

• 50:12Speaker 01

  And that certainly led to this question about what is evidence? What is the integrity of the evidence that's being put out there to try to convince people to give them money, be they policymakers or funders?

• 50:28Speaker 01

  And then it led to, I have this question that philanthropy is going to be a lot harder, especially the way that we wanted to do it and the impact that we wanted to have. And they was going to take this effort around that the core focus of it was around developing better evidence and trying to increase demand for evidence from funders. Again, both public funders as well as private funders. And that's been the core theme of our work ever since.

• 50:57Tyler Cowen?

  Do you think other funders now demand more evidence or that's failed?

• 51:01Speaker 01

  I think they've, they demand more evidence. I think there's also more poor quality evidence out there. The supply has met the demand. And so we started this whole line of work about what we called scientific integrity, academic integrity on the, how do you improve the process and the incentive system of academic research? Because there was this realization we had that everybody in the chain was incentivized to find the positive result, right? Whether it was the funder, the academic, the university, the journal, or the popular press, everybody wanted to find and publicized the positive result.

• 51:45Speaker 01

  And so there was a lot of positive results that were coming out that were either done with kind of low bars of integrity and quality, or kind of at the extreme end, as is relatively rare, but you know, bordering or absolute fraud in the industry.

• 52:04Tyler Cowen?

  Let's say I'm a person of great means and I come to you, I say, John, I think prison is immoral, but I don't want to just release Charles Manson. Where should I put my philanthropic efforts? What do you tell them? What have you learned?

• 52:17Speaker 01

  I think there's this fundamental question of if.

• 52:21Speaker 01

  Somebody's going to get released from prison, which 95% of the people who are in the prison system today are going to get released back into society. Do we want that person to have spent the past 10 years in a gang, fighting for their life, doing nothing productively? Or do we want that person to have been, you know, working on education, working on skills, have been working on their addiction, et cetera? And I think 100 out of 100 people will choose the latter. We have a system where the political economy of putting money into the prison system for most jurisdictions is very low. And so much of our prison system actually looks like the former,

• 53:04Speaker 01

  where it's become the largest mental health institution, the largest place for people with addiction, the largest place with people who, you know, have a lot of time on their hands and are underskilled and undereducated and don't get any improvement in those things. And so I think the real value add is how do you improve conditions within prisons?

• 53:28Tyler Cowen?

  And is there a structural reform that would boost the incentive to do that? Or you just think telling people they should improve the conditions is what we should be directing our efforts at?

• 53:38Speaker 01

  So, you know, I think there's, and what we're very interested in, haven't gotten all the pieces together yet, is kind of the equivalent of the charter school, but in prisons, like can you get a nonprofit to run a prison and try these things? And that nonprofit can supplement the standard money that's coming in from the public sector with private donations and probably kind of a greater focus on volunteers coming into the prison? And just try this as a model, as a prototype and see what the effects are. And then do a long-term evaluation as to what happens to the people when they return to society? And what's their, the impact on the economics as well as recidivism?

• 54:23Speaker 01

  And do the long-term cost benefit on a financial basis? And try to see if you can prove that this is a appropriate model for the public to start funding.

• 54:35Tyler Cowen?

  Let's say we put you in charge of everything. How do you fix our tax laws?

• 54:41Tyler Cowen?

  You can just do it. You're Congress, you're the president, you're the Supreme Court.

• 54:45Speaker 01

  Yeah.

• 54:48Speaker 01

  Big question, big question. We have a system today where I think it's easier to turn dials than to start something new. And so we just have these dials that have existed because they've existed. They were kind of easy to do historically, and so that's what we do. And so things like Pigouvian taxes, which kind of most people agree that you would like to do things that you would like to tax things that are bad rather than tax things that are good, are extraordinarily hard to get started in the US, and whether that's on carbon or things like sugar. So I think that's one. I think a second is, I think you'd rather tax things that,

• 55:29Speaker 01

  tax money that has been made in the past than tax money that's to be made in the future. I think there's fewer distortions, and I'm not talking about a wealth tax, which I think is not able to be implemented. But I think under the step up in basis that we have today where

• 55:46Tyler Cowen?

  So for capital gains.

• 55:47Speaker 01

  Exactly. I think is like the original sin of the tax code. I think there's real questions about how should endowments, including private foundations, you know, which is kind of this legacy of power because money was made in the past or money was contributed to an organization in the past. The tax code then gives favorable treatment to that. And you have organizations that are well resourced today because they were strong historically or were funded by somebody who was successful historically. But the tax code kind of makes those organizations stronger for no good reason. And I think there should be kind of a public test that those organizations should be required to,

• 56:31Speaker 01

  if they're to maintain their influence, to convince new resources to go to them rather than just get a tax benefit.

• 56:39Tyler Cowen?

  So the five to six spend down requirement for foundations, is that the right number? Should be higher?

• 56:45Speaker 01

  I think it should be higher.

• 56:46Tyler Cowen?

  And the donor advised fund out, that should be eliminated or kept?

• 56:49Speaker 01

  That should be eliminated.

• 56:51Tyler Cowen?

  So if it's not five to 6%, what should it be?

• 56:54Speaker 01

  I think the number should be a little bit higher than the expected real.

• 57:00Tyler Cowen?

  Which imposes the test of bringing in new money. That's the key.

• 57:02Speaker 01

  Exactly, that these organizations, including, you know, my foundation, should get weaker over time and not stronger.

• 57:12Tyler Cowen?

  Electoral reform, political reform, and I mean the systems by which we choose leaders and policies. Do you have favored ways you would change those?

• 57:21Speaker 01

  Yeah, I think a lot of the original sin of elections and the electoral system in the US is the primary system and non-competitive races, you know, between the parties. So the vast majority of House seats, the only competition happens in the primary. The person who's more likely to show up in the primary is in a more extreme than the average or median Republican or Democratic voter. In many jurisdictions, the independents are not allowed to vote in the primary. There's more money that comes in from the extremes. And so you end up with a legislature, Congress, that is more extreme than the people are.

• 58:07Speaker 01

  And the independents or the moderates are very much underrepresented in today's political system. And it eliminates a lot of the incentive or creates disincentive for internal party debate.

• 58:24Tyler Cowen?

  So we should do single transferable vote or something else?

• 58:27Speaker 01

  I think non-partisan primaries is.

• 58:29Tyler Cowen?

  But that will end up working like single transferable vote because you have to rate then four or five people.

• 58:33Speaker 01

  Exactly, yes.

• 58:34Tyler Cowen?

  Yeah. You know, Ireland does that, as I'm sure you know, while it seems to work fine. Is there some big advantage they get from that? Parts of Australia do it. Again, it works fine, but I don't look at those places and envy them.

• 58:47Speaker 01

  Right, and I think there's no silver bullet in this stuff. I don't think there's any electoral reform that's going to solve all the problems. You know, there's a lot of it is, and a built in, a lot of it is things like, you know, the, the media incentives, human nature as to how we like to take information and prefer to criticize the other side than to, you know, do real criticism of our own internal beliefs. And so this stuff is marginal, but I think the importance of the electoral system is so great that marginal benefits have significant impact.

• 59:23Tyler Cowen?

  There's a common impression, both for startups and for philanthropy, that doing much with K through 12 education or preschool just hasn't mattered that much or hasn't succeeded that much. Do you agree or disagree?

• 59:35Speaker 01

  I agree. I think the ed reform movement has been, as a whole, a significant disappointment. I think there's been isolated pockets of excellence. It's been very difficult to learn how to scale that. And I think that's largely true of many social programs or many programs that are delivered by people to people, that you can find, you know, a single site that works extraordinarily well because they have a fantastic leader. And that leader might be able to open up a few more sites. But then when you start to scale it to 50 sites and start to go across the nation, it all kind of mean reverts back to, you know, what the whole system is providing.

• 1:00:20Speaker 01

  That said, I do think there's a lot of value in changing the incentives of this system and having the rewards and kind of natural kind of growth cycles and evolutionary components that are so strong and have been beneficial in the business world also go to the K 12 world. And what I mean is that the, the service providers that are good and are delivering good results, both for parents and for kids, should grow faster than ones that aren't. And right now, it's kind of the same. And I think there's a real question about whether government can be both the regulator

• 1:01:03Speaker 01

  and the service provider of the same program, which is what essentially independent school districts are today. And I think the natural role of government is to be the regulator and that they should be regulating third-party nonprofit providers. And that model is what we support and has been rolling out across the nation. I think that the evidence is clear that it's a better system, but it's not delivering transformational results.

• 1:01:34Tyler Cowen?

  When it comes to philanthropy, what's something important you've learned from your wife Laura?

• 1:01:39Speaker 01

  She's great at the organizational components of how do you manage an organization? The communication components. I'm, again, kind of coming from the trading background, that's not my skill set. And I love to dig into the details of specific policies and get into the nitty-gritty of the design of a system. And Laura very much thinks about the big picture and about how AV can be a more effective organization in the macro level.

• 1:02:16Tyler Cowen?

  Last two questions. First, what's something you've learned about markets or society that you didn't believe 10 years ago?

• 1:02:26Speaker 01

  I didn't believe 10 years ago.

• 1:02:28Tyler Cowen?

  You can make it 15, whatever.

• 1:02:30Speaker 01

  Yeah. I think on society, that is very hard to get people off of their baseline for the long term. There's a lot of interventions that can happen that'll change somebody's short-term prospects. And whether that's a job training program, or an addiction treatment program, an education program, and you can bump them off that baseline for a little bit. And over time, there's reversion to the mean. And it's made it very difficult for you to find social interventions that pass the benefit cost test over the long term. And I think that's why we were talking earlier about. Evaluations, we're very focused on the evaluations that we fund of try to do

• 1:03:13Speaker 01

  long-term effects of programs and policies because oftentimes, if you're just looking at what the six-month effect is, you find an effect and a cost-benefit ratio that's not relevant to what actual policymaking should be.

• 1:03:28Tyler Cowen?

  Last question, what will you learn about next?

• 1:03:32Speaker 01

  Yeah, I think we're really digging into housing policy and housing finance. Housing finance is one of the most complicated issues that I've seen in this space. And trying to understand it at a superficial level has given me no insight. And so I think it's one that I really need to spend some time in as we start proposing how to fix these systems. Part of it is, we can't just complain about that the existing system is too expensive and too slow, but have to have real, specific and tangible policies about how to change it, how to improve it.

• 1:04:09Tyler Cowen?

  John Arnold, thank you very much.

• 1:04:11Speaker 01

  Thank you.

• 1:04:16Tyler Cowen?

  Thanks for listening to Conversations with Tyler. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other listeners find the show. On Twitter, I'm @TylerCowan and the show is @CowanConvos. Until next time, please keep listening and learning.