Can a Phone Be a Cow? (with Philip Auerswald)

Can a phone be a cow? It could in 1990s Bangladesh. This was the insight of a small number of mobile phone market pioneers who helped catalyze the spread of the greatest technological revolution in human history. Listen as George Mason University economist Philip Auerswald speaks to EconTalk's Russ Roberts about how the extension of connectivity to traditionally excluded populations led to wide-scale transformations in productivity. They discuss the role of little-known entrepreneurs such as Iqbal Quadir and innovators like Claude Shannon in bringing the mobile phone to the entire world. Other topics include William Nordhaus's paper on the cost of illumination as a powerful metric of human progress, Schumpeter's notion of innovation as new combinations, and what Auerswald calls the most important question the field of economics can ask: How much of human progress is inevitable, and how much depends on the determination of remarkable individuals?

• 0:02Speaker 00

  Welcome to Econ Talk, Conversations for the Curious, part of the Library of Economics and Liberty. I'm your host, Russ Roberts of Shalem College in Jerusalem and Stanford University's Hoover Institution. Go to econTalk.org where you can subscribe, comment on this episode, and find links to other information related to today's conversation. You'll also find our archives with every episode we've done going back to 2006. Our email address is [email protected]. We'd love to hear from you.

• 0:37Speaker 00

  Today is May 26, 2026, and before introducing today's guest, I want to let listeners know that we'll be doing an Econ Talk Book Club around The Iliad by Homer. The first episode with Ido Chivroni of Shalem College, who has been teaching The Iliad for over a decade, will air July 6. It will provide some useful context on the book to help you get started, and I hope inspire you to read it. Additional episodes, I don't know how many, will air in the weeks to follow, at least one, maybe two. And we'll be using the Fagels translation, but there are many others to choose from. And now for today's guest, economist and author Philip Auerswald of George Bay City University. Philip was last here in September of 2017

• 1:20Speaker 00

  talking about populism. Our topic for today is his latest book with the delightful title, "A Phone Is a Cow: How Pioneers of the Mobile Revolution Help Millions Lift Themselves Out of Poverty." Philip, welcome back to Econ Talk.

• 1:37Speaker 01

  Thanks so much for having me. It's a pleasure.

• 1:39Speaker 00

  So let's start with the title of the book. What does that mean, "A Phone Is a Cow"?

• 1:47Speaker 01

  So "A Phone Is a Cow" comes from the story of Iqbal Quadir, who is a central figure in the book. And Iqbal is the founder of grumming phone, which is today the dominant provider of mobile telephony services in Bangladesh. And Iqbal faced the challenge of Creating a mobile phone company in Bangladesh at a time when per capita income in Bangladesh was about $400 a year, which was the same price as a mobile digital handset at the time. So it was a daunting undertaking. Iqbal is featured along with Strive Masihwa because

• 2:29Speaker 01

  they were really the first two people to see mobile phones as a potential device for really everybody, including the rural poor in places like Bangladesh and Zimbabwe. So Iqbal was trying to understand essentially the business model to make mobile telephony work at the rural level, and he drew inspiration, in fact, partnership with Grameen Bank. And so Grameen Bank is famously known for micro loans to women in villages to essentially use those loans for productive assets, including, say, a cow. So the loan would really pay for itself through

• 3:14Speaker 01

  the productive use of the asset. And Iqbal's really central insight in terms of making mobile phones viable in a place like Bangladesh in the mid 1990s was that a phone could be a cow. A phone was essentially a productive item, a productive asset, and not as it really was seen in the West at the time as a consumption good, a luxury good. So that's where a phone as a cow comes from.

• 3:45Speaker 00

  And one of the things I love about this book, we hear his story, which is to call the roller coaster doesn't do justice to it. He and the other entrepreneur you mentioned, Strive, overcome unbelievable business hurdles, technical hurdles, regulatory hurdles. But the fundamental hurdle is what you just mentioned. You have a desperately poor country and you have an item that is a year's worth of income, if not more, for many, many of the people who are going to be the customers. So it's a fool's errand on the surface. What's beautiful about it, of course, is that

• 4:30Speaker 00

  Since that gleam in his eye, the price of a cellphone has fallen dramatically and per capita income in Bangladesh has gone through the roof for Bangladesh, increased dramatically, let's just say it that way.

• 4:43Speaker 01

  Yes, yeah.

• 4:44Speaker 00

  And the reach of that product is absurd, to the point where now Bangladesh, although its per capita income has grown dramatically, it's still, it's not a rich country, but there are more cellphones than there are people in Bangladesh.

• 5:00Speaker 01

  Yeah, yeah. No, I mean, exactly. And I think one of the things I really loved about delving into Iqbal's story, I mean, he and I have known each other for 20 years, so it was really an opportunity for me to work with him and really understand the details, the particulars of how that came about and situated, you know, in this kind of full context. But one of the details that surfaced was that he and his brother had a previous business idea, which was to develop a Bengali character set for the Macintosh, the earliest Macintosh. And at that time, Macintosh computer cost about $4,000 and the per capita income in

• 5:45Speaker 01

  Bangladesh was $200. So it was, you know, basically roughly 20 to 1. And so really, the obstacle was seeming completely insurmountable. Now, I think perhaps at the time they started Grumman Phone, now that I think about it, it may have been more like $300, the handset was $400, so it was a little bit more than, you know, 1 to 1. But what Iqbal was looking at was not the absolute number, the 1 to 1, but it was the change, that it had gone from 20 to 1 to 1 to 1. And that trend, on the cost side, there was every reason to believe that the cost, due

• 6:29Speaker 01

  to Moore's Law, which Iqbal was very well aware, would continue to drop exponentially and that income would grow. And so he foresaw exactly the phenomenon that you described, and that was really what the vision for Grumman Phone was based on.

• 6:52Speaker 00

  But besides the profitability, which ultimately came, there was an idea that this was going to make the world a better place by allowing people to have the freedom to pursue some things they might not otherwise be able to do because they were able to communicate. And one of the themes of this book is the power of communication and connection between people, also the power of connecting different products together in innovative ways. But how did the phone help make the people of Bangladesh more productive? In other words, it's true that once he had the idea, eventually Bangladesh got much

• 7:32Speaker 00

  wealthier and the cost of the cellphone fell, which made it a more viable business proposition. But the beautiful part of this story is that part of that transition was helped by the phone because the phone allowed people to do more than just chat with their relatives in faraway places. How is the phone in a poor country more than just a consumer luxury?

• 7:56Speaker 01

  Yeah, I think one of the difficulties of situating this book, particularly in contemporary US discussions about the mobile phone, is that we see the mobile phone not only as a consumer device, but as a pernicious consumer device. A time sink, a distraction engine, and the idea that the mobile phone could be a productivity enhancer seems anachronistic or, you know, if not just completely made up, right? That's just not our lived experience. But there's something that you and I, and I think probably everybody else knows, which is the United States is not Bangladesh.

• 8:41Speaker 01

  The lived experience of a consumer in really what is, on average, the top 5% of the global income distribution is not the same as it is for the other 95%, and certainly not for the bottom quartile.

• 8:58Speaker 01

  And so what does a mobile phone mean? What did a mobile phone mean in Bangladesh? Actually, Iqbal's brother started the dominant provider of mobile financial services in Bangladesh. So they're, they're, they're, you know, a brother pair that have brought not just communications, but banking. So what's the point there? The point is that the phone is not just being able to talk to people. It's not just being able to make deals and to understand what prices are and understand market conditions and save yourself a day's travel, as, as occurred with Iqbal in the 1970s. One of the reasons that he saw that, you know, his favorite phrase, connectivity is productivity.

• 9:42Speaker 01

  And, and he recalled, you know, an episode where, you know, he walked half a day to buy some needed medications for one of his siblings, only to find that the pharmacy was closed and then walked home. Now, he's a kid. What's his time worth? Not much, but it's a day of time that you would save, literally a day walking back and forth, that you would save just by a phone call. And, and, and that, that, that experience was, was reinforced over and over again, that connectivity is productivity. So just simply the fact of telecommunications service is, is, can be just an incredible time saver and saving time is saving money.

• 10:25Speaker 01

  Saving time is increased productivity. And, and, and beyond that, when we, that's the sort of what we, you know, I get to in later chapters of the book. I only get to mobile financial services, but the phone has been the delivery mechanism for an array of essential services that simply were not accessible, that did not exist to the rural poor before mobile phones, just as telecommunications services did not exist. Landlines never came close to reaching the majority of the world's population. And so, so it is because we have this abundance of services, abundance of options, abundance

• 11:09Speaker 01

  of infrastructure, this, this, this accumulation of a century of depth of investment in our environment, that, that, that the mobile phone seems superfluous. But it is anything but superfluous to the majority of people on this planet.

• 11:27Speaker 00

  The book's about, in some sense, it's nominally about the mobile phone, but it's also really about the role of entrepreneurship in our lives and in growth. So part of the book traces the rather unknown story, or not well-known story, of how the mobile phone came to be. And you ask the question, who is responsible for the mobile revolution? And that's not an easy question to answer, but talk about why that is, and to the extent it is answerable, who is responsible for it?

• 12:07Speaker 01

  Well, that is not an easy question to answer, and that is really, that's really the question I sought to answer in this book. So who is responsible? Entrepreneurs are responsible. Inventors are responsible. Farsighted government bureaucrats allocating budgets to unlikely projects are responsible. Consumers, who are willing to try something, adapt to something, are responsible. And really, the list goes on.

• 12:47Speaker 01

  My good friend and somebody who has been an inspiration in my work for 30 years now, Sid Winter, wrote an article two decades ago in which he really explored this question of who is responsible for a radical technological discontinuity? And he used the mobile phones as his example. I didn't even know that when I started the book, and I came across it. And so I quote him and cite him at length in the book on exactly this case. But so we've talked about Iqbal, and really, that's kind of like later in the story. The market pioneers who did what, you know, you might say, oh, last mile delivery. But it's not just last mile.

• 13:32Speaker 01

  It's to the majority of people worldwide. It's not a ...thing to bring a frontier technology to most people. And that has not been done for many technologies. So that's where we began. We began with those, what you might say, last mile pioneers. But then you sort of, you know, trace it back. Then there had to be the initial mobile phone companies in the U.S. And those faced a lot of obstacles. There had to be the inventors. So you have the, you know, Marty Cooper. I tell the story of Marty Cooper at Motorola, which was hardly an upstart, but it really was the challenger to Ma Bell at the time and not the obvious candidate for having developed the first mobile handset.

• 14:16Speaker 01

  And Marty Cooper's story is tremendous. Marty is still alive, the guy who made the first call on a mobile handset. Actually, Igbal and I did an event with him on the day of the anniversary, 50th anniversary of the first call placed on a mobile handset. So there's Marty Cooper's story and the whole story of how Motorola developed the first mobile handset. And then you go back again to AT&T, Bell Labs. And, you know, this notion that Bell Labs was possibly the greatest single institution responsible for invention

• 14:58Speaker 01

  in human history, it's a claim that one can credibly make. And mobile telephony is just one technology that really originated in multiple, across multiple dimensions, not just the transistor, but the network and extension. And then, of course, we go back. Where did the name Bell come from? Alexander Bell, Alexander Graham Bell. So that's actually where the book begins, is at the Centennial Exposition in Philadelphia, 1876, America's First World's Fair, where Alexander Graham Bell debuted the telephone.

• 15:41Speaker 00

  So, you know, I was thinking, we were talking, what an interesting idea that the mobile phone would be transformative. Well, the landline phone could have been equally transformative, but you'd have to be able to take it with you. So the, the, the shortcoming of the landline phone is that it's landline, it's in your house and it stays there. So if you're not in your house, it doesn't help you be more productive or happy or anything else. And it just struck me when you, you know, you made that list, one name you left off, two names you left off, uh, which I want to mention are Claude Shannon and, and Steve Jobs. So Steve Jobs had this idea that, as you say, it's, we're not as happy

• 16:25Speaker 00

  about it maybe as we once were, that, that we have a computer in our pocket at all times. But what an extraordinary visionary. And if it was just a phone, if it was all it was, was a way to talk to other people, it'd be nice and it'd be good. But the productivity to turn it into a bank, as you point out, it's more than a cow, it's a bank, uh, and many, many, many other things that make people more productive, took a different kind of vision that, that he brought. Uh, Claude Shannon laid the intellectual foundations for much of the digital revolution. And although Anthropic, as far as I understand, it does not say that Claude is named after Claude Shannon, he presumably is the namesake of

• 17:09Speaker 00

  their, uh, LLM. So here's a question I want to ask, having introduced with that. When I was a little boy in the, say, late 1950s, early 1960s, I loved books about explorers. They're very popular for adults to give books to children about exploration. Vasco de Gama, Balboa, Drake, Scott, Columbus, you name it. What could be better, right? Ocean voyages and, and dangerous missions and so on. And we learned that later, sometimes they were, they had a dark side that we know much about. We were told all that when we were seven years old, maybe for the best, maybe not. I'm not saying anything about that. But here's the question.

• 17:54Speaker 00

  They were figures of romance. Why is it that the intellectual explorers of the 20th century are so obscure? Why is Claude Shannon only a household name to people in the most morricane parts of the digital intellectualscape? D H Ring, a name you mentioned, who envisioned cellphone service.

• 18:21Speaker 01

  Known to absolutely nobody.

• 18:22Speaker 00

  Almost no one. Somebody named Jett, J E T T, you mentioned. Why are these people honored and celebrated and used to inspire young people the way physical explorers were? In many ways, they're as if not more transformative of our daily lives. Any thoughts on that?

• 18:42Speaker 01

  Well, there's so much in that question, Russ. I don't even know where to get started. I mean, you picked out, obviously, two very significant names that I did not reference. And just to the point of how many contributors there really were to the mobile revolution.

• 19:01Speaker 00

  You referenced them in the book. You just didn't mention in that little...

• 19:05Speaker 01

  Just now. No, of course. I mean, there's a lot about Claude Shannon, something about Steve Jobs.

• 19:14Speaker 01

  Let me... So I want to start by directly answering your question, which is that I don't know. You know, one of the phrases I developed kind of for the marketing material in this book, I think it's in the introduction someplace, is we too often confuse high net worth with net impact. And we're in a culture where we do celebrate entrepreneurs, and these entrepreneurs, you know, these days, at least from my vantage point, from how I see things, now have a little bit of a complicated public persona.

• 19:58Speaker 01

  You know, when we think about an Elon Musk or Mark Zuckerberg or so forth and so on. So a decade ago... It was a little simpler. Yeah. I remember 15 years ago when, uh, you know, Silicon Valley seemed pretty nice place. Like everyone was excited about, but, but these, these sort of tech titans, as we're thinking about them. You know, there's a, there's a tendency and it is a very flawed and mistaken tendency, a deeply flawed and mistaken tendency to identify entrepreneurship with those few people. These, these, these few very wealthy Silicon Valley situated success stories. Yep. That is not entrepreneurship. Uh, that, that has never been entrepreneurship. It will never be entrepreneurship.

• 20:43Speaker 01

  It is a very small fraction of what the entrepreneurial process is. Uh, Strav Masewa and Nick Balcadiere also are not representative of them. As we know, most entrepreneurship is a single proprietor. It's, it's anybody who takes initiative to build something, create something in the world. So it's a huge phenomenon. It's a global phenomenon. Uh, I think it's a very significant phenomenon. Uh, but why do we not celebrate these stories? Now you went beyond entrepreneurship. You didn't, we were, you talked about E K Jet, who was a government bureaucrat. Uh, but who wrote, um, a, an article, um, uh, for the Saturday Evening Post. Um, that was, um, really about, um, the future of mobile telephony. Um, and he wrote it in July, 1945.

• 21:27Speaker 01

  And so it was this, it was the, uh, it was the same month that, uh, Veneer Bush wrote, as we may think, talking basically about the internet. So these two visionaries saw the mobile phone and the internet at the same time. Now people do not, people, Veneer Bush is known, um, more than E K Jet. But, but so, so, so it wasn't just entrepreneurs you talked about. And then Claude Shannon. I mean, if anybody deserves to be a household name.

• 21:55Speaker 01

  In the United States and anywhere else, it's Claude Shannon. What an incredible figure. What a remarkable individual and to be able to contribute to adding to that. I mean, of course, people do write about Claude Shannon. He is remembered. But so I don't know the answer to that. I don't know the answer to that. But that's certainly one of the reasons I wrote this book. Now, if I could just go on one more moment about Steve Jobs. So, you know, one of the aspects of this story, when we think about, you know, there's a lot of the book, but you know, first third focuses on Iqbal Quadir's story. And so, why so much about Iqbal? And then Strive? And I think, you know, they do merit

• 22:39Speaker 01

  that. So, Iqbal started working on what was Ganafon and then became Grameen Phone in 1993. And we already talked about, you know, where Bangladesh was at that time. Iqbal exited Grameen Phone. He sold his position in Grameen Phone at the same time that Apple was beginning to think about the iPhone. So that gives you a sense of how early Iqbal was. It was certainly not the iPhone that influenced Grameen Phone. It was, Grameen Phone was in a previous generation. Nonetheless, I'm not saying that Steve Jobs doesn't merit

• 23:19Speaker 01

  his reputation as really one of the great consumer tech visionaries, you know, of the last century. And then Shannon, we could just go on. That could be an entire different podcast around Shannon. But Shannon is a foundational figure in not just mobile telephony, but computing and communications, generally speaking, and somebody to which we owe, you know, whether we want to blame him or thank him, but a lot of what the world we exist in would, was at least significantly advanced or would not exist without Claude Shannon.

• 23:55Speaker 00

  Yeah, we're all living in Claude's world. I think that's what it comes down to. Of course, my other thought, I asked the question, I didn't think about an answer. I guess the other part of it is that what Claude Shannon understood about the world is harder to convey to a seven-year-old than Balboa. So that could be, that's definitely part of it. But I think you're right. I think a lot of it's the money. The glamour for the great explorers, the glamour of risk and discovery, for, at least for European eyes, but for the internet, the glamour is the money. And that's a shame.

• 24:38Speaker 00

  But that's another, as you say, that's another story. Let's talk a little bit about Adam Smith, who plays a role in this book.

• 24:47Speaker 01

  Yes, a person about whom you've done some thinking.

• 24:52Speaker 00

  A little bit. A little bit. I don't, you know, I don't pretend I'm an expert on Adam Smith, but I do, I do find him fascinating. But Iqbal Quadir, this person who really laid the groundwork for Bangladesh's access to the mobile phone, was very influenced by Smith. Talk about in what way and what role Smith played, say, relative to the academic side of development economics. In some sense, you know, we say Anisov was the first economist, you could say he was one of the, you could argue he was the first psychologist, I like to say he was the first social scientist. He sat in his armchair and he tried to figure out how the world worked, right?

• 25:32Speaker 01

  Yeah, yeah.

• 25:34Speaker 00

  But academics, they do that, but they also worry about getting papers published and their CV. But Smith was just trying to figure stuff out. And why is that still useful today? And how does that, at least in your mind, or Iqbal's, contrast with the academic literature?

• 25:55Speaker 01

  So there are a lot of different types of entrepreneurs and I'm not at all going to make the claim that Ichbal, who as I indicate and as I describe in the book, I know well, you know, is typical. I don't necessarily think he's atypical either in the specific regard that I'm about to mention, which is that above all, he's an economic theorist. He is somebody who, from the very beginning, was interested in ideas, interested in history, and focused on the practical application of what he learned from studying Smith and

• 26:36Speaker 01

  Hayek and works of history that he engaged with very deeply, you know, in his 20s and 30s. And that didn't just inform, but really formed his notion for Grumman-Fon. So Grumman-Fon is an expression of an understanding derived from theory, and a successful one. And among the theorists who was most influential in this was Adam Smith. So now let's sort

• 27:16Speaker 01

  of, you know, contextualize Adam Smith. I certainly do not claim to be an expert on Adam Smith, but no, no, not any of us is in the field of economics, you know, we're all, we're all fans or influenced one way or the other. My favorite book about Smith is actually Albert Hirschman's The Passions and the Interests, which is barely about Smith at all, but is about the, you know, couple of centuries of economic thinking that led up to Smith. And for anybody who has not read that book, I would say that is one of my top five favorite books in economics. And just, just has, is full of really great insights that I believe are actually directly relevant to a phone as a cow. And so...

• 28:02Speaker 01

  One of the beautiful things about, I think, the way that Iqbal was influenced by Smith is it makes us rethink history as we understand it. So, just quick digression. This year, we're celebrating the 250th anniversary of the founding of the United States of America, or at least the Declaration of Independence. And so, one of the hallmark events that leading up to the Declaration of Independence was the Boston Tea Party. And that was a reaction to taxation without representation, right? So, the Crown imposed taxes on the colonies, and we did not have a role in that. What is not, a question that's not asked often is, why were those taxes imposed to

• 28:46Speaker 01

  begin with? And the reason is, the taxes were imposed to finance Britain's colonization of Bengal, which was, in some ways, the economic center of Asia and a crossroads of the world. Bengal, the textile revolution began in Bengal, and actually then migrated to the UK. And so Bengal was a place of tremendous importance and significance, and was Britain's first expansionary colony, colony of subjugation. The United States was a colony of colonization.

• 29:31Speaker 01

  Bengal was a colony of subjugation. And that required tremendous expenditures to maintain, and that's the reason we had the American Revolution, was because we were taxed to finance Bengal. So, there's a complete, we only think about Bangladesh, you know, Concert for Bangladesh, and the famine, and the revolution, and the miserable history of Bangladesh in the 1970s. Most people in the United States have not gotten past that idea. That's still where we think about Bangladesh. Desperately poor place, you know, Mohamed Yunis, Grameen Bank, all the rest of it, right? Well, there's a lot more to the story of Bangladesh, and to Bengal. And Smith saw that. Smith wrote about Bengal as this sort of crown jewel.

• 30:11Speaker 01

  And he also wrote about Bengal as a place whose wealth was derived from its communications network, going back to, you know, what we were discussing about earlier, but where, in the case of Bengal, the communications network consisted of rivers and channels and waterways that connected the country as a delta country, it's the delta of the Ganges River, that connected the country in an exceptional manner and that allowed commerce to flow from the coast to the interior. And so Smith wrote very eloquently, both about

• 30:48Speaker 01

  Bengal's wealth and also about its subjugation. So to see, to discover, as a young Bengali at Wharton, in the readings of, the writings of Adam Smith, to see Bengal reflected and celebrated was tremendously empowering for Iqbal. And from, you know, then forward, I think he really reinforced his notion that the misery that he knew of his country was not the totality of the story, that there was a before and there would be an after. And he was committed to being part of that after.

• 31:30Speaker 00

  And it's very beautiful. The other part you talk about, which I find very inspiring, is the power of human agency, the ability of people to imagine a future for themselves or for others through products they might bring to the world and make it happen. And of course, it doesn't always happen. When it does happen, it's not always successful. But this idea that we have some control over our destiny, which is a very American idea, but it's also very Smithian idea. And it's a... Unappreciated idea for its novelty. Because through most of human history, people thought of themselves as pawns.

• 32:11Speaker 00

  And of course, in the Marxist viewpoint, you're a pawn of your class, you're oppressed often. Most of the world is in that viewpoint. The idea that you have a choice and the ability to make something that isn't there before of yourself, or to do something for other people that's not charity, but will actually benefit them and you through their purchase of your product. I never really appreciated as a Smithian idea, this idea of self-interest in its sense of destiny and molding your future.

• 32:52Speaker 01

  Yeah, well, I mean, Russ, I won't exaggerate things or seem to pander excessively by saying that I wrote this book just with the intent of appearing on Econ Talk. It's a lot of effort, more than five years, just for this hour, which, by the way, I do enjoy and appreciate. But this is one aspect of the book that I really thought you singularly would appreciate. Because we don't have that many philosophers in economics. And I'm not saying we should.

• 33:36Speaker 01

  I mean, it's become a very technical discipline. And what constitutes a big idea in economics, from the standpoint of the history of economic thought, is not a very big idea. And so, you know, but this is a big idea. Predestination and agency juxtaposed is a big idea. It's a bigger idea than me, it's a bigger idea than you. It is among the biggest ideas.

• 34:08Speaker 01

  That exist, that we have, right? Choice, you know, free will, or destiny, God's will, or our own agency. And so, so there's kind of like, that's the third level, right? You talked about, the first level is the mobile phone, and Iqbal, and Claude Shannon, and this detailed history, which I just loved getting into. And to me, that's, that was the sort of the fun of the book, right? And then there's this next level of like, you know, the history of technology. And how do we think about, you know, economic development, theories of economic development? And, and so there's the kind of like a theory level, but that occupies, and then there's

• 34:53Speaker 01

  this philosophical level. So, the closest I get to that is, is talking about Tolstoy's second epilogue to War and Peace. And, and actually Tolstoy has, this is one thing I bookmarked. So, it's a long passage, but at the end of it Tolstoy writes, "Reason gives expression to the laws of inevitability. Consciousness gives expression to the essence of freedom." And so, he juxtaposes this notion of inevitability, which could be technological inevitability, how much does it matter that we had Iqbal Quadir or Strav Masewa? Right?

• 35:35Speaker 01

  Once you had the building blocks of a mobile phone, once you had the value that a mobile phone creates, it was gonna get to Bangladesh. Does it really matter that one or another person did it? Do we have any choice at all in our technological future? Once something is created, in a planet of eight billion people, someone's gonna figure it out. And if someone decides not to do something, somebody else will do it. Nuclear weapons, whatever it happens to be, these things are all inevitable, in some sense, in some way of thinking. Our reason tells us that. Our minds tell us that.

• 36:16Speaker 01

  We really have no way of controlling these forces that are beyond us. And the political philosophy of inevitability is Marxism. And it's Marxism, not in a derogatory term, it's not to say, "Oh, it's bad Marxism." It's thoughtful Marxism. It's thinking about history as, very specifically, class struggle, but beyond that, simply an inevitable force in which human beings play no significant part. And then we have the opposite, the great man theory of history, right? And it could be the Steve Jobs, it could be the Ichbala, it could be the anybody, it

• 36:58Speaker 01

  could be the Mother Teresa, these exceptional people, without whom nothing that we see would have occurred. I just said that about Claude Shannon, right? You said, "We're all living in Claude's world." And so how is this resolved? And in my view, and I've held this view for a very long time, if there's a single idea that's motivated my intellectual interest for the last 30-plus years, it is the notion that they're both true. It's just not that hard a problem. I mean, it's made out to be a hard problem. You know, the whole struggle between socialism and capitalism is made out to be a very hard problem. You know, is everything inevitable? Are we these, you know, these sort of capitalist, free-will people, Anne Randian, you know, creators? Is it one or the other?

• 37:43Speaker 01

  It's both. It's just both. And that's what I loved about Sid's piece, even though it's just a couple of pages, it's very simple. It's both. We have entrepreneurial initiative, we have free will, and we exist in a world in which a lot is predetermined. They simultaneously, they coexist in this sort of magical way. And at least that's the way I see it. I can't see it any other way. And that's really what I'm intending to say in this book. That's what the book is fundamentally about, is to kind of explore this duality of truly exceptional people who have capacities that other people do not have, who have determination that other people do not have, who deserve to be celebrated in just the way you said earlier. We should be telling these stories.

• 38:26Speaker 01

  And at the same time, there's this combinatorial progression of change over which we have not that much control. And these things exist simultaneously.

• 38:38Speaker 00

  Yeah, I would just put a little footnote to that. It's not so much that we don't have control, it's that... The sense in which individuals contribute to it is is a little more easier to predict. The incentives are overwhelming and they will win out. Those market forces are going to push us to certain outcomes. They will be enacted by individuals making choices. The speed at which they happen will depend on individuals.

• 39:06Speaker 01

  Who they benefit, how they benefit people at certain points, exactly.

• 39:11Speaker 00

  But but the idea of how we should look at our fate.

• 39:17Speaker 01

  Yeah.

• 39:18Speaker 00

  And how much of it is up to us, obviously, it depends on where you live and where you're born, who your parents were, and so on.

• 39:25Speaker 01

  Mm hmm, mm hmm.

• 39:27Speaker 00

  But the idea that Smith saw self-interest, which I think we think of usually as grasping.

• 39:37Speaker 01

  Yeah.

• 39:38Speaker 00

  Or as how I come down when I'm faced with a choice, say, in a negotiation, whether to leave money on the table or not, should I put myself first, or so on. There's such a broader view of that self-interest that you capture that is about our desire to remake the world in our own image, to forge it, to craft it. And your view that that's really what growth is about, it's not this inevitable 3% a year most of the time, sometimes two and a half.

• 40:13Speaker 01

  Exactly.

• 40:13Speaker 00

  But but rather this extraordinary range of options and endowments that we have of products that already exist, and asking, how might we combine some with others to make something that isn't here yet? And some of those things might take a very, very long time to be imagined if an individual didn't come forward with it at a particular time.

• 40:40Speaker 01

  Yeah, I appreciate your qualification, and you phrased it better than I did just now. It's a little bit of a subtle thing to articulate.

• 40:54Speaker 01

  And so, and I, and I, I was just looking in the book, you know how it is with, with books. You know, you finish a book and then I'm well into my next book and then you get the book.

• 41:07Speaker 00

  I just read it today.

• 41:09Speaker 01

  Yeah.

• 41:09Speaker 00

  It's a little fresher.

• 41:11Speaker 01

  I read it yesterday. I read it yesterday and I thought, this is pretty good. I like this book, you know? But that's one of the things I love. This is not my first experience with this, that when you discover a book, you get the physical book and there's just something about the physical book. I'm old school, something about a physical book, even your own physical book.

• 41:27Speaker 00

  Yeah.

• 41:28Speaker 01

  That when you read it, it reads differently.

• 41:30Speaker 00

  Yeah.

• 41:30Speaker 01

  So I have to say, full disclosure, I like the book. I, I mean, I feel like it's probably the best thing I've done, such as it is. I may, but so, so, um, so I was, I was, I just say that by way of, I wanted to find the specific quote.

• 41:47Speaker 00

  Yeah, let's find it. There's a nice quote from Smith.

• 41:49Speaker 01

  Well, it, it, it, the quote from Smith is a very specific quote. Yes, here it is. I found it amazingly.

• 41:55Speaker 00

  Okay. Cause I was looking it up online. Go ahead.

• 41:57Speaker 01

  So, so, so the, the, the, it's about agency. The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle that it is alone and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often encumbers its operations.

• 42:34Speaker 00

  Magnificent. And, and of course.

• 42:36Speaker 01

  Book four.

• 42:39Speaker 01

  So I almost wanted to read it again. It's so beautiful.

• 42:41Speaker 00

  Yeah, it's pretty great. No, it's pretty great. And I, I, I think I've read that quote before, but reading it highlighted like that in the book, it really, it grabbed me in a way it had before. But I wanted, I want to talk about another economist you mentioned in the book. And I thought I understood this paper. But I learned something I hadn't thought enough about, and it's a simple thing. But you pointed out in a way that forces you to think about it. And it's, I think, again, a very extremely profound idea. So.

• 43:17Speaker 00

  One of the more extraordinary achievements of human beings is to have illumination available at lower and lower cost. And by lower and lower cost, we don't mean, say, the monetary price, because that's not the right way to think about it. It's in different currencies in different countries, and it changes over time, and there's inflation. But the right way to think about it is, how much does a person have to work to be able to, say, read at night, or watch a play, a musical at night?

• 43:44Speaker 01

  Yeah.

• 43:45Speaker 00

  And that's fallen in unimaginably large ways. It's gotten incredibly cheaper for human beings to enjoy light. And I thought, yeah, that's cool. And the size of it, the magnitude, what's fun about the paper is he tries to measure it, and it's crude, doesn't matter. It's the enormous improvement in the human experience. But your insight, which I thought was incredible, which I missed when I think about that paper, is it's not just that the candle got brighter and cheaper.

• 44:18Speaker 01

  Right.

• 44:19Speaker 00

  It's that we sequence a set of radically different technologies. In one of them, you go and you kill a whale, and you take the innards of the whale and use it to create illumination.

• 44:37Speaker 01

  To light streets.

• 44:38Speaker 00

  Yeah. And that is really different than how my lights are working right now. And it's not just like, oh, it got better and better. That's not what happened at all. It radically changed over time as people thought of new things. I think that's really, well, the part that I think about a lot is how hard it is to measure standard of living. And that's because the transformations are dramatic. It's not just that, oh, the light's a little cheaper, so you have more purchasing power.

• 45:08Speaker 01

  Which is central to that paper.

• 45:09Speaker 00

  Right. So that part's in there. But the idea that, and there's a quote, which is,

• 45:18Speaker 00

  A one-sentence way, I'm not going to get it verbatim, you'll help me if you know it by heart, that captures this insight, and it's, I think, an incredibly deep insight for business. It relates to Clayton Christensen and the Innovator's Dilemma, which you've talked about recently on the program, it relates to development economics. It's the quote from Henry Ford, which is, you know, "People didn't know they wanted cars, they thought they wanted faster horses."

• 45:44Speaker 01

  Right, right, yeah, right.

• 45:45Speaker 00

  "What they really wanted was to move more quickly, but the only thing, way they could think about it was, I wonder if I could feed a horse something, he could move his legs quicker, and I could get across town quicker." The idea of a car is not just like, "Well, that's a faster horse." It's not, it's not a horse, but it is a better way to get across town, and that is the human experience. I just, I'm getting romantic about it, because I think it's incredibly profound.

• 46:12Speaker 01

  Yeah, I mean, and those, you know, I guess a few of us economists who are specialized in the economics of technology and innovation, like you sort of, I guess, any, you know, any subfield probably talks their way into thinking, like, "This is the only, this is the only subfield that matters." And so, with difference to all the other, you know, subfields in economics, and then when you talk about the economics of production theory, which is really my technical area, that's like 12 people, you know, that care about production, that's a settled problem. You know, nobody is thinking about the production function, but to me, that's an interesting thing to think about.

• 46:53Speaker 01

  So, the Nordhaus paper. The Nordhaus paper perfectly encapsulates what we were just discussing about free will versus inevitability, and you also referenced, you know, GDP growth. We could talk about...

• 47:17Speaker 01

  A diffusion, technological diffusion, S-shaped diffusion curves, right? And you look across any technology, there it is, there's the S-shaped diffusion curve. You always, it's, everything is so regular and smooth that it's hard to imagine that there's any discontinuity, any insight, any, you know, moment of, you know, particular significance underlying it, you know? And, and, and so Nordhaus's paper traces out this, this incredible decrease in the amount of human effort required to illuminate at night. And so, so on its surface, it, and it's a very powerful paper, I've been, one of the

• 48:02Speaker 01

  things that goes back to 1,000,000 B.C., you know, you talk about the long view, it's, it's

• 48:08Speaker 00

  It's a fire.

• 48:09Speaker 01

  It's a wood fire. Yeah, with fire, yeah, fire, going back to fire. So, um, uh, so in terms of the long view, in terms of your work that's been recognized by the, the Schaeffer's Risk Bank and Nobel's Prize of Economics, so-called, um, you know, it's, it's, it's kind of unique. But then, and I guess, you know, if I was trying to imagine what, what, what might have been new in this book about that paper, uh, maybe I, I would have guessed correctly, which is the discontinuities underlying that. I can't really improve on the way you characterized it. Uh, I was pulling up the, you know, the table, but you remembered, um, you know, uh, off the cuff, a lot of the highlights.

• 48:51Speaker 01

  And, and I think that, um, you know, the, the jump from whale oil to electrification is, is a terrific example. And, um, you know, and, and, you know, we can, we can attack the fossil fuels industry and of course, we're, we're very, you know, concerned about climate change and, and all that. But, um, you know, this, before that, we were, we were burning fellow mammals. Um, and that was worse. So, um, so

• 49:17Speaker 00

  And burning down, and burning down forests to stay warm at night.

• 49:21Speaker 01

  And burning down forests, exactly.

• 49:22Speaker 00

  Much worse than to illuminate, but just to stay alive in certain climates.

• 49:25Speaker 01

  Just to stay alive. So when we think about technological progress, what seems like regress in some sense, there's always these paradoxes of progress. We don't see the way in which we have improved across multiple dimensions, not just efficiency dimensions, but also ethical dimensions, as you know, just referencing. So anyway, yes, that is a core point of the book, and it's reflected in that paper. And I guess the big idea is that human progress is about new technologies coming into being and becoming widely used.

• 50:10Speaker 01

  And that's what this book is about. It's not just technologies coming into being. It's not just innovation. What Schumpeter talked about is innovation, a successful market demonstration. The landline was a successful innovation. It reached hundreds of millions of people. But it didn't come close to reaching the majority of people worldwide. The mobile phone did. And so it's a combination of creating new technologies, what Schumpeter talked about, carrying out new combinations. That was his phrase for entrepreneurship, carrying out new combinations. It's to bring those market innovations to people.

• 50:54Speaker 01

  And that's what Iqbal Quadir did. That's what Strive Masewa did. That's really the focal point of this book, although there's a lot of other elements to the mobile revolution. And I will maintain, given my areas of interest and expertise, I will maintain that there is no comparably important question in economics. Because this is the question of human progress. This is the question of human well-being over the period of millennia. Everything else about resource allocation, about policy, about macro, everything else is a footnote to this larger question of how new things come into being and how they reach most people. I cannot see it differently than that.

• 51:38Speaker 00

  Yeah, it's beautifully said. And it's...

• 51:43Speaker 00

  I want to bring, I want to bring Hayek in. And I, and when you said, when you're talking about the diffusion of technology and innovation that, or in this case, it would probably be invention that allowed, say, a filament to be, to bring illumination relative to whale pluber.

• 52:06Speaker 01

  Right, right.

• 52:08Speaker 00

  I've never thought about this before. I think, but when you frame it earlier, as we've been doing, in terms of inevitability versus agency, if you think about the Nordhaus insight that the price of illumination has fallen steadily over time, it's an emergent order, invisible hand argument. It looks like, if you look at it, that someone must have decreed that this should be.

• 52:42Speaker 01

  God's will.

• 52:44Speaker 00

  God's will, or it's a natural law, which is not, it's a different way of saying that's similarly, and it's similar in the sense that the key point here is the inevitability idea.

• 52:56Speaker 01

  Yeah.

• 52:57Speaker 00

  And your insight that it's both, the predestination inevitability combined with individual agency, so they're both happening at the same time. What's driving the illumination is that people like to do things in the dark, so they want light, they want to eat meals at night, they want to go to shows, they want to go to concerts, they want to read, they don't want to be afraid in the winter, starting at 4:30 in the afternoon.

• 53:27Speaker 01

  Right.

• 53:28Speaker 00

  And that fundamental human urge has allowed thousands of people over human history to better themselves by creating cheaper and better ways to banish darkness. And it's both. There is an inevitability, which is driven by the human desire for illumination, but you couldn't have that inevitability without the crazy.

• 53:57Speaker 00

  Insights of people to come up with crazy ways of achieving that, which couldn't be predicted until they happened. And to say, well, eventually I knew someone would have figured out a cheaper way to do it.

• 54:07Speaker 01

  Right.

• 54:08Speaker 00

  It's easy to say, but it's not, it's not gravity. It's not inevitable. It requires at the same time incentives to be in place for people to profit from that innovation and that invention. And it's really a beautiful thing. You know, we, we talk about Moore's law. And you know, people would ask the question, what kind of a law is it? And why should it be that we can always expand the capability of chips at a certain rate of computer chips? And it's, it's, you have the answer, and I've never heard a better one, which is this combination, it looks predestined, it's not.

• 54:53Speaker 00

  You could kill it, you could kill it easily with the wrong legislation and the, the wrong set of regulatory rules. But if you keep the incentives there for improvement, people will develop ways to do it, even though you may not know how they will. And that's the Nordhaus story. And it's, uh, it's, uh, it's, it's a Smith Tolstoy story, if I may be a little bold.

• 55:21Speaker 01

  Absolutely. And, and actually you went in a direction, I, um, it was part of your question I didn't, didn't answer, but, um, it's, um, you know, another way of thinking about, uh, you know, not just the, the core, um, contribution such as it is of this book, uh, but actually of my last three books, my, my only general audience books going back to 2012. Um, there, there's sort of a trilogy. And underlying that is this, this, this idea inspired by Schumpeter that, that entrepreneurship and innovation are the carrying out of new combinations. And this was 1911. And, you know, Schumpeter, uh, you know, before we had evolutionary biology, before we understood DNA, uh, you know, before we really understood the funding.

• 56:06Speaker 01

  fundamentally combinatorial nature of life itself, not to mention technology. He had that insight that there was something combinatorial about innovation. Now, the great Marty Weitzman, whose contribution spans so many different fields, almost to Kenneth Arrow, I would say, you know, very close, had a paper called Hybridizing Growth Theory, which is my favorite paper in the growth literature. And it also borrows from this notion of innovation being fundamentally combinatorial. My friend and mentor Stuart Kaufman, with whom I wrote some early papers, you know, is known for his insight about the adjacent possible that Stephen Johnson then picked

• 56:51Speaker 01

  up on. And the adjacent possible is fundamentally combinatorial. When you have, you know, a set of Lego pieces and you arrange them in a certain way, then given the configuration that you're holding in your hand, there are certain kind of imminent next steps based on the combinatorial nature of the thing you've created, that you add one piece, subtract one piece, you know, that there's a kind of an imminent next possibility in the combinatorial nature of technology that doesn't exist when we think just in terms of scalars. And so we lose something fundamental when we reduce just to the number line, that the technology isn't reducible in that way, it is fundamentally combinatorial.

• 57:35Speaker 01

  And so this idea of the adjacent possible is a way of understanding the combination of this paradox of how do we have free will and inevitability. And the way that the adjacent possible and the combinatorial nature of innovation does that is that the search space for combinatorial innovation is hyper exponential. It is simply impossible to think about in multiple lifetimes of the universe, exhaustively searching everything that God has given us as possibilities. So we must choose a path. And this whole notion of path dependency that Brian Arthur, somebody else who's been

• 58:19Speaker 01

  very influential in my work and my career, who I had the opportunity to meet in 1993 at the Santa Fe Institute Summer School, along with Stuart Kaufman.

• 58:31Speaker 01

  This idea of path dependency originates in this combinatorial nature of technology, and it is the way in which, you know, what I call combinatorial foresight, you know, free will operates in long-term economic growth. Someone has to choose something to try. Someone has to try it. Someone has to test it out. It's what Ricardo Hausmann, Danny Radrick, wrote about is, you know, economic growth is self-discovery. It's the same phenomenon. It's that somebody has to get out there and be that pioneer, be that Vasco da Gama. And for all, every Vasco da Gama, we know there's a bunch of people we never heard of who are sitting at the bottom of the seat, right?

• 59:15Speaker 01

  All those people had to do something. And so, so, so, so to me, when, when you see life, and Shannon wrote about life and combinatorics, I mean, there was, Schrodinger wrote about it, you know, it was very much imminent at the same time that the mobile phone was being created. These are the same set of ideas. They're not different ideas. There's the same set of people and ideas who understood the combinatorial nature of technology and who understood the importance of combinatorics in other areas of creation.

• 59:47Speaker 00

  But I want to put an asterisk or a footnote on that. And again, I learned this from you in your book. It's true, you're right, that, you know, if you have 20 Lego pieces in a certain configuration, you add, you have two you can add on to it. It's really different than if you have two Lego pieces and two to add on to it. Once you have a larger and larger stock of, that you're endowed with, the possibilities do become exponentially, which barely covers it, larger.

• 1:00:22Speaker 01

  Yeah.

• 1:00:23Speaker 00

  But I like your other point, which comes from the Nordhaus insight, your emphasis of the Nordhaus insight, which is, it's true that there's an inevitability about how I'm going to probably add these two pieces when I have 10 already. But I might want to break up those 10, start from scratch, and with those 12 pieces, achieve the goal I wanted to achieve in a totally different way. And that's, so for a while, you're trying to harvest whales more and more effectively.

• 1:00:59Speaker 01

  Yes, yes, yeah.

• 1:01:01Speaker 00

  And because of property rights, it gets complicated. That, that, that has a certain asymptotic, if not negative, impact after a while. But you do that for a while because that's the easiest game is to rearrange, not to rearrange, is to add on, is to combine what, the, the model you're given with some new stuff. But the genius who comes along and, and takes it to another level is the one who says, you know, I, I think I could rearrange all the pieces and create something that hasn't been there before. It's still just a rearrangement. It's still a combination.

• 1:01:36Speaker 01

  Right, right, right.

• 1:01:37Speaker 00

  But I'm gonna bring a new way of achieving my goals with this new combination. And that's, that's the visionary.

• 1:01:45Speaker 01

  Well, yeah, that's right. That's right. And, and I think you probably remember, I, I, I believe it was 2005, so roughly 20 years ago, um, the, the, the final discovered paper by Schumpeter, by Joseph Schumpeter, was published, uh, if I recall correctly, it was called Development. And it was one of the last papers that Schumpeter wrote. And it was on the question of novelty. And so here I've been citing Schumpeter, um, you know, in, you know, as essentially somebody saying that economically meaningful invention, which is to say innovation, carried out by entrepreneurship, is, is the carrying out of new combinations. This was Schumpeter's great vision and insight, and I've just been talking about that.

• 1:02:27Speaker 01

  But toward the end of his life, he was really struggling with this idea of novelty, that if that is true, then under what circumstances can we say something is, is truly new to the world? And the one, the one thing that is in that category in, in my book, the one element of the mobile phone story that I believe is in that category is the transistor. The transistor was something that was just

• 1:02:52Speaker 01

  Imagined and discovered the properties of semiconductors, the possibility of the transistor. And so going from the vacuum tube to the transistor was one of these discontinuities. But the transistor itself was useless. You can't do anything with a transistor, right? You have to use it for something. And it was a decade before, first of all, they figured out how to make them at any kind of scale. And second of all, what are you going to use it for? Like, it's going to be useful for everything. We know that. But it's got to be useful for something before it's useful for everything. So the transistor was this incredible new Lego piece, right? Once you have this Lego piece, then it was like, then you get to the point of like, wait, whoa, whoa, whoa.

• 1:03:36Speaker 01

  Like, everything we're thinking about computation is different. Everything we're thinking about ultimately of telephony is different. Everything we're thinking about, you know, a refrigerator is different. Everything becomes different once we have this thing that becomes the chip, right? Becomes the chip. And so, you know, to me, that's another kind of piece of this is that, that, once we have enough Lego pieces, almost all of invention, I mean, sorry, almost all of innovation, almost all of entrepreneurship, the overwhelming majority is rearranging new pieces. And a lot of it is just bringing existing stuff to markets that don't have it anymore. You know, I did not invent anything. He barely innovated anything.

• 1:04:21Speaker 01

  But he had to create a new way of thinking about something that existed in a new context, which was its own innovation. And so I think it's this interaction of the true novelty, which is just fascinating, how that can happen, and then this whole Lego piece combinatorial thing.

• 1:04:42Speaker 00

  But there's this last piece, and we'll close with this, which is, comes from a paper of William Baumel on rent seeking and how we should think about the wealth of nations, and where is it productive to spend your time in creating new products that help people or in creating new regulations that hamper your competitors? And when you read the story of the roller coaster of Iqbal and Strive, what's his last name?

• 1:05:12Speaker 01

  Masewa.

• 1:05:13Speaker 00

  Masewa. You are forced to realize that the romantic

• 1:05:21Speaker 00

  Story of the business person who has a vision, which they both did, and then forces the world, molds the world to accept that vision, or brings that vision into reality through a set of decisions, maybe with a team of talented people, say, is only part of the story, especially in poor countries with bad governance. Because the temptations of rent-seeking to hamper innovators is so depressing and so important for understanding why countries, certain countries, stay poor.

• 1:05:58Speaker 00

  And it's really hard to remember how many setbacks there are. Because, you know, you step back as an observer of, say, of Apple, and you say, "Yeah, well, Steve Jobs came up with this idea of a phone, and you had to figure out a way to have a screen to enter the numbers. Way to be like the, you'd punch a little keyboard, or what, etc., etc." There are all these decisions that get made. But, as you say, Ickball's not an innovator. He's not, excuse me, he's not a techni, he's not a technologist. He's not an engineer or a technologist. Not an engineer, yeah, exactly.

• 1:06:40Speaker 00

  And yet, what he overcomes through persistence and drive to bring, help ultimately lead to people in Bangladesh having more cellphones than people, is a part of the human experience and a part of the business world that is neglected because it's not romantic, and it's depressing, and it's frustrating, and it inevitably shows you the importance of persistence and drive as much as technology and vision of that kind, to bring things into the world that didn't exist before, so that people can actually enjoy them and use them.

• 1:07:26Speaker 01

  Well, I think that's, I mean, you know, you know what you're doing, so I'm not surprised. But I think that's a great place to close. And so there are a couple of things, you know, I think of real significance in what you just raised. First of all, the Baumol paper. Actually, I have a collection of books that inspired me. And Baumol really was a very significant figure. This is Baumol's Micro Theory of Entrepreneurship, recommended to everybody. But anyway, this specific paper of Baumol, it resolves in a kind of an issue that I think a lot of people, general public type people, you know, have with entrepreneurship, with elevating entrepreneurship, right?

• 1:08:08Speaker 01

  And intuitively, they kind of know something wrong with that picture, right? And Baumol, you know, it goes directly at that. Human trafficking is entrepreneurship. And I just read a great book about lobbying called The Walls of K Street, right? That's entrepreneurship. Sure. It creates absolutely nothing. It probably is net destructive, right? But there's a lot of effort and a lot of reward, a lot of financial incentive around that activity. Sure. And that is pure rent-seeking.

• 1:08:47Speaker 01

  And it is entirely an artifact of the construction of the regulatory environment, the governance environment, the fact that the state has the monopoly over the use of force, and that extends to a lot of other dimensions of economic and social life. And so there's a lot of ways that very creative, diligent, imaginative people can devote their efforts that are net destructive, or at best indifferent, to human well-being.

• 1:09:25Speaker 01

  And it's not at all guaranteed. Another big question in entrepreneurship, and I don't have a really firm view on this, I don't think it's something that it's sensible to have a firm view on, is our entrepreneurs created or made? I mean, sorry, made, you know.

• 1:09:37Speaker 00

  Made or taught.

• 1:09:38Speaker 01

  Exactly.

• 1:09:39Speaker 00

  Created or taught.

• 1:09:40Speaker 01

  Sorry.

• 1:09:41Speaker 00

  Created or born or created.

• 1:09:43Speaker 01

  Born or created.

• 1:09:44Speaker 00

  Born or made. No, born or made.

• 1:09:46Speaker 01

  That's it. Born or made, everybody knows what we're talking about. Okay. Okay. Are entrepreneurs born or made? I don't particularly care. I think they're at least partly made. There's some genetic aspect, it doesn't matter. But Baumol really kind of lands pretty hard on there's a certain subset of people that have these capabilities in any society. It's not everybody. And so how the society is organized will determine whether they become, you know, involved in the human trafficking, whether they go into lobbying, or in some other ways, you know, rent-seeking activities, or whether they become creative entrepreneurs. And so that's the one part of the institution story, that, you know, the How Nations Fail story that I buy.

• 1:10:31Speaker 01

  I mostly don't buy that at all.

• 1:10:33Speaker 00

  You're talking about, you're talking about the.

• 1:10:35Speaker 01

  Asomoglu and Robinson. Yeah, yeah. I mean, I, and for a lot of the reasons that we just talked about, right? I think it's, it goes much, much too far in the institutional predestination direction and misses human agency almost entirely, at least as I read it. There's parts of the book that get into human agency, but I feel like it fails to resolve that. So, but there is a piece of predestination, I think, that Baumol really hits on it. It's how entrepreneurs allocate, you know, their talent. And then, and then the second part of what you said.

• 1:11:18Speaker 00

  It's the rules of the game. You set up the rules of the game. Bad rules, you're going to encourage people to do bad things, and.

• 1:11:23Speaker 01

  You're going to encourage people to do bad things.

• 1:11:24Speaker 00

  A piece of predestination with human agency layered on top of.

• 1:11:28Speaker 01

  So, now.

• 1:11:31Speaker 01

  As for the second part of what you just said, having to do with the centrality of persistence, of grit, as you know, we often sort of talk about in entrepreneurial success. As evidenced in particular in this book, in the stories of Iqbal Quadir and Strav Masewa, but also Nick Hughes and Suzie Loney and Pesca and Shivani Saroya, who's more recently the founder of Tala, a great story. You know, in every case, it is determination.

• 1:12:09Speaker 01

  And I feel like that's really the kind of takeaway from this book that I feel sort of resolves this born or made a story about entrepreneurship. You know, we can all be inspired by stories of people who have exceptional determination, right? And, you know, Strav Masewa, you know, his initial idea, he left the country, he had the opportunity to study in England, and there was a revolution going on in to overthrow the white supremacist government in Rhodesia. And a cousin of his was part of that.

• 1:12:53Speaker 01

  And he said, "I'm going to come back and fight in the revolution," as he was doing, "with Mugabe and his allies." And the cousin said, "You know, we're going to win. Don't do that, you'll probably just get killed. Stay in England and study something that will be useful after we win." And so Masewa gets a degree in engineering. And so you think the story's going to be, he comes back and starts a mobile phone company. But no, that's not the story. The story is that he comes back and gets a job in the government telecommunications monopoly, because that's the only jobs that exist. And then you think, he's going to leave that and start a mobile phone company, but that's not the story. He wants to build a house.

• 1:13:37Speaker 01

  And he gets a loan for the house, but the quotes he gets for the... ...the construction are twice the amount of the loan. So, and in order to manage the project himself, he has to create a company. That's the only way. He has to actually create a company in order to get around this, this, this, you know, extremely high construction bits. So that company becomes very successful. It's a construction business, has nothing to do with telecommunications. And then out of that, he creates an ECOnet. So, and, and then he runs into one obstacle. He runs into another obstacle. He's abducted and threatened. There's all these stories. Ultimately, he first sues the government and loses. And then he appeals to the Supreme Court. He, he appeals to the Supreme Court on constitutional basis.

• 1:14:20Speaker 01

  So he not only sues the Mugabe government and loses, he actually makes a constitutional case that it is a, a, a right of the, of the people of Zimbabwe to have telecommunications services. And, and the heroes of this story actually is Supreme Court. It shows the importance of an independent judiciary. Because over and over, the Supreme Court ultimately rules in his favor. That's why he's able to succeed. But it's just part of the story. It goes on and on. I mean, the amount of determination. And he enlists his evangelical colleagues. He gets ministers who are in Zimbabwe, you know, in conversion missions, that, that actually sign up for ECOnet service even though it doesn't exist yet, to kind of subsidize.

• 1:15:03Speaker 01

  And these, these students showing up, 4,000 students show up and protest in favor of, of the Strav Masewa, because it's really part of this, the second stage of independence. It's the personal, the market independence. They've received independence from white supremacists, but now they have to kind of create that internal independence. So, it, it, this, what are we gonna do? What are we gonna do when we wake up in the morning? In a reality where so much is predetermined, so much seems out of our control? And what these, what this book... It says to me, what these stories that I did not create, I didn't create the stories in this book, they were lived by other people, it's a nonfiction book. I discovered the stories and I did my best to tell them. So when I say that they're great stories, I didn't create them, right?

• 1:15:48Speaker 01

  I mean, I just, I just identified them and tried to relate them, and they are great stories. And, and they're, they're great stories about how we actually make a difference. What we do makes a difference. It can make a difference, it will make a difference. What, what will be is not predetermined. We play a role, small and large, and I truly believe that. And I think it is a deep misunderstanding of history, philosophy, religion, and certainly economics, to believe otherwise. That's really the point of this book.

• 1:16:17Speaker 00

  But I would just add that we make a difference, but poor Strav Masewaio could have made a much bigger difference if he lived in a country that didn't try to crush him to enable Magabi to honor, to enrich his cronies. So that, that's just, it's a tragedy that a man of that talent had to devote so much of it to being allowed to do what he could do.

• 1:16:42Speaker 01

  You know, I just wanna, I just wanna add one thing to that. It's an interesting thing, because years, years ago, I mean, probably early 2000s, I was with Ichbal and the, the engineers from Telenor that had helped Grumman Phone come into being. And this was just after Ichbal, just as Ichbal was exiting Grumman Phone, so he still was part of the company. And I, I said this, I was like, you know, it's incredible that you were able to achieve what you did in the environment that you did. I mean, you know, and, and both of them, these, both the Telenor folks and Ichbal said, well, you know, actually, in some ways, it was easier. I don't think we ever could have done what we did with Grumman Phone in the United States because everything was unregulated.

• 1:17:25Speaker 01

  The, the, the, the way that you know that Strav Masewa and Ichbal Kadir were first was that they didn't pay for the licenses. Within years, within just a few years, the, you know, licenses, spectrum for mobile telephony, even in, in, in poor countries was going in the tens, hundreds of millions of dollars, right? Mo Ibrahim became a billionaire by aggregating those licenses. That instantly become very valuable once the market test was passed. But in Bangladesh, it was just a question of yes, there was a bidding process, but the licenses of the sales were given away because nobody thought that they were worth anything.

• 1:18:05Speaker 01

  So, yeah, I mean, there was something about this absolute lack of appreciation of what the possibilities would be that allowed them to bring together the resources in a way that in a regulated environment would be very difficult. So in some ways entrepreneurs in a place like the United States have a harder time because incumbent power is so entrenched, or at least can be, and regulations are so well-defined, you know, all the building and other restrictions, you know, that we talk about that are very significant. You know, so it's not totally clear that it's harder

• 1:18:50Speaker 01

  in these environments that we live in.

• 1:18:53Speaker 00

  My guest today has been Philip Powerswald. His book is Phone is a Cow. Philip, thanks for being part of Econ Talk.

• 1:19:01Speaker 01

  It's been a real pleasure.

• 1:19:08Speaker 00

  This is Econ Talk, part of the Library of Economics and Liberty. For more Econ Talk, go to EconTalk.org, where you can also comment on today's podcast and find links and readings related to today's conversation. The sound engineer for Econ Talk is Rich Goyette. I'm your host, Russ Roberts. Thanks for listening. Talk to you on Monday.