“You are going to see in a healthy dynamic economy–and I would argue probably the most innovative economy in the world–you are going to see large winners emerge. Those emerge for two reasons, one of which is they are really good at making a lot of people happy. That would be Lebron James and Sergei Brin and others who entertain us and educate us and divert us. Then there are some people that you describe as doing rent seeking–they are taking money from the rest of us using the power of government. A lot of those are in the financial sector, and those I would say are bad ways that the top gets wealthy.” – Russ Roberts Econtalk with Joseph Stiglitz
“I think economics still has a lot to offer. I think economics as practiced by most of the profession in the public eye is full of hubris and should be much more full of humility…. He [Joseph Stiglitz] could be right. He could certainly provide some evidence that he is right, some fancy statistical analysis. And the people who think he is wrong could provide some fancy statistical analysis. Since they can’t convince each other of either viewpoint, it suggests to me that that statistical evidence is not so scientific. He falls into the realm of what Hayek called ‘scientism’. Fake science. I think it’s hard to argue logically that spending money unwisely is the way to get wealthy.” – Russ Roberts on Reason.com
Russ Roberts is the best economist today, perhaps not by the standards of breakthrough research, but due to his trend-setting and prophetic actions in using the Internet to popularize economic thought. In 2006, he launched his weekly economics podcast EconTalk. I have been a listener (I forget exactly how I found it, but I believe it was recommended on the business section of iTunes) from the beginning and, seven years later, still follow every episode.
He is an Austrian School-influenced economist who formerly taught at George Mason University before recently spending more time at Stanford’s Hoover Institute. Roberts has made the biggest impression on my economic views in three vitally important ways:
- He is very willing to admit he does not know something.
- He leaves open the possibility that those who disagree with him may be right.
- He is willing to question the status quo in a public format.
- He asks more questions than he tries to answer.
There are not many economists who openly advocate that their positions as tenured professors will come to an end in the future due to an understanding of technology’s ability to deliver cheap education alternatives. Not many used this technology in its infancy, near the birth of iTunes podcasting, to spread economic knowledge. Russ Roberts did. Not many used their wide-reaching digital podium to critique mainstream Keynesian economists such as Joseph Stiglitz (who has also been a guest on his show, and a nice one at that) and Paul Krugman (mysteriously absent from EconTalk). Russ Roberts does.
And he tweeted me:
“I have had no formal training in economics or finance. I do not fully understand some of the tools and concepts used by those who have had that training. Sometimes I think I’m close, but then they slip away. I question many conventions in economic research; but in some cases it’s just that I don’t fully understand them….As a result, I make errors, both small and large. I don’t like errors, and I’d appreciate help in finding them.” – Introduction to Black’s textbook Exploring General Equilibrium.
“No one’s mind is, or will ever be, as fertile as Fischer’s was. No one is even close. He was crazy and logical at the same time. The force of his logic would push you into corners you didn’t like, or it could open vistas you had not imagined. The crazy streak freed him from conventional wisdom. He was intellectually fearless.” – Friend Hans Stoll in a letter Fischer’s father.
In the words of MIT finance professor John Cox: “Fischer is the only real genius I’ve ever met in finance. Other people, like Robert Merton or Stephen Ross, are just very smart and quick, but they think like me. Fischer came from someplace else entirely.”
I recommend to anyone, regardless of their interest in finance, to read Perry Mehrling’s engaging biography of Fischer Black to get insight into how a genius works.
His paper outlining the Black-Scholes options pricing formula won the Nobel Prize for his coauthor years after Fischer’s death, allegedly because the Nobel committee frowned upon the fact that Fischer had spent much of his career as a non-academic consultant and partner at Goldman Sachs, and thus did not want to give him the planet’s highest academic prize. To bankers and traders, he resided in an ivory tower. To academics, he was a businessman overly concerned with the practicality of ideas disregarding traditional research processes. Fischer ignored both of these groups by happily accepting fewer shares in the Goldman partnership than any other partner and partnering with other traditional professors to translate his ideas into academically-acceptable papers.
Fischer, more than anyone in modern financial research, pursued usable new knowledge for the sole purpose of it being what he enjoyed. Tales of him playing Super Mario Bros. in his office during the day and going to see Gallagher at night show the childlike innocence he brought to the financial community and its research. His simple writing and speech patterns were purposefully designed to cut through to the heart of matters that are so often, in his worlds, clouded by business or academic jargon.
His phrase, “More efficient capital is more capital,” is one of his many simple, yet profound statements. In a world which looks for silver bullets, Fischer understood progress can come from modifying current methods to be a small step better. In doing so, Fischer made great leaps in business, finance, academia, and for anyone looking to pursue their passions.