Capitalisn’t: A Different Story of Inflation
Capitalisn’t podcast hosts Luigi Zingales and Bethany McLean talk monetary policy with Stanford’s John H. Cochrane.Capitalisn’t: A Different Story of Inflation
After two recent episodes examined the pros and cons of meritocracy, the Capitalisn’t podcast considers a related question: How much of “success” is driven by effort versus luck? To help find an answer, hosts Luigi Zingales and Bethany McLean sit down with University of Texas’ Kathryn Paige Harden, a behavioral geneticist, professor of psychology, and author of the book The Genetic Lottery: Why DNA Matters for Social Equality.
Kathryn Paige Harden: When we discover that the genes you’re born with are associated with whether or not you graduate from college, and then we think about, what do college graduates get more of compared to non-college graduates in this country right now? What does that nudge us to in terms of new intuitions about whether it’s fair or unfair?
Bethany: I’m Bethany McLean.
Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?
Luigi: And I’m Luigi Zingales.
Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.
Bethany: This is Capitalisn’t, a podcast about what is working in capital-ism.
Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?
Luigi: And, most importantly, what isn’t.
Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.
Luigi: Last year, we had two episodes on the pluses and minuses of meritoc-racy. And, of course, supporters of meritocracies, such as Adrian Wooldridge, emphasize its ethical dimension. That is, a system that rewards effort. Critics, such as Sandel, emphasize the luck compo-nent.
At the end of the day, it’s an empirical question. How much is success driven by effort and how much is driven by luck? This is an extremely difficult distinction to make empirically. Yet we all agree that we don’t deserve our genes. For this reason, it is important to understand what compo-nent of success is genetically determined. We decided for this purpose to invite an expert on this topic, Kathryn Paige Harden, author of the book The Genetic Lottery.
Bethany: I’d love to start just by asking you to explain both the nuanced po-sition that you’re trying to carve out on this issue and why it is that, on this issue, it is so difficult to achieve nuance, at least in the minds of the people who are reading your book.
Kathryn Paige Harden: The way these studies work, we can collect genetic information on many, many people. To give you an example, a study that we did this year pooled genetic data from one and a half million people. Each person is measured on what are called SNPs, which are single nucleotide polymorphisms. What we’re interested in are single DNA letters that differ between people. So, I might have a G in a certain spot, and you might have a T in a certain spot. These differences between us, they are scattered throughout the whole genome.
We’re measuring hundreds of thousands or even millions of these DNA letter differences be-tween people. And then we’re correlating each one of those genetic variants, variants meaning differences between people, with something we’ve measured about people. In the case of height, this would be, are certain genes more common amongst taller people?
In the case of obesity, it would be, are certain genes more common amongst heavier people? In the case of educational attainment, it is, are certain genes and, actually, to be more precise, are certain SNPs more common amongst people who have gone further in school—specifically, have completed more years of formal schooling?
Once you’ve done that study, what you typically find is, one, the correlations that you’ve esti-mated are incredibly small. Any one genetic variant does not make that much of a difference. We’re not talking about a gene for anything. We’re talking about hundreds of thousands of genes that are all tiny, tiny, tiny correlated with going further in school. We can then take those correla-tions and apply them to DNA from a new group of people. You weight their SNPs by the correla-tions you estimated in your first study, and then you add up those weighted estimates.
I got two copies of a variant that’s associated at R=0.003, with going further in school. So, two times that correlation, and then you add that up of a whole genome. What that gives you is a single number, one number per person, that’s based entirely from just something we’ve measured from your DNA, that reflects our best guess, based just on your DNA, of your likelihood of showing what-ever phenotype we’re studying.
When we’re talking about educational attainment, that polygenic index in white people in the United States, in that population, the polygenic index is as strongly correlated with the rate of go-ing to college as a variable like family income is. We see that students who are on the lowest 20 percent of the polygenic index are five times less likely to graduate from college than students who are in the top 20 percent of the polygenic index.
So, it’s a really crude number aggregating across a lot of genetic mechanisms, the vast, vast ma-jority of which are unknown. It could be that the genes made me have a slightly more symmetrical face, and teachers like pretty people and they give them better feedback. Or it could be that the genes affected my white-matter integrity, and I am faster at integrating spatial information.
Or it could be that my genes made me go through puberty later and then boys ignored me in high school, and so that made it easier for me to focus on math. It could have been any of those things, the latter one being the true example here. And so, we’re aggregating across all these really mechanistically unknown things into this kludgy number, but that kludgy number is as predictive as many of our social-science variables.
So, I would say the position that I’m trying to take is that genetics makes a difference for who we are, and not just our physical selves or our risk for disease, but also how we succeed in the rules of the economy that is currently set up, things like education, things like income. I think what’s more complicated is to talk about, well, what do we do with that information?
Luigi: One of the things I find fascinating about your book is the evidence that you have about the impact of these, as you call them, polygenic indices. For the economists in the room—the virtual room— you find, for example, the polygenic indices have the same explana-tory power as all the socioeconomic factors in determining your success, I think in education or in life, I don’t remember exactly.
There is a huge literature in economics about the socioeconomic impact. When I listened to that, I was kind of struck, because there’s not an equal literature on the polygenic indices.
Kathryn Paige Harden: Yeah. I think this is so interesting that you all have economists as your audience members, because if you’re talking to biologists and you say, “A poly-genic score accounts for about 15 percent to 20 percent of the variation in rates of college com-pletion,” they can kind of be like, “Well, that’s not very much. Fifteen percent still leaves 85 per-cent unaccounted for.”
But economists and developmental psychologists and sociologists who are used to working with data on free-range humans, an R-squared of 15 percent is a big effect size.
Luigi: It’s huge. Yeah.
Kathryn Paige Harden: Yeah. So, there’s a new iteration of a large-scale ge-netic study of educational attainment, linking specific DNA differences between people to their years of formal schooling. It’s about to come out in a couple of months, and that R-squared is the exact same R-squared as the relationship between years of schooling and wages in the US.
I think when you’re starting to think about, the relation between genes and education is as strong as the relation between education and wages, it’s really in the field of the types of relation-ships that we’re used to thinking about seriously. Again, it’s not destiny. We don’t know for sure how much money someone’s going to make based on how far they went in school, but it is telling you something really meaningful about population trends when you’re starting to get into R-squareds of 10 percent, 15 percent, 20 percent, definitely.
Bethany: What do we do about that? What implications does that have for fairness in the world? I’m thinking about it in a bunch of ways, because abdicating the conversation about it—which has been the approach taken by most progressives, as you’ve pointed out—is a vacuum. In vacuums, all sorts of dangerous things flourish. Yet admitting it and discussing it also car-ries some danger, because that can start to tip into exactly the opposite, exactly what we all fear, which is people typecasting you from the moment of birth based on what your genes are.
Kathryn Paige Harden: Yeah. I think it’s really important to think in any con-versation about what do we do with that information, to realize that most Americans currently al-ready think that’s true. If you survey Americans, most of them say that genes make a difference. They have an influence, not just on weight and not just on eye color, but on personality and intel-ligence and academic achievement. I think it’s really the task of interpreting that result and making sense of it and giving a positive path forward becomes even more vital.
I think of it in a couple of different ways. One is, what does it mean for the research we do? How do we identify environmental levers for change? How do we identify targets for potential in-terventions? What can we do with this information to make our research better?
This is where I think economists are natural leaders, honestly, because you all are really used to thinking about, “Is there some sort of natural experiment in the world that I can exploit to give me new information about what causes what?”
And so, genetics is really just another example of that kind of tool to make research better. More broadly than that, away from the academic conversation, is what do we think of as fair versus unfair inequality? Currently in the US, there’s been such an emphasis on this narrative of meritoc-racy, where education has played a really outsized role in our definition of merit.
I think genetics makes us uncomfortable because it prompts us—and I’m certainly not the only one, and geneticists are not the only ones—who’ve been prompting us to have this conversation to think about, is that really how we want to define fair versus unfair? Should so much rest on educa-tion when part of education is so heavily influenced by this thing that you have no control over, the genetic hand you happen to be dealt?
Luigi: One of the things I found particularly striking is that when some of the first results on genetics came out about the impact on education, people started to emphasize grit and say that this is actually a solution. We all like to think that we succeeded because we’re hard-working guys, not because we are genetically blessed. But then you and other colleagues, I don’t remember the . . . find that on executive functions, executive functions are 100 percent inherita-ble. Is that right?
Kathryn Paige Harden: Yeah. There’s a couple of things I want to note there, because I think the phrase executive functions is used in a lot of different ways. When we are talk-ing about executive functions, we’re talking about really basic cognitive abilities. For instance, I might flash cards on the screen and ask, “Does this card match the one that you saw two cards back?” And you’re having to monitor what you saw and what you’re seeing now and maintain your attention. It’s this really basic cognitive ability.
What we do find is that in kids who are all going to school in Texas—they’re typically develop-ing children, so we’re not measuring kids with severe autism-spectrum disorders—that if you test them on a bunch of these type of executive-function tasks, the variance common to the tasks—are you generally good or poor across the different tasks we’re administering—is nearly 100 percent heritable. It’s as heritable as height.
Something like grit or conscientiousness is like, “Do you like to plan ahead, or do you tend to be an orderly person? How quickly do you give up if the task is difficult?” What we also see is that those are heritable. There really isn’t an aspect of human individual differences that’s going to be your get-out-of-jail-free card for grappling with the role of genetics in life. Even things like effort, even things like concentration, all of those things are related to the biology you happen to inher-it.
Your listeners who are parents know this. They’ve seen their kids. They know that some of their kids are more frustration-tolerant or more effortful or more orderly or more impulsive than their other kids. We see this in human life.
Luigi: But so, if you work hard in school, it’s because you’re genetically blessed, not because you make an effort?
Kathryn Paige Harden: Yeah. I think this is where genetics really scrambles with something we really want to do. We want to really neatly divide things up into morally de-serving, rewardable effort and circumstances beyond our control.
But what happens when some of the circumstances are our biology, and they create our brains that are producing the effort? I don’t think . . . Once you start thinking about the development of a human life, that distinction we want to draw between things we can be rewarded for because we have control over them and things that we shouldn’t be, it just kind of falls apart. It really doesn’t make sense developmentally, which people don’t like. We like to be able to say this is the A+ for effort that we get to reward or punish. But pulling that out from the mass of things that go into a human life is difficult to the point of impossibility, I think.
Bethany: A different question. Knowing all that you could know, how would you restructure the concept of meritocracy in our society? What would you do with it?
Kathryn Paige Harden: That’s such a good question. The first thing that comes to mind is, I’ve been reading recently a book that I wish I had read while I was writing mine. It’s by a law professor, Joseph Fishkin, and it’s called Bottlenecks.
He’s coming from this perspective of, where are there narrow throughpoints in American life? We can think of this as high-stakes tests, or we can think of this as the motivation behind Ban the Box, which was, let’s not have everyone who’s had an incarceration history be thrown out upon initially applying for a job, that sort of thing. And then thinking about, well, where are the bottle-necks? Where are they the tightest? How could we get them wider, or how could we get more people around them?
He calls it this pluralistic opportunity structure. The reason I really love that, part of the reason I really love it, I think it really maps very nicely into, what is it about the genetics of education that bothers us so much? Why is that a harder topic than, say, the genetics of obesity or the genetics of depression? I think it’s because education at various points plays such a bottleneck role for other things: for employment, for access to healthcare, for certain types of labor conditions.
I think, in thinking about meritocracy, I would like our conversation to be less oriented around who deserves to get through the bottleneck and more around, do the bottlenecks need to be there? How can the bottlenecks be widened? How can we open up a more pluralistic opportunity structure in America?
Luigi: Let me try with something equally difficult. In economics, there is this famous result attributed to Jackie Schleifer Taylor that says that if you have uncertainty, you can ensure, the moment uncertainty appears, you cannot ensure anymore.
If, in the future, we can predict for sure your expected death, then we cannot insure against death. And we lose some benefits, because everybody benefits from having access to life insurance, especially if you have young kids, and so on and so forth.
The fear that I can see in this research is that we’re going to be able to determine sooner and sooner who is the winner, and the others will not even try, because at the moment, if I’m not told that I am genetically not predisposed to do something, I might try. By trying, I accumulate some skills that might be useful later in my life.
But if they tell me right away . . . I was told at age 10 that I couldn’t sing, and I didn’t even try, and my life has been OK. But if you say no, you’re not predisposed to study, for example, then you don’t even try. That’s really a pretty grim life.
Kathryn Paige Harden: Yeah. I have a couple of different responses to that. The first, is I don’t think we will ever be at a point in which we can predict really complex human outcomes like education or lifespan or psychiatric disease from DNA alone. For lots of reasons, one of which being that all the variation in those things isn’t genetic and because different genes are operating in different environments for different people.
I think even as the genetic technology gets better and better, our relationships between a pol-ygenic index, a measure of someone’s DNA, and something like whether or not you’re going to graduate from college is still going to remain . . . It’s not a pregnancy test. It’s not a diagnostic test. It’s still in social-science variable land.
If we think about what people are taught about genes and biology in high school, versus what they need to know in order to be consumers of that information in their lives, I think there’s a real disconnect there. I think there’s an educational task.
And then, finally, I think there’s a real regulation task right now in terms of who has access to that genetic information. I personally think that probably a polygenic score is about as predictive of your likelihood of having a car accident as your marital status. Your insurance company can certain-ly use your marital status to set your rates. Can they use your genetics? That’s not governed by any federal legislation right now. What about your long-term disability insurance? What about your kids’ private school?
None of those are regulated by legislation right now. Thinking about where are potential, again, bottlenecks in people’s opportunity to participate in modern American life, to what extent could genetic information be used to make those bottlenecks narrower and then what regulation is nec-essary to make that less of a possibility, to mitigate against that danger?
I think that’s a really important question. Unfortunately, I think we’re not having that conversa-tion right now, because too many scientists are mired in the, should we even be doing this science at all, or do genes really make a difference rather than, OK, this is where this is going. What do we need to do on the ground to mitigate against potential harms?
Luigi: Yeah. I think that the issue of regulation is extremely important, be-cause we economists, when we see 20 percent, 30 percent explanatory power, we jump up and down, and we use that in every economic model. The FICO score that determines whether you can borrow for a mortgage has probably less predictive power than the polygenetic index. The risk is that the combination between this information and profit-maximizing behavior of people that try to select is that they’re going to create labels, and you have a low polygenetic index, and you are out of every school, and that becomes really a new form of racism.
Kathryn Paige Harden: Yeah. I think it does. It’s discriminatory behavior, and it’s creating an underclass. It’s saying that there’s something about you that you can’t change that’s not a part of your ascribed identity, and it is blocking you off from participating in some form of American life.
What’s interesting to me is that people . . . There’s such a paradox. When we’re thinking about healthcare, health insurance is the one thing that’s federally governed right now that you can’t dis-criminate against someone on the basis of genetic information. If you have a BRCA gene, they can’t refuse you health insurance. If you actually have breast cancer, before the ACA, before the preex-isting-conditions protection, you could. That’s very, very strange.
If you have a polygenic index that predisposes you towards impulsive behavior, we think that maybe shouldn’t be used by your car insurance. But if part of your impulsive behavior is getting divorced, your car insurance already uses that.
Again, I think genetics, what it does is it pushes on some of our little intuitions about what things are fair or unfair to select on, because we have a really strong intuition that we don’t want our genes to be used against us. But once you start thinking about all the stuff that is influenced by our genes that’s already used against us, that’s already used for selection, a lot of that selection and classification of risk that is built into American life starts to feel a little bit more eerie.
I don’t want people to shrug that off. I want them to sit with it and think about, well, to what extent does that tell us something about the way we approach the pooling of risk in this country around the various things that could befall us?
Luigi: And, to give full information, one of the reasons why we seek out your opinion is because we had two podcasts last year that were very successful about meritocracy. One with Adrian Wooldridge who was, of course, a supporter of meritocracy and sees that this is also almost ethical because it rewards effort.
The other was Sandel, who emphasized the luck component. At the end of the day, a lot has to do with how you interpret the data. And, of course, your book comes really handy in that dimen-sion. The fact that I found particularly interesting, speaking of intervention, is your example of the glasses and how intervention can be designed to actually reduce inequality rather than exacerbate it. Can you elaborate on that, because I think that would be very interesting for our listeners?
Kathryn Paige Harden: Yeah. The glasses example is a classic. It comes from a 1970s paper by Arthur Goldberger, in which he said, “Look, we know that eyesight is heritable. If you have poor eyesight, particularly in adulthood, that’s likely in part because of the genes that you happened to inherit from your parents.” We don’t then throw up our hands and say, “There’s nothing we can do about that.”
What we do is we give a targeted intervention. We give eyeglasses to people who have poor eyesight and not eyeglasses to people who don’t. We’re using an environmental intervention to counteract a genetically caused inequality in functioning. We can think of a lot of examples like this. When people are depressed, that might be partially genetically influenced, but we might re-spond to it with therapy.
It’s harder for some reason for people to keep that in mind when we start talking about genetic influences relevant to education. The thing about meritocracy being good or bad, often, I think people fall into the trap of feeling like you need a one-size-fits-all answer to those questions rather than meritocracy might be instrumentally good for some purposes.
There might be something, some inequalities, between people that no differences in human functioning really justify. That’s one thing that I talk about in my book is that these differences, these equity/efficiency trade-offs, or the extent to which we privilege meritocracy versus address-ing inequality, we might have different answers depending on whether the outcome we’re talking about is graduate admissions to STEM PhD programs versus having access to healthcare. Those are different outcomes for which we might have different decisions.
Bethany: I was thinking as you were talking that maybe the summary—and tell me if you agree with this—is that you’re arguing for a transparent conversation about how we use these things. Right now, we use them, but in very un-transparent ways, where we pretend that we’re not. Very almost dishonest and hypocritical ways in ways that we pretend we’re not, but ac-tually, it’s embedded throughout everything in life.
Kathryn Paige Harden: I think that’s absolutely true. When we discover that the genes you’re born with are associated with whether or not you graduate from college, and then we think about, what do college graduates get more of, compared to non-college graduates in this country right now? That’s telling us something about the world as it is. Not necessarily the world as we want it to be, but the world as it is.
I would like us to have a transparent conversation about, well, how do we do science to un-cover those mechanisms? But also, what does that nudge us to in terms of new intuitions about whether it’s fair or unfair?
The importance of genetics for human development is something that we really want to shirk out of a lot of times. And not doing that, kind of staying with it, I do think forces a hard, but more transparent, conversation about values.
Luigi: You do, I think, an excellent job, first, recognizing the terrible use of genetics in the past, especially by social sciences, and one is worse than the other. Economics, so-ciology, statistics, are really pretty abysmal. You say very clearly in your book that all the studies are basically about white people.
And so, you don’t touch the difference between races, because you can’t. However, you punt on another important issue, because the studies are done only on white people, but there are white males and females, and I don’t know whether there is a different gender in the middle, but I think that you have plenty of that. You punt on the male-female difference in genetic difference. In part, there is some evidence. I saw that in executive function, men are genetically inferior to women.
Kathryn Paige Harden: This is really interesting. When we’re looking at ge-netics, you’re absolutely right, that there’s a lot more data on, at least, potential data on genetic differences between men and women than there are between racial groups.
With education, when we’re looking at educational attainment, part of the reason I don’t really go into sex differences there is there isn’t really that much of a story. If you do the GWAS (genome-wide association studies) separately in men versus women, and you look to see what’s the genetic correlation between them, are the genes involved in education in men, the genes involved in ed-ucation in women, how are they correlated?
The correlation is like 0.99. The forthcoming paper on educational attainment has some analy-sis of X chromosome. There isn’t a huge story there. There just isn’t much to talk about there. What we see is that when we’re just looking at the predictive power of a polygenic score, I write about this in the book, you see really big differences in the early 20th century in the predictive power of the polygenic score for men versus women. It’s much more predictive for men than for women.
And then as women get access to education, the polygenic score becomes increasingly more predictive of women’s educational attainment, until you essentially get no sex difference at the latter part of the 20th century.
Bethany: I wanted to go back to something you’d said earlier about the way in which our DNA will never be completely predictive, that we have to worry about aspects of this, of course, but we don’t have to worry about the complete diagram being handed to somebody at birth.
To me, that’s one of the happiest things I’ve heard in 2022. It’s been a rough start. That’s one of the best pieces of news, because I’ve always loved that line from a Leonard Cohen song, “It’s the crack that lets the light shine through.” It’s the things that we can’t quite add up that are going to save us.
But as a scientist, as a humanist—which I think you are as well as a scientist—which side of you speaks more loudly on that? Is the humanist in you happy about that and the scientist sort of an-noyed, or is your overall feeling about that sort of one of relief?
Kathryn Paige Harden: I think my overwhelming feeling of that is one of nei-ther relief nor annoyance, but somewhat more just awe. It’s really amazing that we walk around and we tell stories about ourselves and we feel agency over our lives and we make moral judg-ments about ourselves and other people, and we are trapped in these shells of bodies that are contingent, contingent on biology and contingent on a developmental program. Mostly I think, how lucky am I that I get to think about that mystery all the time? I think it’s more a source of awe than anything.
Bethany: One of the things that fascinated me about our conversations on meritocracy was the layers of it, that as you start to unpack, what does it mean to be a meritocra-cy? It gets more and more complex in the layers under the surface.
I think our conversation with Kathryn Paige Harden was really interesting because it showed more of the layers underneath that surface. That even some of the components that we all think of as belonging to us somehow, or as being our right, like our ability to work hard, are actually deter-mined by our genes as well.
Luigi: Absolutely, Bethany. I think that this is the fascinating part about meri-tocracy. And also, what I understood reading Kathryn’s book and talking to her is to what extent how we define merit is really a function of the way we design a test and to whom we design a test.
We all have a different portfolio of skills. If you design a test based on singing, I’m the last one in the class, and actually as a little kid in elementary school, the priest told me to stay away from the microphone, because I would ruin the Christmas songs.
Bethany: Oh my God, wait! I have to interrupt you right here because this is something we have in common. For all of our journalist/economist differences. I grew up in a really small town in northern Minnesota called Hibbing, and I actually went to elementary school in an even smaller town called Pengilly, and there were not enough kids to make choir. I thought I could sing. I tried out for choir, and I still remember the teacher hitting a note and going (singing), and she finally said, “We don’t have enough kids for choir, but you can’t join. I’m sorry.” Anyway, back to what you were saying. A commonality, Luigi.
Luigi: Yeah. I cannot fish for my life. Even when I go to the fishing pond where you have to pay for what you catch, I fail to catch fish even there. I’m really incompetent in so many dimensions.
Even Harden said that one of the few things that seems to have a difference between men and women is your ability to organize spatially and actually go back home, to have a sense of orienta-tion. I have a terrible of sense of orientation.
Bethany: Well, I have a terrible sense of orientation, too, actually. So, there’s another commonality. Go figure.
Luigi: Some of these tests have some connection with what we need in soci-ety at some moment. In the old tribal world, in which you had to survive to become an adult—you had a trial by fire—it was because that’s the life you were supposed to run later. That was a good test of your ability to survive.
Today, many sortings are done on things that have nothing to do with what you do later on in life and are more like a way to determine an easy way to rank people, not necessarily for efficiency considerations.
Bethany: Yeah. I think that’s really interesting. I would almost phrase it somewhat differently. We tend too much to take the system of rules that dictate the outcomes for granted. We think this is just the way it is, without actually for a moment pausing and fundamental-ly looking at those rules and saying, “Well, wait. Where do those come from, and what are they based on?”
I think it’s always really interesting when you deconstruct that system. In the case of meritoc-racy, you say, “Well, what are the rules that determine the outcome of meritocracy?” Not just, “This is what the rules are determining, and therefore it is what it is.”
I think of that, and that applies to so many other spheres, too. Actually, there’s an interesting analogy to some of our discussions about capitalism and markets, that capitalism and markets work according to the rules we’ve laid down, too.
There’s no such thing as a purely free market. It’s actually determined by the rules we’ve put in place. These underlying structures are starting to seem more and more interesting to me.
Luigi: Yeah. And I think that overlaying a moral dimension, as Sandel was say-ing, is very dangerous. Sandel himself was recognizing that somebody like Hayek was smart enough not to do that and said, “Look, the reason why you need to compensate brain surgeons more is not because that job is more meritorious. It’s simply because you need to attract talent, and especially if the life you conduct is really painful, you need to retain talent, because we care to have good brain surgeons.” When everybody—even Michael Sandel—when they have brain surgery, they want a good surgeon.
Bethany: But it is actually interesting. This is taking a conversation on a small tangent, but even in the case of doctors, you can argue the point you made earlier, which is that our system for selecting who can become a doctor doesn’t necessarily mean we get the best doc-tors. Because I think many doctors in spheres and aspects of medicine other than brain surgery would tell you that bedside manner and being able to communicate to a patient and being able to talk to them and being able to understand where that person is coming from is every bit as im-portant as your ability to master the knowledge of medicine.
Yet we select for people who can do the latter rather than people who have any empathy and ability to do the former. To me, in different areas of medicine, it’s an interesting example of how what we select for may not actually, in the end, even be what we want.
Luigi: Also, we select for what is easy to select on, because even if you de-cide that bedside manners are important, and I am 100 percent with you that they are very im-portant, it is much harder to select on your bedside manners than it is on how much you can solve differential equations.
Differential equations, there is a right and a wrong answer, and I can rank people on the basis of how many mistakes they make very easily. It is also proof to a liability suit or discrimination suit. I cannot say that the judge was biased because he liked or didn’t like you or whatever. I think that in a litigious society like the United States, I think that objectivity is gaining a premium, even when it’s not the right dimension.
Bethany: I think that’s a really good point. We’re agreeing too much, Luigi. Not only do we have our lack of ability to orient spatially and our lack of ability to sing in common, but it turns out we agree on many of these things as well. We’ll find something to disagree about later.
I agree. I think it’s not just the litigation. I think it’s that in an increasingly complex world, we’re all looking for shortcuts. Little things that we can say this person fits in, this person is who I want in my group, or they’re not.
So, one of the ways we shortcut is academic achievement. That’s dangerous in all kinds of ways, because not only are those supposedly quantitative measures themselves perhaps not as quantita-tive as they appear, but it allows all sorts of unconscious biases to be put to work.
But I think that is one of the tensions in modern life is our desire and very real need to come up with shortcuts versus the really important notion that we need to think about things more deeply and deconstruct them more. Those two things really are in tension with each other.
Luigi: But what I learned from reading the book and talking to Kathryn is that, really, we’re missing out greatly not talking about genetics. Of course, genetics has a terrible history, and we need to be careful.
But as my father was saying, the fact that most geniuses are misunderstood doesn’t mean that if you are misunderstood, you are a genius. The fact that a lot of racist people do genetics doesn’t mean that genetics is intrinsically racist. Kathryn does a fantastic job in explaining how you can do a more compassionate form of genetics and why it’s necessary, both from a compassionate point of view and from an efficiency point of view, because we’re wasting a lot of money trying to do inter-vention that had no chance of success.
Bethany: I was struck by a quote, and I’m embarrassed in my copious note-taking, and I don’t know if it came from a New Yorker article about her, another podcast she was on, or from her book, but it’s a really telling quote, and it’s, “Building a commitment to egalitarianism on our genetic uniformity is building a house on sand.” And I think that sums up very nicely what you were getting at.
What I really liked in her book and in our conversation with her was this idea that we’re con-flating things that don’t necessarily have to be conflated. I think that’s actually been a theme through some of our Capitalisn’t episodes. But in this case, what we’re conflating is we’re conflat-ing the idea of meritocracy with the idea of the structure of society that you want to have. We’re saying, “OK. We have a meritocracy and we’re letting merit determine everything, including these increasingly unequal outcomes between people.”
Well, in addition to breaking down what meritocracy is, you can also say, well, we do want a fairer system of meritocracy to determine certain things, like whether or not you could become a brain surgeon, whether or not you’re equipped to become a brain surgeon.
But we don’t want even a good notion of meritocracy to determine whether or not you get health insurance or how you can live your life, whether you can afford to own a house or not. I think there’s an interesting way in which, for the sake of simplification, we conflate these things that shouldn’t necessarily be conflated. Just because you say you want a meritocracy doesn’t mean you have to let the meritocracy determine everything about the structure of the society in which you live.
Luigi: No, I agree. But I very much prefer the term that we were using in the podcast last year, which is talentocracy rather than meritocracy, because it takes away this moral dimension to it that I think is very poisonous, because it gives you a sense of moral superiority.
Bethany: Yes, I agree. I’ve always had this thing that I thought was just an an-noyance on my part, that was one of my idiosyncratic annoyances. But I’ve begun to think that there might be an underlying serious note to it. What I mean is the way the use of the word “tal-ent” has expanded in the last couple of decades.
We used to think of somebody as talented if they were a musician, they were an artist, and you’ve noticed that . . . At least, I’ve noticed that increasingly over the last couple of decades in the business world, people say, “He’s talented.” Usually, “He’s talented,” rather than, “She’s tal-ented.” But they use the word talent to describe somebody’s ability to have business insights.
I wonder if that’s . . . I’ve always thought that this is just an idiosyncratic annoyance of mine that I think the word talent should be used to describe your ability to sing, which we don’t have, or your ability to do art, but not necessarily how smart you are.
Now, I wonder as we talk, has that been deliberate? Not deliberate in the sense that somebody sat back and thought about it, but deliberate in the way these things happen that, increasingly, de-fining businesspeople as talented has become part of a way of saying that they deserve these high-er rewards. That it’s been another way to justify the meritocracy. Does that make sense?
Luigi: I understand where you’re coming from, but I actually take it different-ly, and I would interpret in a slightly different way, that in the old days, competition was less in-tense. If you were a businessman, it’s maybe because you were born in the right family or you had a little bit of education.
But today there are so many people with good education that to be a good businessman, you need to have the extra talent. It’s not just the education. You need the extra talent. A bit like the artist, in the sense that I can try as much as you want to draw, I certainly would become better than I am, also because I’m terrible, but I would never be talented at drawing. The people who stand out in this dimension, whether it’s art or business or whatever other profession, they’re real-ly talented.
Bethany: I hear you, but the use of the word talent as applied to a field like business is going to continue to bug me.
Luigi: But actually, let’s disagree a bit, because I’m sure we disagree on the gender part, because the only part I was a bit disappointed by Kathryn is that she really shied away from my question on gender.
I understand why, because she’s so attacked on every front. But her defense in the book that we don’t have genes for our races is correct, but it doesn’t apply to men and women. I think that it’s inevitable that we’re going to find some correlation, maybe big, something small, I don’t know, in which the talent is different. We need to start preparing for that.
Bethany: Yeah. I suppose maybe that is . . . maybe if she wants her message to be heard, that is one bridge too far or one set of enemies that she doesn’t need to make. But I am in agreement with you that I can’t believe there won’t be differences. There have to be. Some will be in women’s favor, and some will be in men’s favor.
I don’t think that has to be a terrible thing. We appreciate on some level that we don’t all want to be exactly alike. If we were all exactly the same, the world would be really, really, really boring. As long as differences aren’t punitive, I think, hopefully, we can have some appreciation of that, and it doesn’t have to be a bad thing to note that there are differences. But it’s fascinating, it’s always been a topic of debate among feminists, how much do you say?
I remember I did a piece for Fortune many, many, many years ago about why there were no women in the hedge-fund business. It really encapsulated this debate in that about half of the women I spoke to said, “Well, women are no different than men. We invest exactly the same way, we have exactly the same capabilities.” Because I don’t want to go to a place where I say that women and men are different, because that opens up this whole Pandora’s Box of saying that we’re different, and that will be turned against women.
Then there was another set of women who really embraced this notion of, we’re different, we’re better, we take risk better. We’re more thoughtful about things. We see the world different-ly.
It’s really a division even among women themselves, women ourselves, whether you fall into the category of, I don’t want to acknowledge any difference, because there lie dragons, or I want to acknowledge difference and claim that we’re better. It’ll be really interesting to see how any evolving evidence on this front affects that split.
Luigi: I think that this is where maybe the abuse of meritocracy creates some problems, because the moment you say different, if you have everything value-ranked with merit, you immediately say, “They’re different. They’re better.” Or, “They’re worse.”
It is very hard to just stick to the point that they’re different. Look, having some better spatial ability is super, super important if you are in the savannah chasing gazelles. But with Google Maps, it’s not a big deal. Am I better or worse because I don’t have a huge sense of orientation? Certain-ly, you don’t want to put me as a guide for an Everest hike. But for 99.9 percent of the jobs today, that’s completely irrelevant. We need to understand more what our strengths and weaknesses are on some dimension, rather than attribute a better-worse ranking.
Bethany: I actually disagree with you, which is that, how relevant is that point of difference is actually, in and of itself, debatable. And so, I think that’s very true with spatial ability, because I would argue it applies to a lot more than your ability to determine where you are in the world without access to Google Maps.
I think spatial ability is the essence of being able to do math at a high level, is being able to grasp where things are in space and how they move in space. It’s for sure key to being a good pool player, being able to understand just intuitively what’s going to happen if you hit the ball with a certain spin, what’s going to happen to the cue ball and what’s going to happen to the object ball without having to diagram it out. But the broader macro point is that would be true of so many things that we say, “Well, this is just a little thing. It’s OK to be different on it.” But is it just a little thing?
Luigi: Take eyesight. There is no doubt that having 20/20 is better than being sort of nearsighted. As Kathryn told us, there is a very easy way to fix it and to compensate. Now, do you want to put somebody that is very nearsighted as a pilot of a fighter jet? Probably not. So, there is an advantage to being 20/20. I don’t think that in society we consider people who are nearsighted inferior. Inferior/superior carries a huge, huge weight.
Bethany: It does, but it’s often personal. Your example of eyesight is, for me, I went through a phase, I think it might have been at my mother’s urging, where I wanted to go to West Point and be a fighter pilot, and I have astigmatism and a wandering eye, neither of which are fixable by any means, and I would be disqualified based on eyesight.
It’s a little bit of a personal story, but even these things that are not necessarily better or worse or dispositive in life are personal often. And so, I think they’re all going to be very touchy in ways that we can’t really anticipate.
Luigi: First of all, I got a huge insight on your personality. Now, I understand where you have such a fighting personality. You want to be a fighter pilot, of all things. This aside, I’m not saying that, look, this is not an advantage or disadvantage, but I think society does not label you as inferior if you see less well.
For some things it’s better, for others it’s worse. I learned playing soccer, now I understand why I was so terrible, because I don’t have good spatial ability. You explained to me that, but there are two types of players. One who plays offense and then they have to . . . You shoot 20 times in a game and if you score once, you are a hero. You have to forgive yourself 19 mistakes.
If you are a goalie and you have 20 shots, you have to catch them all. If you make one mistake out of 20, it is a huge mistake. The personality that you must have as a goalie and as a forward are completely different. Now, is one a superior personality to the other? No, it’s different.
Bethany: If we were to have any chance of creating a utopia for humankind, I would argue part of it should be exactly this discussion we’re having as an acceptance of differ-ences, rather than a labeling of them as inferior or superior and a really broad conversation about that, and this is going to sound cheesy, so that differences really do become beautiful instead of bad.
But I think there are so many structures in the world that stand in the way of that kind of uto-pia. From the way academia works at a young age, where your ability to get into an Ivy League school is determinative of the rest of your life in some ways. And from our very human desire to be better than other people, to label ourselves as superior to other people. I think that’s a core and ugly part of humanity. While I really do think that this broad acceptance of difference would get us closer to a utopia, I just don’t know how it will ever work practically speaking.
Luigi: Utopia, by definition, is something you can never achieve. But I think that at least we could move in that direction.
Personally, I can say that these three episodes together made me change my views, and I was much more in favor of meritocracy to begin with, and now I clearly see the downside of pushing too hard on this front.
Bethany: Yeah. Interesting. I remember years ago saying to my father in the wake of me getting credit for the Enron story, I remember saying, “Well, this is really upsetting to me, because I don’t think I deserve it.”
And he said to me, “Well, what makes you think you deserve anything?” I remember saying that to a therapist I had at the time who was like, “This is why you have issues with your parents. And this is so horrifying.”
But I actually think now that what my father said was really, really wise, and I think that was the spirit in which he meant it. That, really, what makes you think that you deserve anything? And that degree of humility is really essential if we’re all going to exist together in any kind of pleasant way.
So, today we thought we would do as our capital-is or capitalisn’t Microsoft’s controversial ac-quisition of Activision. Wow, it would be hard to say that really quickly.
Speaker 10: Microsoft’s going to be acquiring Activision Blizzard for $95 a share, this says, in an all-cash transaction that’s valued at $68.7 billion.
Bethany: Controversial acquisition of Activision. Huh. Maybe it’s not that hard.
Speaker 11: I think this is about Microsoft getting really premier, first-party content to go with their big suite of Xbox . . . you know, Xbox as more than a hundred million peo-ple.
Bethany: Luigi, your thoughts.
Luigi: My preamble is, I belong to a generation that doesn’t do video games. This is not exactly my cup of tea type of market. This said, I think it’s fascinating because, to me, it is the reaction to the fact that Google and Facebook are entering this space.
This space used to be dominated by Nintendo and Sony and Microsoft because the console was crucial. Now, in the near future, the console will become less important, because Google now has some way in which you can do video games, streaming, without any console. There’s a fear that they will be much more entry into the industry, so people are trying to consolidate to defend themselves.
Bethany: That’s interesting. I am not a video gamer either. I’ve been told, actually, I should be, that it might improve my driving skills. Luigi, maybe it could even improve your sense of direction. Video gaming is supposed to work wonders for all sorts of things.
Anyway, that aside, I admit I’m a little biased in this. I had written a story about Microsoft back in, I think it was 2013, 2014. Basically, the guns were blazing for Microsoft from Silicon Valley. Eve-ryone in Silicon Valley, or at least a lot of people, were eager to say Microsoft was on the brink of failure. They were so far behind and had screwed up so badly that they could no longer fix it.
That, frankly, was the story, if I had a story in my mind that I thought I was going to write when I set out. And I ended up meeting Satya Nadella and thinking, if anybody can save Microsoft, it’s this guy. In my innately contrarian way of being, I couldn’t help starting to root for Microsoft after that. The big, bad Microsoft, of all companies, which was the ultimate evil empire when I was growing up in journalism.
But I think that there’s a certain amount of scrutiny that Microsoft’s acquisition of Activision—there, I said it again—gets that the big tech giants’ acquisition of competitors doesn’t get. I recog-nize that’s in part due to the gaming culture, and gamers see themselves as outsiders, and they don’t want to be corrupted by big corporate ownership.
But I still think that the amount of rage directed toward Microsoft is a little bit out of step with the amount of rage that comes at other big, powerful tech companies that make probably more meaningful acquisitions in the scheme of the world.
Luigi: I agree with you because, again, not being a video-gamer, I’m much more concerned about information, news, media, and the impact of these on democracy than the impact of video games on democracy.
The most important aspect that I think that is not being emphasized, at least in the articles I read, is that the game is changing. The video game is changing, because there will be a lot of entry by the same players, but players that so far have not been in the video-game business, and I think that this is a defensive acquisition, not an outreach of Microsoft into a different domain.
Bethany: I agree. I think that’s a smart way of thinking about it. That said, if you look at the history of many big acquisitions—and I’m saying this as an anecdote-driven journal-ist, not empirically speaking, I have not done the analysis.
But if you look at many, many big acquisitions, they don’t turn out well. Look, Microsoft has effectively destroyed Skype, or at least not done with it what one could have done with Skype. And so, the history of Microsoft making big acquisitions and making them phenomenally successful isn’t great, and I think that’s actually true of a lot of big companies.
My guess is that this doesn’t bode well for Activision’s innovation and ability to succeed in the future unless, and I don’t know the answer to this, unless its culture is very similar already to that of Microsoft. For some reason, I really, really doubt that Activision’s existing culture is similar to Microsoft’s.
If I had to bet, from the standpoint of sheer, is this going to make Activision more valuable or less valuable, I’m going to say it’s going to make Activision a lot less valuable, and in purely a de-struction-of-capital way, this is a capitalisn’t.
Luigi: Totally. You’re absolutely right. The big exceptions, of course, are the ones where you do generate some monopoly power. So, Facebook’s acquisition of Instagram or WhatsApp have worked out really, really well. But in a sense, the fact we’re worried about Mi-crosoft and the success of this acquisition suggests that maybe the antitrust concerns are less than people make them out to be, and the business concerns are bigger.
Capitalisn’t podcast hosts Luigi Zingales and Bethany McLean talk monetary policy with Stanford’s John H. Cochrane.Capitalisn’t: A Different Story of Inflation
When providers change ownership, patient health hangs in the balance—but there may be a prescription to address some of the problems associated with consolidation.Is Health-Care M&A Hurting Patients?
What would trouble for China’s second-largest real estate developer mean for the Chinese economy?Capitalisn’t: Is Evergrande Really China’s Lehman Moment?
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