The Secret Sauce Behind Pop-Music Hits

In their new book, ‘Switched on Pop,’ two podcast hosts discuss why songs by Rihanna, Drake and others break out

Why did Rihanna and Calvin Harris’s “We Found Love” top the charts for 10 weeks? Partly because of the song’s unconventional structure, say podcasters Nate Sloan and Charlie Harding. The two examine “We Found Love”—and more than a dozen other 21st-century hits—in their book, “Switched on Pop,” which comes out Friday.

The volume borrows its title from the podcast the two 33-year-old friends began five years ago about the subtle techniques shaping today’s Top 40 hits. Mr. Sloan is a University of Southern California musicologist and Mr. Harding is a songwriter and musician who plays the guitar, drums and keyboards, as well as other instruments. Their podcast and book are filled with sophisticated but accessible discussions of pop hits from the 2000s and 2010s, from the catchy hook of Ariana Grande’s “Break Free” to Drake’s use of simple rhymes in “God’s Plan.”

In addition to offering a theory-driven take on what the authors call “the bubbliest of bubblegum pop,” the “Switched on Pop” book provides a toolkit for appreciating popular music. The authors delve into musical building blocks like melody, rhyme and sampling.

Messrs. Sloan and Harding spoke with the Journal about how streaming and hip-hop are transforming pop music. An edited transcript:

Charlie Harding, left, and Nate Sloan turned their podcast about popular music into a book. PHOTO: ELLYN JAMESON
You already have a podcast. Why a book?

Mr. Harding: Listeners were saying, “I learned a lot from the show, but I want a comprehensive guide to how to listen more thoughtfully.” That knowledge sits in music-theory textbooks. So we saw an opportunity.

Mr. Sloan: When we’re doing the podcast, we’re responding quickly to what’s happening in the fast-changing world of popular music, which is a great exercise. Forcing yourself to listen to pop makes you confront your own calcifying biases. But the book allows us to think about the things we’ve learned and put them in historical context.

There’s surprisingly little discussion of actual music in the music media. Are you guys an alternative?

Mr. Sloan: People tend to focus on the lyrics of songs and the artist’s personal life. Adding music to that discussion gives even more depth and nuance to how you can think about pop’s role in our culture. There are probably people who think Taylor Swift could release anything and it would be a hit, because of her celebrity. We’d say no. These songs are popular for a reason. You may not like that reason, but there is a reason.

Older listeners often say music isn’t as good as it was. What’s your response?

Mr. Sloan: Pop music reflects the time in which it is made and may not be as relevant to you as you age. But at the same time, what’s been revealing about doing this podcast and book is finding out how pop is changing. One thing we track is how timbre [the quality that lets us distinguish different artists or instruments] and tone are becoming such important elements of pop. Things that might have been privileged in the past—complex harmonies, lyrical creativity, guitar solos—aren’t as privileged now. That can be disorienting, but it doesn’t mean music is bad. The hope is, when you do have to listen to, say, Skrillex, you can at least say, “I don’t like this, but I kind of understand why someone would.”

Mr. Harding: It’s OK to like the things you like, but I also feel strongly that it’s not OK to think other kinds of music are outright bad. By expanding your palette of hearing, you can be more inquisitive.

Are older fans looking for things that are no longer there and then ignoring the innovation? Music, over time, becomes like a foreign language.

Mr. Sloan: I agree. It’s hard to listen to something that doesn’t follow the musical criteria we’ve established. But new music is complex in different ways.

Mr. Harding: Part of Drake’s brilliance, for example, is he is able to say something that sounds utterly familiar—as if you’ve heard it a thousand times—and yet no one has quite put those words together in that way.

Mr. Sloan: It’s a gift, being able to write those catchy nursery rhymes. The way Drake uses rhyme is masterful. One thing he does in the song “God’s Plan” is give you the same phrase, but at different points in the rhythm—keeping it fresh.

The book discusses big hits. Any recent ones you don’t like?

Mr. Sloan: A song we find vexing is “I’m the One,” by DJ Khaled. This is a song we will not redeem. We think it’s derivative, offensive and boring. And yet it was a No. 1 hit. You still have an opportunity to ask why.

Let’s talk Rihanna.

Mr. Harding: Rihanna’s “We Found Love” with Calvin Harris came out in 2011, and while it might seem like any other pop song, it’s upsetting a long-held tradition. Since the 1950s, one thing that’s stayed relatively stable is song form—the verse-chorus form of songs. What this song does is take the structure of electronic-dance-music songs, which is different, and superimpose it on pop.

Mr. Sloan: And now it’s hip-hop that is pushing the verse-chorus form to its breaking point. Take “Sicko Mode” by Travis Scott. It doesn’t have a verse or a chorus. It’s this stitched-together collage of song fragments that seems more at home in the work of an experimental composer.

Will music streaming lead to shorter, simpler songs?

Mr. Harding: The economics of streaming incentivizes songs to be shorter because you get paid per song. We’re also seeing more choruses at the start of songs to hook you in. Listeners have more choices than in the past. It’s forcing producers and songwriters to think intensely about never having a dull moment. But I think there’s always been anxiety about technological change. Songwriters have long paid attention to the medium, from the limits of the vinyl record to the CD.

Mr. Sloan: These developments always circle back to something much older. It’s easy to feel a certain panic about streaming. But “Old Town Road” is still 15 seconds longer than the shortest No. 1 hit ever, in 1960. What’s past is prologue.

The Last Chance to Defeat China and Win Back the Cyber Domain?

Two months ago, when Zooming In did a story on Huawei and global 5G deployment, Huawei was poised to take control of much of the world’s cyber domain. We talked about the national security implications of that prospect. And we observed the U.S. efforts to raise awareness of that risk. Two months later, when we did another story on this topic, we realized the world knows Huawei a lot better through these efforts, but Huawei’s momentum has not stopped. In fact, Huawei and China are playing a grander game. They have a brilliant strategy that is working well with the very nature of a crony capitalism. Can this battle still be won by the free world? And what does it take to win? Let’s find out in this edition of Zooming In.
F

Steven Pearlstein, “Can American Capitalism Survive?”

19:43
well I’d like to illustrate why it’s not
19:45
with a simple a simple analogy or a
19:47
simple story it’s a made-up story but
19:49
not really and it’s about a barrel of
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tobacco now in the 18th century the
19:58
person who owned a plantation on the
20:00
James River and produced that tobacco
20:02
and sold it in barrels and used the
20:07
proceeds of those sales to pay all of
20:10
the expenses associated with the
20:12
plantation Shirley felt that at the end
20:15
of that process the money that he had
20:16
leftover was his just dessert he earned
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it he earned it in a competitive
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marketplace and it was his and anyone
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who would take it away from him would be
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stealing but over time the profits from
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that barrel changed
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they changed when we got rid of slavery
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of course they changed when we passed
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laws that says that sharecroppers had
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certain rights relative to the owners of
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the land they changed again when we
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changed the minimum wage they changed
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when it made possible for the workers on
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that plantation to have unions every
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time we change the rules the marginal
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productivity of the market income of
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both the people who planted and picked
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the tobacco and the guy who owned the
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plantation they changed and we can see
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from that little example that all
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markets operate within a set of rules
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and norms and that those rules and norms
21:24
are highly subjective they are not
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objective they’re political they’re
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socially determined
21:31
and the implication of that is that if
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market incomes are in fact subjective
21:36
and contingent and they can change when
21:40
you change the rules then in fact there
21:43
is nothing objective about what we earn
21:45
I could change the rules and instead of
21:50
earning eight hundred million dollars a
21:51
year Steve Schwarzman could earn you
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know a mere four hundred and twenty five
21:56
million dollars a year and each of the
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three hundred and seventy-five thousand
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employees in the firms that he controls
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could each earn a thousand dollars more
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and that would still be market income so
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it’s pretty clear that markets by
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themselves are not an objective
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determinant of your economic
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contribution if I can monkey around with
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it that much then there’s some there’s
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some some part of that that is
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subjective and not objective and once
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you accept that then from a moral point
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of view there really is no distinction
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between what I’d call pre distribution
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which is monkeying around with the rules
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and the norms that change market incomes
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and redistribution which is let’s leave
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the norms ‘el and the rules of law alone
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and we’ll just redistribute it
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afterwards through taxes and transfers
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morally there’s really no difference you
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might prefer to do it one way or the
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other but neither of them is theft
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they’re both ways that we might want to
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respond to things that we don’t like
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about our system the third pillar is
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that we don’t we shouldn’t care about
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income inequality all that matters is
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equality of opportunity at least from a
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from a moral standpoint and you hear
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that a lot from defenders of markets the
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reality is and I think we all know this
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equality of opportunity is unachievable
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the data from social science it gets
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complicated I read a lot of it and I’m
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going to summarize it really simply at
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least half the difference in the market
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income between you
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and you I picked you randomly cuz that’s
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sort of statistically the way I had to
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place it is explained by the result of
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who your parents were both in terms of
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your jeans and i know that’s
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controversial but also in terms of
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upbringing in terms of nature as well as
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nurture yes we have gone a long way to
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removing legal barriers that determined
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wealth and income based on birth order
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or title or class or race or gender yet
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even the most well-funded and meaning
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and well-meaning institutions can’t
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close this this irreducible gap and I’ll
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give you the example of Harvard
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University which a few years ago had so
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much money in its endowment not so much
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anymore but in those days so much more
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money that they decided to go to needs
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blind admission which means that they
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would admit the best class of students
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that they could irrespective of who
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needed what because they had so much
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money it didn’t matter and in fact if
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you had to if you had income below your
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family had income below $65,000 and that
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was back a few years ago you paid no
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tuition at all and that no family would
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be required to pay tuition of more than
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ten percent of income and what was the
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result of that basically that’s a
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perfect meritocratic set up for the
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arguably the best university in the
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country
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only 5% of those admitted came from the
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bottom quintile the bottom 20% of
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households by income and 21% only 21%
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came from the bottom 60% me and Harvard
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actually is now better than other elite
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schools on that matter typically at
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those other elite schools there are more
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students from the top 1% than there are
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from the bottom 50% despite all that
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scholarship and all that meritocracy
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education once the great equalizer of
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opportunity has in fact now become an
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instrument of inequality indeed and this
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actually is not an original idea of mine
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it’s actually 40 50 year old idea as as
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the economy becomes more meritocratic as
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barriers for race or gender or class
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fall away in a competitive market that
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only increases the importance of the
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distinguishing factors that remain
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factors like natural talent factors like
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personality traits which are often
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inherited or developed early in
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childhood so we need to acknowledge the
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limit of how much we can or even want to
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equalize opportunity maybe some of you
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have heard of Kurt Vonnegut’s dystopic
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satire Harrison Bergeron which I don’t
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think you have on sale here nobody reads
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it anymore but it’s about a society
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that’s fixated on equality of
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opportunity and it’s an equality of
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opportunity is enforced by a handicapper
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general and the handicapper general
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insists that all News announcers who are
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hired have a lisp
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and that smart people all smart people
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have to go around wearing headphones
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with music blaring in their ears to
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distract them which by the way I think
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has happened and people who are athletic
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would have to walk around with backpacks
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with weights on their back what Veronica
27:51
chose is that you know you want to
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equalize opportunity you can get pretty
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absurd of course if we want to try to
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equalize things in terms of upbringing
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we could take all children away from
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their parents at birth and send them to
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state-run boarding schools until they’re
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17 and that would certainly equalize
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that but we probably don’t want to do
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that either
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and so we’re left with a sort of
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unpleasant conclusion which is equality
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of opportunity is is neither possible
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nor in fact desirable and if that’s the
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case and if we are morally uncomfortable
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with the fact that Steve Schwarzman
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earns the same income as 15,000
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elementary school teachers then we can’t
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rely on equal opportunity to solve the
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problem we have to address the problem
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directly the final argument from free
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marketeers is that it’s
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counterproductive to slice the economic
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pie into more equal slices because we’ll
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only get a smaller pie that there’s an
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absolute trade-off between equality and
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economic efficiency and growth so I’m
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going to ask you to think about a
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thought experiment imagine the world in
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imagine an economy closed economy in
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which all the income is divided
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perfectly evenly everyone gets exactly
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the same now imagine another world in
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which all the output all the income of
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the economy goes basically to three guys
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and everyone else has a subsistence
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living
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[Music]
29:37
we know that at either of those extreme
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the
29:42
I gets pretty small you can ask anyone
29:45
from Soviet Russia about that first one
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it’s pretty small but on the other side
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you can imagine that it would be pretty
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small too why would anybody actually
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work harder take risks or share a new
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idea with the owner if they were not
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going to get anything from it if the
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three guys who control everything
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[Music]
30:14
continue to get everything so
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intuitively we understand that at the
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extremes it’s true there’s less growth
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and that as you go away from those
30:25
extremes you probably get more growth
30:28
and there’s probably some sweet spot in
30:30
the middle of this curve at the top
30:33
that’s the nice balance between too much
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and too little
30:39
equality there’s a lot of economic
30:41
literature on this and too much to
30:44
recall here but I wanted to share with
30:45
you a an experiment done by an economist
30:51
named Richard Friedman Freeman he misses
30:53
years ago he divided groups of graduate
30:56
students you for some reason
30:57
experimental economics is always done
30:59
with graduate students for reasons that
31:01
may be self-evident into three groups
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and they were each group was told that
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they were they was supposed to solve
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some puzzles but the only indifferent
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about the groups they were random was
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that how they were going to be
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compensated in terms of the prize money
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and in won the prize money would be
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distributed perfectly evenly everyone
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will get the same to the winning team
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and in the other it would be a
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winner-take-all whoever on the team
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solved the most would get the entire
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prize and the third group was some mix
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of the two everyone would get a minimum
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and then there would be some sort of
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bonuses for those who solved the most
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well I think you probably know where
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this is going hands down the group
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repeatedly they did this experiment
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repeatedly that did the best was the
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group
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that where everyone gets a minimum and
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there were bonuses in other words some
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sort of mixture now why is that the case
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why is it that organizations like the
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IMF which is not exactly known as a
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hotbed of radical economic thinking has
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concluded that the United States and
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Britain are probably on the wrong side
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of the sweet spot that we have much more
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we have more room to be more equal
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without going to the other side of the
32:32
curve and getting a smaller pie there
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are several reasons they give and
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there’s one that they sort of mentioned
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in passing which I think actually is the
32:42
most important and that is that rising
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inequality depletes the trust that we
32:50
have in each other and our willingness
32:52
to cooperate and the trust that we have
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in institutions the willingness to
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sacrifice what’s good for me in the
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short run for what’s good for us
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in the long run what creates and
33:04
sustains trust and cooperation as I said
33:07
before is our moral instincts there
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simply aren’t enough police and courts
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and lawyers although in Washington you
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wouldn’t know that and auditors to
33:19
enforce honesty reliability cooperative
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behavior we need social socially
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enforced norms in order for a system to
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work well we need to know that when we
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stand at an ATM machine that the guy
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behind me is not going to rob me we need
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to know that when you go out in the
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morning to get our newspaper that it’s
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going to be there we need to know that
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people line up at the cash register of
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politics and prose and don’t cut in line
33:53
if there’s a line trust and cooperation
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provides the grease to an increasingly
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complex machinery of capitalism it gives
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us the confidence to make investments
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with people who
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don’t know and don’t control to take
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risks to buy products that we’ve never
34:14
tried before from people that we don’t
34:17
know trust and cooperation also grease
34:20
the increasingly contentious machinery
34:23
of democracy that allows government to
34:26
mediate between competing interests and
34:28
allows government policy to respond to
34:32
rapidly changing economic conditions now
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we don’t have great measures of social
34:38
capital of trust but we have some the
34:43
most famous actually I don’t know
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whether you’ve heard about this is the
34:46
old trick that Reader’s Digest did they
34:49
took wallets and they put some money in
34:51
and along with an address of the so
34:52
called owner of the wallets and they
34:54
left them on the streets in different
34:58
cities and and it had the address and
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the phone number to see how many people
35:03
actually returned them called up and
35:05
returned the money and that’s one
35:07
measure of social capital you can do
35:08
that over time and you can do it over
35:10
and different different distances we
35:12
have another measure which is called the
35:14
General Social Survey this question is
35:16
asked of literally tens of thousands of
35:19
people around the world every year and
35:21
it’s a simple question agree or disagree
35:24
most people can be trusted maybe or
35:28
maybe you won’t be surprised to know
35:30
that in the United States measures of
35:33
social capital have been going down for
35:35
the last 30 years and are among the
35:37
lowest in the advanced countries though
35:40
not as low as they are in Italy I might
35:43
add we know that societies with high
35:47
social capital are healthier they’re
35:49
happier and it turns out they’re also
35:51
wealthier and the erosion of social
35:54
capital now puts us on the wrong side of
35:57
that sweet spot it means that if we want
36:00
to have faster growth we need to move
36:03
toward more equality not less so can
36:07
American capitalism survive it’s a nice
36:10
title wasn’t my choice but anyway
36:15
what was your choice
36:18
why greed is not good opportunity is not
36:21
equal in fairness won’t make us poor but
36:23
I got the smaller type
36:24
I think I’d answer the question this way
36:29
the story of the last three decades is a
36:32
story about a meaning of the moral and
36:35
ethical norms by which we establish
36:38
trust that encourage cooperation and
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we’ve had a serious erosion of social
36:47
capital because of our embrace of this
36:49
kind of market fundamentalism the
36:51
delicate balance between selfish
36:54
individualism and cooperative altruism
36:57
that was identified by Adam Smith and
37:00
Charles Darwin as the key to human
37:02
progress that balance has been lost and
37:06
the result now manifests itself in a
37:09
skewed economy a polarized politics and
37:13
a dysfunctional a dysfunctional
37:15
government and a social fabric that is
37:18
torn and frayed and it’s been bad for
37:21
our economy it’s been bad for our
37:24
politics and it’s been bad for our souls
37:28
Thanks so if you have any questions I
37:37
think I’m supposed to tell you to line
37:39
up at those microphones and and and
37:42
we’re looking for questions not speeches
37:46
do you have an opinion on what senator
37:50
Sanders has proposed I believe he named
37:52
it after one of your employers the besos
37:55
Act yeah that would require certain
37:58
large corporations to reimburse the
38:00
government for public benefits that are
38:03
given to their imprint on their
38:05
employees in general my response to
38:10
things like that is it’s sort of a nice
38:12
instinct it’s a nice idea I don’t think
38:14
it would be very easy to do that and I
38:16
don’t think we have to do that that’s
38:19
sort of a that’s it’s sort of punitive
38:24
and it it it
38:28
you know I’m a market guy you know I
38:30
want capitalism to work I want markets
38:33
to work and that’s a little there are
38:39
better ways to do that we need a safety
38:41
net and we need to pay for that in a
38:43
progressive way and it may be that we
38:47
need to have laws that say you do some
38:49
things or you know a company has to do
38:51
some things or other things but this
38:53
notion of trying to figure out what the
38:56
employee what benefits the employees get
38:58
and then calculate that and then send
39:00
the bill to the to the employer I for
39:04
one thing it discourages people from
39:05
hiring low wage workers so yeah I don’t
39:09
think the incentive structure is a good
39:11
idea is is right for that yes even most
39:15
of your talk has been about individual
39:17
and group methodologies to do natural
39:21
things but what happens how is
39:24
government regulation how is the
39:27
president how is the Congress affecting
39:30
this what things should we well they’re
39:32
affecting it a lot they’re affecting it
39:35
a lot yeah you know you want to talk
39:38
about labor law you want to talk about
39:39
antitrust law you want to want to talk
39:41
about securities law all of those things
39:43
affect all of these things that we’re
39:46
talking about but for those of you who
39:49
will have this instinct that government
39:51
is going to solve this I would tell you
39:54
that it’s much more important that the
39:57
intellectual part of it which is that we
39:59
conceive of this differently and that we
40:02
come up with a set of you know social
40:05
norms where the social norms come from
40:07
they don’t come from the government and
40:09
and in the answers I don’t know where
40:11
they come from that’s sort of magical
40:13
it’s some one of the things that
40:14
actually academics are looking at quite
40:18
quite seriously now which is where does
40:20
social norms come from you know we had a
40:22
social norm that to be to be married you
40:24
had to be heterosexual and then you know
40:26
one day we turned around and that wasn’t
40:29
a social norm that changed very fast but
40:31
there are other social norms that take a
40:32
long time to change so I can’t tell you
40:34
how we change them but it’s much more
40:36
important to change the norms it’s much
40:39
more important for this
40:41
teve Schwartzman’s of the world to be
40:43
embarrassed by their thing because we
40:46
can’t write enough laws to make Steve
40:49
Schwarzman behave the right way and you
40:51
know what as soon as you write them
40:53
they’ll figure out a way around them and
40:55
then we’ll get really be in a
40:56
cat-and-mouse game it’s it’s sort of
40:58
more important to think a little more
41:00
intellectually about you know what this
41:02
thing is called capitalism and what we
41:04
like about it when we don’t and talk
41:06
about it and use social pressure you
41:09
know the me to movement is probably done
41:12
a lot more for protecting women from
41:16
harassment and worse than any laws that
41:20
we pass and and I think it’s more
41:22
important that we not jump to a
41:24
government solution for everything being
41:26
not because I’m against regulation I
41:28
actually am NOT but that’s probably
41:30
those should be the last things we think
41:33
about not the first things I completely
41:37
disagree I figured you would I remember
41:41
I I’m old enough to remember when we had
41:44
norms and we had social democracy and it
41:48
was called the New Deal and it worked
41:50
and we talked about Keynes and the idea
41:54
that to have an economy grow you had to
41:59
have you didn’t give the investors of
42:00
money you made sure that people had
42:02
enough money to buy things I mean they
42:05
had spent ten years in the depression so
42:07
people understood that and what changed
42:12
was government the the New Deal the
42:15
labor laws Social Security so older
42:18
people have money securities regulation
42:22
and with it came norms so that George
42:28
Romney made $300,000 a year running a
42:31
real company that made real stuff and
42:33
Mitt Romney made millions of dollars a
42:36
trading company so what is anything
42:39
that’s your question and I’m gonna
42:41
answer it really succinctly okay which
42:43
is that I’m almost as old as you are
42:52
if if CEOs in the 1950s and 60s had
42:57
wanted to beef jerkey had wanted to pay
42:59
himself more 300 million rather than
43:02
nine three million or whatever three
43:04
hundred thousand he actually had the
43:06
power to do that the boards were more
43:09
captive back then than they are today
43:10
and he couldn’t he could have done that
43:13
toward whatever was equivalent back then
43:15
he didn’t do it and the reason he didn’t
43:18
do it is if he did it he would have felt
43:21
guilty and he would have been socially
43:23
shamed and I’m not saying just socially
43:25
shamed by his workers he would have been
43:28
shamed if he went to this if he went to
43:31
the Country Club in the locker room the
43:35
other CEOs would have said George that’s
43:38
very piggy of you and it makes all the
43:41
rest of us look bad and anyway we’re
43:43
trying to feat fight socialism and
43:46
you’re going off and paying yourself 300
43:48
Millions so it was a social norm that
43:51
prevented George Romney not the New Deal
43:53
from paying himself 300 million dollars
43:55
and his 50% or 60% or ninety percent
43:58
income tax yeah nobody paid that and
44:02
that’s that’s a sort of left-wing sort
44:04
of urban myth that people paid ninety
44:07
percent taxes they didn’t no one was
44:10
that stupid anyone who made that much
44:12
money was not that stupid to pay ninety
44:14
percent taxes but that’s what the
44:16
official tax rate was but that’s not
44:19
what people pay though they they did pay
44:21
more than they do now rich people but
44:23
they didn’t pay ninety percent had you
44:26
asked me my reaction to your first
44:29
example of presumably bad corporate
44:32
behavior a New York life’s decision to
44:35
outsource its IT services to India my
44:38
response would have been that’s
44:40
globalization and I’m surprised that you
44:44
used that example to illustrate the what
44:48
you believe the flaws are in American
44:51
corporate behavior do you in fact think
44:55
we should start slowing the process of
44:58
globalization its impacts on the US
45:00
economy and if so
45:01
don’t you go about it I don’t and and I
45:04
gave that example to emphasize the
45:06
second part of it which is in order to
45:09
get your severance you have to train
45:10
these guys that’s that’s what that’s
45:14
what gets us angry okay it’s not the
45:16
first thing okay it’s the second thing
45:19
that’s not the way you treat a human
45:22
being who has been your loyal employee
45:24
for thirty years now it may be you you
45:27
know you have to you have to you have to
45:29
move your IT operation for competitive
45:32
reasons there so I’m not against that I
45:34
said to you when I started that these
45:36
were useful ideas in the 1980s and one
45:38
of those was rearranging where work was
45:41
done so that it could be done in the
45:42
most cheap and efficient way but there
45:45
are ways to treat people and there are
45:48
other ways to treat people and that was
45:50
my that’s the example and that has to do
45:52
with maximizing shareholder value I
45:55
think if that’s taken things too far
45:58
[Music]
46:00
hello what I what I want to ask you
46:08
about is what you’re saying
46:11
I agree with most of it but nevertheless
46:14
at this point I think we have to make
46:17
like giant steps and what I’m suggesting
46:20
is is that we have to have a public
46:24
discussion on how we want to format what
46:29
we do to move forward in other words
46:31
what are the economic factors we have to
46:34
look at cash flow what it takes to live
46:37
what the distribution is where the
46:39
aggregates are mm-hmm
46:41
and we haven’t in my opinion started as
46:45
a culture either nationally or
46:47
internationally to start to do that
46:49
because if we never get rid of the
46:50
aggregates in our culture that’s power
46:53
the aggregates meaning what aggregates
46:56
of wealth aggregates of power control
47:00
universities I mean look at everything
47:02
that goes through Yale you cannot you
47:05
cannot suggest somebody for anything I
47:08
mean I’m being exaggerating here but it
47:11
comes up over no
47:12
over and over again now what’s the
47:13
reason are the all the smart people
47:15
there I am not sure about that but my
47:19
point is we’re not analyzing it at my in
47:23
my opinion quickly enough to project
47:27
what it might look like where we want to
47:29
go because this is a big big deal I
47:32
guess what I would say to that is we
47:36
first have to have a functional politics
47:40
and in order to do that we have to learn
47:44
to trust each other a little more and
47:46
learn to compromise and learn to
47:48
cooperate and until we can do that you
47:52
really can’t fix anything it’s not that
47:56
we don’t don’t have ideas for how we can
47:59
make things better but we actually now
48:01
have very little process to do that and
48:04
to sort of have the conversation that
48:07
you’re talking about we talk past each
48:09
other now or I don’t know but when we’re
48:13
you know I for the last 30 years have
48:16
been writing about economic policy
48:18
you know that’s my life it’s not worth
48:22
my time to write about economic policy
48:23
anymore Who am I writing it for you know
48:26
who’s who’s gonna do anything it’s a
48:30
waste of time
48:30
so until we fix the plumbing which
48:34
includes sort of having a different
48:37
perspective on these things and talking
48:40
more about virtues and a little less
48:43
about income shares I don’t think we can
48:47
really address this thing we need to fix
48:49
the plumbing first well the guys Dave I
48:54
thought this was the Kate Atkinson talk
48:56
but I guess right so I walked in here
48:59
and here we are in a very high micro
49:01
economic plane I hadn’t expected so yeah
49:04
pardon my question is this guy this guy
49:07
by the way it was my college roommate so
49:11
it wasn’t hard I try to introduce myself
49:13
as Steve Schwarzman but I didn’t think
49:15
that would fly so I’ve been exposed but
49:19
I’m gonna ask you a very specific
49:21
microeconomic question I don’t know if
49:23
it’s discussed in a book of such high on
49:27
such a high philosophical plane but
49:30
where do you where do you come down on
49:32
minimum wage laws especially national
49:35
minimum wage laws as opposed to
49:38
collective bargaining established rates
49:41
of wages
49:42
well I if you can comment also on on how
49:47
you feel about that most recent local
49:49
product of that DC tipped wage Act
49:54
that’s because so the last thing is I
49:56
don’t really understand the tip wait I’m
49:58
not smart enough to understand what that
50:00
bill did so I think we can talk about
50:02
that afterward but minimum wage Earned
50:05
Income Tax Credit and and a greater a
50:09
greater possibility of unionization are
50:14
all part of what we would need to do I
50:17
think to change the rules so that the
50:21
market incomes come out a little more
50:23
equal all of those some people by the
50:25
way I don’t know I’m not going to go too
50:27
much into this think Earned Income Tax
50:28
Credit is all you need to do you don’t
50:30
need to do minimum wage
50:31
some people think $15 minimum wage is
50:34
what you should do and you don’t need to
50:35
spend so much tax dollars on earned
50:37
income tax credits I think actually a
50:39
combination they each have different
50:41
perverse incentives and disincentives
50:42
and so if you had both of them working
50:45
together it would be better and it would
50:47
also be better if the possibility of
50:51
organizing a union were much more
50:53
realistic right now any company that
50:56
wants to prevent a union from being
50:58
organized can do so basically he’s a
51:02
labor lawyer so he knows that you can
51:04
fire all the people who try to unionize
51:05
and they will punish you but that they
51:07
will punish you but that 15 years later
51:09
it’s illegal but they’ll punish you 15
51:11
years later what’s more important and
51:14
what used to be true is that companies
51:16
that treated employees like that were
51:18
shunned in fact one of the most hopeful
51:22
things that I
51:23
see happening in the area of companies
51:27
that sort of ruthless and always trying
51:29
to maximize shareholder value is that
51:31
those companies actually are now having
51:33
trouble attracting young employees who
51:36
won’t tolerate it and they won’t get
51:39
good young employees if you if you
51:41
behave in that ruthless manner and and I
51:44
think that actually is the most hopeful
51:46
thing that I have seen and by the way
51:48
that’s not a law that’s social norm
51:51
whereas employees won’t work for
51:53
companies they think are disloyal and
51:55
ruthless or environmentally
51:58
irresponsible or treat other employees
52:03
you know and in that way so that to me
52:08
is is is a more important way to go and
52:12
to think about how we encourage that
52:14
yeah I I’d submit to you that what we’re
52:16
upset about is that wealthy people in
52:19
our society don’t play by the same rules
52:21
as we do and we’re not as upset about
52:24
Steve Schwarzman making 820 million
52:26
dollars what we’re upset about is that
52:28
he’d lot he likely pays the income tax
52:31
rate at the carried interest rate that’s
52:32
where upset about well that’s something
52:34
that’s obviously a big that is writing
52:36
deal like that but you know I I hate to
52:38
do this but I want to put your employer
52:39
the employer up it as as Exhibit B yeah
52:43
which is you know my employer X okay but
52:46
you’re who owns the company and that is
52:48
here you have a company that’s asking
52:50
for public subsidies and rumor has it
52:52
that one of them is we want to keep the
52:55
withholding tax from the state that
52:57
that’s part of what’s on the block that
52:59
rubs this is on that rubs me is very on
53:02
good that’s good okay right that that’s
53:04
alright so I submit to you that it’s
53:06
really a fairness thing not a not a
53:09
social norm
53:10
well fairness is a social well okay you
53:20
know there are some communities that
53:23
offered him a lot of money or offered
53:25
Amazon a lot of money where the
53:27
politicians had to go back and say I’m
53:28
sorry we were drawing our offer and why
53:31
did they do that well they heard from
53:32
their constituents who were offended by
53:34
it right but what I’m saying is that
53:36
they their men
53:36
populating the laws – for example have
53:38
carried interest tax rates and and so
53:41
therefore what therefore make things
53:44
transparent so that you don’t mind if he
53:46
makes eight hundred and twenty eight
53:47
hundred twenty million dollars as long
53:49
as he pays thirty seven point four
53:51
percent or whatever the tax rate is on
53:52
all amounts above 1.2 million that’s my
53:55
point
53:56
well let me just respond to that by
53:57
saying you’re worried about the carried
53:59
into hit the tax rate that he pays I
54:01
worry more about the fact that his firm
54:04
earned so much profit above what is a
54:09
normal profit that the markets he
54:13
operates in are uncompetitive and that’s
54:15
a bigger thing to be concerned about and
54:17
it does have to do with securities laws
54:19
and other kinds of laws then worrying
54:22
about his carried interest benefit which
54:24
is which is outrageous
54:26
also but the bigger problem is why does
54:30
his firm earn enough to pay him that
54:32
much and that’s the bigger problem for
54:36
not adding that much to the economy I
54:39
mean he’s not like he’s you know it’s
54:41
not like his Bill Gates and he invented
54:42
some great thing that improves all of
54:44
our lives or something like that or
54:45
Facebook if you think that did but um
54:48
but he didn’t do it he didn’t invent
54:50
anything he didn’t improve you know he
54:52
didn’t even write a good book yeah so
54:57
this might be a utopian question or just
55:00
a stupid question but I’ll ask it anyway
55:01
so it seems like the the nature of work
55:06
is evolving that there are factories
55:08
that are being designed with no human
55:09
work at all and so with artificial
55:12
intelligence so given all of those
55:14
trends how does any of that impact on
55:17
what you’re talking about that that work
55:19
will be defined differently or who does
55:21
work will be done differently so there’s
55:25
in economic these days is sort of two
55:28
camps one camp worries a lot about
55:33
artificial intelligence taking all the
55:35
jobs away and there’s not going to be
55:38
anything for the everybody to do and it
55:42
will make inequality worse I am just not
55:45
in that camp the sweep of history and
55:50
economic history
55:51
that we’ve had those kind of advances
55:53
they’re lumpy they do they do it’s not
55:55
like it’s a nice steady curve they do
55:57
come in waves and the transitions can
56:00
sometimes be hard but you know it’s sort
56:03
of what I teach in in economic
56:06
principles if you make the economy more
56:08
productive
56:10
it makes the pie bigger and you might
56:13
have some issues about how you divide
56:15
the pie but you know there won’t be
56:19
people in those in those factories doing
56:21
those things but I’ll give you a little
56:25
example I don’t know 20 years ago if you
56:29
said I had a personal trainer everyone
56:32
was in now
56:36
I don’t know there’s a lot of personal
56:37
trainers around so you know when we have
56:40
more money and when we’re richer we find
56:43
things to do with it and that often
56:44
involves service and that often involves
56:46
people and not robots and you know we go
56:49
out to more restaurant meals so there’s
56:50
gonna be more people working in
56:51
restaurants yeah III just you know is it
56:56
possible that this is this is a sort of
56:58
this this is the one time where it won’t
57:02
work it’s possible but III don’t think
57:04
so
57:06
one more says boss
57:12
I remember reading got the rise of the
57:15
meritocracy by Michael Young yes forty
57:17
years ago forty year he warned about
57:19
meritocracy he was the one any point any
57:22
coined the term meritocracy do you have
57:25
that book I’ve been trying to get my
57:32
book club to read it for 20 years you
57:34
know I I just I just reread it you don’t
57:37
want your book club reading it why not
57:39
it’s really hard to read well yeah but
57:42
it’s cool it’s very dated and easy brick
57:48
right he’s a boozer breathless he’s sir
57:51
Michael yelling well anyway someone
57:53
already asked about my first course it
57:55
was gonna be about Earned Income Tax
57:58
Credit yeah and a basic perhaps a naked
58:01
a negative income tax a guaranteed
58:03
income for everybody
58:05
for that if you in the last chapter I
58:06
talked about my version of the ubi but
58:09
and it’s more like a negative income tax
58:11
and it is the others but which guess who
58:13
came up with that right Brit anyway but
58:23
so suppose you did that yeah do you
58:28
would you agree I think that a large
58:33
part of what’s going wrong for us now is
58:35
that people are self segregating by
58:36
income because our schools are paid for
58:38
by real estate taxes have you read the
58:41
book because you you know that’s exactly
58:44
what I think is a big problem oh I think
58:50
so you know geographic segregation in
58:54
terms of equality of opportunity the
58:56
biggest challenge is this you know sort
58:59
of geographic segregation by class and
59:01
you know it was in 1954 how many years
59:04
ago was that fifty four years ago that
59:07
the Supreme Court said segregation by
59:09
race was unconstitutional and we need
59:13
new law now and you know I don’t think
59:16
we’re moving in that direction this week
59:17
in the Supreme Court but we need a court
59:22
to say segregation by class is also
59:26
unconstitutional
59:31
we didn’t we were a classless society
59:34
remember everybody if you were stinking
59:36
rich you assumed you’re gonna try to do
59:38
something useful well I don’t at least
59:40
that I I don’t I don’t I don’t think
59:43
necessarily rich people are any more
59:46
evil than necessarily they used to but
59:50
anyway but you made a very good point
59:54
which is that that selves first of all
59:57
the big sort there’s a book called the
59:59
big sort that probably is here and you
60:01
should read it it’s a great book but we
60:03
are sorting ourselves by education and
60:05
income and and that gets reflected in
60:08
where we live and that gets reflected in
60:10
where our kids go to school here’s a
60:11
little data point the socio-economic
60:18
the average socioeconomic status of the
60:23
kids in a class is a better predictor of
60:28
the kids educational performance than
60:32
his own or her own economic situation in
60:35
other words if you send rich kids to
60:37
poor schools they don’t do as well if
60:40
you send poor kids to rich schools they
60:43
do better that the class that they’re in
60:46
the socio-economic makeup of the class
60:48
they’re in is a better determinant is a
60:50
more is a better predictor of their
60:53
educational performance than their own
60:55
families and that tells you that you
61:00
know we need to worry about this
61:02
segregation by class and in school rooms
61:04
because it’s having a bad effect
61:07
particularly on poor communities thank
61:11
you very much
61:12
[Applause]
61:25
you

Amazon Changed Search Algorithm in Ways That Boost Its Own Products

The e-commerce giant overcame internal dissent from engineers and lawyers, people familiar with the move say

Amazon.com Inc. AMZN -1.87% has adjusted its product-search system to more prominently feature listings that are more profitable for the company, said people who worked on the project—a move, contested internally, that could favor Amazon’s own brands.

Late last year, these people said, Amazon optimized the secret algorithm that ranks listings so that instead of showing customers mainly the most-relevant and best-selling listings when they search—as it had for more than a decade—the site also gives a boost to items that are more profitable for the company.

The adjustment, which the world’s biggest online retailer hasn’t publicized, followed a yearslong battle between executives who run Amazon’s retail businesses in Seattle and the company’s search team, dubbed A9, in Palo Alto, Calif., which opposed the move, the people said.

Any tweak to Amazon’s search system has broad implications because the giant’s rankings can make or break a product. The site’s search bar is the most common way for U.S. shoppers to find items online, and most purchases stem from the first page of search results, according to marketing analytics firm Jumpshot.

When people search for products on Amazon*, nearly two-thirds of all product clicks come from the first page of results…

Row 1

2

3

4

5

6

7

8

First page

Other pages

0

20

40

60%

…so the proliferation of Amazon’s private-label products on the first page makes it more likely people choose those items.

Search for ‘men’s button down shirts’

Search for ‘paper towels’

Amazon private- label products

Sponsored content

*Based on a study in 2018 of anonymous consumer actions on mobile and desktop devices

Note: Product searches conducted Aug. 28

Source: Jumpshot

Angela Calderon/THE WALL STREET JOURNAL

The issue is particularly sensitive because the U.S. and the European Union are examining Amazon’s dual role—as marketplace operator and seller of its own branded products. An algorithm skewed toward profitability could steer customers toward thousands of Amazon’s in-house products that deliver higher profit margins than competing listings on the site.

Amazon’s lawyers rejected an initial proposal for how to add profit directly into the algorithm, saying it represented a change that could create trouble with antitrust regulators, one of the people familiar with the project said.

The Amazon search team’s view was that the profitability push violated the company’s principle of doing what is best for the customer, the people familiar with the project said. “This was definitely not a popular project,” said one. “The search engine should look for relevant items, not for more profitable items.”

Amazon CEO Jeff Bezos has propounded a ‘customer obsession’ mantra. PHOTO: JIM WATSON/AFP/GETTY IMAGES

Amazon said it has for many years considered long-term profitability and does look at the impact of it when deploying an algorithm. “We have not changed the criteria we use to rank search results to include profitability,” said Amazon spokeswoman Angie Newman in an emailed statement.

Amazon declined to say why A9 engineers considered the profitability emphasis to be a significant change to the algorithm, and it declined to discuss the inner workings of its algorithm or the internal discussions involving the algorithm, including the qualms of the company’s lawyers.

The change could also boost brand-name products or third-party listings on the site that might be more profitable than Amazon’s products. And the algorithm still also stresses longstanding metrics such as unit sales. The people who worked on the project said they didn’t know how much the change has helped Amazon’s own brands.

Amazon’s Ms. Newman said: “Amazon designs its shopping and discovery experience to feature the products customers will want, regardless of whether they are our own brands or products offered by our selling partners.”

Antitrust regulators for decades have focused on whether companies use market power to squeeze out competition. Amazon avoided scrutiny partly because its competitive marketplace of merchants drives down prices.

A majority of Amazon’s sales come from retail, but a majority of its operating profits come from its cloud-computing unit.

Retail, subscriptions,

advertising and services

Amazon Web

Services

Percentage of total sales

86.9%

13.1%

Retail sales and

commissions: 75%

Percentage of operating income

42.1%

57.9%

Note: First half of 2019; Amazon doesn’t break out operating income for retail.

Source: the company

Now, some lawmakers are calling for Washington to rethink antitrust law to account for big technology companies’ clout. In Amazon’s case, they say it can bend its dominant platform to favor its own products. Sen. Elizabeth Warren (D., Mass.) has argued Amazon stifles small businesses by unfairly promoting its private-label products and underpricing competitors. Amazon has disputed this claim.

During a House antitrust hearing in July, lawmakers pressed Amazon on whether it used data gleaned from other sellers to favor its own products. “The best purchase to you is an Amazon product,” said Rep. David Cicilline (D., R.I.). “No that’s not true,” replied Nate Sutton, an Amazon associate general counsel, saying Amazon’s “algorithms are optimized to predict what customers want to buy regardless of the seller.” House Judiciary Committee leaders recently asked Amazon to provide executive communications related to product searches on the site as part of a probe on anticompetitive behavior at technology companies.

Amazon says it operates in fiercely competitive markets, it represents less than 1% of global retail and its private-label business represents about 1% of its retail sales.

Amazon executives have sought to boost profitability in its retail business after years of focusing on growth. A majority of its $12.4 billion in operating income last year came from its growing cloud business.

Pressure on engineers

An account of Amazon’s search-system adjustment emerges from interviews with people familiar with the internal discussions, including some who worked on the project, as well as former executives familiar with Amazon’s private-label business.

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The A9 team—named for the “A” in “Algorithms” plus its nine other letters—controls the all-important search and ranking functions on Amazon’s site. Like other technology giants, Amazon keeps its algorithm a closely guarded secret, even internally, for competitive reasons and to prevent sellers from gaming the system.

Customers often believe that search algorithms are neutral and objective, and that results from their queries are the most relevant listings.

Executives from Amazon’s retail divisions have frequently pressured the engineers at A9 to surface their products higher in search results, people familiar with the discussions said. Amazon’s retail teams not only oversee its own branded products but also its wholesale vendors and vast marketplace of third-party sellers.

Amazon’s private-label team in particular had for several years asked A9 to juice sales of Amazon’s in-house products, some of these people said. The company sells over 10,000 products under its own brands, according to research firm Marketplace Pulse, ranging from everyday goods such as AmazonBasics batteries and Presto paper towels, to clothing such as Lark & Ro dresses.

Inside an Amazon fulfillment center. PHOTO: KRISZTIAN BOCSI/BLOOMBERG NEWS

Amazon’s private-label business, at about 1% of retail sales, would represent less than $2 billion in 2018. Investment firm SunTrust Robinson Humphrey estimates the private-label business will post $31 billion in sales by 2022, more than Macy’s Inc. ’s annual revenue last year.

The private-label executives argued Amazon should promote its own items in search results, these people said. They pointed to grocery-store chains and drugstores that showcase their private-label products alongside national brands and promote them in-store.

A9 executives pushed back and said such a change would conflict with Chief Executive Jeff Bezos’ “customer obsession” mantra, these people said. The first of Amazon’s longstanding list of 14 leadership principles requires managers to focus on earning and keeping customer trust above all. Amazon often repeats a line from that principle: “Leaders start with the customer and work backwards.”

One former Amazon search executive said: “We fought tooth and nail with those guys, because of course they wanted preferential treatment in search.”

For years, A9 had operated independently from the retail operations, reporting to its own CEO. But the search team, in Silicon Valley about a two-hour flight from Seattle, now reports to retail chief Doug Herrington and his boss Jeff Wilke —effectively leaving search to answer to retail.

After the Journal’s inquiries, Amazon took down its A9 website, which had stood for about a decade and a half. The site included the statement: “One of A9’s tenets is that relevance is in the eye of the customer and we strive to get the best results for our users.”

Mr. Herrington’s retail team lobbied for the adjustment to Amazon’s search algorithm that led to emphasizing profitability, some of the people familiar with the discussions said.

When a customer enters a search query for a product on Amazon, the system scours all listings for such an item and considers more than 100 variables—some Amazon engineers call them “features.” These variables might include shipping speed, how highly buyers have ranked product listings and recent sales volumes of specific listings. The algorithm weighs those variables while calculating which listings to present the customer and in which order.

Nate Sutton, an Amazon associate general counsel, at a House Judiciary Subcommittee hearing on antitrust in July.PHOTO: ANDREW HARRER/BLOOMBERG NEWS

The algorithm had long placed a priority on variables such as unit sales—a proxy for popularity—and search-term relevance, because they tend to predict customer satisfaction. A listing’s profitability to Amazon has never been one of these variables.

Profit metric

Amazon retail executives, especially those in its private-label business, wanted to add a new variable for what the company calls “contribution profit,” considered a better measure of a product’s profitability because it factors in non-fixed expenses such as shipping and advertising, leaving the amount left over to cover Amazon’s fixed costs, said people familiar with the discussion.

Amazon’s private-label products are designed to be more profitable than competing items, said people familiar with the business, because the company controls the manufacturing and distribution and cuts out intermediaries and marketing costs.

Amazon’s lawyers rejected the overt addition of contribution profit into the algorithm, pointing to a €2.42 billion fine ($2.7 billion at the time) that Alphabet Inc.’s Google received in 2017 from European regulators who found it used its search engine to stack the deck in favor of its comparison-shopping service, said one of the people familiar with the discussions. Google has appealed the fine and has made changes to Google Shopping in response to the European Commission’s order.

To assuage the lawyers’ concerns, Amazon executives looked at ways to account for profitability without adding it directly to the algorithm. They turned to the metrics Amazon uses to test the algorithm’s success in reaching certain business objectives, said the people who worked on the project.

When engineers test new variables in the algorithm, Amazon gauges the results against a handful of metrics. Among these metrics: unit sales of listings and the dollar value of orders for listings. Positive results for the metrics correlated with high customer satisfaction and helped determine the ranking of listings a search presented to the customer.

Now, engineers would need to consider another metric—improving profitability—said the people who worked on the project. Variables added to the algorithm would essentially become what one of these people called “proxies” for profit: The variables would correlate with improved profitability for Amazon, but an outside observer might not be able to tell that. The variables could also inherently be good for the customer.

Amazon commands more than one-third of U.S. retail dollars spent online.

Share of 2018 online retail sales

Amazon

36.5%

eBay

6.9%

Walmart

4.0%

Apple

3.9%

The Home Depot

1.6%

Source: eMarketer

For the algorithm to understand what was most profitable for Amazon, the engineers had to import data on contribution profit for all items sold, these people said. The laborious process meant extracting shipping information from Amazon warehouses to calculate contribution profit.

In an internal system called Weblab, A9 engineers tested proposed variables for the algorithm for weeks on a subset of Amazon shoppers and compared the impact on contribution profit, unit sales and a few other metrics against a control group, these people said. When comparing the results of the groups, profitability now appeared alongside other metrics on a display called the “dashboard.”

Amazon’s A9 team has since added new variables that have resulted in search results that scored higher on the profitability metric during testing, said a person involved in the effort, who declined to say what those new variables were. New variables would also have to improve Amazon’s other metrics, such as unit sales.

A review committee that approves all additions to the algorithm has sent engineers back if their proposed variable produces search results with a lower score on the profitability metric, this person said. “You are making an incentive system for engineers to build features that directly or indirectly improve profitability,” the person said. “And that’s not a good thing.”

An Amazon warehouse in Mexico in July. PHOTO: CARLOS JASSO/REUTERS

Amazon said it doesn’t automatically shelve improvements that aren’t profitable. It said, as an example, that it recently improved the discoverability of items that could be delivered the same day even though it hurt profitability.

Amazon’s Ms. Newman said: “When we test any new features, including search features, we look at a number of metrics, including long term profitability, to see how these new features impact the customer experience and our business as any rational store would, but we do not make decisions based on that one metric.”

In some ways, Amazon’s broader shift from showing relevant search results is noticeable on the site. Last summer, it changed the default sorting option—without publicizing the move—to “featured” after ranking the search results for years by “relevance,” according to a Journal analysis for this article of screenshots and postings by users online. Relevance is no longer an option in the small “sort by” drop-down button on the top right of the page.