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#138 - Russ Roberts

Y Combinator podcast.

March 17

Russ Roberts is an economist, a research fellow at Stanford, and a hosts of the widely popular weekly podcast EconTalk. His podcast started as a simple way to teach more people the basics of economics, and has since become a window into every bit of Russ's interests. In this episode of Y Combinator podcast he shares a bit of his story, what he finds the most peculiar about economics, and dives deep in various philosophical discussions about life, startups, teaching and everything in between.

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Hey, how's it going? This is Craig Cannon and you're listening. Toe y Combinator is podcast. Today's episode is with Russ Roberts. Russ is the host of the podcast T e con talk. He's also a research fellow at Stanford's Hoover Institution and the author of several books, including How Adam Smith Can Change Your Life. You can Find Russ on Twitter at E Con Talker, and I've also linked up his podcast in the description If you wanna subscribe. Alright, here we go. So to start off the podcast, I want to talk about one of your previous episodes, the one with Jonah Goldberg. So you pulled out a passage from his book, The Suicide of the West,

where he wrote, Capitalism cannot provide meaning spirituality or a sense of belonging. Those things there upstream of capitalism. I really enjoyed your conversation, and I kind of want to talk about it in the context of startups. So what are your thoughts on this meaning spirituality in a sense of belonging in regards to creating your own company?

0:55
Why do entrepreneurs start copmanies?

Most entrepreneurs don't seem to have money as their primary motivator. Money is just the means of keeping the business moving. What they really want is to make a mark on the world.



Well, in a previous life I was out of business school, and I one of the things I did there was to connect MBA students with entrepreneurs. We have something called the hatchery, and entrepreneurs come in front of students present their ideas and the job for the students was to write a business plan for that idea. And in the course of doing that, I met with a lot of entrepreneurs because obviously we couldn't take everyone who was interested. I got find out what they were interested in, what they cared about. And, um, one of things that was very moving and I actually stole the sudden fictionalized, didn't put in one of my books was the non financial motivation that founders have. And obviously there's a financial motivation. If you're not gonna make money, it's probably not gonna get investors. And it may not keep your attention and eventually won't be able to pay your workers.

So you do have to make money, and you have to think more than you spend to have a viable business. That's, Ah, beautiful, a beautiful thing. But I was struck by how much people care about the what I would call a spiritual part of it. So I have a memory of Ah Harper started a software company. Uh, and I remember him, and if he choked up, her teared up. But he definitely had an emotional moment when he said to me, You know, I wish my dad had seen my company because his dad passed away. He said,

I wish my dad had seen what what this product is. And then he stopped and he was brought up short. He said, I don't even like my dad And I thought, Wow, that's one of the deepest things I've ever heard right this incredible primal desire to first of all, please your father or make your father respect. You earn the respect to your father. But the role of a startup or anything you creates, not just start up anything you create. The mark you make on the world that you want your parents to see is, um, way beyond. I think the monetary part of it. So the money counts. But I think obviously ah,

starting a business, creating something that can sustain employees and pay them is death thing, the world in your own way. That's just ah, the way we make our mark, and I think that's a really beautiful thing. I think it's a phenomenal thing that in America. It's relatively easy to Dio, and I think that's that's really important to part of what makes America what it is.

3:28
Why did Russ Roberts start Econ Talk podcast?

Russ realized there was a sizable audience willing to listen to what he had to say, and it was exhilarating!

His podcast, Econ Talk started with a few thousand listeners more than a decade ago and has since grown by a few orders of magnitude.



And was that your intention behind the contact to make your own dent?

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Um, I just have before I answer that I want to go back to the Jonah Goldberg quote about Extreme Capital is about. I just I think it's, you know, I think it's bizarre how capitalism bears the burden of human nature. Yeah, so people say capitalism that mean that assistance based on greed? It is a Milton Friedman thinking is opposed to what? What system doesn't have agreed greedy people in at every system. Maybe not greedy, just at least self interested. But to go back to your question. You know, when I first started podcasting in 2006 I was invited. Before I start, I was. The reason I got into it is somebody invited me to be on their podcast,

and I asked them how many people would listen. Figure it be 80 114 said about two or 3000 I thought Whoa, uh, if you told May that it two o'clock tomorrow afternoon, we're gonna be in a large theater and there's two chairs at us on that stage, and you consider one and Chad and these 2000 people 2500 people are gonna be interested in what you have to say now, some, of course, gonna leave before the 10% 20% through, because they're allowed to leave without you seeing them in the podcast. But they're going to start. They're gonna they're gonna come and buy a ticket to reserve a space. Just what a download really is, I would have said I did say So I'm in. Okay, I'm coming.

I'll be on your show. And then I realized maybe I could do this, and I don't think I'd want to do it every week. That's him like a horrible. But eventually I realized that if I didn't do it every week, I'd have trouble attracting listeners. And if I could do it every week and that is the audience grows. Basically, you are hanging out in what started as a theatre auditorium, then became a basketball stadium, and right now, free contact gets a football stadium of listeners every Monday morning, and that just blows me away. It's moving to Mae, it's Ah, I feel blessed and privileged and honored to be able to do it,

and it's, um it has the strange piece to it, which is that my listeners know me pretty well. I have 700 hours of material of which, you know, I'm probably 300 of the 700 hours. There's a guest, usually almost always. And so I don't talk the whole time, But I talk maybe a little less than half the time. Ah, so somebody who's been listening from the beginning of which there are nontrivial number have hung out with me for 300 hours. That's a you know. One way to think about that is it's ah, let's see, It's,

um I don't know, It's a lot of road trips of of intimacy, but I don't know them. They've hung out with me, but I haven't hung out with them. So that's a strange, beautiful, poignant aspect of this business. But the bottom line is dancer question. The chance to hang out with those people every week is exhilarating to bay and its wonder. Wonder aside, I love it,

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Yeah, to go off on aside for a moment. I have the same experience, and it's often much more focused because it y c we have the single demo day, right? Cause you didn't episode with PG and Sam and they talked about it. And so before Demo Day, we have this thing called Alumni Dem a day where people have gone through the program. Come and see the company's demo, and invariably someone will come up to me in the bathroom while I'm at a urinal and pat me on the back and say, Hey, Craig, really love the podcast. Maybe not right now.

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E Like you're there, buddy. They've been Yeah, exactly. Yeah, it's

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cool. I'm very happy with you. And so you know, now you're seven. What's what episode Do you just release

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6 90 something We're close

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to seven on almost 700 episodes. Seep. Um, I'm kind of curious if it's possible for you to summarize thes these key concepts that you've talked about because I mean, I haven't gone back to Episode one, so I don't know what it was in the beginning, but you have a pretty wide spectrum of guests toe all of our stuff or in large part, is related to technology in some way a lot of like started founders. Listen, we are nearly two or three key economic concepts that you could kind of impart onto a startup founder after almost 700 episodes of the Contak

7:58
Why do so many people listen to EconTalk podcast?

The podcast started with basic economic ideas which were useful in business (some examples below) but have since transitioned into interesting topics that Russ Roberts wants to learn more about.

What kind of econ ideas have been covered in EconTalk that listeners found useful? Opportunity cost, comparative advantage, and emerging order, among many others.



I. Normally I'd say I have no idea, but I actually do have an idea. And the reason I haven't ideas, not from me, but from those founders that have talked to me and said, I love e con talk. I say thank you And then they say It's really helped me with my business and I've never wouldn't have imagined that had no inkling was shocked and surprised and taken aback and curious. And, uh, you know, for May, almost everything I do is I try to have a mix of entertainment and education. Um, there's a sweet spot between those of you know what works best or what works better than others. If it's too entertaining, you don't learn anything.

If it's to educational, nobody listens sometimes. Ah, so the challenge is to find that sweet spot. But the idea that it would be useful to somebody running a business never crossed my mind literally would never have come to me. until I hang out here in the Stanford in the summers and I interact with people would start ups UM, V C's and others and and they tell me that they find it come talk helpful, and I So I asked her why. And one of the answers that I hear think they're a couple of answers somewhere. There's some basic economics concepts that are useful, and I should say that, you know, when I started, E contact they did was to interview economists about the research. Um, that's not what is anymore.

It's every once in a while. Blue Moon. It's, ah, economist right about the research, but now it's, um I'm lucky. It's basically the show is really should be called what Russ Roberts is interested in, which changes over time. I got tired of talking about Bitcoin and monetary theory and what caused the financial crisis of 2008. I did 25 or 30 episodes on that topic of the financial crisis, and I've learned what I think I can learn from it, and I don't care if there's a really great book on it now that summarizes a bunch of stuff. I'm probably not gonna talk to him because I kind of It's not that I might not be a great book. We could even have a good conversation. I don't think I wanna learn enough from it to go through the effort of reading it and the same Mr With monetary.

Three A Bitcoin kind of have a rough idea of where we stand and there's it's The answer is there's a lot we don't know, and when we get a little closer, I might do it again. But I'm not going to any for a while, even though everyone tells me I gotta interview so and so because he really understands a thing. I don't know, I doubt it, but okay, I'm Ada. So, you know, in the early days it was very economics focused, and there are some basic economic ideas. I think there were useful in business. The idea of opportunity costs idea that when you do something, you can't do something else.

That's a good thing for a person in business to know it sounds trivial. It's not in practice. It's easy to forget that. And so when you hear that in a pod caster Oh yeah, it's a useful thing to remember. They do have comparative advantage. The idea that there are things that are too expensive for you to do for yourself, and you should pay someone else to do them for you. I re founder has to deal with that issue. When do you hire director marketing? When you hire an account, when do you hire an HR director? When do you etcetera, etcetera those air? You know, tough tradeoffs and thinking about that,

I think, is useful because I think I wouldn't be surprised if a lot of founders have what I would call a control problem. And so giving up control is very challenging for for most, for a lot of people, especially founders, and so being forced to think about that's probably a good idea. But I think that the most interesting thing that people have told me they found useful is the idea of emerging order, the idea that certain things can solve themselves under the radar and that that their forces that work to work on problems, even when you don't explicitly try to control them and solve them, and that just is not a natural idea. It's not the way we're taught. It's good reasons not to teach it, right? Most things you want something done, You gotta do yourself. I always used example the dishes.

The dishes won't do themselves. Someone's got to get into the kitchen and do the dishes. The garbage has Doesn't take itself out. You gotta roll the garbage to the curb. Uh, etcetera, etcetera. But there are a lot of problems that get solved that you don't have to worry about. Like, Oh, if a lot of Chinese kids move into cities and start using pencils in school because they're not on a farm anymore and now they're not pencils to go around and how we could have pencils in America because the Chinese are gonna have them all. And I'm going to show up at Staples and say, Could I have a dozen pencils? They're gonna say what you mean. Come back in a year. The Chinese got all of them this year that doesn't happen and you don't lose sleep over.

And that's an amazing thing. I did. Ah ah, Palm called. It's a wonderful loaf in its animated online, and it's about the phenomenon that in a major city everybody goes to bed at night, not worrying that when they wake up. Is there gonna be food for everybody who's in charge of that answer? Nobody. Nobody's in charge. If you like whole wheat bagels, you don't have to send a letter to the city all saying, You know, I just felt were not getting enough whole wheat bagels this year. Could you make sure the next year you, Pam,

plant more? Ah, wheat, all these things. There's a lot of problems and solve themselves that's generally of interest in that world of public policy. But in a business, it's also useful because there are problems that your culture could solve their problems. There are things you can outsource. There are things you can you know. Somebody told me I didn't. I was gonna hire ah was gonna expand my head count. I realized them to do that. Rent that, like, to me, that's an obvious idea.

And it is obvious. Everybody understands that what this economic concept of emergent order that did that there's certain things they're self regulating or that control themselves. It's forced you to think about it in a different way, and so I think that's wonderful that anybody found that useful in a practical sense. But you know, most of what I do is not useful. It's just interesting. That's what I tried. I tried to get smarter. In theory, being smarter is useful. Ah, but for

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you found on that right? And so when it comes to communicating these, that is whether it's to you know, your Children or friends or listeners. What are effective methods for actually teaching it in such a way that someone into its it UNR really understands it and can put it to use?

13:59
What is the point of learning economics?

Economics, when it is well taught, should give students a lens to understand the world.



So I used to spend a lot more time thinking about some aspects of that because it's very easy to teach a class and given exam when you're in the classroom, which I was for 30 years, very easy teacher class given exam and convince yourself that the student have learned something when in fact they've all learned almost nothing. One of my favorite teacher evaluations I got was I got a one out of five, and the students said Professor Roberts is a horrible teacher. He expects us to apply things on the exam that that he expects us to apply the material on the exam two things we've never seen before. Of course, that was the whole goal. The class. I mean, what's the point of learning to tell me? Things I can explain to you work that right? It's just memorization, right? So that's not what we're trying to do here we're trying to do is teach how to think. And economics, when it's well taught,

should be about giving you a lens to understand the world. So, um, the challenges, how do you convey material in ways that are memorable and that you can internalize and then apply the things that aren't just the example you got? And you know one way to do that? It's a conversation, so I think a great podcast can do that can help you here the back and forth of a conversation. Rather monologue, which would've book is Book is a lectures of monologue. Ah, conversation replicates. Maybe your own thinking processes. It makes it more likely that the lesson will go in. Ah, the other way you do It,

of course, is just through trying toe workout, the implications of an idea that are so obvious what those implications are where the unintended quanta consequences one of the most important lessons of economics that we talk about on he can talk is the idea of, And then what? So you can tell me what's gonna happen if you put this policy in place, but and then what? What, what what the next set of consequences that come from changing incentives, the way you've done them through sale, price control or a attacks or subsidy or tariff? It's easy to see the first round direct effects. The harder thing to see is the indirect effects, and that's what economics and when it's well, talk should sensitize you that way. I mean, the other lesson is,

most things were just forgettable. So you've got to convey things in ways that are memorable. I try to do that through narrative. It's why three of my books or novels, That's why I wrote co wrote to rap videos and wrote that palm I mentioned because what I was trying to do there, among other things, was was rhyme is much more easily memorized, and I was hoping to create ways for people to communicate. Using quotes from those efforts, I give an example at the end of the fight of the century, which is the second rap video which opera Polo the filmmaker. We have the line talking about capitalism. Give us a chance so we could discover the most valuable ways to serve one another. And to me, that's That's the romantic, idealized version of what capitalism can be.

There's crony versions of that where, instead of trying to figure out what makes value to you, my customer get the government to keep out a competitor or to get a special payment, or it's all kinds of ugly versions of capitalism. I could defraud you. I could lie to you. I could deceive you. It's hard to do if I have. Competition is gonna be a lot harder, but when it works well, that's what it does. It gives you a chance to discover how to serve. We serve one another, and that's pretty amazing. But that's that is a pedagogical device that rhyme your Ah, you know,

my kids know that my heart, my, uh, that's useful. That doesn't mean you understand it just cause you can spit it back to May, right? There's a lot there. There's a lot there, so I fully understand that you have think through what the consequences of that idea and concept are. But that's another piece of it. How do you convey it in a way that people will remember it, that people are gonna have it in front of mine, not back up?

17:57

So much of it is also repetition. Yeah, you know, you're it has to be your most quoted Adam Smith line. Men desires not only to be loved, but be lovely, right? And it's just, like burned into my ears now to

18:9

my right. And by the way, you know their city contract drinking game. You should come by. Ah ah, I don't get any money from it about, uh, it's a fan created. It's very charming. Um, it's things I say all the time. What makes me happy is it's a long list. That's one of them. Yeah, every time, every day. If I say that,

you know you drank Recep, I can't remember. But the those things I deliberately say them a lot, and one of the reasons I do it's that I like that to be burned into your mind is listener. And of course, the guest has never made me never heard it before, So I also want the guest to hear it for the first time. Right? Um, you know, my mother favorite quote is high ex. Ah, curious task of economics is to demonstrate to man how little they know about what they imagine A little They really know about what they imagine they can design. Um, that's a powerful idea. Most people,

it never crosses their minds. So it's an awkward quotes. Not that good. I almost tortured, and I've said 1000 dives, so it's not an ideal quote, but it's pretty good and it gets it something, and you're right. Repetition support.

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But then with your book, how Adam Smith can change your life, you basically my into eating of it was, Here's this incredibly valuable texts. It's not well known, and it's also know that's mysterious moral sentiments, right? And it's also not necessarily incredibly easy to parse. Correct. And so you kind of took it upon yourself to re digest it and put it back out there to the world. And so what? I mean, obviously the title kind of alludes to it, but what was your main objective with the book? What were the ideas. You want to communicate

19:43

that sort. A few things you don't want is just honor Smith, who wrote this book that nobody reads anymore. And I think it's full of insight that there's a certain tragedy there that people only think of the wealth of nations when they think of Adam Smith and particularly have a caricatured version of the wealthy nations in their mind that greed is good. It's not with that book's about. It's a total misunderstanding of the books and exploration of the power of self interests, not greed. You can be self interested without being greedy, and you could be charitable by yourself. Interested kinds obvious, um, thoughts there. But his first book, The Theory. Moral Sentiments Teacher in 17 59 is all about the virtue of not being greedy on why anybody is not greedy. Right? People aren't self interested all the time where they ever do anything but Evelyn.

Why do they ever take other people in tow? Think about other people when they go through the world, and so that's really interesting. It turns out it's not obviously interesting. It's that load. I mean, who cares? People are nice, but I think Smith had about a zillion insights into how we interact with others. And as I read the book, I realized that there was Ah, there's a lot of wisdom here that people weren't grasping that they'd missed a chance toe, no. And so that was my main goal was Toe takes him its ideas and apply them to modern examples from business from family to family and your daily interactions with the people in your circle of friends, associates, sentiments,

colleagues. Um, and in particular, I think if I had to say, Well, you know, is there a central idea? Um, that quote you gave man naturally desires that only to be loved. But to be lovely and by love, Smith didn't just mean romantic. He meant respected, honored, et cetera, and lovely, he meant worthy of honor.

Where their respect think about thinking about that as an aspect of a central part of human nature is incredibly powerful. It gives you insight into why people do some weird things in your life. You can acquire they so and the answer is Oh, yeah, man, naturally, desires only be love, but to be lovely. So we care about our self respect. We care about the respect of others. Remembering those two things doesn't come naturally to most economists. And I think so, reminding people that probably the greatest economist who ever lived was really focused on, not just money. And then the next part of that was, Smith says,

Well, how do you get to be loved? And the answer is, How'd you get people to pay attention here? How do you get to be honored? How do you get to be respected? Especially? Well, there's two ways. One is fame, wealth and glory, fame, wealth and power money. Power thing. Yeah, okay.

We all know that those people we pay attention, those people, you know, uh, I think Donald Trump has all three. I'm not sure if he's really wealthy, we're not. There's some uncertainty about that. He's definitely famous, and he's definitely powerful, and he's probably wealthy. So if he stopped by today, I was just example. When I'm giving a lecture, I always say, if if Donald Trump walked in the room,

you stop paying attention to me. I don't care whether you like him or not. Okay, with the voted for more, not with you hate his guts or love them. He's famous. He's wealthy and powerful on those kind of people. Commander Room, period and a poor for gotten pitiful person is ignored. Not just doesn't it doesn't. It's not just, oh, he's not gonna get as much attention as Donald Trump. It's like that person doesn't exist. You see that? You know we're in San Francisco,

you see that homeless people? That's right. When I give people money, I do try to look up in the eye. Do you try to tell me I have a nice day? It's not much, but it's better than ignoring him. Um, the point is, Spencer Point is that we strive to be paid attention to and the natural way we strive to do that is through fame, power and money, says of all people. Adam spent, The first economist says. That's a bad path. It's tempting.

LA people follow it. Don't the better way to be loved. That is the better way. To be respected, honored and praised is to be virtuous and wise, and that's a funky path that's so hard path. It's not the glittering path is what he says. The glittering bath is the fame, power and money thing. And but, he says, that's be careful. Go down that path, you're gonna do something you're gonna regret. It's not gonna make you happy. And so I thought that insight coming from an economist was really important and really sad that people think you can always about making money and only making money. And that's

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just not true, let alone Adam Smith's

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report. Exactly. Opposite Right? So those were mine

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was really Michael. Yeah, and you know, to me, it's also a kind of a pillar of at least what he contact has become. There's a lot of that human element in relation to the economy.

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Yeah, I'm out, I interview. People have interesting things to say that I think I could learn something from but increasingly, who have things to say about aspects of daily life that are not just financial, although financials find and I, I like interview people in business who let me and let listeners get access to a world that they wouldn't say. So you know, I interviewed uh, Lisa Turner is an organic farmer because I want What's that? Like? I interviewed Alex Warner, Shelly, who's the ah on chopped and runs a high end restaurant, New York City called Butter. What's it like to run a restaurant every night? And,

you know, just one thing I remember from her is that when she told her dad that you wanted to be a chef, he said, Okay, just remember you'll never spend Christmas or Thanksgiving with your family like Oh, yeah, I guess that's true. If you want to be a chef, you got to give that up. So that's cool. So those kind of insights that you know I love, that it's a small part of the program. But I love whenever I could do that. The woman who cuts my wife's hair or the guy who sold in my car, you know, trying Thio pull back the curtain on things you might not normally have access to.

It's really fun for May, um, but I'm also interested in people who have ideas about things that are outside what people would normally call economics. And so I thought about changing the name because it's not so much he can talk anywhere, and there are a lot of people think ago. Oh, we can't talk, all right? I'm not gonna like that. I don't know. It's a tough one. Yeah, it's okay. Um, have to change my twitter. Handle me. Come. Talker always found that interesting

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choice. Like he didn't have your own e contact handle on a Robert Sandal. Announced to eight. Yeah, exactly. Um, all right, so you're obviously quite popular on Twitter. Even if here. Now, Russ Roberts, Um, you have a bunch of questions sent in one related to this. Steve Idema asks. Russ Roberts has emphasized the limits of Onley looking where the light is when it comes to studying well being, how can economists incorporate the aspects of well being that aren't easily quantified?

26:30

This is a recent theme. Interestingly, think that he that listeners sees it is ongoing. Um, lately everything about the fact that we focus on things we can measure. So the metaphor is talking about There is the idea of the drunk who's under the lamppost looking for his keys. And the sober person comes along and says, Let me help you when you lost your keys. Yeah, And after a while, they can't find him. And the silver person says to the drunk, You sure you lost him here. Oh, I don't think I lost him here. But the lights, that's where the lights the best.

So we tend to look where the lights, the best, where we have data, what we have data on. But when I start to realize lately that's a cliche, it's true. But I think what I started worry about lately is that not just we look where the light is, the stuff that's not under light. We forget about it doesn't exist. It's not just like, Oh, it's hard to see and I'm not sure what it is and how big it is, Whether it's small or large, it's that only look where the light is and I just So the metaphor I used for this now is Ah, if you have, if you have a hammer,

everything looks like a nail. It's not just that, it's that you only see nails. It's not like you go. It looks like it. Now. I'll try to hammer down like everything's it now, yeah, and a cloud I don't know about clouds cause they don't remind me about nails at all. So I don't think about clouds, so I think there's ah challenge in economics that we focus on things that are measurable and forget, not just focus on them. Forget about the non measurable. And, you know, there's a lot of examples.

When I start talking about this, an example would be saying Medicine, uh, medicine. People kind of focused on a 10 live Die, Live, Die. How about quality of life? Well, that matters. Of course, that man is sure, of course, that matters. But when it comes down to it, curing the disease or remit putting the cancer remission,

even if it means you have a horrible life while you're under the treatment and you die pretty soon after that, people would call that a victory. It's not a victory to may probably not probably a mistake, but we get very focused on that outcome, alive or not alive. And so in economics, we focus on things that could be quantified with dollars, things that can't be like dignity, tribal lately on the program. Get it? It's not gonna sounds like, Oh, I understand I can't measure dignity, so I have to kind of way that in in a qualitative way, it's that dignity has forgot the only thing that matters right now in America's inequality or how much income you have. And if it's too low,

we worry about that. The idea that it's high, but you don't have any dignity or, you know we give you a check to replace lost income because you've been displaced, say, by technology. That's Justus Good is probably not true. Why not just a cz good, even though, I mean, if you ask somebody, Uh, okay, you're making $45,000 a year now, and this technology is gonna come along. Could take you out of your job You're not able to anymore.

But I'll give you a check for $45,000 which, according to a really bad economic theory, says you'll be just as happy cause you could buy just as much you did before. And of course, we all understand, right that those aren't the same that I might lose my dignity. The inability to support my family is changed. You could say I'm still supporting him through the check that I'm receiving, but most people would say that's not the same. If given a choice, they'd prefer to work. Even though work is unpleasant, often So how do you remember to keep that in mind? And I think what happens is is that we don't So the question which the fantastic question which read the last part again, would it, would it? Steve asked.

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So Steve asks, How can economists incorporate the aspects of well being that aren't

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easily quantified? So what we tend to do is say, Okay, we're not measuring dignity. We need a bearable for dignity, right? So let's go out and asked people how much dignity to have and with Grail it on, Put it on a scale of 1 to 5. I had a big argument on Twitter a few months back on happiness from having Children. Okay, and there's a lot of surveys about whether have people have Children happy? Are not married people happy or not, Single people happy or not? And I said that most of that is meaningless. Why said that's not so interesting right now talking about if you want. But somebody said meaningless. There's a lot of patterns in that in that literature,

that air of useful toe look at you know how happiness varies with incom. How happy to stairs with marital state whatever. And I said, I said, You know what? Those were really There is a meeting there. What they tell you is how people respond to surveys about happiness. Those are not the same thing. They might be the same. There might be similar. They might be identical even. But I wouldn't assume that is, by starting point. It's different thing. So the temptation, first of all to ignore things that aren't quantified and then to say Okay,

now I've got to quantify some unquantifiable things is very natural, and it's probably a mistake, Of course. Now what with somebody said to me, Hey, ah, well, I suggested that a survey about parents, feelings of satisfaction about having Children versus parents who married couples or couples, or single people who have who don't have Children and their level of happy to say, on a scale of 1 to 5. It's not so meaningful, in fact, could fool you into thinking you understand something you don't. So one of the response I got was, well,

more information is always better, and my view is no, it's not. It often is. I'm very pro information like data like evidence, but there is evidence. That's not data. That's very hard for people in 2019 to remember. There are things we understand about the world that don't come from a survey. The don't Crumb from a A Some quantified things. So in the case of Children, you said a man, you know, my wife and I are trying to side they were of Children. Where's the best date on that? I said,

Well, I'm not sure the city any anti good date on that. But there's evidence on it, just not data. What do you mean? So the answer would be, Well, you know, I've read some books, read some novels. That's what fiction is about. Fiction isn't just to pass the time or distract you. Help me understand something about the world that a great thinker put in the form of a narrative. I talked to people that have conversations. People have kids that don't have kids asking what they're satisfactions are now somebody satisfaction from Children or somebody satisfaction from being single may not apply to you. You understand that the data often struggled to make that distinction.

They assume, oh, it's gonna apply to everybody probably won't. So you've got to make some non quantifiable assessment of how meaningful that information you've gathered is for you. That includes almost every decision you make in your life, right? Whether to go to college. What? To major in who to date who to marry, who? Not to, etcetera, etcetera. What, Dad? For dinner tonight.

Oh, you gave it a 4.50 I forgot. I'm a vegetarian. This barbecue restaurant is not for me. Those are the easy ones. The hard ones is most of life rule the

33:24

But it's the current paradigm, right? So you like you look online like I want to find this metric. But for almost all of time before it was, my neighbor has two kids. Let me ask him rank. What

33:36

do you think? Actually, you know what it was through most of time. Having kids is what people do. So I'm going to get married and have kids. Now everything's up for grabs. You don't have to get married. You can be totally You're not gonna be stigmatized. You could have kids in marriage or not marriage. You could have kids through a test tube or through a human big. There's so many choices right and a lot of the traditions about how to deal with that uncertainty or out the window, which is a really interesting part about being alive right now, right? A lot more freedom, lot less guidance. But in the old days what, you didn't look it up.

He didn't try to figure it out. It was what you did. It was It was a came in the air. You breathe. It was just considered normal. Now it's not normal. It's whatever you know, it's up to you, which is very cool. And your country

34:29

have a couple thoughts related to the So first of all, just a touch on that. Use the example of Warren Buffett son in your book. Yeah, and that was a great one, Peter. Yeah. So forget the $170,000 in Berkshire stock. Um, and which would have some to 100 million, I guess of the some absurd

34:46

that he was given the stock and he had a choice. Yeah, His dad said you probably read it more recently knighted, but the debt Oren says something like, uh is your gift. You not get anything else for being right? It's It's a fabulous gift is very generous. $100,000. 80. Whatever it was, you can keep it. Hold on to it. Let it grow. It may not. We may fail or you can cash it out. He cashed it out, uh,

lost the chance to let it sit and accumulate to whatever millions and millions of millions of dollars which wasn't guaranteed, right? Was it guaranteed. Instead, he sold it. Financed, going, I think into the music business and set a successful career is a musician. He's not. Many people have never heard of him. Um, but he's had a very meaningful and satisfying life. And then you got asked question, Did you make a mistake? All right. No,

35:37

I mean, he wouldn't say

35:38

so. I don't think he would, but he could be lying to himself. But again, you have to ask yourself, There are people who would call that a mistake. And for them they should have held it, done something else, had cashed out the money 20 years later and written a wave, and that would have been fine for them. The others who would have sold it and going to music school have been going to the music business would be the last. The thing they dio. Yeah, and everybody has to do with space

36:0

for themselves. But now, in the context of someone starting a company, obviously, you know, companies like Facebook are in the news around unintended consequences. You having talked so many people? Um, over the course of the contact, what would you advise to a founder in terms of thinking about these unintended consequences of their product, like basically looking where the light is not into the future?

36:23
What are the unintended consequences of startup growth?

Investors often have expectations different from those of a founder, and as a company gets bigger, the nature of work and focus of a founder has to change. It is simply not enough for a company to remain in its present state, as the markets won't let it.

This inevitably creates a struggle for the founder, and the company, but is only induced because of this constant need to grow bigger than their current state.



And that's a great question. Um, I think what's interesting? I don't know if this is fair. I've started thinking about this in the last year just because of the nature of the conversation around these companies. It's like you want to take Mark Zuckerberg aside. Say, you know, Mark had a really good run. Fantastic run. You've created a product that is really in many ways, magnificent. Uh, and you can see that that, by the way, when Facebook took a hit from the, um what was it called Camera General Damage Analytica scandal.

They put out a series of ads on TV and wherever else they did that basically said, you know, we're gonna remember how Facebook used to bay, and it's their very romantic at. It's a very idealistic. They're very beautiful. They're set to work the right music, and they're very moving. I enjoyed watching the ad just for, you know, for the emotional kick. Ah, but you want to say you want to play that for Mark and ST Mark? That was then. This is now. You've lost that.

But why? Why have you lost it? Why can't you be content with what Facebook is now, or even what it was three years ago, which was fabulously productive and profitable? The answer, of course, is that the stock market doesn't feel that way. The stock market includes many people bought it recently who didn't get to enjoy those romantic, idealistic CE times. They expect future growth, and that's a treadmill. That's the hamster wheel that you know. I think many founders get stuck on. And by the way, it's not just founders.

The human challenge of Maur is so hard, and I see it in the opposite world in the nonprofit world, where a mission driven organization that wants to save people's lives or make them more meaningful or feed the homeless loses its focus because they get interested in collecting more money, even though under the fundraising, where a donor will make a gift for some funky piece of the business that they care about. That is really off mission. But the the CEO of the corporal of the nonprofit goes money. It's a nonprofit, Remember, it's not a profitable, not the fact that it's called nonprofit. It has a mission that is very distinctive. That's not bottom line, and they don't can't. They can't help themselves. They go off Mission S.

So I think that's it's a human problem. It's not just a founder's problem, but it is interesting that, you know, it comes up in a number of ways. The way we're trying to now is through the stock market, and or investors have expectations that may be different from yours. The founder and then the founder starts easily convinces themselves that Oh, those were my expectations, too, because they want to take the money. Ah, and they want to be successful, is seen in the eyes of others, and that's that's for human. But the other part is the transition from your company to somebody else's company.

And I think when you start a company or three things that to me have very similar emotional payoffs starting a company, writing a book and having a child. All right, They're all something you did that you feel was part of the creative process. And you have a new moons, irrational amount of pride in the idea that someone would say at the age of six, Say, you know, I think I could do better. Drop raising your kid would be a camp. I I'll pay a lot of money. Never. Well, not never once in a while, people do give up their Children for adoption, obviously,

but they tend not to do it for a large payoff. That might, because you can't afford it. But keep it, take care of the trial. We understand that. But general people, don't you think you could do better with another pair and I'm gonna ship out? Doesn't happen. The idea of saying we don't write the first half of the book, but, you know, I think I'm not good at ending. You're like a closing pitcher. Yeah, bring it on.

Bring in Ah, around Rivera and let him finish it off? Never. Not well, almost. Okay, people punch up scripts. Not totally true. Movies are different. Movies were really interesting example. That's right, and they don't like it, by the way. Yeah, One of my favorite favorite favorite books of all time is Adventures in the Screen Trade, which is by William Goldman.

This the script writer who wrote which casting Sundance Kid and more, even more effectively, the Princess Bride. It's He's a wonderful, wonderful writer, and he talks in that book. One of my favorites is tells a 1,000,000 a 1,000,000 phenomenal stories in there. It's a great read in Just Passed Away in the last year, recommended book Tremendously. Three talks about going to like the debut for like, a famous movie night. Remember which, once he shows up for the screening. Yeah, and he gets to the party or the premiere, and the guy says,

Who are you? Says you're not unless I'm William Goldman. I don't see analysts are, he says. I'm the screenwriter, he goes, and I see on the list because they have no prestige, so they are treated really poorly idea that you would take somebody who has created something finished it. And now we're gonna say I'm sorry. We have to throw it out or throughout the last half, or we're gonna change the ending. So they have very intense fasting. They have very limited creative control. They're paid an enormous amount of money for that, uh, for the right to take away the control.

So we get it. We understand it, uh, sort of, but so no one would turn over their kid. Almost no one. No one would let their book. We finished by different author after they died. Sometimes. But a lot of authors evil say this unfinished manuscript. Burn it. God forbid someone else should finish it or someone who should even see it in this form. But a founder often has to turn over their baby toe. A stranger who they may have even had interaction with as the investor or the co worker, the cofounder, whatever.

That doesn't go so well. We know that it's a classic problem in entrepreneurship and investing in business. So, um, that's just brutal. And and we have There's no rationality there, right? You can't say, boy, they have different skills than I do it, but they do a lot better. I was really good at this first part, but this next part's way out of my comfort zone, I can't handle it. Well, let's let somebody else

42:44

just happened with Apple. I mean, Tim Cook is still criticized for not being creative, right? He's like, Oh, he's the operator. Yeah, And then the ever get the name of the next guy that people are saying that Oh, this guy might be the heir apparent for Apple. But he's also not creative. And now Johnny IVs out. It's over. That

43:0

might be actually, but But I think this idea very few people have the self awareness to say I'm not the right person for the job at this point. And, um, and the reason what I'm suggesting here this long rambling, um, so thoughts on startups, Children and writing is the emotional part of that. Ownership is so far beyond respect. Your first question. It's not about the money. I could convince you rationally that this next person's gonna take it to a whole new level. And one of the answers is I don't need a whole new level, right? You know, if you said to me, I could take your daughter and turn her into the greatest tennis player of all time.

It's like That's not my goal, That's your goal. So I think the other issue, of course, for Founders is growth. And the idea that you know, I'm kind of content with what I have is pretty great. I love the hamburgers that this restaurant produces. But if you want to be Ray Crock, you got about got dream a little bigger than that. And we understand that. Ah, when you take on investors, you get expectations about that, and

44:9

that's part of the game. Well, it depends on your investors. Yeah, that's true, too. Okay, so we still have more questions. I want to get to as many as we can. Ah, Anthony, why ask the question about the show he says, has a guess on you can talk ever like basically encouraged him or made you change your mind on a topic.

44:30

The answer is yes. Um, I think that's a very interesting question, because I used to talk a lot on the program, not quite as much as I do that I don't talk about it quite as much now as I used to, but I used to talk a lot about the fact that there's very little academic research that changes people's minds. Right. People don't go. Oh, you did a state. The minimum wage. I've always been against it. But now I guess I'm for it. Or vice versa. Yeah, I've always loved them in a way, I guess it's an awful thing.

No one study does that. There's a lot of reasons for that, some of which are studies air hard. They're all flawed. They're all in perfect, and you can always find something to dismiss about a study. But that's interesting, right? They're not decisive s so I think what that question is getting at is, you know, is over an hour of your life where you went Oh, my gosh, I've looked at this wrong the whole time, and the answer is occasionally, I think more interesting for May. A mask.

If I may ask a variation on that question, are the things you learn from me can talk that were radically different than what you knew about before? It's not so much a change my mind. I have feelings about and ideas about uncertainty and randomness and probability that I've learned from interviewing. Now some Taliban reading his books times seven times. You know, people complain that he's rude on Twitter and I try to be civil. And what the heck am I doing talking to him? Why am I giving him a platform? The answer is, I learned a lot from him. He's not evil. He's just a little rude. Sometimes. Maybe you're tougher. If he was evil,

I wouldn't interview him, I don't think, but he's not evil at all. And he's a nice guy, actually, in many ways. And he's really smart and different and more importantly, got me to see things that even some things already understood that. But I internalize them in ways I hadn't before. So that would be one example where that I know that there's uncertainty. The world. Yes, I did that. I know that it's hard to think about probability. Yes, I did that,

too. Is random just tricky? Ah ha. But he gave me a whole framework for seeing those issues I didn't have before. Um, I think it's a little bit of inside baseball, but I had a guest on Paul Flatterer who are in the business school Stanford, and he said you were a little paper that actually come out. I think he wrote to publish it, and he just wrote to start conversation where he said, You know, when you build a model and then you go out and it has implications and you go out and test the implications, we call that science that's part of science in economics. A lot of people do that, and they decide that if the implications turned out to be true, that means that the assumptions of the model captured reality.

That's not true. So, for example, let's say, um, it's a rainy night truck driver in the mountains has to go around some dangerous curves. I'm going to assume that the truck drivers solving it said differential equations related to friction and speed and acceleration to decide how fast to drive and where to turn and answers. That's a pretty good model that would get most truck drivers would capture what they do. It's not what actual truck drivers do. You would be that stupid to think that because you've assumed that that the truck drivers are really good at math, you understand that that's a model. I don't think plants urine for sunlight. I don't think they yearn for, but they do act as if they do. They turn towards the sun.

47:56

Another example of this is robots don't know how hard to squeeze something. Humans were amazing. Yeah, I've never crushed a coffee cup in my life. Correct? Robots can't

48:4

figure it out. Correct. Why do

48:6

you mention that? Because it's on my mind. In terms of artificial intelligence, people are often talking about, you know, training robots to do certain tasks. No problem. So they're thinking

48:17

the implication that robots, when they don't crush the cup home, they understand or they're like people. No, no, no, no. They're not like people. They're not doing what people do. We see this with autonomous cars. Most people think autonomous cars drive the way humans do. They don't evidently, so far, mainly they are like more like a train on a set of rails than the way I interact in an intersection. Okay, we get that. Everybody knows that.

What's the inside of that? The inside of that is that in economics, a lot of people leap to the conclusion that they've captured something about the real world. So I would give you just ah example. There were actually people who think that because the minimum wage does not always lead in measurement two people losing their jobs that fell in the blank that businesses aren't competitive when they're dealing with low skilled labor, they could exploit them, pay them whatever they want that does that follow? Um, the example I used on Ah, Twitter that nobody responded to it. I don't want to cut this correct, but was one of my favorite things in the last few months is it, uh, somebody on Twitter speculated kind of as a joke. It was Noah Smith who I follows very interesting economists, he said.

I wonder if said, You wonder if dating APS give you a bad match because that way you won't get married and you'll keep using the route that was his pole hit a pole and a surprising larger. More people either for fun or actually believe that that's what they do. They give you a bad batch. OK, so I said I raised the following speculation. Suppose you believe that's true. Your model of the world is that dating APS are deliberately designed to do a bad job so that you will not get married and that will you will keep using their out. Okay, let's say now you start using this dating app. How are your dates? Yeah, they're not that good. You know, I'm really not that happy with who they've sent mad with. Oh,

that That's evidence that my model of their behavior is correct. That would be a kind of a strange thing to do because you don't really have a person of a baseline. It's really hard to match people up. So you don't have a baseline to figure out whether that's what's going on. But secondly, to really confirm that you wouldn't know somebody you want to find a memo, right? You'd want to find code, right? But to just assume that you learned something about their behavior because of your your measured crude measure, of how the outcomes would be would be a weird thing, kind of stuff all the time. And I realized I do that. So when I had Paul on to talk about that, I realized, Oh my gosh,

I've thought that I've kind of had him assumed that's correct. In a certain way for a long time. And so that forced the change of mind. Not a very interesting thing, maybe. No, I think that's a great weight.

50:52

Has seemed to have convinced you to dead lift

50:56

for a while. At one point in my life, I was I was thinking, was starting to go to a gym and I wrote wrote him because he does answer my emails, which is and I said, Are you still lifting? And is it a good thing that he said Yes. So I thought, OK, by the way, it's a very interesting human problem in a world of uncertainty where you know, that date is in perfect one way t we respond to that as we look for authority, right? And he's an honest man, in my view, may be frightening, frighteningly honest man to some unnecessarily honest.

And I thought, you know, he would not lie to me that dead lifting is still working for him now. It may not be good for May, right? They only work for him, But I'm gonna I'm gonna try that. So I I've done some weightlifting, would call it dead lifting. Ah, but I did. Cem interval. Ah, training with weights that did almost nothing for May accept improved my ability to do certain weight lifting at the gym. It was very just, uh,

dispiriting. I didn't really want to do is get better bringing in the water drugs from the curb Ah, the heavy big gallon e how many gallons it is. Thanks for my water cooler at home and then getting my suitcase into the upper, you know, dragging or wearing it and then putting it into the bin. That didn't change it all. I got really good. It's a curling weights at the gym. Or, you know, whatever that rep thing waas And what now some would say is that you should have been using those machines. You should have been dead lifting literally dead, lifting barbells. E didn't do barbells. I didn't do Nautilus.

I was doing, you know, things that simulate by where Forget what it's called now, um, maybe was novelist can't remember anyway. Ah, but, um, I don't need squid, but blacking.

52:43

Yeah, What is this way? Don't need to have

52:45

a talk with I don't know if we're fun. He said he's in these a de haber to I'm in his

52:49

quarters. So we're Yeah. Um okay, so I have, like, one final question related thio e contact. Bingo. So you often quote one of my favorite talks ever. Which is this is water by David Foster Wallace. So this was like, he doesn't say experience in seven Kenyon College commencement. And you, you quote one line particular, which is? Everyone worships which I love this talk so much. My question to you is, what do you worship?

53:20
What does Russ Roberts worship?

We all have a desire to be part of something larger than ourselves, something that's transcendent in history. It. is a very powerful human urge, related to tribalism.

You can worship anything. A lot of people mistakenly worship beauty, but your beauty will fade. Others worship money, and their money does not give them true satisfaction. Sports is a worship of human effort and failure. There are a lot of options.

Religion typically helps people live a life without doubt, giving answers to all the questions of life. Russ, on the other hand, practices Judaism as a way to wonder about the mystery and the wonder of life, things we do not understand.



So I'm gonna digress for a second to talk a little bit about that quote, because what does he mean by that? What he means is, I think, is that the reason I love it so much is that I think we all have a desire to be part of something larger than ourselves, something that's transcendent in history. That's typically been religion, but it's not. The only thing is not even close for some people. It's the sports team for other people. It's their political party, and I think, understanding that that is a very powerful human urge of related tribalism. And this transcendence urged that I think people have is very cool and very insightful and helps me think about things a lot. The next part of it. He talks very powerfully about, he says.

You know, a lot of people mistake mistakenly worship. It's comes back to her Adam Smith conversation earlier. They're mistaken. Mistakenly worship beauty and your beauty will fade. They mistakenly worship money, and their money will does not give you true satisfaction, he suggests worshipping one of the things that are tried and true. One of the religious says, Pick of goodwill, you know, pick a religion. But, um, so it's a you know, it's a statement that we all have religions.

That's what it really is about. For some, it's, you know, something called religion that people call religion for a long time. Christianity, Judaism, Islam. But for others, it's It's the New England Patriots religion, or it's NASCAR religion or yoga religion, or it's vegetarianism. Er it's being a particular political party, and those air a mixed bag in my experience, because we tend to have trouble accepting the beliefs and tastes of people outside of religion, it tends,

it's hard not to have it promote self righteous s o. The challenges is to worship something and still be respectful. What other people worship, which I just failed right now because I just said there's a fix. People worship that aren't good. So anyway, um, you asked why? We're sure. I think I worship. I'm a religious Jew, which is on the contract drinking game, because I do mention that occasionally it's why don't eat squid. I ate when I was younger before I was religious. It's delicious. I'd be a huge blacking squid guy in a different ah version of me different paths.

Um, and I find, you know, from a religious worship is deeply meaningful. And I I mentioned it partly because I think people were not religious have Ah, I would say, Ah, strange misconception about what a religious life is like, that it's about certainty. And then once you once you have religion, you know, if the doubt, anything of all your questions answered and you could just go about your business and do what God wants you to do. And it doesn't work that way for May may work for some religious people. I'm open to the possibility. But for May my my interest in and practice of Judaism is a way that I cope with the mystery of life,

the awe of life, the wonder of life, the things we don't understand. Why the salmon comes back to the same place it was born, Why the human heartbeat starts in the womb. Um, why we love one another why we hurt people we love. These are all things that I think are unanswerable and early, mostly unanswerable so far. And, uh, religion helps me experience that not just how to think about it but experience it a different way. So it spreads religion. But I your questions a great question is it forced me to think about the other things I worship that aren't religion. Um, I really like human striving.

I really like one of the reasons I think I'm a sports fan and I like almost every sport. It's some level of seriousness. Is the drama of human effort and failure Um, and the poetry, That is a very beautiful thing. I say The other thing I worship is probably human creativity, Which is ironic since I think a religious life is about getting outside yourself. Ah, away from putting human beings at the center of the universe and putting something larger. But I You know, I still I still think that the human enterprise is deeply moving. And I recently saw Apollo 11 the documentary on the mission to the Moon, and you know, I had goose bumps like that. The whole thing is that that particular dramatic or well done, in my view,

is that critically the narration and the ark of the narrative is is slow at times It's not. It's not what you think. It's not what I expected. Okay? And I found myself, though still with, like, goose bumps of the whole thing, because it's a ridiculous thing that we put three people inside a little tiny thing and shot him 240,000 miles away. That would be an amazing thing, just a land on the moon, but that we thought we'd get him back and that we did, and that they stoically we're pretty cool about it the whole time, instead of being like terrified and it really is showing it, it's just an incredible human achievement. It's,

you know, to me, it is that there's, ah, I think eat of the eye pie is minus one plus one is what that's true, and people figured it out, and I just probably misquoted it, and we're not positive. I'm not gonna go lip. It sure doesn't matter. Those kind of human discoveries, um, just make me They make me move me incredibly. And, Ah, great piece of art.

I love. And so sports are human creativity generally. And, um, you know, the other thing I'm just going to say, even though it's no, no, it's a weird thing, but, um, human dignity, in the face of suffering and death are desire toe confront that in our pitiful human way, it kind of pulls together both interest in religion and my, uh, you know,

honoring of human human action. It's just, um there's something about being alive. That's, you know, appreciating that great drama is, um, as a beautiful thing.

59:28

That's great. Well, I think that's a great place to stop. So thank you so much for coming in. Thanks for having me, Craig. All right. Thanks for listening. So, as always, you can find the transcript and video at blogged out y Combinator dot com. And if you have a second, it would be awesome to give us a rating interview wherever you find your podcast. See you next time.

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