Chris Hughes on How to Craft a Thriving Market

Over the last several years, both parties in the US have been drifting away from laissez-faire thinking about the economy, and more towards the view that the state has an active role in shaping markets. You have Republicans talking about stricter anti-trust and sovereign wealth funds, and of course Democrats embracing things like industrial policy efforts in key strategic sectors. But how do you design markets well? When does it fail? And what is the history of this type of thing in the US. In this episode, we speak with Facebook co-founder-turned-economist Chris Hughes, who has published the new book Marketcrafters: The 100-Year Struggle to Shape the American Economy. In this conversation, recorded at the New York Public Library in April, we talk about his research on the history of marketcraft in the US, and how that study of history informs his understanding of today's economic policymaking. Read more: Markets Plummet as Tariff-War Woes Fuel Exodus From US AssetsOnly Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

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

• 0:00Speaker 00

  Finance is increasingly being built on digital rails. But as the adoption of virtual assets, tokenization and stable coins grows, can regulation not only keep pace but help accelerate it? Find out more later in the podcast.

• 0:16Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 0:58Speaker 01

  and hiring practices, but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 1:41Speaker 01

  Bloomberg Audio Studios. Podcasts, radio, news.

• 1:57Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:02Tracy Alloway?

  And I'm Tracy Alloway.

• 2:03Joe Weisenthal?

  Tracy, we recently did another special live episode at the New York Public Library.

• 2:08Tracy Alloway?

  Yeah, a really great venue, a really special evening. And fittingly, given that we were recording at a library, the library in New York, it was all about a new book.

• 2:20Joe Weisenthal?

  That's right. It was a pretty fitting location. So you are going to listen to our live episode that we recorded with Chris Hughes. He's actually one of the original founders of Facebook, but he left fairly early into the company's journey. He's currently getting his PhD at Penn in economics, and he's the author of the book Market Crafters: The 100 Year Struggle to Shape the American Economy.

• 2:41Tracy Alloway?

  Yep. Take a listen.

• 2:43Joe Weisenthal?

  Thrilled to be chatting. Why market craft? You know, we talk, people use the term industrial policy a lot these days, got very hot over the last several years. What does market craft mean? Why title it that?

• 2:56Speaker 04

  Well, hello, hello. I'm happy to be here. And before I answer exactly what market craft is, and we spend the next hour talking about it, I just have to say that it is such a huge honor to be both here at the library, an institution that I care immensely about, and to be a guest on this live taping of Odd Lots.

• 3:14Tracy Alloway?

  Aw, thank you.

• 3:15Speaker 04

  Odd Lots is my number one favorite podcast, and so.

• 3:18Joe Weisenthal?

  We love when they say that on the recording, but that is a good reminder. It is a live taping. So, you know, silent cell phones, you can cheer and clap a little bit.

• 3:26Speaker 04

  So, market craft, what is it? The basic idea is that policymakers are often harnessing and shaping, harnessing private markets and pointing them towards public goals, like making Americans richer, safer, and more economically secure. And that there's actually a very long history of doing that in the United States. It's done by Republicans, it's done by Democrats, it's done to ensure energy stability, financial stability, or make semiconductors here at home. There are a ton of successes in the past, plenty of failures. And the whole point of writing the book was to try to tease out what are the lessons for our contemporary

• 4:11Speaker 04

  policy environment today, because we're gonna. Have to rebuild on the other side of the chaos that exists in the world right now.

• 4:18Tracy Alloway?

  So, just on this point, I mean, a large part of the book is pointing out that the US does in fact have this history of market craft, as you put it, and certainly other countries, this is kind of the norm, you know, Norway has sovereign wealth funds, parts of the Middle East have sovereign wealth funds, even in economies that aren't necessarily centrally controlled, there's a bigger role for governments to play in the economy. And yet, in the US, up until fairly recently, I think it's fair to say industrial policy was almost like a dirty word, and there's this knee jerk reaction to this idea. Why is that?

• 4:54Speaker 04

  Yeah, I mean, I think, listen, we all exist with this idea in our heads that markets exist and are almost forces of nature. And then on the other side of the balance sheet, there's government. I mean, I'm the first to say that the language that I've used for years has been around verbs like to intervene, as if markets come first and then government is just like the emergency room that happens when things go awry and you've got to bail out a bank. And the whole point of my book is to say, actually, something bigger is happening. Like, if you look at the American economy, between healthcare, pharmaceuticals,

• 5:37Speaker 04

  aviation, semiconductor and high tech, clean energy, and add up the size of these industries, you are well over half of American GDP in industries where the state not just has a heavy hand, but is actually crafting it from the beginning. And so, it is about industrial policy, there's a lot in there about industrial policy, but it's actually about something bigger. Market craft is something that encompasses what the Fed does in financial markets, what the Strategic Petroleum Reserve does in energy markets. There's a whole set of strategies that I think we have to be. Uh wrestling with.

• 6:13Joe Weisenthal?

  All right. I had a question that I was gonna save to near the end after we had like gotten more relaxed etc. But I've decided.

• 6:20Speaker 04

  Let's just do it.

• 6:21Joe Weisenthal?

  I've just decided that I'm just gonna jump in with this question, which is you're one of the co-founders of Facebook. Many people in Silicon Valley and tech have enjoyed extraordinary fortunes under a sort of existing market economic regime. And in recent years, we've seen a number of them become seemingly very hostile towards the public sector, this sort of emergent anti-state politics. And people have different theories. Some people are like, oh, they got their feelings hurt from the New York Times or something like that. What is your theory for the emergence of this?

• 6:55Speaker 04

  Well, I mean, it's hard not to have that image of Bezos and Zuckerberg and the whole crew behind Trump at the inauguration and just see that and say, what are those guys hoping for? You know, certainly it's to make more money somewhat, but I think it's about something bigger. I think they wanna have more power. They wanna have more respect and they feel like in the Biden years, there was too much focus on things like competition and fair markets and but if you fast forward, I mean, it's not even been 100 days. You know, the trial against Facebook is ongoing. Mark Zuckerberg was on the stand for much of last week. If you're not following it closely, the FTC filed suit against Uber two days ago.

• 7:39Speaker 04

  And there's and Google just last week lost its second antitrust case with a federal prosecuted by the Justice Department, making clear that it's a monopoly. So we're only a few months in and you squint and you look and you're like, what are these guys getting out of this? It doesn't seem like very much.

• 8:00Tracy Alloway?

  Since you brought up the FTC, I mean, this is something I don't think a lot of people were expecting this to happen, but like anti-monopoly seems to be a through line between Biden and Trump to some extent, right? And certainly pursuing some actions against big tech. Why do you think that is? Like, why is this an area of consensus? And then just going back to Joe's question, you think any of those guys who were standing at Trump's inauguration, are they happy with the current situation?

• 8:30Speaker 04

  No, I don't think so. No. But you know, anti-monopoly is a bit how I got into market craft in the first place. So about six years ago, I wrote a, an article in New York Times saying that I thought Facebook should undergo structural separation or breakup, that its corporate power had become too concentrated and had become a monopoly. And that started me on a journey of really wrestling with the history of anti-monopoly in the United States. And you can't think about that set of topics without seeing public actors saying, hey, we want markets to work a certain way. We don't think that they should be concentrated with a lot of power. We think they should be competitive. We think it should be easy for new entrants to come in and innovate.

• 9:15Speaker 04

  We think markets should keep prices low, wages up, and innovation going. And so we are going to use the tools of public policy to craft those markets to ensure that's the case. If, whether it's the free market going to lead to it or not, it really doesn't matter because we have this goal as a common good. And so, once you sort of, once I began to see that in the anti-monopoly world, you quickly saw it at the Fed as an institution that, you know, most free market Bible-thumping folks would say that they appreciate, but, you know, the Fed sets the price of short-term

• 9:54Speaker 04

  credit and is actively in markets buffering that, that price through open market operations. And then if things really go awry, you bet it's going to be there to step in to stabilize. So that market is crafted and managed every single day for stability. And so I began to see all these kind of cross-pollinations and similar trends and that, you know, a couple years later, here's the, here's the fruit of that.

• 10:38Joe Weisenthal?

  All right, I have one, I want to go back to resentful billionaires again. Let's do it. And I have a different. You're not the only one. But tell me if it's total nonsense. You know, I tweet all day because I want people to hear all my thoughts. And you wrote a book, you left Facebook, and you're an economist, and you published a book that's influential and intellectual. How much is it about resentment that they're extremely wealthy and successful, but they also want to be regarded as smart?

• 11:05Speaker 00

  What's next for virtual assets? I'm Jacob Rees, host of Economy Scale, a series exploring growth in key global sectors. And this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

• 11:21Speaker 05

  We're seeing a lot of institutional players come in, digital asset dedicated hedge funds, high-frequency traders and that sort of thing, and folks who service institutional clients.

• 11:30Speaker 00

  As more capital enters the market, adaptive regulation is likely to become increasingly key. Reese Merica Ripple says.

• 11:38Speaker 06

  A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80-year-old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai.

• 11:57Speaker 00

  Listen to the full episode wherever you get your podcasts. This series is brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.

• 12:07Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk, and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs, and hands-on experience matters more to recruiters. than advanced degrees with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 12:50Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote must be willing to work extended hours and weekends as needed. One major perk for all that hard work? Employees access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 13:31Tracy Alloway?

  This, in my opinion, is why Twitter exists.

• 13:34Joe Weisenthal?

  Yeah, this is my impression that there is that they also want to be market crafters. They don't just want to be market competitors. They want to my sense is that we all want to be market crafters. And how much is it about they felt like, yeah, incredibly successful, but they didn't get to help craft it?

• 13:51Speaker 04

  Yeah, I think that's I think that's directionally right. I should say I try very hard to avoid social media. So I'm not on the blue app. I'm not on Instagram. I lurk on Twitter. I recently opened a blue sky account. It doesn't have a lot of followers. It'd be great if I had a couple more. But so I'm not actively using social media. So it's harder for me to weigh in on that. But I am, I do think that there is this lurking desire to partner with government in some cases and craft markets. And so there's a very crisp example. It's not from one of the current billionaires, but there's this guy, Robert Neuss, which some of you may have heard of. He was one of the co-founders of Intel, grew up as a son of a congregationalist minister in a family in Iowa.

• 14:37Speaker 04

  Ends up going to MIT and then invents the integrated circuit, which is a fundamental part of the semiconductor, makes gobs of money. And after years of that, guess what happens in the mid 1980s? Japan. Japan as an industry starts really outcompeting the American semiconductor manufacturing market. They are moving faster. They have their own industrial policy that's pushing it. And so all of a sudden, Nois, who had for his entire life been a libertarian, who didn't want anything to do with government, thought it was not a great idea, would have liked to downsize it, as we're seeing other billionaires be interested in today.

• 15:21Speaker 04

  All of a sudden, he shows up in Washington and he says, wait a second, we need an industrial policy for semiconductors and for chips. And the Defense Department agrees because they're concerned for national security reasons. And Nois and the government effectively partner because their interests at that moment are overlapping. We get something called Semitec, which is created, which is about a billion dollars that's invested to enable the semiconductor companies to begin coordinating, making their vertical, their supply chains vertically more integrated and more efficient. And a few years later, America recaptures its market share globally of semiconductors.

• 16:06Speaker 04

  We are back on the top. So, you know, I think that the lesson from that is complicated because on the one hand, you do see a private sector actor with a lot to gain from private wealth maximization, but working with the public sector, where the public sector also has a lot to gain from semiconductors being made in the United States. And in that case, it worked for both. It doesn't always work out like that. But I think that's clear historical evidence of the fact that there is this lurking desire for market craft on the part of a lot of these folks.

• 16:41Tracy Alloway?

  Now I'm torn whether I should ask another question about angry billionaires who tweet a lot or about the book. So I'm going to try to thread the needle. Elon Musk at Doge. It's a very active organization, some would say. Would that count as market craft under your framework?

• 16:59Speaker 04

  No. No, no, but I mean, seriously, it's. That's just tearing apart the federal government and the administrative.

• 17:07Tracy Alloway?

  Yeah, because your book actually emphasizes the importance of institutions.

• 17:11Speaker 04

  It's the exact inverse. So my book makes the case that when market craft is successful, you have administrative agencies like the CHIPS office, like the Fed, like the SPR, that have a clear mission: onshore semiconductors, keep financial markets stable, et cetera. And then they have the discretion to pursue that mission and the ability to get it done. And that it is critical to understand that institutions in America need that power in order to make markets work more effectively. That doesn't mean that they're always perfect, but we get much worse outcomes when we create these balkanized sort of hybrid setups.

• 17:53Speaker 04

  And that's what you see in something like healthcare markets today. So the importance of institutions is at the center of this book. And my belief in Musk and crew are just trying to demolish all of them.

• 18:06Tracy Alloway?

  So on the institutions point, I mean, I think part of the institutions' problem in US politics is that you get a lot of people who think that these are unelected officials with a lot of power, you know, the sort of like ivory tower bureaucrats who are deciding everything. How do you, I guess, how do you overcome that, like, sort of instinctual, I guess, negativity towards building more institutions in the US government?

• 18:33Speaker 04

  I think you show people where it works. And you have to be clear about where institutions actually deliver for people. So I'll give you an example that's a little bit further back in history. So the book starts with the story of the National Investment Bank that we create in the Depression. In 1932, Herbert Hoover, actually, a Republican, creates an institution called the Reconstruction Finance Corporation with a clear mandate, first, to reinforce capitalism that was disintegrating at the time.

• 19:07Speaker 04

  And then a few years later, the mandate expands to actually spur development. At the head of this thing is this larger-than-life figure named Jesse Jones. So this guy was born in Tennessee, but he moves to Texas at a young age. He invests in all kinds of local businesses, and by the time he's 30, he's a millionaire. And a few years later, he's got so much money that he's building buildings in New York City and all across the eastern seaboard. Then 1929 happens, and he has less to do. So he is a Democratic Party activist. He's been a fundraiser for a long time, even shares an office with Roosevelt in 1924. He convinces the Democrats to have their convention in Houston in 1928, where, oh,

• 19:52Speaker 04

  so conveniently, balloons fall from the ceiling that say Jesse Jones for President. He's like a larger-than-life figure, but he's at the head of this bank, this institution, the National Investment Bank. And when he comes into power at the beginning, he says, you know, "Our first mission is going to be to reinforce all of the private commercial banks, recapitalize them, make sure that they're ready for deposit insurance." But then in the second phase, on the advice of John Maynard Keynes and some other economists, Jones, in consultation with Roosevelt, says, "We gotta really deploy public capital into the American economy, particularly in industries that are going to encourage a lot of employment and make things cheaper for consumers."

• 20:35Speaker 04

  So they prioritize housing. And they build a kind of institution that's named Fannie Mae, which endures, obviously, today. And they invent the 30-year mortgage, which, at the time, mortgages had been 10 years. By expanding it to 30 years, the cost of housing comes down significantly, and all of a sudden, you see a boom in housing. And then there's a third phase in the war years, where they birth the aviation industry and synthetic rubber and all kinds of other things. And so my point is, is you see a man who comes in skeptical of, you know, of the far-left in the New Deal period, certainly wouldn't have identified with those folks, but who

• 21:14Speaker 04

  ends up believing in and building an institution of American capitalism that crafts markets toward a common good. And so that example is really inspiring. It's further back in history, but we've got all kinds of things that are closer.

• 21:29Joe Weisenthal?

  One of the criticisms of a lot of legacy institutions, whether it's universities or various parts of the public sector, et cetera, that comes from the right is that they've lost their own sense of mission. We have to tear them down because they have lost their own sense of mission. They're consumed with niche obsessions, consumed with identity, things like that that are unrelated to their mission of whatever it is they're building, whether it's homes, whether it's semiconductors, whether it's education. When you look at the history, do you see any evidence of sort of mission deviation or institutions that have lost their north star?

• 22:09Speaker 04

  It's not a pattern that I saw in the research of the book. And if that happens, that's what Congress is for. I mean, the Congress holds institutions accountable and monitors their activity. I mean, take the CHIPS Act. It was passed in 2022, but CHIPS was actually an idea from the first Trump era that

• 22:31Joe Weisenthal?

  I think Tom Cotton was really into it, yeah.

• 22:32Speaker 04

  Yeah, well, yeah. And the undersecretary of state for economic affairs and a whole set of folks were very invested in it. It gained steam and it's passed in 2022. And then, you know, quite quickly, money begins to move. Congress, actually, a year later says, you know what? We're going to exempt semiconductor construction from NEPA requirements, making it the environmental requirements that in some cases could have made it harder to build. So Congress stepped in to make sure that something that they did actually happened more effectively. Or similarly with the Fed. I mean, Congress is constantly tweaking the Fed. Who gets to decide who's going to be the Reserve Bank president?

• 23:16Speaker 04

  Even in some cases, the methodologies for monetary policy implementation. So I think accountability is very important. But accountability rests in the legislative branch, not with an impulsive billionaire just running through town with a hammer.

• 23:31Tracy Alloway?

  Speaking of the Fed, I think you mentioned that you initially set out to write a book just about the Fed, right? Like, what was the cause of the switch? And then, I guess, how did that inform your research process?

• 23:42Speaker 04

  So I have a special place in my heart for Fed history. I've been working on a dissertation at Wharton for a few years, which is more properly narrow and focused on that topic. And I thought that's what this book was gonna be initially. But then, when the conversation around industrial policy exploded, and the IRA, the climate bill happened, the CHIPS bill happened, the infrastructure bill happened, a new conversation around tariffs in the Biden administration was happening, it felt like there was a bigger story to tell. And the challenge that I, the thing I wanted to do was to explain, how did we get from the era that I grew up in, that, you know, the Clinton and George W.

• 24:26Speaker 04

  Bush era, where most people thought markets self-regulate and work on their own, to a moment where both parties, both Democrats and Republicans, put the state at the center of the economic story? And I wanted to track that history in the past 15 years and see it through the Great Recession, and then the challenge of climate, and then the rise of China and the pandemic, and understand how you got these bizarre agreements, like, you know, almost a dozen Republicans voting for Lena Kahn in the Senate to run the FTC. How did that happen? Where did that come from? And how enduring might that be?

• 25:08Speaker 04

  And that set of questions then took me way back into history, and then back into the present day.

• 25:13Joe Weisenthal?

  Well, how did we get 12 Senate Republicans to vote for Lena Kahn?

• 25:18Speaker 04

  I think the confluence of those four events made Americans, let alone policymakers, realize that markets don't just take care of themselves, and that that whole idea, that whole story, wasn't working. That capitalism needs to be cultivated, and that markets need to be cared for. In the introduction of the book, I talk about this meta- Metaphor of a vegetable garden, which might seem a little hokey, but at least for me, it's personal because when I grew up, my, I grew up in North Carolina in a small town and my dad tilled up a third of the backyard to make a vegetable garden and constantly forced me in the summers to go like weed and pick green beans and stake tomatoes and do all

• 26:03Speaker 04

  these things that I did not want to do.

• 26:06Joe Weisenthal?

  Tracy likes doing these things.

• 26:08Speaker 04

  Yeah, a lot of people enjoy this, it turns out, not me. So, but nonetheless, I spent an inordinate amount of time in that garden. And so when I started to think about like, well, what are markets like if they're not these self-regulating systems? The, the best metaphor that I, that I landed upon is a garden because it recognizes there are organic forces that can sometimes be unruly, that won't necessarily cooperate and just do exactly what you want to do. But it also recognizes that you need care and cultivation to steer those plants. You need to plant some things in the sun and some things in the shade. You need fertilizer for some things. You need to get the weeds out for others. You need to shape these markets.

• 26:51Speaker 04

  You need to point them in a direction to ensure they're actually working, that they're producing a harvest that you, you, you want to eat and then, and that is going to be nutritious. And so I kept coming back to that metaphor and I think it is the right one to think about how markets actually work.

• 27:07Tracy Alloway?

  I want to say one thing about gardening.

• 27:10Speaker 04

  Okay.

• 27:11Tracy Alloway?

  Which is everyone has this image in their minds that it's like this really peaceful, like pastoral activity and it's not. It is like this violent struggle to stop everything from killing each other, basically.

• 27:23Speaker 04

  Yes, that sounds about right, yeah.

• 27:24Tracy Alloway?

  So I, I like the metaphor. Um, okay, uh, speaking of, uh, bad stuff happening, uh, almost every example in your book of, you know, instances of market craft actually developing stems from a crisis of one sort or another. There's the Great Depression, there's obviously the COVID pandemic, um, you know, high inflation, high oil prices, things like that. Do you have to have a market crisis before people can start building consensus that there is actually a role for the government to come in and try to achieve some policy aims through market craft?

• 28:01Speaker 04

  No, but it helps. And it's always matters how you define the crisis. You know, there are several examples of market crafters who are very successful in the book, who are not responding to crisis. So I have an extended passage on Alan Greenspan, who is normally not thought of as like a market crafting kind of guy. He's supposed to be the deregulator in chief. And he did do plenty of that when he was the Chair of the Fed. But he also had a vision. And so I'm going to use him as an example to make it clear that market craft is neither good nor bad in and of itself. It matters, it's a tool and it's pointed towards a certain end. And it can be a good one, or it can be a bad one.

• 28:45Speaker 04

  For Greenspan, it was financial innovation. He so intensely believed that the more efficient markets would be, the more prosperity and stability would come out of that. I mean, the guy is writing papers when he's a young analyst in the 50s along these lines. He eventually knits them together in his PhD dissertation. And then when he becomes Chair of the Fed, yeah, he does deregulate and take a lot of rules out of the way. But he also makes really important policy actions to encourage the development of financially innovative tools, things that we now know of as credit default swaps

• 29:29Speaker 04

  and special purpose vehicles. And the kinds of things that did indeed significantly increase leverage in the financial sector, did in some cases mean markets moved faster and more efficiently. And he believed would ultimately create that kind of market discipline that would keep the whole system stable. So he had a goal. It was market, it was financial innovation, and he was using the power of his institution to deliver on it. It's just, it had disastrous consequences, and he was wrong.

• 30:02Joe Weisenthal?

  Let's talk more about the Fed. By the way, I think it's really cool that you went after, you know, after the Facebook and did all this stuff, then you got your PhD.

• 30:10Speaker 04

  Well, we're still working on it.

• 30:11Joe Weisenthal?

  Yeah, okay.

• 30:11Speaker 04

  I gotta finish the dissertation.

• 30:13Joe Weisenthal?

  Working on your PhD. I read Kevin Rudd, the former Prime Minister of Australia, after he was PM, went and got his PhD at Oxford and wrote an amazing book about Xi Jinping. So maybe there's hope. Maybe Tracy and I will get PhDs one day. But I hear different things about the history of what people call Fed independence. And people going, oh, in the old days, presidents were always hectoring the Fed chief to do this or that. And this isn't really that unusual. And other people are like, oh, no, this is a cherished thing and that we ever, you know, intervention by the White House. In your research on the Fed, how unusual or usual is it for this sort of pressure that we see? Did presidents used to tweet to lower rates?

• 30:57Joe Weisenthal?

  Whatever the equivalent was back in the day?

• 30:58Speaker 04

  Yeah. Well, obviously, it's a very timely topic, given that, you know, last week, Powell was about to be fired. This week, apparently, it was never even really considered. Uh, so there is a very long history of presidents trying to bully Fed chairs to get what they want with monetary policy. It is, you know, virtually since the beginning of the institution, this has been a trend. Kennedy and Kennedy's administration does it with Bill Martin in 1960. Lyndon Johnson summons the Fed chair down to his ranch in Texas and takes him on this legendary jaunt. Richard Nixon is pressuring Arthur Burns. Reagan doesn't really

• 31:42Speaker 04

  like Volcker, so he replaces him. We could go through all of the examples. And this is different. Because this time, the president isn't just pressuring the Fed chair to do what he wants. He is threatening to take illegal action to fire him, which it's very clear in the Federal Reserve Act is not legal. The president can only remove the chair for cause, and similarly with the other members of the Board of Governors. And so, and it's not just a threat, obviously. Like, Trump has done this. He has fired two of the five FTC over at the FTC, two of the five commissioners who are Democrats.

• 32:25Speaker 04

  Also illegal in the FTC Act, it is illegal to fire them unless it's for cause. He's done at the NLRB, at the credit unions, et cetera. So I think this is a real threat. I tend not to use the word independence because I think the Fed is actually quite sensitive to political and economic trends, what they're hearing in a lot of different domains. It is an insulated institution, which I think makes it stronger, but it is not a purely independent one. And these threats, I think, are really unprecedented, and we should all be frightened by them.

• 33:17Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Businessweek's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices, but according to recruiters,

• 34:02Speaker 01

  advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 34:41Tracy Alloway?

  All right, so speaking of things that might be different this time, we do have a president who seems very, very determined to divorce the US in some ways from the rest of the global economy, the global financial system. The subtitle of your book is "The Hundred Year Struggle to Shape the American Economy." You could easily have titled it "The Hundred Year Struggle for the US to Shape the Global Economy," right? The US went on a very explicit mission to shape our current financial system, and you do have a very chunky chapter in there about Bretton Woods. Talk to us about why we should all, I guess, familiarize ourselves with things like Bretton Woods, Eurodollars, capital controls in our current climate.

• 35:22Speaker 04

  Let me tell a little bit of the story of the breakdown of Bretton Woods and why it matters for today, because when I wrote that chapter, I had no idea that the dollar would actually be threatened as the global reserve currency, and this is real. So Bretton Woods was this agreement that came out of World War II that where the United States committed to sell gold at $35 an ounce, and it would peg the dollar to all other foreign currencies. So this way, the dollar effectively became the bedrock of the global financial system, and underneath it, there was gold.

• 36:03Speaker 04

  So it was an effective gold standard, but the United States was making the commitment to be able to redeem dollars for gold should a foreign country or anyone else in the market want to make that exchange. Now, the whole system was premised on the fact that, as the rest of the economy grew, the United States had to increase the amount of dollars in circulation over time, because as economies grow, they need more currency. If the dollar is the base currency, is the global standard, you need more of it. One problem, the more dollars you print, the less they're worth. And so by its very nature, you are not going to be able to deliver on the promise

• 36:48Speaker 04

  to redeem gold at $35 an ounce. So it's like a vice that tightens between 1940, between the post-war years and 1971, when it gets just so impossible for the United States to continue this commitment. There's a run, and in, I tell the story of the book, where Nixon summons every single person who runs any of the economic institutions in the country to Camp David, and they come up with a plan, and they end the Bretton Woods system. They end the gold commitment, and they move into a regime of, eventually it becomes a regime of floating exchange rates. Now, we make it through, partially because price and wage controls hold down inflation

• 37:33Speaker 04

  for a period, et cetera, but it is touch and go for a lot of that period. And so then you fast forward to today, and I think the easiest way to think about it is, instead of gold being that thing underneath the dollar that guarantees its value, it's the institutions of American capitalism. So the dollar continues to be the global reserve currency today, and the reason that is, is because we have had an independent central bank. We have had a treasury that reliably and always pays the coupon on its, on its debt in a way that investors can believe in and expect. And so does people want dollars? People want US treasuries. People want these financial assets.

• 38:18Speaker 04

  And now, two things are throwing that into question. The first, obviously, is Trump's impulsive economic policy, which disregards the importance of institutions in the first place. But the second is, we're flooding the market yet again with, with dollars and dollar-denominated assets. Like, the deficit last year was 7% of GDP. It's not supposed to be that high in a healthy economy. And right now, the plan is another $6 trillion of tax cuts, which is, just to give it for perspective, is as much as the tax cuts of Trump 1.0 and the pandemic aid combined. And we're already at 7% of GDP. So we have another moment where we flooded the world with dollars,

• 39:03Speaker 04

  where they're losing value. And the underlying guarantee of that value, the security of American capitalist institutions, is under threat. And so you're seeing an unprecedented period and a potential run.

• 39:17Joe Weisenthal?

  Yesterday night, there was a news story. President Trump said he wouldn't want to raise taxes on millionaires because it would be, quote, disruptive to the economy. And then he said that the millionaires would leave the country, which I'd hope most of them would be, you know, stick around. But that's his view of them. But what does it say, you know, about even the prospect for market craft? If people in government don't feel that they have the capacity, the political power, et cetera, to at times bring pockets of wealth to a heel, so to speak, and to wield that power? Or were they like, is there any prospect for positive market craft in a world where politicians feel that like they're subservient

• 40:02Joe Weisenthal?

  to huge pockets of wealth?

• 40:05Speaker 04

  I very much think so. So I'm skeptical in this administration that that's gonna happen. But I think there's all kinds of opportunities for positive market craft. So the things that I focus on these days are the cost of living crisis in the United States. I mean, that is what voters are very clearly still frustrated about. Prices are up 20% from the beginning of the pandemic till now. And it's particularly concentrated in things like housing. Americans spend a third of their income on housing. And then if you go to groceries and then you go to care, healthcare or childcare, you're above 50% for most families.

• 40:45Speaker 04

  And so we can craft housing markets to make housing cheaper. We can certainly do some of the zoning and streamlining that the abundance folks like Ezra Klein and others are for. I think that's a good idea.

• 40:58Tracy Alloway?

  I kind of wondered how long it would take us before we mentioned abundance.

• 41:01Speaker 04

  We got like 30, 35 minutes.

• 41:03Tracy Alloway?

  It was pretty good.

• 41:05Speaker 04

  I think that those are good ideas, but I also don't think that you can just make it easier to build and then sit back and hope people show up. At least that's not been the experience in California. Like, it's been years since they have been on this process of trying to change their laws and building starts are not showing the same kind of growth that you would like. You have to craft markets more aggressively. There's a lot of other tools, particularly public investment. So we need a housing construction fund for multifamily developers to make it cheaper to build. You guys have had some folks on your podcast who make this case. You know, the estimates are that for an investment of about $50 billion

• 41:46Speaker 04

  at a federal level, you could get somewhere between 1 and 2 million homes built. And that's about half the housing shortfall in the United States. That's quite a lot of progress. You could have an industrial policy for modular. So modular is the kind of housing where you build the components off-site and then you bring them in. And there's this amazing time-lapse video, which I saw about six weeks ago of an apartment building in Denver where they bring in the pieces and it goes so quickly, it looks like my son plays with magnet tiles, these like building lots.

• 42:17Joe Weisenthal?

  My kids love them too.

• 42:19Speaker 04

  They're amazing. But you just see it and you just watch this apartment building, the 77 units, go up in the course of seven days. And it's mind-blowing. And, you know, half of the building that happens in the Nordic countries is through modular. And so that's a kind of industry that I think if we had an industrial policy to encourage, not just public investment, but also standard-setting, making sure it's possible for people to get mortgages for them, you could see significantly more development. So I think we need a market craft for housing. On food, I think we could do reserve stock buffering. On eggs and coffee, like I talk about in the book. On care, there's a whole set of interventions as well. There's

• 43:03Speaker 04

  an aspirational agenda, is what I'm trying to say, that could help us attack the cost of living crisis. And this administration is gonna hike prices through the tariff policy, not bring them down. And so Democrats are gonna have to have another message and also, you know, the specific policy expertise to get it done.

• 43:24Tracy Alloway?

  Yeah, there's a long running joke on Odd Lots that what America really needs is a strategic pork reserve.

• 43:29Speaker 04

  Yeah, like they have in China.

• 43:30Tracy Alloway?

  We can all agree on this. Okay, speaking of agreeing, one of the chapters in your book that I really enjoyed was the sort of behind the scenes look at Bidenomics.

• 43:42Speaker 04

  Yeah.

• 43:43Tracy Alloway?

  And you do get a really good sense of some of the discussions that take place, the areas of disagreement, the sort of protagonist and antagonist, I guess, in this discussion in your book is Larry Summers versus Brian Deese.

• 43:59Speaker 04

  Exactly.

• 44:00Tracy Alloway?

  And you were also involved in the Obama administration. Talk to us what you learned about the actual sausage making process of market craft and what sort of, like, how do people actually reach consensus on a lot of these things when they have very different opinions about how the world works?

• 44:17Speaker 04

  So I had this experience where in writing, for most of the book, I was largely in archives and secondary literature in the past. And then the last third of the book is contemporary. And so the methodology just shifted to talking to a lot of people. So I ended up talking to most of the folks who had been involved in Bidenomics inside the administration and people like Larry Summers and Jason Furman and a lot of people on the outside.

• 44:47Tracy Alloway?

  Larry does like to talk.

• 44:48Speaker 04

  It turns out. I talked to a lot of people and the person that I zeroed in on was this man named Brian Deese, who some of you may know. Past Odd Lots guest. Indeed. He was the Chair of the National Economic Council. The reason he's so interesting is because he was one of Larry's proteges. In 2008 and 2009, he is on the Obama campaign and he effectively runs the bailout of the auto companies. And in that experience begins to see, wait a second, we can't just be bailing, we can't have the emergency room view of the economy where we come afterward.

• 45:29Speaker 04

  We have to be thinking proactively ahead of time about how to shape and build industries that work better. That takes him to work on climate change. And then all of a sudden, the Biden administration, he becomes the director of the National Economic Council. And then he, you know, articulates this big vision. It has two pillars. The first is build. So that's public investment in climate, infrastructure and chips. And the second is balance. So that's competition in particular, but also supporting labor and other similar kinds of initiatives to ensure that the economy is competitive. And boy, Larry doesn't like it.

• 46:12Speaker 04

  He is throwing rocks from the outside pretty much the entire time and often talking to Brian and others on the inside. And the reason I think that story is so powerful is because it shows the emergence of not just a new generation of policymakers, but a new way of thinking about the economy, which starts from the premise of market craft and doesn't fall back into a kind of neoclassical economic framework of market failures and externalities and how are we going to fix things after the fact?

• 46:44Joe Weisenthal?

  I guess I have more of a politics question, or, you know, we had this sort of nascent industrial policy, market crafting, and then it looks like the plug is being pulled after four years. And I would guess that there must be a lot of frustration among Democrats to hear someone run on, we're going to build things in America again, we're going to build manufacturing, right after a period of two or three years in which more plants were opened and more factories were broken ground on than any time in my life. And so what I'm curious, from your perspective, I guess from a political sustainability standpoint is people seem to like, in theory, the idea of manufacturing, the aesthetics of it.

• 47:28Joe Weisenthal?

  But do people actually like it in practice? Or is like, because it didn't seem like it got any results politically?

• 47:35Speaker 04

  I don't know if manufacturing per se is the thing that people like, and I'm a little skeptical that you're going to really reinvigorate the American economy by rebuilding the manufacturing sector, but I'm not quite sure I agree with the premise of the question. Trump is certainly not pursuing a market craft, that's clear. However, a lot of the people around him have spent years developing their own visions of a market craft that puts the state at the center, so.

• 48:05Joe Weisenthal?

  You're talking about Orrin Cass in your book, for example.

• 48:07Speaker 04

  Well, Orrin Cass, but I'm talking about Marco Rubio and J.D. Vance and Josh Hawley, a lot of these guys who I think are the future of the Republican Party, who believe that we need state institutions to direct markets towards certain goals. Now, their goals are not really my goals, I should say that. I mean, they are very concerned about drones and critical minerals and national security, whereas I'm more interested in climate change and other things. But nonetheless, right before Vance became the vice presidential nominee, he was about to introduce a bill for a national investment bank. The same

• 48:46Speaker 04

  idea that I was just talking about from the New Deal era, that he believed as an institution would have the power to direct markets. Now, he was doing that with Chris Coons and Mark Warner and folks on the left. But what I'm trying to say is, it may be dormant in this period, but I don't think that ideology is gone. We're going to hear about a sovereign wealth fund in the next few weeks from this administration, and there's a deadline that the Treasury Secretary will have to bring a report on it. I wouldn't be surprised if we see some trace remnants there, even though I am skeptical that anything meaningfully will be done. I don't think that means that Trump's chaos can define the Republican Party for forever and ever.

• 49:28Tracy Alloway?

  We do have some questions from the audience that we should probably bring in. I'll start with one, obviously very topical at the moment, but how is market craft playing into the race for dominance in artificial intelligence?

• 49:45Speaker 04

  Yeah, I mean, so far, the federal government has decided to let the private sector, you know, develop AI on its own in the United States. It's certainly different than in China and then elsewhere. And there hasn't been a market craft. There's been talk of it in the Senate in particular. There's interest in public investment. There's been talk of a, what we call a public option for the cloud. So a way of making it easier for smaller companies to access computing powder to build advanced AI models. But none of that has yet come to fruition. And so I think it's important to say that like market craft isn't everywhere all the time, you know, lots of policies affect markets. But to craft a market, you

• 50:30Speaker 04

  have to have, you know, policymakers with a clear intent shaping it and guiding it. And so far, in the AI markets, it's been more of a hands off kind of approach.

• 50:41Tracy Alloway?

  But if we had like a lone office for AI startups, something like that would count as explicit market craft, right?

• 50:47Speaker 04

  Well, for sure. If Congress said, hey, we want more small businesses doing AI. So we're going to appropriate money and we're going to create an office over here in the Commerce Department to do that. They're, they have, they have an agenda. They're crafting that market.

• 51:00Joe Weisenthal?

  Just putting on back on your tech founder hat for a second, it's kind of separate from market craft, but I guess it sort of intersects with this. When DeepSeek came out, people started really, and it was before that too, but people have really started talking about AI specifically as this existential area of competition, kind of like, kind of like achieving the nuclear bomb. Like who is going to get to AGI first, us or China? Do you, I mean, do you think of AI or AGI specifically in such stakes?

• 51:32Speaker 04

  It's a huge deal. I'm not sure I want to go to the nuclear bomb. That seems like a very high bar, but it's a huge deal. I think that the advances in AI is certainly the most profound changes in technology.

• 51:49Speaker 04

  In my, I think I want to say in my life, it feels more transformative to me than the mobile phone, which I think would be my bar. I mean, it's, I'm, I'm using the models, my husband's in the front row. I'm, he watches me use the models all day, every day for everything from like recipe substitutions to, you know, doing deep research on a particular topic. Of course, you have to check the, the facts and this and that, but I mean, they are incredibly powerful.

• 52:15Joe Weisenthal?

  Tracy, I have to say, like, I'm an AI user enthusiast, but Tracy's-

• 52:19Tracy Alloway?

  I too watch Joe use the models all day.

• 52:22Speaker 04

  You don't use them?

• 52:23Tracy Alloway?

  I do, no, I do. It's just not as much as you guys.

• 52:26Joe Weisenthal?

  Man! I want to say, I am an enthusiastic trier outer of all the AI models. Oh, I recently got access to Manus, Tracy.

• 52:34Tracy Alloway?

  Oh, really?

• 52:34Joe Weisenthal?

  Yeah, sweet. Um, but, uh, I have yet to find an application that consistently enhances my work productivity.

• 52:41Speaker 04

  Really?

• 52:41Tracy Alloway?

  That's not true.

• 52:42Speaker 04

  What about, okay, headlining?

• 52:44Joe Weisenthal?

  I haven't- No, I'm, I'm better at headlines.

• 52:46Speaker 04

  Of course you are. No, no, but that's, that, of course you are, but it's helpful to have a kind of sidekick to brainstorm headlines.

• 52:53Joe Weisenthal?

  Have Tracy!

• 52:54Speaker 04

  Okay, well.

• 52:55Tracy Alloway?

  Yeah.

• 52:56Speaker 04

  Fair enough. Not all of us have Tracy.

• 52:58Tracy Alloway?

  Um, no, I disagree with this. Like, AI is a phenomenal tool for our day-to-day productivity. It just is. Um, why don't I ask another question from the audience? I know you care about climate change, and this is one of your big projects, so we have someone asking, how do we make progress with climate policy in light of its politicization, politicalization, and the issue of affordability? And one thing I would just add on to that question is, you know, one of the things we've seen under binomics was, oh, we, we should build more green technology in the US. And a lot of that makes sense, but I guess the counterargument to doing that is, if we really care about the climate, and if there is actually

• 53:41Tracy Alloway?

  this massive sense of urgency to doing something about it, then why not get all the really cheap solar panels in volume from a place like China?

• 53:51Speaker 04

  Mm-hmm. Well, I think we need-

• 53:55Speaker 04

  Even more investment, likely significantly more investment than we got out of the IRA. And we need it to be better coordinated. So I think the IRA investments are, you know, still stand. Obviously, business uncertainty has just gone through the roof. So no one exactly knows what's going to happen. There are signs that the Republicans will keep some of the pieces of the IRA, maybe not for solar panels or EVs, but for things like hydrogen or carbon capture or things like that. I'm cautiously optimistic. But we need additional investment. And then we do really need an institution whose mission it is to tackle climate change and that Congress can hold accountable. So that instead of

• 54:38Speaker 04

  just saying, oh, we're going to give subsidies through the tax code where the government effectively has no ability to determine what's getting the most funding, there is an ability to say, okay, this, these breakthrough technologies need more support. These other things are doing just fine. I think that's going to be the long term solution. I'm a bit, I'm with you. I'm not sure that tariffs on solar panels are going to help us get to the, you know, the tools that we need to combat climate change that we need.

• 55:08Joe Weisenthal?

  Tracy's right, by the way. I get a couple when it comes to AI. I sometimes will be like, okay, we're I know, I'm right. Because I literally watch you do this every day. Yeah, I'm Joe Weisenthal. I co-host the Odd Lots Podcast. We're interviewing Chris Hughes tonight at the New York Public Library. What would be some questions? I do ask that. And I sometimes upload PDFs and it's like, just give me the summary. So I want to acknowledge that. Yeah, no, that is helpful. It's helpful. Someone is asking about student loans. And I'm curious, you know, people perceive the market for higher education to be broken in various ways. And I'm curious whether it's on the funding side for the consumer, the student, or whether there's anything interesting that you've learned about that space?

• 55:53Speaker 04

  Yeah. So there are a lot of these markets that I would call gray zones. Is higher education a market? At least the way that I want to think about it, most of the time it's not. It should just be a fundamental, you know, good, an opportunity that everybody can get an education that they want. So I'm not sure we even have to use a market crafting framework to say, you know, college in the United States should at least be affordable, if not free, and there's a way to use policy to make that happen. But I think that it is due for sort of wholesale re-imagination, and there is something wonderfully

• 56:32Speaker 04

  simple and direct about, you know, Bernie's promise for free college that, you know, is hard to do, but I think it's that kind of aspirational guarantee that people crave, people respond to, and it's policymakers' response to deliver on that. Of course, you're going to have to raise taxes, whether it's for this or some of the other issues that we've talked about, to make that happen. But I don't know, that's the, I think that's the kind of country I want to live in. I think that's the kind of country that most Americans want to live in.

• 57:04Joe Weisenthal?

  That's a great place to leave it. Chris Hughes, thank you so much for joining us in this live episode of the Odd Lots.

• 57:27Tracy Alloway?

  That was our interview with Chris Hughes, the author of Market Crafters, live at the New York Public Library.

• 57:34Joe Weisenthal?

  Really good evening, really interesting topic, one very near and dear to the themes that we've been talking about on Odd Lots.

• 57:40Tracy Alloway?

  Yeah, definitely touches on a lot of them. Shall we leave it there?

• 57:43Joe Weisenthal?

  Let's leave it there.

• 57:44Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alocke. You can follow me at Tracy Alocke.

• 57:49Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at TheStalwart. Follow Chris Hughes on Twitter, he's at Chris Hughes. Follow our producers, Carmen Rodriguez, at Carmen Armin, Dashal Bennett, at Dashbot, and Cale Brooks, at CaleBrooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have all of our episodes and a daily newsletter. You can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 58:13Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we do these live events, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

• 59:06Speaker 07

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