How to Read Economic News Without Spiraling
Alex Mayyasi on the very human reasons behind our financial panic
Every time we open a news app, we are hit with a fresh wave of economic dread. But why does the financial forecast always sound like a pending apocalypse, even when the data tells a remarkably stable story? Longtime Planet Money contributor Alex Mayyasi joins host Zachary Karabell to offer a badly needed dose of fresh air to clear out the oppressive nature of recent economic news.
Mayyasi and Karabell look at the very human reasons behind our financial panic. Mayyasi explains how Wall Street actively profits from keeping the average person confused, why working class wage increases get reported to the rest of us as frightening inflation, and the psychological strange magic of living through a growing economy with the consumer sentiment of the 2008 crash. They also break down the superstar effect, the true cost of service industries, and why the weekend is an artificial human invention worth protecting.
Watch the full conversation below:
All episodes of the What Could Go Right? podcast are available here.
Transcript
Zachary Karabell: I’m Zachary Karabell, the founder of The Progress Network, and this is What Could Go Right?, my weekly podcast where we try to look at what could go right, given that everybody tends to be looking at what could go wrong. Think of this as your weekly dose of fresh air that will dispel the putrid stench of dystopic, dystopian miasma.
And one of the things that we are particularly dyspeptic and dystopian about is the state of our economy. Now, I’ve thought a lot about whether the economy even exists. It’s just a set of numbers that exist like a guide map or a star map in an otherwise chaotic world that gives us some sense that there’s a system there, rather than just an amazingly confusing jumble of stuff.
And I think demystifying what’s going on in, quote-unquote, the economy is the first step in dealing with what is actually going on in the economy. And there’s one show that I think many of us have listened to for years called “Planet Money,” which is on NPR, which does an amazing job of that kind of demystification.
It’s quirky, it’s interesting, it’s well-produced, and one of the longtime contributors to “Planet Money” is Alex Mayyasi, and he has a new book called Planet Money: A Guide to the Economic Forces That Shape Your Life. And that is indeed what it is. It’s sort of a primer with stories about things one needs to know to grasp what’s going on economically.
Alex, great to have you on What Could Go Right? I’ve always admired “Planet Money.” In addition, I’ve admired it because you had me on for an episode, which immediately means that you’re the most amazing show in the world.
Alex Mayyasi: Of course.
Zachary Karabell: There is a certain upbeat tonality to it, even when you deal with negative things or challenging things.
It’s a quirky let’s-understand-the-world. Everything is complicated. Let’s try to make things a little more simplified, not in a dumbed-down way. But, I mean, you all do have a kind of non-dystopian, dyspeptic … it’s not a sour show, it’s not a hand-wringing show. It’s a show, I think, animated by a good deal of bubbly curiosity.
Alex Mayyasi: I think that’s fair, yeah. I think me and the “Planet Money” hosts are very much animated by curiosity. I think there is a general course of optimism that runs through “Planet Money,” but not because we think the state of the world is always great as it is, but we also think it’s empowering to both recognize things that do work really well and understand how the world works better.
But also when we note parts of our economy that are unfair or not working well, I think it’s also kind of empowering to better understand why they’re not working well, because that helps you understand how they could be better and not be resigned to our fate: Oh, everything’s always going to be unfair and terrible.
We can recognize all sorts of progress that’s happened, and that’s great, and also recognize things that aren’t going well, but do so with an eye toward they are things that could be changed and improved.
Zachary Karabell: So in that spirit, we try to ask everybody one question where they think of something that went really well within the topic we’re talking about. So what’s one thing that strikes you that went unexpectedly well for the U.S. economy?
Alex Mayyasi: One thing that comes immediately to mind is, you know, there was this moment just after the pandemic where inflation was starting to go up. For a lot of Americans like myself, it was really our first personal experience with high inflation, wondering what a dollar was going to be worth a few years from now.
And, do you remember this moment? It was very common to read editorials and even just straightforward news articles talking about how it was almost inevitable that a recession would be coming. And I think the reason that people were so confidently predicting a recession is because there’s this trade-off that’s widely documented in economics that usually if you have really high inflation, generally the only way to fight that is to do things that cause more unemployment or a recession.
That’s the central bank, the Federal Reserve, doing things like increasing interest rates, which is the cost of borrowing money. It makes mortgages more expensive. It makes it more expensive for businesses to borrow money to expand. Basically, all the things that power economic growth. The central bank often makes it more expensive to borrow money, and that kind of puts the brakes on the economy. So that can reduce inflation, but at the cost of lower employment rates, potentially a recession. And it’s this generally noted phenomenon that often, to really control inflation, comes at the cost of more unemployment and recession.
And this kind of unexpectedly positive development that people who were not pessimists were predicting this recession, and it never really came, that inflation really came down to a more manageable level without this huge amount of economic pain that was expected. And I think that’s a testament to a few things, but one in particular is that America has had a long history of the central bank being independent and not run by technocratic economists and bankers trying to think about how to control inflation and manage this trade-off between employment and inflation, and not influenced by politicians who are thinking about the short run and might be okay with a bunch of inflation happening later on as long as the economy looks hot and good right before the next election.
Zachary Karabell: I’m gonna agree with everything you’re saying. And then in the spirit of the episode we’re doing of trying to help people, try to help us all figure out what the hell is going on in the world as we know it, I’m now going to put on my devil’s advocate cap and disagree with everything you’re saying.
And that’s from the perspective that you get a lot, and I know that we all feel a lot, which is all these numbers may say whatever they say, but that clearly doesn’t accord with the lived experience of a lot of people. So even if you tell people that there was no recession in 2023 or into ‘24, one of the animating factors of the 2024 election was that everyone felt like inflation was really still high and their cost of living was untenable.
One of the things that’s going to happen in 2026 heading into the midterms is spiking energy prices, which start with gasoline and then kind of make their way into food and all these other things. So a lot of people feel like, “Wah, wah, wah, wah, wah, economic statistics, GDP, wah, wah, wah, wah, wah. My life is not economically good.”
Things are getting out of hand, and I’m being told these numbers, which I guess might be true, or maybe at worst, they’re complete fabrications, and the Bureau of Labor Statistics—you know, Trump fired the head, and maybe it’s all just the Trump economy or the Biden economy. So what do you say to people who legitimately say I’m calling bullshit?
Alex Mayyasi: Well, I think I’ll divide my answer in two parts. I think one, with the Iran war and the closure of the Strait of Hormuz, we’re seeing inflation going up strongly once again.
Zachary Karabell: And by the way, people, we may be listening to this when the strait’s open again. Yeah. But whatever the long-term effects are is not going to change between now and whenever you’re listening to this.
Alex Mayyasi: Right. And so I think that’s kind of a point that the central bank can do a lot, but at the end of the day, if there’s a war that blocks oil shipments and that causes inflation, the central bank can only do so much about that. There are kind of lots of fundamentals in the economy that shape inflation.
But to your second point about this kind of mismatch where, okay, sure, there was no recession, but people sure aren’t feeling buoyant and optimistic and confident in their finances. I mean, I think that’s real. I think my point is that it was an unexpectedly good phenomenon where there was just a lot of widespread expectation of a recession, and we did not have a recession where there are lots of layoffs and this economic malaise that stretches for years, and it takes years just to get back to the baseline beforehand.
But yeah, I mean, I think that is a big question in economics right now, that consumer sentiment, people’s feelings about the economy are about as low as they have ever been recorded. You have to go back to times like the 2008 recession, the darkest days, to find sentiment as low as it is recently, or periods like when we had actually had people in, during the Arab-Israeli war, lining up for gasoline, and you’re waiting for half an hour to try and get gas, and then you don’t even get it.
Like, those are kind of the moments where you see such a low level of confidence and sentiment about the economy. There’s definitely open questions about why exactly that is, but I do think it is still a very positive, unexpectedly positive outcome that this experience of very high inflation, we at least for a time got back to relatively modest levels of inflation without inflicting this kind of terrible economic harm that we’ve often seen, like in the ‘70s when inflation was super high, and the way we got back to it under control was just this very high levels of economic pain.
So much so that someone rushed the Federal Reserve building and tried to abduct a member of the Fed to get them to reduce interest rates and make it cheaper to get a mortgage …
Zachary Karabell: “I’m holding onto this banker till you lower rates.”
Alex Mayyasi: That was the level of pain in the economy. And so I don’t want to discount what people are feeling now. I feel my own sense of uncertainty, but I think that’s kind of the perspective that’s helpful to keep in mind about that piece of good economic news.
Zachary Karabell: All right, I’m going to take a quick Alex break here. So you’re used to doing all the interviews. You’re doing this book now. What does it feel like to be on the other side of the microphone here?
Alex Mayyasi: It’s been interesting. Yeah. I’m usually the one asking the questions. I mean, I think it feels a little bit different where I am talking about my reporting. That is something that journalists do with a fair amount. I think what was more unexpected to be on the other side of the microphone is that Planet Money likes doing stunt journalism or learning by doing.
Zachary Karabell: Just wait for later in this episode to see what we’ve got planned. I think there’s a water bucket over your doorway. I don’t know what the producers lined up for you.
Alex Mayyasi: But, you know, “Planet Money,” we made a—one of our reporters, Alexa Heratz Ghazi, made a whole series of episodes about the making of the book and as a way to better understand the publishing industry. And so that was a moment where the “Planet Money” gaze was focused on me instead of the other way around, which was an interesting experience, and I had that moment of, before an episode comes out, being like, “Oh, he recorded audio while I was getting news about whether we hit the bestseller list. I wonder what I sounded like during that moment? I hope I don’t sound like a total goon.”
Zachary Karabell: So what is the theory behind those… I think once you bottled a fake vodka. I mean, it wasn’t fake vodka, but it was a—you made up a label for the vodka and pretended it was a high-end one. You set up a business once?
Alex Mayyasi: “Planet Money” has bought a toxic asset and lost all their money by doing so. “Planet Money” has bought oil from a handshake deal with someone, like a small oil operation, and then followed the supply chain of oil by trying to sell it and following along the pipeline. I mean, it all kind of started actually when “Planet Money” first made a T-shirt many years ago and decided, “Oh, this is a business story,” and so we went to a cotton farm where the cotton came from and followed the whole supply chain.
Zachary Karabell: And the theory behind that is it makes it more relatable. It turns it from abstract numbers and concepts into real, tangible things that you think is a better story?
Alex Mayyasi: For sure. I mean, I think “Planet Money” has often tried to tell stories to explain the economy and to find people who are experiencing things themselves. And so sometimes it’s helpful, especially to be able to do this whole supply chain aspect. Okay, we can be the ones experiencing it ourselves. So that’s often been the reason for some of these. Another was sending a satellite into space. Often when there are many actors involved, it can be helpful to learn about the process by going through it ourselves.
Zachary Karabell: There is a powerful public education component of what “Planet Money” does, and it’s, I’ve always wondered. For years in the 20th century at least, Americans had civics, they had home ec. Home ec, of course, wasn’t really about economics, although it was a little bit about managing a home. Certainly all these things were kind of gender divided.
Alex Mayyasi: Yeah, but that’s the origin of economics. I think the original Greek for economics, you know, it originally referred to the management of the home. So home ec is kind of hearkening to the origins of the word.
Zachary Karabell: But if you wonder why we don’t teach that, meaning people have often talked about they can graduate high school, and if they’re lucky, they can do an algebraic equation. They might know when the Battle of Gettysburg was fought. If they’re lucky, they’ll have some idea of how a cell functions, but they won’t know how to balance a checkbook. Now granted, I guess no one quite balances a checkbook anymore. Isn’t it wild to live long enough so that something that seems so anodyne and simplistic as saying “balance a checkbook” has become completely anachronistic to the point where X number of people hearing that will go, “A what? Doing what to what?”
Why do you think people that are so mystified by — politics, I guess, have an intuitive sense to them, particularly in the horse race aspect of an election. You know, person A, person B, person that gets the most votes wins. Like, that’s a pretty straightforward proposition. But somehow money and how money works and how economies work, people get much more overwhelmed. They shut down. They find it boring. I guess it often is incredibly boring, a lot of jargon. But they also feel overwhelmed, that it’s too much, and I guess there’s a good deal of fear.
Alex Mayyasi: I think one piece of it is there are large classes of people who benefit from making money and finance and economics seem more complicated, and by using more jargon rather than less, right? There are people in Wall Street or the wider finance world who make a very good living by convincing people this is all really, really— you know, investing is really, really complicated and you need to pay me 2% per year of your assets so that I can invest for you, because I’m so good at it, I can invest for you.
And there are versions of that in other fields. So I think that’s a piece of it, where there’s an incentive for people to make things more complicated rather than more simple. Probably also a piece of where money is something that’s very, it can just be scary to think about. It’s something that matters so much to us. It’s our security, it’s our stability. It gets wrapped up in status as well, and self-worth. So I do think there’s a way where sometimes there can be some apprehension about diving into it. People might learn it’s less complicated than it seems, but we don’t always want to dive into things where we do have some nervousness around it.
But in some ways, I’m also the worst person to ask that question to—right—because I think I find money and economics so interesting and so fascinating. It is understanding how the world works. It’s understanding people. And so I hope with this book and other work I do that more people will share that sense.
I think a lot of really powerful ideas in finance, business, economics are quite simple but very powerful, and they can explain a lot. And change how you understand the world, and also give you this calming, empowering sense of having a better understanding of what’s going on in the world.
And yeah, “Planet Money”’s not the only ones to do this, but I think that was a big motivation for me, is to make this material really engaging and often delightful, even as it is at times frustrating or complicated.
Zachary Karabell: I mean, there’s that kind of canard of things not to talk about over a Thanksgiving table: money, politics, and sex. And increasingly it feels to me in the world that we live in, politics and sex are okay, but money still isn’t. I mean, there’s the old joke about someone sees their therapist and they’re going on and on about family life, and they’re going on and on about sexual fantasies or problems they have, and somehow money comes up, or the therapist asks, “Well, how much do you make?” And the person goes, “I’m not going to tell you that. That’s private.”
And we still have this whole, I think, shrouded-in-mystery aspect of money. I mean, New York and some of these other states over the past years have created transparency rules where there’s some salary transparency. Because it used to be you really didn’t know what other people were making. You couldn’t line it up. I suppose to some degree the gig economy, which I want to talk about in a minute, has made some clarity about what people are making for any particular thing.
But have you found that, over the years in reporting all this, there’s still a degree of, like, money is Voldemort? You know, it is the thing whose name shall not be mentioned?
Alex Mayyasi: Yeah, I think there can be hesitation to talk about it, for sure. But there’s so much power in overcoming that, because money gets so much at what is important to us and what’s valuable. I mean, anytime people choose to spend money on something, you are expressing your values because you are choosing to not spend that money on something else.
Similarly, when you spend your time—spending your time on one thing or another. And it’s not always the case that the things with the biggest price tags are the most important, but there’s certainly a lot of signal there. You know, when something is very expensive or a market is very, very large, that often indicates that it’s really important to us, whether in terms of being a resource that’s really badly needed for fundamental economic reasons, or just things that we really care about and therefore value really highly.
So I think, yeah, money does often reveal a lot, and that’s both sometimes why people are uncertain or hesitant to talk about it. That’s also why it’s so interesting and so important. And there’s a “Planet Money” episode some of my colleagues did that was about companies that started doing salary transparency, right?
So companies suddenly made it so that everyone could look up in a public spreadsheet—or public at least to members of that company—the salary of everyone else in that company, and it led to uncomfortable conversations.
I think in some cases it revealed things like women who were earning less than men for comparable jobs. It also revealed uncomfortable things where some people said, “Hey, why am I getting paid less?” And it led to a conversation with their boss or manager of, “You’re getting paid less because we don’t think you’re doing as good a job.” And, you know, maybe the boss or manager was wrong, maybe they were right. But that’s something that was surfaced very, very visibly with the salary transparency.
Zachary Karabell: So you have a chapter in the book about the gig economy, and it’s sort of a tale of two gigs. Where do you come out on this? There was the initial promise of gig work, and the positive part of it was going to be you get liberated, you get to set your own hours, you have autonomy.
The negative side has been you don’t get benefits, you have no job security, you have no pricing power, there’s no unions because that’s the antithesis of a gig economy, and therefore you’re constantly at the whim of whomever you’re gigging for, slicing, dicing, and you’re the last person to be on top of the priority list for money.
Where do you come out on this? I mean, has the gig economy been a mixed bag, a good thing, a raw deal?
Alex Mayyasi:I think you can go either way. I think actually my biggest takeaway from writing that chapter and doing that reporting was that the association of the gig economy with a few specific companies like Uber, Lyft, DoorDash, TaskRabbit has made it seem like a smaller and less important phenomenon than it is.
I mean, a significant number of people work for Uber and DoorDash and TaskRabbit, but as a share of the overall workforce and economy, it seems like a little bit of a niche. But actually, if you broaden the lens a little bit to think about people who are working on a contract, people who are not doing a full-time job or even a part-time job, but living in this world of not employment, but contracts and gigs, that becomes a very significant part of the workforce and a very long-term trend that predates Uber and Lyft and TaskRabbit.
So something that’s been happening for years is that I think there’s been a lot of attention if, say, a Fortune 500 company closes a factory in Pittsburgh or Georgia or where have you, and moves that factory overseas, right?
People realize that offshoring has gotten a lot of visibility. What’s gotten a lot less visibility is this phenomenon that’s been happening a lot where companies basically just take some chunk of their employees and move it out of the walled garden of their company or full-time employment.
And so they might say, “Oh, the janitors, we don’t really need them to be full-time employees. We’ll save money if we instead go to the world of gig and contract work, and we outsource that work to a janitorial company.” And in some cases, it might be that those janitors are actually, in theory, contract workers running their own businesses, even if they’re contracted through this arrangement that is how you get janitors to clean your offices.
Similar things might happen for hotels. You go to a hotel, a lot of those people might not be employees of the hotel chain. They are provided by contracting services that provide the kitchen staff for the hotel or the concierges and cleaning staff.
So that’s a big phenomenon that’s also part of the story of gig work—if you think about moving away from employment and moving work outside of the walled garden of the company and toward contract work. And then similarly, for very educated workers, there are fractional chief financial officers. There’s increasing prevalence of workers—engineers, executives, marketers—who are hired on more of a contract basis.
So there are fundamental reasons, to do with technology, why this has been happening more and more, and it also necessitates rethinking a lot of laws, because labor laws in particular have been built around the assumption of a full-time job at a company. That’s where you get your healthcare benefits. That’s where you get overtime protection and labor protections.
I think there are upsides, too. There are people who have benefited as well. But I think that’s my biggest takeaway: how this is much bigger than an Uber driver or a DoorDash delivery person. It’s a big trend in the economy.
Zachary Karabell: And do you think it is part of the reason for this feeling of the disconnect between capital and labor, where capital’s doing really well and labor is flat-lining? That is a common perception narrative.
Alex Mayyasi: I think it can be part of it. Like companies have definitely—this is one of those moments where more efficiency cannot, can potentially be not a net social good, right? It’s like from the company’s perspective, it’s like, okay, you know, we’ll just focus on our core competencies, but these other parts of the business, they don’t need to be full-time employees who we treat with fairness and make sure they have health insurance, right? We can just pay them the minimal amount possible that the market will provide.
So I do think it’s for sure part of that story of labor-capital.
Zachary Karabell: So, you know, in that line, you write a little bit about in the book about comparative advantage and about trade. And it feels to me like there are some themes that have been recurring over the past years: that capital’s doing better than labor, that globalism or neoliberalism or whatever you’re going to call the forces that were arrayed ideologically and in practice from the 1990s after the end of the Cold War till the present led to a certain erosion of traditional manufacturing, traditional jobs in most developed countries, that that also accrued to capital and not to labor, that it’s created more economic insecurity, the erosion of unions.
Like that’s a powerful theme in politics. It’s a powerful popular sentiment in your reporting. And when you look at this, is it true? Is it partly true? Is it an emotional response to genuinely tectonic changes in a global economic system? Like what is going on here?
Alex Mayyasi: Yeah. I mean, I think there are a couple different directions I could go, and I think that’s one where the somewhat less satisfying answer is how hard it is to do economic research. And I think I’ve talked to economists who are like, “If you give me a narrative you want to tell about inequality in the United States, I can go find the statistics that will back up your narrative. And if you want to tell the exact opposite narrative, I can go get you the inequality statistics that will tell you the exact opposite.”
So I do think that’s part of what’s frustrating and hard about it, is that it can be hard to agree just on this one set of facts, even when people are very well-intentioned and want to come to an agreement on the objective facts and then have good debates and create good policy.
Zachary Karabell: The eye of the beholder problem, right? Yeah. Or a little bit, meaning you tell me what you think and I’ll prove it.
Alex Mayyasi: Yeah, yeah. You know, the kind of famous quotes about like “lies, damned lies, and statistics.” I mean, it’s been interesting. I think one thing that I’ve encountered quite viscerally by the process of publishing this book and going on book tour and talking to lots of people about it is that there are often questions that contain the assumption that the middle class is dying and everything is becoming one big overlord class, and then the subclass of people in poverty.
And like statistics don’t really bear that out. The average worker hasn’t seen wage gains of the type we saw in, say, the ’50s and ’60s, some of this post-war boom, where the average worker really benefited a lot as the economy grew. But I think people are just really surprised if you bring up that the average worker salary has gone up over the past years, or that actually part of the reason that we have had inflation after the pandemic was because so many very low-wage working class workers did see wage gains.
And so that shows up for other people, especially middle and upper class people whose views are over-represented in media, as inflation for them—because that’s restaurant costs going up, that’s childcare costs going up. Working class people getting a raise often shows up as inflation.
It’s an odd place to be in, where I feel like things probably have gotten better for the average worker and for the economy more than the vibes feel like over the past number of years. But certainly when we look back at economic history, it doesn’t feel like the gains of increasing prosperity from economic growth have been as broadly and fairly shared as they have in the past. That indicates that we could be doing a lot better.
Zachary Karabell: And where do you think this leads in terms of the political manifestation that increasingly, both on the left and right, is a more populist version of whether it’s tax the rich, whether it’s there shouldn’t be billionaires, whether it’s there’s a system that’s skewed in favor of the few and against the many, us.
The most recent version was Occupy Wall Street. That was about the 1%. I think we’ve come some ways in the 15 years since that, and people are now focusing on the 0.1% less than they are on the 1%. Maybe that’s progress, maybe that’s regress. What does one do about that? Does that have a good ending?
I mean, there is a reading of America in the Progressive Era at the turn of the 20th century in response to the Gilded Age extremes of poverty and wealth that said there was good that came out of it. There was a more leveling factor. There was a taming of the excesses of unfettered free market capitalism.
Alex Mayyasi: What I hope one of the contributions from myself and other economic and business reporters can be is just an appreciation for nuance, where that energy can be turned into policy that is successful. Because I think sometimes, when I see people’s very justified rage, anger, frustration with the economy and with parts of the economy that have gotten more expensive like childcare and housing, and have made things really tough for people, even as wages have maybe still gone up but not by that much.
I think sometimes there can be a tendency to reject the whole system. You know, you see misbehavior by a company, you see wealth flowing to a small group of very, very wealthy people and not to the middle class and working class, and there might be this tendency to say, “Oh, capitalism is all terrible.”
And I think what I’ve tried to do with a number of stories in this book is point out how many different ways—it’s not all laissez-faire capitalism, largely a myth, right? There are always market designers, whether it’s a question of intentional or not or fair or not, who are designing the system to help control the outcomes we get: whether we get really efficient outcomes and lots of wealth, and then how that wealth and prosperity is or is not widely shared.
And so my hope is that that frustration can be channeled into people playing a more active role in making sure—there’s a lot of enthusiasm for wealth taxes. Senator Warren has her tax on ultra-millionaires, I believe that’s her phrasing.
You know, California talking about a billionaire tax. There are a lot of cases of European countries where they’ve started doing those kinds of wealth taxes and moved away from them, just because they haven’t been as effective as they’d like for technocratic reasons. The wealthy are very good at dodging taxes. Suddenly, okay, all my wealth is now in art. And that’s very hard to evaluate and tax effectively.
And I don’t think that means you say, “Okay, we won’t ever tax wealth,” because certainly, as Senator Warren often points out, there is a wealth tax in this country that’s paid by many middle-class people. You’re paying tax on property taxes. For most families, the biggest source of wealth is their home.
Sometimes I’m like, let’s just do the Manhattan Project, but for figuring out how to tax ultra-millionaires and billionaires who have $1 salaries but make incredible amounts of money through stock and all these other things that are hard to tax.
When people are like, “Oh, it’s really hard to do a wealth tax,” it’s like, well, let’s figure it out. Like, this is—we put a man on the moon. We put people on the moon. Okay, now let’s figure out how to tax people fairly so that billionaires pay their fair share too, and it’s done in a way that makes sense.
That seems achievable to me. Let’s do that.
Zachary Karabell: Well, that’s the kind of stuff like Emmanuel Saez and Piketty have been trying to do for years. By the way, look, I’m asking a lot of these questions because one, I get a lot of these questions, so now I get the opportunity—yeah—to ask you the questions that I get.
Two, I think I’m—there is something to be said for people understanding, all of us understanding with more nuance, as you just alluded to, what is actually going on as a constructive or even imperative injection into the debate over what do we do? Because if “what do we do” is predicated on an overly simplistic view of things, then whatever we do won’t work. Hence the—you know—you just alluded to the wealth tax.
France tried this for a while. Huge popular support for a wealth tax in France. The government, which to some degree reflects popular will, tried to do this, and it just didn’t work. They didn’t collect enough. There were a lot of hurdles. That wasn’t for a lack of buy-in. It was for lack of it just isn’t the right tool necessarily.
Alex Mayyasi: Yeah. And I think I like your move to history, because I also think a lot of what might be phrased as populist rage has led to New Deal programs, but also things you maybe wouldn’t have expected as much before doing so much research for this book and other reporting, like the history of deposit insurance, right?
So the idea that we’ll try to prevent runs on the bank during the Great Depression by the government being the ultimate bank backstop. That was something that there was a lot of populist support for. There’s this kind of great paper that“the man in the street is for it,” which was this idea that banks—many bankers were lukewarm on deposit insurance, and it was a lot of ordinary people who saw the way they would be wiped out during recessions, depressions, bank runs, and thought, “Yes, this is something the government should be doing.”
So I think there are a lot of really constructive ways, yeah.
Zachary Karabell: I used to say this thing in some of my talks, they were called them bank runs because people ran to the bank. I mean, it was not a metaphor. When there was a panic that all the deposits were going to be called, you ran to the bank. You write about fractional banking in the Planet Money book. Basically, banks lent more than they had in deposits. When suddenly something happened and people thought, “Oh my god, the bank isn’t going to be able to meet its commitments,” you ran to the bank. And you ran to the bank because the first 100 people in line got their money, and then their bank was out of money.
And when it was out of money, without federal deposit insurance, you were out of money. There was no recourse. You couldn’t sue a bankrupt bank. I mean, you could, but it wouldn’t do you any good. So it’s really important people remember that these things happen to prevent those things from happening—and have in fact somewhat prevented them from happening. I guess there was a fear in 2008, right? We both remember there was that brief moment where we’re like, “Oh my god, you’re gonna go up to an ATM and it’s gonna read out on a screen, ‘We’re sorry. Come back later. There’s no cash.’”
You know, on the cynical side of things, you write in the book about the invention of leisure and the invention of weekends as serving a lot of really potent capitalist aims to sell products toward leisure. Cynical people would say you’ve manufactured leisure as a consumer commodity rather than given people actual free time. Where do you come out on this? And I guess explain how you wrote that chapter, what that chapter says.
Alex Mayyasi: I compared the weekend to technology, right? Because it is this kind of not inevitability. There are a lot of ways we structure our time that are based on natural things— the sun rising and setting, the month coming from the moon, the year, and so on. But a weekend, that’s just a human invention.
It has certainly a religious background to it. But if you look at it, there’s a long history for this kind of seven-day week outside of religious context as well. And so it’s interesting—you can find examples of actors pushing the weekend, like Henry Ford, who had this view, right? He wants workers to have free time so they’ll buy the products—and enough money so they’ll buy cars and go on road trips.
And there was also a way that the standardized work week and shorter work weeks was pushed just so there would be fewer layoffs during the Great Depression. But then of course you also have socialists advocating for this as humane treatment for workers. So it’s this interesting way it was pushed almost both—you can find people working for capitalist aims as well as for socialist or pro-worker aims, thinking about what kind of world we want to live in.
But I think part of what’s fascinating for me there is that the weekend, the invention of the weekend, almost creates—it’s like a platform, almost the same way the App Store and the iPhone creates this whole ecosystem that others can build on.
You know, only when you have the weekend and so many people having time off at same time can you really imagine a world so full of like giant stadiums where 50,000 people can gather at the same time to watch a game or like bottomless mimosa, mimosa brunches on, on Sunday.
Zachary Karabell: Those are not naturally recurring phenomena, the mimosa thing.
Alex Mayyasi: I don’t know. We can’t do the natural experiment. But you need enough people who can do bottomless mimosa brunches on Sunday at the same time.
My take on that isn’t very cynical. I think the weekend, there’s some people who love having a weekday free when everyone else is working. But to a large extent, it’s a way that we’ve made the scarce resource of time more valuable, right? A lot of people, it’s more valuable to have a Saturday free when your family and friends are also all free, so you can do things together.
And that’s why I think it’s particularly dangerous—or something people should particularly resist—this kind of encroachment on our collective free time on the weekend of always being on, always checking work email, always being a little bit somewhere else. Because I think in some ways, if people’s weekends are no longer free for leisure, an hour of your time that was once worth $20 is now worth $5, because there aren’t the people around to enjoy it in the same way.
Zachary Karabell: So what are three things—and if you don’t want to do three things, you could do two, you can do four. This is not a Monty Python test where you’re going to go, “Ah.” Um—look up that reference if …
Alex Mayyasi: I got it. I got it.
Zachary Karabell: … No, no, I’m sure you know it. This is an injunction to the listeners. What are three things people should know about “the economy”?
Alex Mayyasi: I mean, I think one is the power of compound interest, right? Which is the idea that, the most famous example is if you invest money in the stock market or you save money for retirement, over the long run it’s not just that the initial money you invest will grow, but the money you earn from that investment will then grow as well.
So it kind of has this snowball effect that’s so big that over long time horizons it kind of breaks our brain. But I’d deepen that a little bit to say to also think about where else you could see this kind of compounding growth in other parts of your life or career, right?
I think there might be examples like in my field in journalism, when people start getting a newsletter following. That’s something that if your newsletter following grows a little bit every month, it will feel small at first, but in the same way that you’re saving for retirement from that money you put away years ago, that can grow and grow and grow through compounding growth and become huge and really valuable to you.
I think for many people there might be something comparable in your professional network. If you start growing the number of people in your field and career that you’re connected to, and if that grows 5% every month or year or what have you, that compounding growth rate can become really powerful.
So at first you just have a small circle of people you know maybe through your first job, school, university. But if that grows and all the people you meet have their own networks, that can become over time an incredibly powerful tool for those times when you need to tap your network for finding valuable information, to find a new job, to make a hire if you’re the hiring manager, to get valuable advice. That’s another place we could see compounding be really valuable beyond the classic saving and investment.
Zachary Karabell: Okay, so one is compound interest and/or network effect.
Alex Mayyasi: Yeah, network effects is a good way to put it. Another one I think about, especially for people who are younger, maybe earlier in their careers, is the superstar effect.
So this is the idea that a singer 500 years ago could entertain one room full of people. So if you’re a really good singer, maybe you’d get paid by that room full of people pretty well and you could make a living as a singer and do pretty well. But because of technology, the best singers nowadays and the best entertainers can entertain not just one room full of people, they can entertain almost the entire world.
You know, everyone can be listening to Taylor Swift, Beyoncé, Kendrick Lamar. And so you now have a world where the very best singers and entertainers make vastly, vastly more money. There’s this winner-take-all phenomenon in industries like singers and bands.
Whereas for someone who’s kind of a good singer, suddenly you’re competing directly with Taylor Swift. It’s much harder to make a living. You probably have a full-time job and you do some concerts and gigs on the side.
And so I think it’s very helpful to think about your own career: is your career one that has this kind of winner-take-all effect from the superstar effect? Because if you want to work really, really hard and be the best at what you do, maybe you do want to work in a field like Hollywood or—I think in our case, like in media, this absolutely happens, where some journalists can be read by people all over the world, but it’s made it harder to live as kind of like, you know, but like local newspaper reporter, that’s become very, very tough.
You know, do you want to be the very best, work super hard, and then reap the gains from being in this kind of winner-take-all field? Or, you know, if you value work-life balance more, don’t want your job to kind of be your entire life, you might prefer to be in a field that hasn’t really been affected by the superstar effect.
You know, maybe something like sales or nursing, where you can be good at your job and you don’t have to be the very best, and being good or even just average at your job can still lead to a good paycheck and a good life. So that’s the superstar effect.
Zachary Karabell: And what’s the third thing?
Alex Mayyasi: One other idea that’s really powerful is this idea that over time in successful economies, goods get cheaper but services get more expensive. This is often called “cost disease,” because it’s this idea that if you divide the economy into two parts, you can think about it this way.
There’s one half of the economy that gets more and more efficient thanks to technology. You know, we used to have something like 70% of the American workforce working on farms. Now a tiny fraction of people work on farms …
Zachary Karabell: Right now it’s 2%.
Alex Mayyasi: … but those farms are way, way, way more productive. Factories over time often get more and more productive.
But there’s this other part of the economy that’s very labor-intensive. It doesn’t really change that much over time because of technology. These might be things like barber shops. Barbers are not doing 10 beard trims in the time it used to take to do one beard trim. You can’t really have two people perform a quartet. Childcare is a great example—you can only have, generally, still very labor-intensive work. You’re not going to have one person watching 1,000 kids, whereas they used to only watch 10.
And so what cost disease is, is that because of this mismatch, the part of the economy that’s always growing more productive will offer higher salaries to attract workers.
So then, you know, people in this other part of the economy, no matter how much you love being a teacher or working on Broadway, working in childcare, being a barber, at some point you might say, “Hey, look, if I don’t ever get a raise, I’m gonna go to that other part of the economy where the salaries and wages are so much better.”
And so then you have childcare centers, Broadway theaters and so on raising their prices, and so those very labor-intensive parts of the economy get more expensive. And I think that’s just very powerful for understanding all sorts of parts of our economy. It’s why even people in the U.S. who are very well off struggle to afford childcare. It’s why everything is a fast-casual restaurant where you order yourself, and sitting down and having a waiter come by—that’s very labor-intensive, that’s cost disease, that’s very expensive. It’s a very powerful lens for understanding the economy and our world.
I want to know your choice for unexpectedly positive development.
Zachary Karabell: I think the stability of financial markets over the past—well, certainly since 2008, and that’s, as scarring as that was, that was now going on 18 years ago. I mean, if you only have one major hiccup every 20 years, that’s pretty good—as long as that hiccup is not a permanent rupture.
And to some degree, that was the story of the 19th century. You could metronomically say every 20 years there was some sort of panic or crisis, but it also wasn’t nearly as stable in between those. Before then, you were in the 1970s before there was a real—you know, there was a brief moment in 1987, there was another brief moment in 1999.
But for the most part, the promise of financial market stability—and I think one of the great problems of the way globally the crisis of 2008-2009 was internalized was the bankers and the rich people got bailed out, and everybody else suffered. Now, it’s certainly true that everybody else suffered and there wasn’t enough cushion, which people learned from COVID, but if you hadn’t bailed out the financial system, the real-world effects would have been exponentially more damaging than the actual real-world effects were.
And it’s always problematic to make these statements because you always worry you’re going to be that guy in 1929 who said that the markets have reached a permanent plateau of stability. So I feel like I’m saying this, and by the time the podcast comes out, everything will have collapsed. But it does seem like there’s just a degree of financial system stability, and that doesn’t just benefit the rich.
I mean, 52% of Americans have their savings in the markets. The Comptroller of New York, very to the left, Mark Levine, a guy I like a lot, talked about using New York City’s $80 billion in index funds for its retirement plans to have shareholder activism to protest the way Elon Musk is going to structure SpaceX’s IPO, right?
That’s a good sign that a lot of us are literally invested in markets—and therefore invested in their stability—and there’s been a lot of stability. And I think that is an underrated aspect of why however bad things are, they’re just not nearly as bad as they feel, or they’re not nearly as bad as they should be given how bad people think they feel.
Alex Mayyasi: Yeah, and it is a kind of heartening amount of learning that there are people learning the lessons of the Great Depression to try and make sure the pain of 2008 did not become as big as it did during the Great Depression. And then you had people during the start of the pandemic thinking about how, in 2008, there were ways that it was the rich comforted more than the poor.
And I think, you know, I remember talking to a friend who seemed very sage and wise, saying, “Everyone’s about to be really, really poor because of the pandemic,” and how many people would be out of work.
Zachary Karabell: Right.
Alex Mayyasi: It’s pretty remarkable the way that American families were supported, and certainly gave people a taste of what the government could do when vast resources were deployed to help ordinary families.
Zachary Karabell: And that was true in Western Europe. It was true in lots of Asia. Yeah. I mean, it was extraordinary. Like, people got a lot of money in their pockets, which is one of the reasons why there was the kind of inflation there was, and part of that was there was another bill in 2021, which may have been overkill, meaning after all the money that was spent in 2020 to make sure that people didn’t panic, that they could afford food and their rents and their mortgages.
And we managed to have this global economic shutdown with remarkably few economic consequences in real time, commensurate with just how extreme that was economically. And I think, of all the things that happened during the pandemic, the degree to which the economic pain of it was mitigated was pretty extraordinary.
I’ve just used the word extraordinary twice, but it’s because I feel so strongly—about how extraordinary it actually was.
Alex Mayyasi: I have another question for you. You wrote a book called The Leading Indicators that talked, for example, about the history of GDP. You were looking at some of these numbers that are very important that you’ll hear on the news, see in newspapers very regularly.
I would love to know what are some maybe more unexpected or fun indicators that you follow or think about for understanding the economy?
Zachary Karabell: That’s great, and I’ve thought about those a lot. And I’ve also tried to help people understand that these big economic numbers, including the unemployment rate, are really not meant to be a gauge of whether your life, my life, our peer group, our community’s life is doing well or badly.
They’re big systemic numbers that collapse a lot of variety into one statistic, and they’re not meant to be a gauge of your economic health. It’s like if the average temperature of 335 million people is 98.6—you go, no one has a temperature, but a lot of people could be dying, and a lot of people could have 102, and that average wouldn’t tell you. Those numbers are like that.
I do think consumer spending is often a gauge—spending on non-healthcare and non-essential categories—is like a gauge of what people are doing rather than what they’re saying they’re doing or what they’re feeling. And yeah, you’ve got to discount debt from that, but if a lot of people are eating out at Cheesecake Factory, it means a lot of people have enough money to eat out at Cheesecake Factory.
Now, they could feel like crap doing it, they could feel like crap because of the food they’re eating, but those numbers are really useful because they tell you something tangible. Sentiment doesn’t tell you anything other than what people feel. Spending on certain things—and a lot of that comes from companies, actually—tells you what people are doing, and I think that’s really useful when you try to think about what’s actually going on in the economy.
Leisure spending, right? Right.
Alex Mayyasi: It’s a put your money where your mouth is moment, because if the pollster says, “How do you feel about the economy? Do you think there’ll be a recession coming up?” and you say, “Oh, I think it’s terrible and rubbish and there’s probably a recession coming,”
Zachary Karabell: And you’re like, “Oh, I gotta go. I got a dinner reservation.”
Alex Mayyasi: Yeah, yeah. You’re about to go out for a nice dinner. You’ve put down a down payment on a new house. You’re gonna move into your dream house and do a bunch of renovations. Then yeah, it’s like, are you really feeling a recession, do you really think the economy is rubbish?
Zachary Karabell: Right. And of course, I say that and I realize that is one of these moments where everyone’s going to say, “Yes, but,” and we probably should say yes, but, because it doesn’t mean there aren’t tens of millions of people who can’t do any of that at any given time.
But that’s also always been true. We have never lived in a world where everybody’s doing okay. Full stop. And back to your nuance point, these things can be true and many people can be doing not well, so that’s kind of what I think about.
Alex, I want to thank you for writing the book. It’s a great primer. It’s lovely production, meaning the way the book is done is it kind of embodies the “Planet Money” quirky spirit with some illustrations and some charts.
Alex Mayyasi: I’m a particular fan of the illustration of the gambling ducks at the start of the banking chapter. I’m not the illustrator, so I’m not bragging about my own work. But I love them very much. And I think this looks very different from any other business or economics book you’ll …
Zachary Karabell: It absolutely does.
Alex Mayyasi: … see at the airport or the bookstore.
Zachary Karabell: It matches the spirit of the show.
Alex Mayyasi: Yeah.
Zachary Karabell: So, which I think is great, and it’s very readable, which was your point and your intent. So thank you for your work. Thank you for all you’ve done, and I’m sure we will keep talking.
Alex Mayyasi: That sounds great. Thanks so much for having me.
Zachary Karabell: Well, there you have it. Listen to the episode, read the book, listen to “Planet Money,” and that’s all you’ll need to know to know about what’s going on in the economy, which is your answer right there.
No more civics classes, no year of struggle, no weird elliptical material on whatever financial website. Just continually replay this episode and read his book, and then check out “Planet Money” every now and then.
So thank you very much for listening. Thank you to the people at Kaleidoscope for producing.Thank you to my team at The Progress Network for being my team at The Progress Network. And please send me your suggestions and your ideas to info@rivertwice.com. Check out my weekly free newsletter, The Edgy Optimist on Substack. Check out What Could Go Right?, The Progress Network newsletter on Substack, and we will be back with you next week.
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