In July, Nick took the stage at TEDSummit in Edinburgh, Scotland to make the case for a new economics that recognizes people, not capital, as the driver of economic growth. The talk, released by TED last week, explains why unchecked greed will inevitably lead to the collapse of society. In this episode, Nick takes us behind the scenes of the making of the speech and shares his hopes for its impact, and TED Business Curator Corey Hajim gives us insight into the making of a TED conference. To hear Nick’s full speech, visit the links below.
Video of Nick’s TED Talk: https://www.ted.com/talks/nick_hanauer_the_dirty_secret_of_capitalism_and_a_new_way_forward
Audio of Nick’s talk on the TED Talks Daily podcast: https://podcasts.google.com/?feed=aHR0cHM6Ly9mZWVkcy5mZWVkYnVybmVyLmNvbS9URURUYWxrc19hdWRpbw&episode=ZW4uYXVkaW8udGFsay50ZWQuY29tOjQ4NTQ1&hl=en&ep=6&at=1568658932671
Nick Hanauer: Hey gang, to hear my full talk, you have to check out the awesome podcast Ted Talks Daily. Those guys post a new idea every day of the week on every subject imaginable. And you can find it wherever you’re listening to this podcast.
Nick Hanauer: If we truly want a more equitable, more prosperous and more sustainable economy, if we want high functioning democracies and civil society, we must have a new economics. And here’s the good news. If we want a new economics, all we have to do is choose to have it.
Speaker 2: From the offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer. One American capitalist’s desperate attempt to save us from ourselves.
Nick Hanauer: I’m Nick Hanauer, founder of Civic Ventures.
Stephanie Ervin: I’m Stephanie Ervin. I run a lot of our advocacy and campaign work here at Civic Ventures. Nick, your most recent speech for Ted is out. You recorded last month in Edinburgh on the Ted main stage, which was super cool. What an honor.
Nick Hanauer: Yeah, super fun.
Stephanie Ervin: And at the end of this episode we’ll play a clip from your speech at Ted and tell our listeners where they can watch the whole thing. But I want to take you back and talk about what led up to this moment of you taking the main stage at Ted this year. You’ve done two Teds before. Can you talk about those and what you covered?
Nick Hanauer: Yeah, so I gave my first Ted talk I think in 2012 and that was pretty controversial because I made this argument basically about inequality in 2012, that the true job creators in a market economy aren’t rich people like me, but rather are middle class consumers. Sort of hard to believe but in 2012 talking about inequality was not fashionable. It made people really angry and crazy. And there was a lot of controversy around that talk. But we got past that controversy and in 2014 I did another talk based on this piece I wrote for Politico called the Pitchforks are Coming for Us Plutocrats, where I warned that rising inequality was going to bring a lot of social and political disruption, which clearly has come.
Stephanie Ervin: Right. And that got 2.1 million views.
Nick Hanauer: Yeah. Right.
Stephanie Ervin: Incredible.
Nick Hanauer: But to be clear, the first one got millions of views too. And then the good folks at Ted agreed to let me do a third talk, which is less prognostication about the problem, but more a discussion of what we have to do to get ourselves out of this mess.
Stephanie Ervin: Right, so we’re five years from the last time you took the stage. That warning that you gave to your fellow plutocrats that the pitchforks were coming.
Nick Hanauer: Yes, they definitely are coming. Yeah.
Stephanie Ervin: Do you think it had an impact?
Nick Hanauer: The talk?
Stephanie Ervin: The talk.
Nick Hanauer: Well, it certainly didn’t prevent people from electing Donald Trump, which is very much in the spirit of the pitchforks coming. If you let inequality rise too much, it shreds the reciprocity norms that social cohesion and democracy depend on. And the election of Donald Trump was an expression of people’s anger about the political system.
Nick Hanauer: They were, most people felt screwed. And certainly Hillary Clinton represented, not an antidote to that screwing for a lot of people, but just more of the same. And they were lashing out. And so they ended up electing the person who was lashing out too. And now we have, honestly a big, big problem because it’s not just that the policies are bad, they are, but a lot of the norms that the democracy depend on have been torn down. And that is either going to be hard or it may in fact be impossible to repair.
Stephanie Ervin: The pitchforks are still coming. They may have come in one form.
Nick Hanauer: And it may be too late, but here we are.
Stephanie Ervin: But what about with the economic community, when you gave that first speech and even when you gave the second one in 2014 there wasn’t yet a consensus in the economic community that at least the orthodoxy was wrong. Do you think since then that’s changed?
Nick Hanauer: No, no, no. For sure.
Stephanie Ervin: You were confronting people with those speeches and they were shocked by what you said.
Nick Hanauer: And angered by the claims and for sure the academic economic community was still pretty resolute that there was no problem. Or at least the majority. And in 2014, the idea of the $15 minimum wage for instance, was still regarded as insane and counterproductive and politically impossible and so on and so forth. And now it’s a much more normalized idea. In 2014, we were still fighting with virtually every academic economist over the idea of that. That it was possible, plausible.
Stephanie Ervin: We’ve at least made some progress.
Nick Hanauer: We have made some progress, sadly, not enough fast enough, but definitely there’s been some progress made.
Stephanie Ervin: I want to spend most of our time talking about your most recent speech. It’s still super fresh. As we talked about, your last couple speeches were sort of predicting pitchforks being sort of a warning beacon for your fellow plutocrats, helping identify the problem that we were facing. And your latest speech sort of serves as an answer to that. Did you think about it that way when you were writing it? That you want it to be the answer to the question or problem you were identifying previously?
Nick Hanauer: Yeah, a little bit, but the other thing that happened is that our thinking evolved a lot over the years in between the last speech and this one too. My academic work with people like Eric Beinhocker and others on the weaknesses of neoclassical economics and the emerging strengths of the alternatives has developed a lot. And I could not in 2014 have articulated as clearly as we can now, why neoclassical economics and neo-liberalism is so wrong, not just morally objectionable, but actually factually incorrect. And what the alternative is and both of those things are infinitely clearer to me today than they were then. And I think I can say with super high degrees of confidence, how and why the existing neoclassical orthodoxy is wrong and how and why this emerging non neoclassical consensus is a good replacement for it. And so the challenge of this speech was to try to make in about 14 minutes, a speech about really technical things that people could kind of understand.
Nick Hanauer: And so in the speech we tried to identify a couple of, three of the foundational mistakes of neoclassical economics and neo-liberalism, the idea of equilibrium homo economicus. And to suggest an alternative way to think about it that the market economies are evolutionary systems that generate prosperity by enabling people to solve human problems. And that you can pretty easily derive from this new set of first principles, a set of reasonably simple ways to think about what to do and what not to do. And so I’m still at work trying to write a book on all this stuff, which would be complicated and comprehensive. But in the speech, I think we do a moderately decent job of laying out what’s wrong and what’s right and what we should do and what we shouldn’t do.
Stephanie Ervin: Yeah. And it’s a good exercise, right?
Nick Hanauer: Yeah.
Stephanie Ervin: To try and make approachable in only 15 minutes, these really complicated. Both the tear down and the what we can do now if we choose to argument. Especially given we’ve devoted even just on this podcast to some of the ideas you mentioned homo economicus.
Nick Hanauer: Yeah, hour after hour after hour.
Stephanie Ervin: Hour after hour.
Nick Hanauer: Yeah, yeah, yeah. A lot of content.
Stephanie Ervin: Are there things that you feel like you left out that didn’t make it in because it was only limited to 15 minutes?
Nick Hanauer: I left out probably a more adequate explanation of what the recent science tells us about human behavior and the dynamics of human social systems. That it’s now well established that people aren’t homo economicus. In fact, they’re cooperative, other regarding and social. That doesn’t mean they can’t be selfish. They can be and in fact often are, but that isn’t the fundamental part of human nature. That in fact, occasionally people are selfish, but if you think about your life, your daily life, 98% of what you do is cooperative behavior. Every time you walk through a door, go sit down in a restaurant or take an elevator, you are participating in cooperative behavior or doing stuff that only cooperation made possible. And then once in awhile we do something competitive.
Stephanie Ervin: Right, and all the human science, all of that research that’s been building over the years to explain that obviously can’t get cited and teased out in a 15 minute speech.
Nick Hanauer: Right. And the great challenge for the speech was, is that your instinct when you’re making one of these technical cases, you want to be able to cite and explain that there’s not enough time in a short speech like that. What you have to do is just assert and so we asserted a bunch of things in that speech, but feel strongly that we could, the assertions are defensible.
Stephanie Ervin: Yeah. I got to sit in a few practice sessions. I know a lot more went into it despite the fact that you know this shit cold. I know it wasn’t just one draft.
Nick Hanauer: Oh no. Oh my God. Yeah. We went through 30 drafts and the early ones were super technical and as you recall, we tried those out on people and they were just like, what did he say? People may still out there and say, “What did he say?” But trust me, what we ended up with was far better than where we started.
Stephanie Ervin: Did you think about the fact that Ted sort of represents this more elite audience when you were giving your speech and thinking about what you wanted to come out of it?
Nick Hanauer: There’s two Ted audiences. There’s the people who go to the conferences, that’s one group of people and then there’s people who watch the videos. That’s a similar but different audience, obviously. The group of people who want to listen to a 14 minute long speech on economics is a pretty elite crowd to begin with. I don’t care how, what kind of a speech you give, obviously not everyone is interested in that. We definitely tried to write the speech so that it would be broadly accessible and accessible to people who are not experts in economics or who didn’t think about this stuff all the time.
Stephanie Ervin: Do you think you achieved that in the end?
Nick Hanauer: Only time will tell. I don’t think it matters what we think. I think it matters what the broad audience thinks.
Stephanie Ervin: We talked about how over the years the consensus has changed at least on sort of throwing out the orthodoxy. Of being able to identify that sort of orthodox economics got it wrong. But the new ideas that you presented and that we’ll give our listeners a chance to hear, those new ideas are not the new consensus.
Nick Hanauer: No, definitely not.
Stephanie Ervin: There’s a group of you who think this is the path forward.
Nick Hanauer: Yeah. And the best, my colleague Eric Beinhocker, who runs the Institute for New Economic Thinking, has this framework that he uses to describe sort of the ecology of economics. And they’re really, there’s sort of three camps. There’s the orthodoxy, which are mostly old white guys who are like, what? Is there a problem? No, it’s all fine. What inequality? That’s good.
Stephanie Ervin: Profits are soaring.
Nick Hanauer: Yeah, yeah. Yay. And there is a big group of those folks who are like, no, homo economicus, perfect. Equilibrium theory, perfect. Everything’s it’s all fine.
Stephanie Ervin: I like being selfish.
Nick Hanauer: Yeah, exactly. It’s all good. Then there’s another group that of people who are trained classically but who definitely think, okay, there’s some stuff that’s super wrong here and we have made mistakes and we’re going to fix them. We call that school, market failurism. And market failurism, those are the group of neoclassical economic thinkers who acknowledge all of the market failures, inequality, climate change, the disruptions of globalization, all these things. They’re like, oh my God, there are all these markets.
Stephanie Ervin: Trade, consequences, all the bad shit.
Nick Hanauer: All the bad shit. There’s a ton of bad shit. Yeah, there’s a ton of bad shit and those are called market failures and we have to fix them and we have these ways of looking at it that will allow us to address market failures. And that’s good work and fine work. But there’s this other school of thought which we’re trying to build, which is that maybe we should have a theoretical framework for economics where all of the interesting bits, you don’t call market failures. It’s kind of nutty.
Stephanie Ervin: Novel.
Nick Hanauer: That all of the things that you need to work on in economics, we call market failures. That’s a sign that maybe the theoretical framework you’re using is inadequate. And our argument is, if your behavior model is wrong, if the way in which you could see the system is wrong, if your theory of value is wrong, and if your way of imagining how human societies generate growth is wrong, then all of the things that happen will be failures. And if you get your behavioral model right and you have a modern view of the system and you have a adequate theory of value and a better way of understanding how human societies generate progress, then you have essentially incorporated all of the interesting bits in economic theory. And it’s not just a matter of smashing down the failures. And so that’s what real new economic thinking is. That’s the promised land. And the great challenges to build the theoretical framework in the promised land while encouraging the market failurism guys to continue to work hard to mash down the failures.
Nick Hanauer: And the challenge of course is, is that even the best people in market failurismland who are working assiduously to try to make the world a better place, are quite defensive about their theoretical models because they are wedded to them and still think that they’re all we need to fix the world. And I respectfully disagree. I think that those models are what got us into this mess, and they’re not likely to get us out in a complete way. That’s the challenge.
Stephanie Ervin: Yeah. And so like you said, you didn’t invent a lot of this content but you’ve collaborated on a lot of it with folks in the new economics space.
Nick Hanauer: Yeah, we didn’t, to be clear, we didn’t invent any of these new economic concepts. All we’ve done, our work has been simply to raise up in a coherent way, the research that social scientists have been doing for the last 40 years on behavior and systems and so on and so forth. Eric and my work is to simply show how and why we know the old frameworks are just wrong, just objectively wrong and what social science has produced over the last 40 years to replace it. And when you lay it out, it’s like holy crap. That stuff’s wrong and this stuff’s right and we should go in this direction. But it will be a long, hard slog to get there.
Stephanie Ervin: But I think the other contribution that’s significant that you make in particular, is finding ways to make these arguments accessible and approachable and understandable. Because it’s not, I don’t know this to be true because I’m not in your sort of academic space, but I would assume that if you’re purporting a new economics that’s more inclusive, that then the arguments should be more widely shared too. The theory and the understanding of where growth comes from should also be available and transparent and not just kept among economic elites.
Nick Hanauer: For sure. And one of the great challenges is to create a new political consensus around new economic theories. Because in the absence of that, you end up with the same crappy policies framed in the same crappy ways by the same crappy people, benefiting the same small group of rich people. That the economic consensus over the last 30 or 40 years created a political consensus that generated a policy consensus that screwed most people and benefited a few. And so in the absence of creating a new kind of consensus, that thriving middle class creates growth isn’t a consequence of growth. You can’t really build the politics and the policies that will lead to a better world.
Stephanie Ervin: Yeah.
Stephanie Ervin: It was fun to talk to Nick about his experience with Ted and what went into planning his speech. But I also wanted to get behind the scenes with the Ted folks and what it was like to work with Nick from their perspective. To do that I talked to Corey Hajim from Ted.
Corey Hajim: I am Corey Hajim. I’m Ted’s business curator, which means that I look for speakers from the world of business to talk about ideas on our stage. And then I also help people script their talk and deliver it. I coach them through the process.
Stephanie Ervin: And what did you do before joining Ted?
Corey Hajim: Probably not a typical background for people at Ted, but I worked in finance for about 10 years just prior to Ted, both in asset management and then also as an analyst and an investor.
Stephanie Ervin: Oh wow.
Corey Hajim: Yeah. Kind of unusual. But I think in some ways sort of similar because as an investor you’re always looking for interesting people with new ideas and kind of understanding their stories and their strategies and trying to figure out whether they have power and traction. In some ways similar.
Stephanie Ervin: Do you like it more than finance?
Corey Hajim: Yes. This is the best job I’ve ever had. I absolutely love it. There’s nothing, I can’t imagine a more interesting job. You’re just meeting with people. Interesting, smart people who have ideas and want to have the impact and then really helping them shape and deliver their message in a way that can be, have the most impact. And helping someone communicate something really clearly and then seeing them do it is so satisfying. I also don’t have to wear suits.
Stephanie Ervin: Bonus, I don’t have to wear suits either, which I also really cherish. Can you tell us a little bit about how Ted goes about curating the main stage? What goes into it? How do you decide what topics or people to include?
Corey Hajim: Sure. As I said, we have a team of curators and some people have particular specialties so we’re all kind of out and about talking to people and reading and listening and so there’s kind of two ways to come at it. There are, what are the ideas that we think are important to bring to the Ted audience and then trying to find a speaker to match with that. Who’s the right person to speak to that topic? And then there’s just like, here’s an interesting person doing XYZ, and trying to narrow down what their idea might be. It’s both sides of that equation. And then in general when we think about a conference, we want people from all around the world. We want a balance of different backgrounds and industries and specialties and even speaking styles if possible. We want a really balanced and broad program with science and tech and business and art and all the different things.
Stephanie Ervin: I want to transition a little bit into Nick and his specific speech. Why did Ted decide to have Nick on stage in Edinburgh this year?
Corey Hajim: Well, the topic that Nick was addressing around economics and income inequality is one that we felt was really important. And we did have several speakers who overlapped in some ways with the issues that Nick was addressing and we felt he had a unique perspective. We’re always looking for people, when we go to find a speaker, we look for somebody who has deep expertise in the subject matter that he or she is going to address. And so for Nick, this was something he was very passionate about. He had studied, he had actually had projects that tested his theories, with the minimum wage issue in Seattle. We were really excited to have him be a part of it and share his perspective. And it’s pretty unique as someone who’s been very successful and then, has spent a lot of time thinking about how the world and capitalism can be done differently.
Stephanie Ervin: Looking back, do you have any reflections on the process that went into helping Nick prepare his speech? What was it like from your vantage point?
Corey Hajim: From my vantage point, Nick was great to work with. Very open to conversation about different points he was making, feedback. Crafting a Ted talk is probably more of a collaborative process than people realize. There’s always a small group of people on our side that is there to help that speaker craft their talk. And it’s very much their idea and their words. But when you’re thinking about giving a talk that will hopefully reach a million or more people, you want to make sure that those words land in a way that can have the most impact. We’re always here to help people. And Nick was great about receiving that feedback and being thoughtful about how he was going to present his idea and just continuing to craft it. It is so many rounds of iteration and he was really great about it. It can be hard. It’s hard to keep going and going and going, but it’s usually worth it. And he was great to work with.
Stephanie Ervin: And you asked Nick a question at the end of his speech. What was the question and why? Why did you think it was important to ask it?
Corey Hajim: The question was about his wealth that he’s built over the years and he was talking about economics and that we should change it and how it’s done and it’s unfair and it’s creating inequality and growing inequality in our world. And so the question was about, if you don’t like the system, why not give your money away? When we ask followup questions, it’s often to address something that might be a critique of a talk. We figured this might be something that people would be thinking about. And so we do those followups to just let that person kind of address something that might be criticized.
Stephanie Ervin: It feels like every conference is sort of a moment caught in time, and that it reflects the sort of maybe the leading edge, maybe of the place that we’re in. What do you think the future holds for Ted, five or 10 years from now?
Corey Hajim: It’s really hard to say, but I think, and I hope that we’ll continue to do what we do, which is find new and world changing ideas to share with people. I think Ted’s really unique in that when people come to the conferences, they’re really engaged. They put away their phones. We don’t allow people to have their phones out. They’re focused and they’re really interested in curious in these big ideas that can have huge impact and change the way they think about things. And I hope that we continue to bring ideas to people and that people remain open to having their minds changed or learning something new. And so I don’t know that things will be dramatically different. Just the ideas will keep changing.
Stephanie Ervin: Well I really appreciate getting the chance to talk with you today and pull back the curtain a little bit for our listeners about what goes into everything that you all do at Ted and the speech that Nick gave this year. Thank you so much.
Corey Hajim: Oh, we were glad to have him and thank you. It was great.
Stephanie Ervin: We’re going to play the last five minutes of Nick’s Ted speech. Nick, could you sort of tee up for our audience what they’re about to listen to?
Nick Hanauer: Well in the last five minutes, we sort of go to what you should do. And the five rules of a better economic organization, and I think we should let the speech speak for itself.
Nick Hanauer: How do we leave neo-liberalism behind and build a more sustainable, more prosperous and more equitable society? The new economics suggests just five rules of thumb. First is that successful economies are not jungles, they’re gardens. Which is to say that markets, like gardens must be tended, that the market is the greatest social technology ever invented for solving human problems but unconstrained by social norms or democratic regulation, markets inevitably create more problems than they solve. Climate change, the great financial crisis of 2008 are two easy examples.
Nick Hanauer: The second, the second rule is that inclusion creates economic growth. The neoliberal idea that inclusion is this fancy luxury to be afforded if and when we have growth is both wrong and backwards. The economy is people. Including more people in more ways is what causes economic growth in market economies.
Nick Hanauer: The third principle is the purpose of the corporation is not merely to enrich shareholders. The greatest grift in contemporary economic life is the neoliberal idea that the only purpose of the corporation and the only responsibility of executives is to enrich themselves and shareholders. The new economics must and can insist that the purpose of the corporation is to improve the welfare of all stakeholders, customers, workers, community and shareholders alike.
Nick Hanauer: Rule four, greed is not good. Being rapacious doesn’t make you a capitalist, it makes you a sociopath. And in an economy as dependent upon cooperation at scale as ours, sociopathy is as bad for business as it is for society.
Nick Hanauer: And fifth and finally, unlike the laws of physics, the laws of economics are a choice. Now, neoliberal economic theory has sold itself to you as unchangeable natural law when in fact it’s social norms and constructed narratives based on pseudoscience. If we truly want a more equitable, more prosperous and more sustainable economy, if we want high functioning democracies and civil society, we must have a new economics. And here’s the good news. If we want a new economics, all we have do is choose to have it. Thank you.
Corey Hajim: Nick, I’m sure you get this question a lot. If you’re so unhappy with the economic system, why not just give all your money away and join the 99%?
Nick Hanauer: Yeah, no, yes. Right. You get that lot. You get that a lot.
Corey Hajim: Not the first time.
Nick Hanauer: If you care so much about taxes, why don’t you pay more? And if you care so much about wages, why don’t you pay more? And I could do that. The problem is it doesn’t make that much difference. And I have discovered a strategy that works literally 100,000 times better, which is to use my money to build narratives and to pass laws that require all the other rich people to pay taxes and pay their workers better. For example, the $15 minimum wage that we cooked up has now affected 30 million workers. That works better.
Corey Hajim: That’s great. That’s great. If you change your mind we’ll find some takers for you.
Nick Hanauer: Thank you.
Corey Hajim: Thank you very much.
Nick Hanauer: Yeah, so there you go. And for sure could not have done this without, of course, our our own Goldie who helped me revise this speech about a thousand times. And my collaborator Eric Beinhocker. And by the way, the folks at Ted, Bruno who made a huge contribution and honestly a bunch of other friends, my friend Brian Koppelman, the Creative Billions weighed in, my friend Neil Katyal gave me some great advice. A whole mess of other people and hopefully it worked out.
Stephanie Ervin: Yeah, team effort. As a reminder, if you want to hear the full speech, you can find it at Ted Talk’s daily podcast or you can view it on ted.com and we’ll make sure to put links to both in the show notes.
Nick Hanauer: On an upcoming episode of Pitchfork Economics, we’ll be talking about free trade, but of course as is our want, much of that conversation will be theoretical. We want to hear from you, how has trade policy affected your life? Have you had a job offshored overseas? Has it been good for your business? Tell us your story. Give us a call at (731) 388-9334 and maybe we’ll use it on the air.
Annie Fadely: Pitchfork Economics is produced by Civic Ventures. The magic happens in Seattle in partnership with the Young Turks Network. If you like the show, make sure to subscribe, rate, and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer. Follow our writing on Medium at Civic Skunk Works and peek behind the podcast scenes on Instagram @Pitchforkeconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.