James Robinson on What It Looks Like When a State is Failing

The third and last episode from our Chicago live show is with James Robinson, a professor at the University of Chicago and a recipient of the 2024 Nobel Prize in economics (which he shared with Daron Acemoglu and Simon Johnson). His most famous work is 2012's Why Nations Fail, and in that book he and his co-author Acemoglu document the institutional factors — whether it is reliably run elections or open markets that help facilitate innovation — that determine why some states thrive and others don't. So we ask Robinson the big question: What would have to happen for the US to be considered a failed state? Read More: ‘Middle Powers’ Grapple With New Survival Strategies Under Trump https://www.bloomberg.com/news/articles/2026-10-14/-middle-powers-grapple-with-new-survival-strategies-under-trump?utm_medium=referral&utm_source=podcast&utm_campaign=odd_lots&utm_content=article Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox, plus unlimited access to the site and app. bloomberg.com/subscriptions/oddlots https://www.bloomberg.com/subscriptions/oddlots?in_source=oddlotspodcast See omnystudio.com/listener https://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.

• 0:00Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee, so search Barclays Brief wherever you get your podcasts.

• 0:24Speaker 01

  Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting Work Mode, available on Plus and Pro Plans.

• 1:06Speaker 02

  Games on a break? Don't doom scroll, try rips on Underdog. Buy a digital pack, rip it open and reveal a real physical card. Football, basketball, even Pokemon. Packs start at just $5. Ship it straight to your door or sell it back instantly at full market value. Max value up to $125,000. Download Underdog and get in on the chase. Deposit $5, get five free packs. Real rips, real cards, real cash. Only on Underdog. Unleash your dog. 18+, terms apply. Top grails are extremely rare.

• 1:39Speaker 02

  Bloomberg Audio Studios. Podcasts, radio, news.

• 1:55Tracy Alloway?

  Hello and welcome to a very special episode of the Odd Lots Podcast, taped live in Chicago. I'm Tracy Alloway.

• 2:02Joe Weisenthal?

  And I'm Joe Weisenthal.

• 2:04Tracy Alloway?

  Joe, there's a lot to talk about when it comes to institutional failures nowadays.

• 2:08Joe Weisenthal?

  Yeah, absolutely true. You know, there's a lot of people, they talk about geopolitics a lot. And of course, there's multiple wars going on. But I also think that if you're in the markets these days, just think about the economy, you actually just have to talk about politics, politics.

• 2:22Tracy Alloway?

  You really do. And so I'm very happy to say that we have the perfect guest, someone who's actually never been on the show before. But I think a lot of listeners will have heard of him because not only is he a Nobel Prize winner, he is also the author of a very famous book that you and I have probably read a couple of times now called Why Nations Fail. So we're going to be speaking with James Robinson. He is, of course, a professor at the University of Chicago. Hope you enjoy the conversation. Well, Professor Robinson, thank you so much for joining us. Really appreciate it.

• 2:52Speaker 04

  My pleasure.

• 2:53Tracy Alloway?

  Why do nations fail? No, okay, let me ask the other obvious question right now. Is, I'm just going to get into it. Is the US a failing nation?

• 3:04Speaker 04

  How long do we have?

• 3:07Speaker 04

  I, no.

• 3:08Joe Weisenthal?

  Okay, good.

• 3:09Speaker 04

  Not, not, not yet, not yet. Yeah.

• 3:12Joe Weisenthal?

  Wait, I have one more, one more random question. Do you call yourself a Nobel Prize winner? Or do you say, I, like, you're a Nobel Prize winner, right? I think it's a real Nobel Prize.

• 3:22Speaker 04

  Well, you know, there's some debate about that, you know, because Alfred Nobel didn't actually specify a prize for economics, you know, and it came later on. So, you know.

• 3:33Joe Weisenthal?

  It's a Nobel Prize. You're a Nobel Prize winner.

• 3:35Tracy Alloway?

  I think you should just go for it.

• 3:36Joe Weisenthal?

  Yeah.

• 3:38Speaker 04

  I, I've got, I've got the badge.

• 3:39Joe Weisenthal?

  Well, there you go.

• 3:42Tracy Alloway?

  All right, the US is not a failed state, is it? Or failed nation? Is it failing?

• 3:48Speaker 04

  No, I mean, you know, by failure, you know, we're really talking about economic failure, economic success. Failure is a big word. It covers lots of things. So, you know, my work is really about economics and about how societies who succeed economically do so because they create institutions, sets of institutions, kind of rules that channel people's energy, you know, in directions which are socially beneficial, innovation, entrepreneurship, creativity, you know. But those energies can be channeled in many different ways. And I think what you see in the United States historically is you've had very, what we call inclusive institutions, you know,

• 4:31Speaker 04

  institutions, rules that have created very broad-based patterns of incentives and opportunities, economic success, you know. And, and poor countries like Venezuela, say, went into decline because they created the opposite, which we, we call extractive institutions. So institutions that don't create broad-based opportunities or incentives. They create incentives, the very narrow cliques, the chavistas, you know, and most people are just excluded from opportunities. So, so I think the history of the US, you know, has been a remarkable success story. But I think, you know, as we point out in our work, in any society, there's always challenges to inclusive institutions.

• 5:15Speaker 04

  You know, some people were doing very well in Venezuela, out of that system. So, so I think, you know, there's always challenges. And there's been a history of challenges in the United States, by the way. You know, it's not, it's not a simple, you know, good guy, bad guy story.

• 5:30Joe Weisenthal?

  But the thrust of your work, if I understand it, is that typically in economics, and we talk about what's good economic policy. It's like, well, maybe we should have an independent central bank. Maybe we should have a tax system that doesn't penalize productivity, et cetera. And all of that may be true, but all of this is downstream essentially from politics, right? Is this the idea that like, there is no way to just like, set up, write down a list of good economic policies if the institutions and politics aren't there in the first place to be conducive to it?

• 6:04Speaker 04

  Yes, absolutely.

• 6:05Joe Weisenthal?

  Great.

• 6:06Speaker 04

  That's right. I mean, I think all that, you know, that, that stuff about economic policy and economic institutions are all important. But you, the politics has to support that, absolutely, yeah.

• 6:18Tracy Alloway?

  How did you actually develop that approach? Because when we think about economics, I mean, we, we often think of traditional economics as a model that says if X happens, then Y is the result. It's all very formulaic versus your approach that really emphasizes, I guess, the politics, the institutional strength. And you also emphasize, I guess, critical junctures in history where things could have gone either way.

• 6:40Speaker 04

  I think, you know, it's really, I was trained as an economic theorist, you know, and, and when I finished my PhD in 1992, I just, I had this kind of epiphany. And, and I realized I just, I was very interested in these problems, particularly of developing countries. And I realized I just didn't understand anything. And the first place I sort of, so I just needed to start immersing myself in some sense. And the first place I did that actually was in Colombia, interestingly enough. And when I got to Colombia, I realized I have no way of understanding what's going on here. And I just had to kind of back up and start asking myself, why do things happen the way they do? And then, then the politics just looms incredibly large.

• 7:24Speaker 04

  Like, think about Venezuela. How could you understand the economic trajectory of Venezuela or all those mistakes without understanding the politics of Chavez and Chavismo or even before that, you know? So, yes.

• 7:37Joe Weisenthal?

  So all of this makes a lot of sense and I find it very intuitive. But I also have an issue with, I guess I would say there's maybe a certain non-disprovability issue that, that I think about, which is that you say, okay, here's a rich country like Britain and the US. They say they must have good institutions. And then here are some countries that are poor, Venezuela, et cetera, Argentina. And you say, oh, they're bad institutions. But if we're only looking at the outcome, how do you actually establish sort of, I guess, a priori, that that is the actual thing? Let's say you didn't, let's say you didn't know anything about the economy. You were, you were looking at something about a country, but you were not given privy to GDP growth, anything like that.

• 8:20Joe Weisenthal?

  Are there other ways to know whether that country has good or bad institutions?

• 8:27Speaker 04

  I mean, you know, what we got the Nobel Prize for, me and my collaborators was sort of trying, sort of establishing empirically this connection between institutions and economic development. But, you know, that's a hard question to ask. You know, you could look at life expectancy, you can look at infant mortality, you know. I think when you look at most failing countries failing economically, yeah, they do badly in terms of income per capita, but they do badly in terms of most socioeconomic outcomes also. You can even look at night light, you know. The most famous photograph we have in our book is the Korean Peninsula at night.

• 9:02Joe Weisenthal?

  It's getting brighter, the North Korean Peninsula. It's getting a little brighter.

• 9:07Speaker 04

  Maybe the presidential palace in Pyongyang, you know. There's a wave pool, you need, you know, you need, you know.

• 9:13Tracy Alloway?

  You've mentioned Venezuela a couple of times. Can you just apply your framework for us to Venezuela under, I guess, Chavez and Maduro? And then Rodriguez now?

• 9:23Speaker 04

  Well, I think, you know, that comes into path dependence, as you mentioned. Like, I think, you know, if you look at the history of the Americas, if you look at this economic divergence between North America and Latin America, you know, that's, that's very deeply rooted in history. It's rooted in the way very different types of societies got created in the colonial period. You know, in Latin America, you see societies based on coercion of indigenous people, on slavery, you know, and, and that created hierarchy, you know, it created very extractive institutions. And that led to poverty. And, you know, I think, you know, if you look at the United States, of course, that's a complicated picture. The US South had what we would call extractive institutions.

• 10:07Speaker 04

  But for us, you know, and of course, the South until very recently was poorer than the rest of the country. It was less urbanized, there was less industry. But, you know, the key thing is that when the US institutional framework got kind of definitively set up in, you know, with the constitution, it's really the, you know, it's the North that somehow. Really created that, you know, so there were compromises.

• 10:29Joe Weisenthal?

  Actually, can you explain, this is a little bit of history, because when they landed in the US, they were hoping to replicate the extraction of South America. It didn't work the same way. Why?

• 10:41Speaker 04

  Yeah, I mean, that's a fascinating story that with the Jamestown Colony, the origins of the Jamestown Colony, you know, the colonists came with a model of how you colonize the New World, which was actually completely based on the Spanish conquest of Latin America. It's just that you couldn't, there were no indigenous people to exploit in Virginia. And, you know, there's a whole sort of farcical early history where the English settlers try to, you know, try to set up a model exploiting indigenous people. And the, you know, in the meantime, they didn't bother planting any crops and two thirds of them starved to death because their model was, we don't work, you know, we exploit the indigenous people. And when that model crashed and burned, then they had to kind of experiment with

• 11:21Speaker 04

  other types of models, including, let's get, we need to get British people to come here. So how do you get them to come? Then they created a much more inclusive set of political and economic institutions because they realized, you know, of course, this was before the slave economy takes off. They realized that, you know, to have a viable economy here, we need to get people to come. And so then there's this institutional transition, you know, and Virginia creates this legislative assembly with universal male suffrage, which is a sort of unprecedented innovation.

• 12:07Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets, fast. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

• 12:32Speaker 02

  Underdog already has team picks, player props, money lines, spreads, you name it, they got it. But apparently, somebody over there said, you know what's missing? Screaming like a maniac about a rookie card on your couch. And we love them for that. Because Underdog now has rips. You get a digital pack starting at just five bucks. You check the live odds, see which grails you could pull, then rip it open to reveal a real physical card. And the grails are no joke. They have cards up to $125,000 in value, and plenty to pull. From football and basketball to Pokemon, with new limited edition packs dropping regularly. Even cooler, you can decide to keep the card and Underdog will ship it straight to your home, or sell it back instantly at 100% of its fair market value. And the cash

• 13:17Speaker 02

  goes right in your account. No listing it online, no stranger lowballing you in the messages. Just rip, reveal, and cash out instantly. Or make some room on your shelf. Download Underdog and get in on the chase. Get five free rips packs when you deposit $5. Real rips, real cards, real cash. Only on Underdog. Unleash your dog. 18 plus. Terms apply. Top grails are extremely rare.

• 13:42Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT Work, I'm Carol Muster. Just when it seemed American car buyers had left electric vehicles for dead, there are new signs of life in that corner of the auto market. Bloomberg's Cara Carlson and Gabby Coppola report that Tesla and Rivian each posted better-than-expected EV sales for the third quarter. Executives at Hyundai and Ford say dealers are asking for more battery-powered inventory to sell as customers come back. Even some lower-volume models from Toyota and GM's Cadillac brand are gaining momentum. Dealers have also sold through much of that excess inventory, going from about a 180-day supply of EVs in early 2026 to 78 days' worth in August, roughly in line with industry stocks of vehicles

• 14:27Speaker 01

  with combustion engines. It all points to EV demand that's beginning to stabilize after last year's boom and bust tied to the cancellation of generous US tax credits for EV buyers. EV sales have stabilized at close to 6% of the US market this year, according to researcher Cox Automotive. To be sure, many automakers continue to report weak year-over-year EV sales, and a demand boom for new EVs has not materialized. Instead, shoppers are snapping up gas-electric hybrids, as well as used EVs, which can be had for prices similar to their conventional counterparts. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com/work. Available with all paid ChatGPT plans.

• 15:10Speaker 05

  This is Alexis Christofres for Bloomberg Surveillance. AI is everywhere. Outcomes are not. Not because AI doesn't work, but because AI hasn't reached the workflows yet. The campaigns, the launches, the quarterly planning, those workflows are still run by humans alone. AI is making individuals faster, but it's not making businesses more productive. That's the gap Asana is built to close. Asana is the operating system for human agent teams, your easy button for AI productivity across every team. Ready-to-go AI teammates pre-built for marketing, ops, and IT. No prompt engineering, no setup. They show up where the work is happening, already onboarded in your workflows, ready to deliver. And the

• 15:53Speaker 05

  more they work with your team, the smarter they get. With Asana, your whole company can work on the same plan towards the same goal, whether you're a team of 10 or 10,000. Asana, where humans and agents workflow together. Try it at asana.com. That's A-S-A-N-A.com.

• 16:11Tracy Alloway?

  Just going back to Venezuela. So with Rodriguez now, like, how would you, is that system still an extractive system?

• 16:18Speaker 04

  Absolutely. Yes.

• 16:19Tracy Alloway?

  Say more.

• 16:20Speaker 04

  And we're not doing anything about it, and we should be, yeah.

• 16:23Joe Weisenthal?

  Well, this relationship that now US and Venezuela have, or Marco Rubio and Rodriguez have, what is, is there an interesting parallel in history? Is this an unusual relationship?

• 16:36Speaker 04

  I, I think it's not so unusual. You know, I mean, I think if you look at the history of US relations with Latin America, you see similar things, you know, you know, US in the past occupied Haiti and, you know, Hispaniola and, you know, so there's the United Fruit Company. It's not ridiculously anomalous, no.

• 17:01Tracy Alloway?

  This is going to be a devil's advocate question. I just want to make that very clear before I say it. But is there a path where accountability to the US for Venezuela could lead to more domestic democratic accountability?

• 17:17Speaker 04

  In Venezuela?

• 17:19Tracy Alloway?

  Yeah.

• 17:20Speaker 04

  I, you know, I think it's very difficult for any outside power to sort out these problems, you know, in some sense. Like, what my research shows is that, you know, countries that make a transition from more extractive to more inclusive institutions, they do it because they find a way themselves, or they sort it out themselves, you know, like Chile, for example. So, you know, Chile is by far the most successful economy in Latin America. It has the best functioning institutions. That was the Chileans that did that, you know. So I don't think the US can really solve that problem in Venezuela. You know, I think they could probably not exacerbate it, but, but, but, but I don't, I'm not sure that they're able to solve that, that problem. And I think it's an interesting question,

• 18:04Speaker 04

  you know. So I wouldn't say, you know, I wouldn't say Latin America is the way it is because of the way the United States. Sometimes it's interacted in a very dysfunctional way, but I don't think the United States is responsible for the problem. That's much more deeply rooted historically.

• 18:18Joe Weisenthal?

  You know, you have a very big fan these days. The new president of Syria, I believe, who used to be a jihadi not that long ago, is now like Mr. like neoliberal, like going and like speaking at like, I don't know, like the Atlantic Institute in Brookings. And he's like, I read Why Nations Fail and stuff like that. First of all, that's, what's that like?

• 18:47Speaker 04

  I'm waiting for the call, you know, he hasn't called me yet.

• 18:50Joe Weisenthal?

  So, okay, this is, let's say he does call. He's like, I really liked your book, but now I gotta like put some of this institution building into practice. Is there a model for like, okay, let's build some durable, inclusive institutions that he could reach for? Is there another country where it's like, you know what, follow their playbook? That worked?

• 19:08Speaker 04

  Yeah. I mean, I think that that's very complicated, you know, because I think, you know, what our research shows, and, you know, the, the way we've approached this is, you know, if you want to compare all these different countries and today and historically, you need a sort of, you need a concepts which are sort of flexible enough to cover a lot of details. You know, if I talk about inclusive and extractive institutions, of course, the details of those things are very different. But if you're in the business of actually advising Syria, which I'm not in this business of advising, gut Syria or anywhere else, actually, you know, then all the details become...

• 19:44Joe Weisenthal?

  If he's listening, your phone line is open.

• 19:46Speaker 04

  I'm like, you know, what I'm happy to do is, you know, people want to talk to me and they want to ask me questions about what I know and what models might be helpful for them. I'm happy to engage at that level.

• 19:58Joe Weisenthal?

  Okay.

• 19:58Speaker 04

  But, but, you know, to do anything useful for Syria, you'd have to understand the details of the politics and the institutions and the society. And of course, I don't.

• 20:07Tracy Alloway?

  Well, this kind of gets to one of the criticisms from your famous non-fans, which was Bill Gates. So Bill Gates wrote a book review of Why Nations Fail, and he kind of criticized you for explaining why strong institutions matter, but not explaining how to actually get them. What's your response to that particular criticism?

• 20:29Speaker 04

  Well, you know, institutions are, you know, like, they're an outcome of a sort of political equilibrium, I would say, you know. So, so, you know, our research has been about trying to describe those equilibrium and trying to describe sort of historically why some parts of the world got into the situation that they did. And, you know, and so changing them, like, that's something completely different, you know, like, you know. So, so we try to describe historically why societies changed and how they changed. But, you know, the idea that there'd just be some lever that you pull in Syria, that seems a bit kind of simplistic to me, you know. So, so I, you know, I, you know, he

• 21:10Speaker 04

  has a very simple view of the world, I suppose, you know, he sort of thinks, he thinks like an engineer, you know. But, but, but, but social, social systems are not like, you know. They don't like computer programs.

• 21:23Joe Weisenthal?

  So we started off with like the very aggressive loaded question is US failing and you know.

• 21:28Tracy Alloway?

  And now we return to it.

• 21:30Joe Weisenthal?

  No, no, well, no, yes, kind of. We look at the United States these days and people are certainly like, you know, setting aside failing. Their institutions, like people are worried about the future of an independent central bank. People are worried about like, is our voting system going to be durable and so forth? Like, are there patterns of this? Does this look like anything familiar when you look across the country of, you know, across the landscape of failed, failed nations?

• 22:03Speaker 04

  I mean, I, you know, I think there's lots of problems in this country, honestly. You know, for me, President Trump and all of that is, you know, he's a symptom of people's discontent. You know, if you look at data on people's trust in institutions in this country, it's absolutely horrifying. You know, so there are real problems here. A lot of people are very unhappy with what's been going on, you know, with their opportunities, with the societies. And in some sense, you know, you could think of this as a big failure of inclusion in this country. I mean, if you don't have a college degree, you know, which is the, the sort of narrow majority of people in this country, you know, your income is no higher than it was 50 years ago. It's absolutely astonishing. So that's a failure of inclusion. So there are problems with institutions and they need to be addressed.

• 22:47Speaker 04

  And I think he's a symptom of there's problems. So we need to solve these problems and we need to figure out how to solve them. I'm not sure that he actually has a solution, but you know, in some sense, you have to recognize there's a problem to come up with a solution. And, you know, I don't think President Biden really sort of understood that, you know, and now we see it. And, and of course, it's a bit nerve wracking, you know, because part of this, you know, is a challenge to institutions for sure. But then you could say, well, institutions aren't working, so let's, let's figure out how to make them better.

• 23:18Tracy Alloway?

  You mentioned inclusion just then, and a part of your framework is this idea of if political power is broadly distributed or not. What if you get a system where everyone gets a vote, but their political choices are like ultimately determined by campaign finance and lobbying and who controls the media and the narrative that's being spinned? How does your framework apply to, I guess, what people would call democratic capture nowadays?

• 23:47Joe Weisenthal?

  Yeah.

• 23:48Speaker 04

  I, I mean, you know, I, I think, you know, so I've done a lot of research on this question of, you know, the impact of democracy on, on kind of public policy and economic growth. And, you know, what, what we find, I think the evidence is overwhelming that democracy is associated with better public policy, more inclusive public policy, more spending on education and higher rates of economic growth, you know. But, but that's not to say, you know, that there's, democracy varies enormously, you know, there's lots of different sorts of democracies and some democracies have worked very imperfectly. They could be corrupt, they could be clientalistic, they could be captured. I, you know, and I, so I think like, you know, I, I do tend to think that there are,

• 24:29Speaker 04

  those are issues, you know, like the, the enormous amount of money, you know, hundreds of millions of dollars that's thrown into these elections.

• 24:36Joe Weisenthal?

  Yeah.

• 24:37Speaker 04

  You know, is, is a problem, you know, for me, like, the biggest problem with inequality is actually the way it spills over into the political system rather than, you know, just in terms of the economy.

• 24:48Joe Weisenthal?

  Do you think oligarch is a good word to describe? You know, a lot of people refer, they talk about Elon Musk and oligarchs. It's become like a thing in the discourse. Or is that a useful term for when we look at the influence of money or extremely wealthy individuals who maybe are politically active, et cetera? Do you find the sort of oligarch framework to be illuminating?

• 25:11Speaker 04

  I'm not sure it is, you know, because, you know, the funny thing about Elon Musk is at the end of the day, you know, he's made all of that money through innovation, you know, and I think people admire that. You've got to admire the guy, you know, he's just so ambitious and driven and he's producing stuff that people want.

• 25:30Joe Weisenthal?

  And that's distinct from what we would classically call like, when we use the word oligarch.

• 25:36Speaker 04

  Yeah, I think, you know, when people start talking about oligarchs in Russia or oligarchs in, you know, Latin America or whatever it is, they think about people who've made their fortune by, you know, currying favor with the government or through monopolies and things like that. So it has this pejorative connotation that I'm not sure, I don't think it's good for society that Elon Musk can freely pour hundreds of millions of dollars into elections, but I think you have to recognize the way the wealth was made.

• 26:03Tracy Alloway?

  Actually, now that we're talking about Elon Musk creating stuff and subsequent wealth, can you talk about, I guess, industrial capacity? So this is, this is a big topic in the US. The US wants to build up certain industries, certain strategic industries. We seem to be in competition with China for doing things like semiconductor fabs and that sort of thing. In your framework, how do you sort of clarify, I guess, a government that wants to build capacity in a good faith, economic, maybe, you know, democratic way so that the gains flow to everyone versus an autocratic or oligarchic state where the wealth accrues to a select few?

• 26:43Speaker 04

  Well, I, you know, I think, I think there's good arguments for having, you know, various sorts of industrial policies, for instance. And, you know, you see, I mean, there's a lot of economists who say, oh, you know, we can't, you know, the United States can't do that. We can't build up all this industry. But actually, you know, the fact of the matter is, you know, if you look at a place like South Korea, South Korea created from scratch amazingly competitive industry, like shipbuilding industry, you know, Hyundai hadn't built a rowing boat, you know, in the late 1960s. And then it started, you know, you know, so, so it went from nothing to create. So, you know, why couldn't the United States do that? Of course it could, actually. So, so, but in order to do it, you need to be immensely serious.

• 27:27Speaker 04

  You need to plan, you need to have strategy. I don't see that.

• 27:32Tracy Alloway?

  How do you ensure that you don't do, do that in a corrupt way? So for instance, you know, right now, the US government is taking a lot of stakes in different companies. I think it just announced yesterday it was taking a 4% in global foundries and that might be fine, but some people might also worry that maybe the process is corrupt in some way, maybe we should better understand like which companies go up for a government contract bid and that sort of thing. How do you make sure it's, it's fair?

• 28:01Speaker 04

  Institutions.

• 28:02Tracy Alloway?

  Okay.

• 28:04Joe Weisenthal?

  You just say that, you say that, it's institutions. Leave it at that.

• 28:08Tracy Alloway?

  But which institutions? Which institution should we most be worrying about, actually? That's a question I wanted to ask you.

• 28:13Speaker 04

  Yeah, I think, I think accountability about, you know, that's really about the process through which this is done, how contracts are allocated, you know, that, that process. You know, I think in the Korean example, that, you know, that was not hap, when that started, you know, that was done under this sort of, sort of military government, you know, but, but it was a very different context, you know, it was a geopolitical context where there was this contest with North Korea, you know, it was like very pressing, you know, for the Korean military to do these things. But it was only sustained because that transition occurred in Korea in the 1980s towards much more democratic, accountable governance. Like then you see economic growth is even faster and, you know, I think that's, so,

• 28:57Speaker 04

  you know, I think one thing we point out in Why Nations Fail is all sorts of things can happen in a transitory way. You know, the Soviet Union even did well, you know, transitorially, but you have to sustain it, then the institutions become really important.

• 29:09Joe Weisenthal?

  Well, let's talk about China because they, obviously the economy has grown extraordinarily. You said like, you know, generally speaking, democracy is good, but it's not always great and there are ways it could go wrong. Like what, what, how would you describe the institutional preconditions such that China has seen such extraordinary growth over the last few decades?

• 29:32Speaker 04

  Well, you know, I think, I think if I look at the economics, then, you know, China has flourished because it made this transition from extractive to inclusive institutions. You know, it's not the genius of the Communist Party that did that.

• 29:44Joe Weisenthal?

  But what are the inclusive, people would say, what? China has inclusive institutions? So like, what are the inclusive institutions?

• 29:51Speaker 04

  I think, I think there's two things to separate here. One is the economics and one is the politics.

• 29:55Joe Weisenthal?

  Okay.

• 29:56Speaker 04

  So the politics is sort of unreformed, you know, and we would say that's extractive institutions. So the paradox is, you know, how you have that with inclusive institutions? I think, you know, the whole history of the Chinese transition from 1978 is the, you know, is the Communist Party kind of detaching itself from the economy to allow entrepreneurship, to allow business to start and, you know, so, so how is that combination possible? And, you know, what our theory says is that, you know, there's many instances of that historically, you know, even the Soviet Union, for example, grew very rapidly for 50 years, you know, so, so we would say, you know, that's a sort of anomalous, it's a kind of, we call that extractive growth, you know, and it'll go off the rails, you know, and

• 30:40Speaker 04

  it'll go off, I don't know how it will go off the rails.

• 30:43Joe Weisenthal?

  You're predicting, you're making a call here.

• 30:44Speaker 04

  Absolutely, yeah. So, so, you know, and I think the reason, the basic reason for that is obvious, which is power tends to corrupt and absolute power corrupts absolutely, you know, and you don't have to go very far back in Chinese history to see that.

• 31:12Speaker 02

  Underdog already has team picks, player props, money lines, spreads, you name it, they got it. But apparently, somebody over there said, you know what's missing? Screaming like a maniac about a rookie card on your couch. And we love them for that. Because Underdog now has rips. You get a digital pack, starting at just five bucks. You check the live odds, see which grails you could pull, then rip it open to reveal a real physical card. And the grails are no joke. They have cards up to $125,000 in value, and plenty to pull. From football and basketball to Pokemon, with new limited edition packs dropping regularly. Even cooler, you can decide to keep the card and Underdog will ship it straight to your home. Or sell it back instantly at 100% of its fair market value. And the cash

• 31:56Speaker 02

  goes right in your account. No listing it online, no stranger lowballing you in the messages. Just rip, reveal, and cash out instantly. Or make some room on your shelf. Download Underdog and get in on the chase. Get five free rips packs when you deposit $5. Real rips, real cards, real cash. Only on Underdog. Unleash your dog. 18 plus. Terms apply. Top grails are extremely rare.

• 32:22Speaker 01

  This is the Bloomberg Tech Minute, brought to you by ChatGPT. Now with ChatGPT Work, I'm Carol Muster. Just when it seemed American car buyers had left electric vehicles for dead, there are new signs of life in that corner of the auto market. Bloomberg's Cara Carlson and Gabby Coppola report that Tesla and Rivian each posted better-than-expected EV sales for the third quarter. Executives at Hyundai and Ford say dealers are asking for more battery-powered inventory to sell as customers come back. Even some lower-volume models from Toyota and GM's Cadillac brand are gaining momentum. Dealers have also sold through much of that excess inventory, going from about a 180-day supply of EVs in early 2026 to 78 days' worth in August, roughly in line with industry stocks of vehicles

• 33:07Speaker 01

  with combustion engines. It all points to EV demand that's beginning to stabilize after last year's boom and bust, tied to the cancellation of generous US tax credits for EV buyers. EV sales have stabilized at close to 6% of the US market this year, according to researcher Cox Automotive. To be sure, many automakers continue to report weak year-over-year EV sales, and a demand boom for new EVs has not materialized. Instead, shoppers are snapping up gas-electric hybrids, as well as UDVs, which can be had for prices similar to their conventional counterparts. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at chatgpt.com/work. Available with all paid ChatGPT plans.

• 33:50Speaker 05

  This is Alexis Christofres for Bloomberg Surveillance. AI is everywhere. Outcomes are not. Not because AI doesn't work, but because AI hasn't reached the workflows yet. The campaigns, the launches, the quarterly planning, those workflows are still run by humans alone. AI is making individuals faster, but it's not making businesses more productive. That's the gap Asana is built to close. Asana is the operating system for human agent teams, your easy button for AI productivity across every team. Ready-to-go AI teammates pre-built for marketing, ops, and IT. No prompt engineering, no setup. They show up where the work is happening, already onboarded in your workflows, ready to deliver. And the

• 34:32Speaker 05

  more they work with your team, the smarter they get. With Asana, your whole company can work on the same plan, towards the same goal, whether you're a team of 10 or 10,000. Asana, where humans and agents workflow together. Try it at asana.com. That's A-S-A-N-A.com.

• 34:49Speaker 01

  Running a business means you're always on the move. The Delta SkyMiles Reserve Business American Express card is made for frequent travelers who want premium benefits that works as hard as they do. For a limited time, new Delta SkyMiles Reserve Business card members can earn 200,000 bonus miles, the highest miles offered this year. And when you need to recharge, or find a quiet place to work, the Delta Sky Club can turn a layover into precious productive time. Or a restful reset. You can enjoy 15 visits each medallion year to the Delta Sky Club when flying Delta, and unlock unlimited Delta Sky Club access after spending $75,000 in purchases on your card during a calendar year. Plus, receive

• 35:32Speaker 01

  four one-time guest passes each medallion year, so you can bring a colleague along. That's 15 Sky Club visits, plus four guest passes for an annual value of up to $950. Value estimate based on $50 per visit rate to purchase additional visits or bring a guest to the Delta Sky Club. Apply today at www.delta.com/podcast. Offer ends 11/4/26. Minimum spending requirements and terms apply.

• 35:57Tracy Alloway?

  The argument you make in the book is that if you have maybe more economic inclusion without political inclusiveness, then you get this elite that basically stimmys creative destruction of industries. So you don't get as many, I guess, as much evolution in the economy as you would otherwise. And for that reason, in the book, you say that you think eventually China's growth is going to slow down. I mean, we're here in 2026. It's below 5% in the first half of 2026, but like, you know, 4.6% or whatever is still pretty good. What would make you think that you were wrong in that creative destruction argument?

• 36:37Speaker 04

  Yeah, I mean, that's a, that's a, that's a good question. I mean, you know, I tend to think I'm wrong all the time. You know, I don't admit it in public, but.

• 36:47Joe Weisenthal?

  No one's listening to this. This is not being recorded.

• 36:51Speaker 04

  I mean, I think, you know, like, obviously, you know, China is culturally very different, you know, from Western societies. So I think, you know, an interesting line of thought is to say, you know, maybe there's just something culturally different about China, you know, about the history of the state. You know, there's no history of accountability, you know, in China. You go back 2,500 years, you know, you don't have anything like that. You know, there's a very different notion of state and society in China. So, so I think, you know, you could imagine that there's, there's something anomalous culturally about this that keeps it going, you know. But I still think, you know, absolute power corrupts absolutely.

• 37:33Joe Weisenthal?

  It's gonna go after us.

• 37:34Tracy Alloway?

  It's just a matter of time.

• 37:35Joe Weisenthal?

  But you know, it's like, it's interesting, though, because, for example, a few years ago, they had the big crackdown on big tech companies. And like, Jack Ma was like, put in his place, et cetera. This, from the outside, and I'm very, I'm very unreliable here, because I consume a lot of Chinese propaganda on like Instagram and stuff. So I just think everything's going amazing there, you know.

• 37:58Tracy Alloway?

  Just China, massive.

• 37:59Joe Weisenthal?

  This looks like, this looks like a political system that's anti-capture, that's maybe avoiding capture more than a democratic institution. That the business, that you can get very rich in China, but you cannot, it's not easily for the successful businessman to have much political influence.

• 38:17Speaker 04

  Yeah, yeah. And, you know, China, China does have these advantages, you know, like, I mean, for example, this obsession with meritocracy in China. You know, I see that, you know, teaching Chinese students. You know, if you ask about where are they from, you know, you see this immense sort of social mobility in China. You can get ahead in China. Anyone can get ahead. And, you know, that's, that's very cultural also. You know, that's been for 1,000, 2,000 years, they've had this examination system getting on for, you know, where, you know, people got to the top and they worked for the, you know, the elite were meritocratically chosen. Now, the British elite, they're just a bunch of like, demobilized warlords, you know.

• 38:59Tracy Alloway?

  You know, the creative destruction thing reminds me, I wanted to ask you at least one AI question, probably more than that. But, so, the creative destruction argument is that if you have, you know, elites, incumbents in power, they're going to block new things because they want to protect their own sources of wealth. In a place like the US, if a local community votes against a new data center, is that democratic empowerment, or is that creative destruction? And how do you tell the difference between the two?

• 39:35Speaker 04

  Yeah, I mean, I think that's.

• 39:36Tracy Alloway?

  Sorry, not creative destruction, blocking.

• 39:37Joe Weisenthal?

  Just destruction.

• 39:38Tracy Alloway?

  Yeah.

• 39:38Joe Weisenthal?

  Economic destruction.

• 39:40Speaker 04

  I think that's, you know, that's, people are rightfully anxious about the consequences of AI for their jobs and their incomes and standard of living. You know, for me, the whole, you know, there's an interesting analogy between what's happening, I think, what's going to happen, and the Industrial Revolution. You know, if you look at the Industrial Revolution, the mechanization, in Britain, for example, the mechanization of, you know, cotton spinning, weaving, you know, what was the impact of that on weavers' wages? They tanked by 2/3. You know, their wages fell by 2/3. You know, what was their reaction? The Luddites, you know, they got hammers and they tried to smash up the machinery, you know. And so, isn't

• 40:21Speaker 04

  that what's happening now? And I think the analogy to falling wages is probably pretty apt also. You know, if you think about that fact that I was talking about earlier, about what's happened to people without a college education, the, the evidence suggests that the biggest factor explaining that is the diffusion of computers, computers displacing relatively unskilled workers. So, you know, we're still trying to recover from that. And now we're faced with AI.

• 40:48Joe Weisenthal?

  Well, I'm sure, you know, speaking more of AI, you know, in the last several weeks, there's been like this sense of dread and despair that's come over the math community because of these breakthroughs and probably math professors at University of Chicago, some of your colleagues. Like, would you be surprised if we had something that truly resembled a big neo-Luddite movement in America or in the modern world?

• 41:13Speaker 04

  Yeah, I'd be surprised. I mean, I, I, well.

• 41:16Joe Weisenthal?

  Aren't we still the same people, you know, like, have we changed?

• 41:21Speaker 04

  Yeah, I don't know. It's a good question. I don't, it's hard to know what it's going to accumulate into. I mean, I, you know, I think there's going to be, you know, science fiction aside, you know, there's going to be big improvements in productivity like there was in the Industrial Revolution. You know, it's how you spread, how you spread that benefits to society that's, that's going to be sort of critical.

• 41:43Speaker 04

  I don't know. That's a good question. Yeah.

• 41:46Joe Weisenthal?

  I read an interesting paper of yours in prepping for this, which is talking about the sort of like, maybe it's like the economist obsession with stamping out market failures. So there are things that economists don't like. They hate rent control. They hate, many of them think that like you gotta be really careful about like not setting minimum wages too high, union power, like maybe some of that like isn't optimal. But as you point out, like these, maybe these are like the least worst outcomes. Can you talk a little bit about maybe some of this sort of monomaniacal obsession with economists of getting rid of these and how they can be costly?

• 42:27Speaker 04

  Yeah, I think, I think the problem there is economists don't understand the politics of these things.

• 42:32Joe Weisenthal?

  Yeah, say more about that.

• 42:33Speaker 04

  You know, I mean, yeah, there's an economic argument for having trade unions if you have monopsony power. You know, if employers have market power setting wages, trade unions can actually increase employment. But, you know, leaving that aside, I think if you look at, you know, think about Western European societies where trade unions have played important political roles, like in Scandinavia, they've been enormously important in creating and sustaining inclusive political institutions. So you can't think about the economics without thinking about the politics. I guess that's a lot of our research.

• 43:07Joe Weisenthal?

  So like you get rid of the union and maybe you get a brief uptick in GDP, but then a couple years later, everyone is alienated and then it all falls apart. Like that's sort of the secret.

• 43:18Speaker 04

  That's part of the mess we're in now. You know, it's not just about the diffusion of computers, but also de-unionization, that, you know, the sort of elimination of unions in this country. That's also part of what's created this sort of alienation, it seems to me.

• 43:32Tracy Alloway?

  We're gonna have to insert the monopsony klaxon into this episode. Sorry, an ongoing joke we have on the podcast. Whenever anyone says monopsony, we're supposed to have a sound effect. I don't know if we actually do it, because I never listen to the post-edited versions, but.

• 43:45Joe Weisenthal?

  We can't listen to our own voices. It's too painful.

• 43:47Speaker 04

  I said that completely independently. I wasn't.

• 43:51Tracy Alloway?

  Just in terms of interesting research, is there anything you're working on now using AI that would have been impossible before you could deploy large language models?

• 44:00Speaker 04

  Absolutely, absolutely.

• 44:01Tracy Alloway?

  Tell us why. Give us a preview.

• 44:03Speaker 04

  So, so one, one, you know, one project we're working on is, so one of the things that we're sort of fascinated with at the moment is just trying to understand the role of kind of ideas on, in politics, you know, like, I mean, you know, economists and even political scientists tend to focus very much on sort of material interests. But I think ideas, like your, your notion of like how the world should be and what's a legitimate way to organize political authority. And that's very important, you know, we think. So, so what we're doing is basically using AI to sort of, you know, we've digitized enormous amounts of political, works of political

• 44:45Speaker 04

  philosophy. And we're using that to look at the impact of philosophical ideas on action in 17th century British politics. They might say 17th century British politics. Why the heck are we doing that? Well, that's the era of Thomas Hobbes and John Locke and some of these immensely important works of political philosophy. So we're trying to understand, how did those arguments affect the way people acted and argued and behaved? So that's, that would have been impossible without AI.

• 45:14Joe Weisenthal?

  I'm really excited about this stuff. I think like the opportunity to sort of like use basically quant, use quantitative approaches on huge bodies of text and score them on various dimensions is like a very exciting aspect of AI.

• 45:30Speaker 04

  Yes. No, I, I, I agree. I mean, you know, I, I, I tend to think, I'm trying to think of AI as something that complements me and makes me more productive. And, you know, I hope that's generally true.

• 45:42Joe Weisenthal?

  All right, we have one minute left.

• 45:44Speaker 04

  Oh, gosh.

• 45:44Joe Weisenthal?

  Why do nations fail?

• 45:48Speaker 04

  Because they create extractive institutions. There's still a minute left.

• 45:54Joe Weisenthal?

  Well, we didn't even need a minute.

• 45:56Tracy Alloway?

  What, what should we be watching out for in terms of the US?

• 46:00Speaker 04

  In terms of?

• 46:01Tracy Alloway?

  The US.

• 46:01Joe Weisenthal?

  Yeah, what should we be looking out for?

• 46:03Speaker 04

  Well, I think we should look at how the election goes next month and how properly things are conducted. And also, I think we should look at whether people try to undermine the kind of, you know, the, the sort of the, you know, undermine, I don't know what the right word is, the veracity of the election. I think what we've seen in this country in the last few years is enormous attempts to undermine, you know, elections. You know, there's very little evidence, for example, in this country, that elections are improperly done, or they're fiddled, or they're fake, or they're whatever. So I think this language attempting to convince people of that is very damaging to the institutions.

• 46:44Joe Weisenthal?

  Professor Robinson, thank you so much for coming to Odd Lots Live. It was fantastic.

• 47:02Tracy Alloway?

  That was another episode of the Odd Lots Podcast, recorded live in Chicago. I'm Tracy Alockway. You can follow me at Tracy Alockway.

• 47:09Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashil Bennett at Dashil Bennett, Cale Brooks at Cale Brooks, and Kevin Lozano at Kevin Lloyd Lozano. For more Odd Lots content, go to Bloomberg.com/odlot for the daily newsletter and all of our episodes. And you can chat about all these topics 24/7 in our Discord, discord.gg/odlot.

• 47:32Tracy Alloway?

  And if you enjoyed this conversation, then please leave us a positive review on your favorite podcast platform. If you're watching the video, then please like or leave a comment or better yet, subscribe.

• 47:42Joe Weisenthal?

  Thanks for watching and listening.

• 48:15Speaker 02

  Games on a break? Don't doom scroll. Try rips on Underdog. Buy a digital pack, rip it open, and reveal a real physical card. Football, basketball, even Pokemon. Packs start at just $5. Ship it straight to your door or sell it back instantly at full market value. Max value up to $125,000. Download Underdog and get in on the chase. Deposit $5, get five free packs. Real rips, real cards, real cash. Only on Underdog. Unleash your dog. 18+, terms apply. Top grails are extremely rare.

• 48:46Speaker 06

  Some people use ChatGPT to answer questions. Others use it to get real work done. With ChatGPT work, you bring the goal. Plus, real inputs like briefs, notes, files, feedback, data, and project plans. It can help turn them into an analysis, tracker, deck outline, prototype, or workflow you can review and keep shaping. You stay in control, giving direction and choosing the final output. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting work mode. Available on Plus and Pro plans.

• 49:17Speaker 01

  Join me, Cyndi Lauper, with Chef Michelle Bernstein and Dr. Panico to talk about psoriasis and psoriatic arthritis, the potential connection and risk of developing permanent joint damage. Cosentyx secukinumab is prescribed for adults with moderate to severe plaque psoriasis 300-milligram dose and adults with active psoriatic arthritis 150-milligram dose. Don't use if you're allergic to Cosentyx. Before starting, get checked for tuberculosis. An increased risk of infections and lowered ability to fight them may occur, like tuberculosis or other serious bacterial, fungal, or viral infections. Some are fatal. Tell your doctor if you have an infection

• 49:55Tracy Alloway?

  or symptoms like fevers, sweats, chills, muscle aches, or cough. Had a vaccine or plan to, or if inflammatory bowel disease symptoms develop or worsen. Serious allergic reactions and severe eczema-like skin reactions may occur. Learn more at 1-844-COSENTIX or cosentyx.com/cindy.

• 50:17Tracy Alloway?

  Some days, it's the little things you look forward to most. And with Pepperidge Farm's thoughtfully crafted cookies, there's always something worth savoring. Maybe it's a Milano, made with premium chocolate between two delicate biscuits. A Sausalito, baked with rich milk chocolate chunks and macadamia nuts. Or the simple buttery goodness of a chessman. So pour the coffee, find a comfy chair, and take a moment to treat yourself to a cookie. Or two. Pepperidge Farm. Have a little taste.