Q&A Michael Spence

Driving Change (DC): Today, we’re talking with Michael Spence, a Nobel Prize-winning economist, who spends his time between the University of Bocconi in Milan, and Stanford, in California. Michael, thank you for joining us.

Michael Spence (MS): I’m delighted to be with you. 

DC: I want to start really, by folks diving straight into the pandemic, and its consequences, particularly for an area that you and I have talked about a lot in the past, which is the future of work, you know, obviously, we’re left with a situation where there’s been a dramatic shock to the economy that’s caused many people to lose their jobs, one of the prospects for getting people back to work

MS: Well, they’re a little grim and tough in the kind of short to medium run. So, I mean, you know, I think there’s two things going on. One is the pandemic, you know, situation forced us to conduct experiments that we normally would have conducted, but at a much slower pace. And some of those experiments are going to result in learning that, you know, changes the whole pattern of work, you know, maybe more working from home, maybe a lot more collaboration, and maybe less sort of international travel, now that people kind of know how to do it. And the platforms are getting better at facilitating it. 

But the flip side is that the pandemic economy both domestically and internationally as a, as an adverse shock with respect to distribution, and the easiest way to see that or lead, the way that kind of hit me was I looked at a study done at the University of Chicago by a couple of professors early on in the pandemic, and they asked the question, what fraction of work can be done at home in the United States? And the answer they came up with is an approximation, because they did it really quickly, was one third, then they looked at it by geography and sector in the sector ones are really striking. So, you know, it ranges from like, 80, some odd percent in the tech and financial sectors down to 4% in hospitality, right. So basically, you know, when you stand back from that you think 4% of those people can work from home, and we had to shut them mostly down in the pandemic. 

And then there’s a serious question that none of us knows the answer to, which is how fast they can come back, which really, I think depends primarily not on policy so much as how fast we can get the, the pandemic under control, meaning the prevalence down to the point that people’s risk aversion doesn’t cause them simply not to go. And that looks like it’s a process that varies across countries, as you will know, the Chinese have done it more aggressively using tools, including digital ones that were not willing to use. And, and we’ve probably done it more slowly. I mean, I’m, I’m not in the business of handing out praise or criticism. But it’s pretty clear the process is going by so i think you know, the growth patterns. And we’ll match the employment patterns. And they’ll be by sector. And there, there are a set of sectors that are going to struggle to come back.

DC: So if we talk first about Europe versus America, and then we’ll come on to talk about China. There were different approaches taken to to the question of, can we keep people in jobs for as long as possible and hope that we come through the pandemic, with as much of the existing economy and workforce in place so that when things do start to grow again, we’re not having to rebuild from scratch? How are those experiments and different policies played out?

MS: Well, you know, there are real differences. So the similarity is that, you know, everybody basically decided they had to buffer the economy, meaning the household sector and lots of businesses that were going to make a buck The shock and the you know, the shock is can be thought of, you know, and I think most people don’t think of it this way. But it’s a shock to the balance sheet that, you know, there are a bunch of parts of every economy that where the people’s balance sheets are fragile and thin enough that it’s not much of a shock absorber. So what basically governments have done is run big deficits and transferred some, a fairly substantial amount to the sovereign balance sheet where it’s not perfect, but easier to manage.

So that’s kind of you know, that’s General, after that, it gets more complicated. So in the United States, we had, you know, a bunch of programs that, you know, in unemployment insurance, which is not new, we had programs to support businesses and, and programs to support businesses, keeping people on, and so on. The Europeans were further down that road Well, before the pandemic, I mean, the Europeans use this kind of technique in the great financial crisis, and even before, and what the what the Europeans do, I mean, it’s most obvious in Germany and some of the northern countries, but it’s also true in Italy, we have a program that similar where the state sort of absorbs some of the costs, but but basically, what what these economies do is, in businesses in partnership with the state, basically redistribute the costs around. So what happens is that in, you know, in the jobs get slimmed down, but fewer people are unemployed, right? So they kind of spread it around. And I think it’s actually a pretty sensible way to do it. But it’s hard to implement. So if you hadn’t put it in place beforehand, you know, you can’t you can’t snap your fingers and get it done overnight.

DC: So does that mean, do you think that America is going to suffer from prolonged higher rates of unemployment? because it hasn’t had that kind of job sharing scheme? Or is it if this just drags on, at some point, the furloughs and other job sharing schemes sort of reached their time limits and stop in Europe? And essentially, they then catch up on the unemployment rate?

MS: Too many variables? I mean, so I would say on that I, you know, if you held everything else constant, yes, that would make the American unemployment higher. But there are still elements in the American economy that that, you know, might produce faster growth and say where I am in Italy, where we have grown, essentially negligibly since the year 2000. So in that men know that factors in as well. So I mean, I’m not wildly pessimistic, but I think what the way I think about it, man, I think Matthew is there’s going to be puff pockets of real distress, you know, people in sectors that really do struggle to come back, and that that will make unemployment higher than we would like. But it also mean that it, you know, it’ll be a struggle to move those people into other sectors as the economy recovers. So it’s partly, you know, structural transition of a certain type, I guess,

DC: there’s all this debate about what shape the economic cover his recovery will be, is it going to be a V w, square root shaped account in a K as well idea where they half the economy goes up? And the other half goes? down? Although I think that’s sort of cheating the metaphor a bit. But I mean, what do you what, what’s your kind of default prediction for how, how the economy grows from here.

MS: And it’s, I think, maybe the square root is the one that’s been used most often in the United States, the French call it the wing of a bird. So you get a sudden, you know, very big contraction varies across countries, then you get a flat period where you’re trying to get the virus under control. I’m speaking now, mostly, but the developed countries just for a moment. And then you get things that can come back fairly rapidly. And so you get something that starts to look like the start of a Wii after the after the trough, so to speak. And then you get ones where the headwinds are, you know, a lot bigger, like international air travel, I don’t know when people are going to feel safe and comfortable doing that. And when all of the bilateral international restrictions are removed, but it doesn’t look like it’s very fast. And so and so that you so from your point of view, go down flat up fairly fast, and then start to level out. And I think that’s where the square root idea. Square root idea comes from. But I think, you know, I mean, there’s lots of flexibility. And you know, exactly what that looks like, in any particular case. But I think that pattern is is a reasonable guess, now that we’re six months into this.

DC: but the best approach in terms of job creation, you know, normally economists would say, well, this just kept growing, again, is that is that the right policy at this point? Or is there anything we can do about the growth rate beyond the stimuluses that we’ve seen so far?

MS: I mean, I think the thing we lost track of in America is that the bet what the SEC the other best thing you can do is get The pandemic under control? Because I mean, to the extent you can, you know, lower the prevalence. So I think the differences we see across countries are mainly attributable to that. And so, so then, of course, widely available successful vaccine, provided people actually have it administered to them would would accomplish kind of the same thing, only even better. I mean, that would produce a, you know, a V. I mean, very quickly, but that, but, you know, there’s hurdles, even there. I mean, I’m appalled at surveys that I read, you know, that, you know, a third of the people say they willing to do take, you know, have the vaccine injected? I, you know, I don’t, I’m not terribly aggressive about this, but I mean, there’s a balance between, you know, individual freedoms and rights on the one hand and collective interest. And the simple truth is, my friend Mohamed el erian, I think, invented a useful phrase, he said, in finance, everybody knows that counterparty risk is and if it’s big enough, the system stops because nobody trusts the other party, you and I are both familiar with that. Is that what we have as human counterparty risk, as long as the prevalence is pretty high, everybody is a risk everybody else. And and so we we need to do do things that reduce that risk to restore, you know, confidence that you can safely engage in ordinary economic activity, like riding the subway to work, and stuff like that. So I mean, I mean, I, you know, that we’ll get to China, but China use digital tools in a way that we probably can’t, because of concerns about data and privacy and even trust in the government. Hmm. But that, but the Chinese are walking around with mobile health certificates that are color coded, you know, so if you’re in circulation in China means that some system, you know, powered by a fair amount of data thinks that your probability be infectious is relatively low, huh. And we basically can’t do that. But it may turn into crude terms. We’re all yellow. I mean, right?

DC: Where, to what extent, but to what extent does a mask become a sort of proxy for that in a way? I mean, if people are wearing masks, does that does that overcome the counterparty risk sufficiently that Well, actually, a normal life could resume some extent?

MS: Well, it certainly helps. I mean, I’m no expert on the medical and epidemiologist side side of this. I don’t think mask but social distancing, I think is helpful. And it being outside is certainly helpful. I mean, it seems pretty clear that, you know, the most dangerous situation is lots of people in an enclosed space with poor ventilation. So if you’re outside, you’re, you know, not gathering in large crowds, and you’re wearing a mask. You know, I think that that’s it’s not a perfect substitute for what we’re just talking about. But it certainly helps if everybody complies.

DC: Or you brought up China, obviously, it started there. But they have got on top of it pretty quickly, in the end. What is the economy doing in China? What’s happened to job losses job, you know, and then job creation after they started to get the pandemic under control? And what does that tell us about what might happen elsewhere?

MS: Well, I would say if so, China’s recovering pretty quickly, um, they basically had took the hit in the first quarter, mainly, whereas we took the hit in the early part of the second quarter. So that year, as you said, they’re ahead of us. But because they were so aggressive about it, I mean, that literally locked down the whole city of 11 million people, and, and didn’t let anybody go in and out. I mean, you can argue, but whether that was too brutal or not, but anyway, that’s what they did. And these other tools that we don’t have to review again, and I would say China is looking more like a V shaped recovery. But even there, you know, there, there are sectors that are going to be stubborn, with respect to recovery. And China is still an economy like many others, that is dependent on the red state of the rest of the global economy. And so there’s nothing they can do about that except, you know, live with it. So it’s a faster recovery than we’re seeing in some other places. But it’s, but it’s not just just snapping back. But you know, maybe bits and the anecdotal information from China, is that you know, what you would think of as ordinary, fairly ordinary economic activity is returning like restaurants or functioning and stuff like that.

DC: Hmm. And then we’ve been largely to About the developed economies, what are you seeing in the developing economies about? Obviously, places like India have sort of suffered extraordinary job losses as a result of a fairly aggressive lockdowns in some places, does this setback the path of development for a lifetime?

MS: I think it does for a while, I mean, developing. So if you think of the resources we went into this with, we’re richer. So our balance sheets are a little bigger. The Sovereign, the fiscal space is bigger in the developed countries than in than in many developing countries in emerging economies. And the medical situation is, I mean, we all get stressed out, I mean, but when we have a real, you know, kind of peak load problem in the medical thing, but anyway, they have less capacity. So in terms of the kind of basic tools that you use, they’re, they’re less well armed. And I think the worrying thing, if you look at the tracking data for India, the economy is coming back, but it’s coming back with, with the virus still, you know, the confirmed cases growing at a pretty rapid rate, meaning the way the Lamont Academy measures, its days to doubling, it’s actually becoming a fairly common way of explaining to people how fast is going. So they’re, they’re making progress, but it’s very slow. You know, they’re doubling days in excess of 20, which is good, because if you’re under 20, it’s it’s a lot under 20, it’s basically out of control, given the lifecycle of the virus in individual. But what I what I worry about, and I’m not sure whether the data are all that good to make sort of significant comparisons across, especially the poorer countries, but what I’m worried about is that the the, the health livelihood trade off is much Starker in poorer parts of developing countries, or in just plain poor developing countries, and that there’ll be forced open up the economy and then just have to accept the consequences in terms of health, because, essentially, because they the alternative, which is locking down the economy for extended period is worse, if I can put it that way. And so that’s not necessarily an economic catastrophe. But it’s not, it’s certainly something that from a health and human welfare standpoint, you wish you wouldn’t see a virus will help containment if they took the vaccine, vaccine vaccine, not a vaccine, vaccine, or some other therapeutic that really works, if it’s widely available, would help. There’s some international support on all those fronts, medical, financial, and so on. But I don’t think there it’s big enough to blunt the blow to a number of countries.

DC: And I guess that will mean they will continue to be isolated from the global economy to some extent, whilst that remains,

MS: they will and then you know, and then when, so they got, they got to deal with this, but they have to deal with the unknown consequences of a fragment and global international sort of structure again, so we just don’t know, at this point. I mean, they, for much of the post war period, you know, these poor countries, we lived under this big multilateral tent that the United States and others built. And it was an important element and the opportunity set for growth for many of them, and they still need it, especially the poorer countries. And we so we don’t know, at this point whether, you know, tensions between the US and China and other tensions, I mean, Europe is not getting along all that well, with China right now, either, etc. If this will produce some kind of fragmentation, that that that diminishes the opportunity for, for the development for the smaller poor developing countries, I mean, we can probably in the United States enter a bilateral world, you know, where we negotiate with our major trading partners, whatever is advantageous to it, but that doesn’t really work, you know, for a landlocked country in Africa say so, I think there’s a concern about that. I’m not saying the whole thing is collapsed to the point that the opportunities are gone, but it’s getting there. The other thing they have to deal with is that is you know, digital technology is moving so fast in the area of automation, vision, robotics, you know, and so on that the labor intensive process oriented manufacturing source of competitive advantage may not be as powerful driver of the export side of growth that it was in the past and that means that not that the global economy is unimportant, but they’re, you know, if they have to invent or discover you know, other ways of leveraging the global economy. Other sources of comparative advantage, I guess, is the way an economist would put it in order to, to achieve the kind of growth that we saw in their earlier in the early starters.

DC: So the old Chinese model of just making lots of cheap stuff for the West is not really gonna work necessarily anymore. Yeah. So what?

MS: It may not work or, you know, I mean, I think a lot of countries are hoping that the baton will get passed, and that opportunity won’t collapse so fast that that it cuts them off, but it but it looks like it’s at least a threat.

DC: So we have these two big policy challenges in terms of what we do about the future workforce and getting people jobs. Yeah, what, which is your unique pandemic, concern about industries where there’s high human counterparty risk, as you put it, tourism? travel, and the other is where these Digital Trends have accelerated by everyone being stuck at home and, and so forth? What policies, you know, should governments be adopting to deal with those two quite different shocks? In terms of equipping people to get back to work?

MS: Yeah, you’re right. So they are different. I mean, I think, you know, the, I don’t think there’s a magic bullet other than vaccines, that, you know, that are a substitute for getting the virus under control. So I just on that side, I’m pretty clear.

DC: so if you’re in a, if you’re in an industry that is reliant on basically having trust and high, low Counterparty, lowcounterparty risk of terrorism, you just think is, if you’re a country like Italy, that’s reliant on on tourism, your only strategy is to make convince people that it’s a virus has gone down.

MS: it’s a safe place. And and you have to convince the domestic folks that it’s safe to let them in. Right. I mean, they banned in, you know, well, not banned, but you know, this summer, because we had an outburst in that, or outbreak of association of the United States. The Europeans pretty reasonably said, we’re not wildly enthusiastic about having Americans come. But that’s not a permanent condition. I mean, they are wildly enthusiastic about having us come once, once we’re, you know, safe. So yeah. So I think on that side, that one’s with nothing straightforward, but that one’s pretty straightforward, I think. But on the other side, I think, you know, the lion’s share of the discussion, which is not misguided is is has to do with really ramping up our capacity for helping people, you know, change what they do skills and all that stuff. And I think the digital tools are showing, partly as a result of the pandemic experience, that they’re really quite useful in getting that done. And that’s going to, from my point of view, that involves collaboration that, that involves business, educational institutions and government that seems to you know, we thought that before, I think it’s even more true now, whether we can get that done.

DC: What do you mean, specifically?

MS: I mean, you know, everybody has pieces of the puzzle, right? So businesses know, you know, how their business models evolving and have a pretty good sense of what skills they need. And they may even be pretty good, armed with the right tools, be pretty good educators or partners with educational institutions and getting the job done. And there’s, you know, a reasonable amount of evidence that done at a local level, you know, with state governments or local institutions, that these partnerships actually kind of work. But but the So I think, you know, that’s an important part of the puzzle. A second piece is, you know, I, I’m not nobody I that I know, is wildly enthusiastic about sort of a, you know, scattershot approach to sort of international relations and international trade. But we could have a strategy, you know, for dealing with China and for dealing with international trade and institutions and so on, because we know that all that has to change anyway, we’re not going to go back to where we were before, as the strategy that includes, you know, domestic employment, to the extent that there’s still an issue of, of, you know, where jobs reside geographically. I’m not against that, right. I mean, I but but it, you know, done stupidly, it doesn’t really help and doesn’t really work and done smartly. I think it could, could add to the, the balance. The the part that seems to me hard is the last thing I wrote about which is, you know, in the start in the in the public traded equity markets, an increasing part of the value that’s being created as in is being created. But with intangible capital, and the entities that are doing it are doing it with relatively small number of employees. So basically, if you stand back from it, there’s a kind of this is overstate that in terms of simplicity, but employment is diverging from value creation as measured in that way. And then he asked the question, well, who owns those assets? Because it mean, you know? And the answer is, it’s highly concentrated set of people at the upper end of the distribution and a bunch of institutions. And so it’s not, I don’t want to oversimplify the picture. But I mean, I think, to fully solve this problem, you know, we’re gonna have to sort of figure out a way to have broader participation in value creation, you know, the turbocharge parts of the economies value creation process? And we don’t have that now, actually, and nobody has it. I mean, so this is a this is a challenge that no, no country I know, of is actually addressed effectively.

DC: I mean, it sounds right. I mean, I mean, it seems to me it is right there. But basically, what’s happened with this crisis is an acceleration of a lot of these trends that were towards greater concentration of wealth and the equity in the future growth. Yeah, amongst a small part of the population. I mean, as you say, it does open up the question of me, firstly, like, if, if most people aren’t going to be in jobs that are high value creation? Or there weren’t been jobs at all? Do we need to provide some kind of universal basic income or some equivalent of that to keep people at a sufficient standard of living? That even if they’re not doing fulfilling, meaningful work, they’re at least not fighting and rebelling and refereeing society down? Or do we need to actually, you know, the question of much heavier taxation of the welfare sort of on the table, but again, I’m I’m slightly skeptical about how easy it is to pull that off politically and practically. And then, and then what do you do when you take the nationalized chunks of the of the value creating economy do great, you know, see some of the equity and put it into a common fund or some kind? I don’t know, how do you do it?

MS: Well, I mean, I think that last, you know, is something that deserves being explored. I mean, you know, these are things that if you get them wrong, can really screw up the economy. See, you know, I’m skeptical, like you. On the other hand, that sort of trajectory of the distribution of balance sheets in the economy is not very, you know, promising from the point of view of political and social cohesion. So, I mean, I think the most privacy avenue to explore, and I don’t, I don’t want to pretend that this is kind of, you know, a solution, because it’s not worked out is, I think that everybody thrives in a, in a system that is created by, you know, the social contract the Constitution and the government and what you know, and its investments in people and technology and science and so on. And I think we probably need to look for a way for it to have the public broadly, maybe through the government, be a kind be passive kind of owners of that, of that. Now, how do you I mean, and that’s a little different from taxation, I think, right?

DC: Because taxation has been the traditional way that we’ve done that,

MS: yeah, taxation is and traditional way we’ve done it and, you know, and and I think we’re probably depending on the outcome of the election, we’re going to do more of it. But and I don’t mean to set that aside, but, but I think, you know, exploring this other avenue, as a compliment to that is a worthwhile idea. I mean, I don’t, you know, we’ve had bits and pieces of this, I remember, the late James Tobin put forward a widely discussed not eventually not implemented proposal, to finance college, with essentially loans where you paid back based on you remember this on the front, basically, if you’ve what you’ve committed to is a very small fraction of your future income. And so people who became artists and musicians, some of them became fabulously wealthy, and they paid a lot and some other people who went into the nonprofit sector and did a lot for their fellow human beings or citizens, you know, didn’t pay so much. I mean, it is, again, the mechanics of these things need to be worked out. And, you know, there’s all kinds of moral hazard and other problems that, you know, have to be thought through associated with that, but I think that it’s the right, it’s a time when creativity in these dimensions, as well as you know, responsible effective use of the existing tax system is a good idea.

DC: Hmm. And are you optimistic that we’re gonna see that because I think one of the things I was struck buys, you know, people were aware of the threat that digital posed to maybe to a lot of traditional jobs and the traditional middle class employment. But there wouldn’t seem to be a lot of policy reaction to that, you know, might the crisis shock us shock the world’s governments into doing something more ambitious and creative?

MS: In my, you know, I did it kind of depends on where you are? I mean, I think, because what the challenge is, is it varies, you know, so mean, in the United States, I think we still have reasonably powerful engines for generating, you know, innovative new economic activity, and we don’t want to destroy those. So we, we just have to, to address the problem is it very likely we’ll address it, you know, me night, I, in an environment in which a significant subset of the population feels with some good reason that they were kind of abandoned over the last few decades. And don’t, I’m going to put this mildly, I mean, and dislike the elites. And the, you know, and the people on the coasts and a whole bunch of other versions of that, it’s a little hard to see that, that, regardless of electoral outcomes, that that turns into something in the short run, that looks like a constructive, you know, dialogue about how to achieve inclusiveness. I mean, you know, just trying to be realistic. I mean, I think in Europe, at least on digital, the challenges perceived here is that they’re way behind. And so they, you know, they need more platform companies, they need a cloud computing system, you know, that goes along with their policies with respect to data, they need opportunities for very talented, innovative young people, to sort of build companies with supportive ecosystems around them, so they don’t have to go to New York or Washington or California, etc. So I mean, I think the challenge there is kind of modernize, digitize, and, and get back somewhere near the forefront. And of course, that has consequences for growth. So it’s, it’s a slightly different person, at least perception of the challenges in Europe is a more if you just look at Gini coefficients, it’s a more egalitarian operation. It’s not exempt from the pressures that we’ve seen, you know, David Autor and others have documented that, that job and income polarization to varying degrees is curved across a broad swath of the the developed world. So I mean, I, you know, that and that’s digital and globalization and whatnot. But they’ve, they’ve had Paul, we’ve had policies in Europe that have muted the impacts of that to a greater extent than, say, the UK or the US.

DC: But Europe hasn’t had a great record or catching up on on these sort of innovation, deficits, hazards. And so I suppose it does still, I mean, I’m struck as we talk that I mean, it’s by no means a foregone conclusion that, you know, in two or three years time, however, we think about the relative effectiveness of the policy response to the pandemic in America and Europe, that America may still emerge, you know, with stronger economic prospects than than Europe over the decades ahead.

MS: Yeah, absolutely. I mean, Europe has a kind of unification agenda. That’s still there. People are kind of a little optimistic because of the emergency fund, you know, the 750. euro mergency fund, because it’s, it was financed with European debt. Right. So people are saying loans is really the first time unlike the great financial crisis, where we’ve, where Europe has taken the position that we’re kind of in this together, as opposed to, you know, if you’re in trouble, it’s your fault, get out of it, kind of kind of attitude. Now, whether that turns into some more momentum on a broader front, that the place, you know, still is kind of fragmented, to some extent linguistically. You know, they need the institutions, the European level institutions, that not bureaucratic ones, but ones that really pump energy into the system, you know, the way the NIH does in America and our biomedical complexes and so on. So, yeah, we got a long way to go. This is the bottom line and we’re pretty far behind.

DC: So one last question. The audience for this is this primarily policymakers. It was the number One policy recommendation you would have for policymakers around the world as they think about how they give their work people the best chance of having good work in the years ahead.

MS: I, on the on the work question, I guess I would say, if I’m allowed three points, right, get get the virus under control, recognize we have a common problem and cooperate with each other on you know, sort of finding solutions, including technological ones. And, and, and then focus on on skills, jobs and retraining.

DC: Good. Well, I’m not practical on that practical positive node. Michael Spence, thank you very much for talking with me and driving change today. Thank you. Thank you, Matthew, enjoyed it. Great. Thank you so much. It’s so interesting. And it’s the I mean, the China stuff is so interesting as I mean, because you’re very I mean, you’ve done a lot of thinking about China. I know. But and do you feel like and this this, they must emerge from this infinitely stronger in the world economy and in their political, geopolitical strategy? I think?

MS: Well, yeah. Yes. In the in a sense. I mean, on the other hand, there, do use a technical term pissing a lot of people off. And so it didn’t just us. And so, you know, I think they could overplay their hand. In a number of dimensions, you know, excessive aggressiveness internationally. You know, they there’s, they have a widely held view that comes from looking at the West that our systems don’t work very well. But they may have, but they may sort of throw the baby out with the bathwater, because there’s some parts of our systems that do work. Well. I mean, this isn’t true, the sensible people know perfectly well, that we’re going to end up in different places with different values. But there’s lots of ways we can, you know, cooperate like each other work together, and stuff, but, but we’re going to live in, even people, you know, that I would include myself in this group are going to live in a more hostile environment, you know, so I’ve been, I’ve been along with a bunch of other people, you know, involved as a member of the advisory committee to an academy in Hong Jo that jack ma set up, no bank told him hold the bank, Holmstrom loans to people al Roth, because we’re really intrigued at learning from the Chinese experience about, you know, the both opportunities and challenges from implementing fairly rapidly, elements of of a digital economy. And one of the really encouraging things that that I’ve learned from that side, Matthew, is that the studies they do, based mainly on the e commerce and FinTech platforms, which are huge, and they have all the data so they can do amazing things. I mean, you combine Alibaba and alipay. Yeah, it’s not the whole thing, but it’s a fairly large fraction of the economy. And, and the growth patterns associated with the the the digital economy are really startlingly inclusive, right? Because, you know, some people in remote areas seem to have a bigger impact, you know, then people in Shanghai might third and fourth tier cities and the rural areas, mainly because the digital economy is doing what we all thought in 2000 would do and that is make remoteness less costly. So, you know, so in Shanghai, you’ve got, you know, medical facilities and retail and all that stuff. And so it’s sort of nice button, if you’re somewhere far to the west, you know, you’re buying a greater variety of products, you don’t have established retail is, you know, etc. So it’s, it’s, it’s pretty impressive. The other thing I’ve been very struck by as is the use of data. So they, they just have, you know, mean, Tencent, I mean, WeChat pay and Ali pay between and probably have 80% of the digital payments market, or more probably 90% of the digital payments market in China and China’s well on the way to being essentially a cashless economy based on mobile payment systems. And it’s a well designed system. So they have a mountain of data and when they use that data, they can they can issue credit to people who are completely anonymous, to the traditional channels like names. And so if it if the platforms have the right and relatively including Have intentions, right?

they can make a big difference. My general conclusion when I’ve looked at, you know, the applications of AI and health and, and, and in the economy and so on is that these these inclusive impacts are really big, really big, mega big, boring you, but I’ll give him give me one other example. Yeah, this is just a silly little example, because there’s lots of them. But you know that you, we’ve all been startled by the speed with which image recognition is grown. So two kids at Stanford, went to the dermatologist and said you want to try to use this to see if we can detect skin cancers. And so they collected a bunch of data was a big training data set was pretty hard work. And, and they borrowed Google’s image recognition engine, because it’s too expensive to build one for that, you know, little application, and it worked pretty well. And then you know, and then, so there’s subtleties about type one and type two errors and all that stuff, you know, put false positives and negatives and stuff that medical people would be very interested in. But it wasn’t intended to be an experiment that led to the substituted decision of this for dermatologists, and certainly not for people, you know, like us who live in a major city. But then, but you can take a picture of this with the thing that almost everybody owns now, and ship the picture, and turn the artificial intelligence loose on that. And 80% of the world’s population isn’t anywhere near a dermatologist. So somebody’s eating back up from it, you say, well, what’s the impact? In human welfare terms? It’s a dramatic expansion of this aspect of primary care. Hmm.

DC: And I suppose as you say, I mean, in China, you you’re able to get away with stuff digitally that you can’t in America, in Europe, and I guess, weirdly, because of the state of trust towards the platform companies, you know, they’re probably going to struggle to do some of that inclusive use of data more than China.

MS: Yeah, I think that’s right. And there’s more barriers make, that the Chinese so far. The main thing about that Chinese situation is that the government asserts the right to see the data. That’s not even remotely close to our situation in America. And they reserve reserves the right meaning they are the authority authority with respect to what content on the internet is destructive or not. And, and they take off the stuff they think is destructive. And that’s not going to fly with us either. Because we don’t have anybody who does no institution, you know, that has that constitutional authority. So we’re going to end up in different places, but I do think it’s not hopeless. I mean, you know, there are ways of building inclusive ecosystems around the platforms and and over time acquiring trust that you know, that gives people confidence in the use of the the data at least in some dimensions.

DC: I hope so. Um, so you’re gonna be back in the you’re gonna brave the fires of California at some point you’re just gonna stay put in Atlanta.

MS: Well, I you know, I’ve been here for six months, you know, with at least three trips to the US that we normally take canceled, either by flight cancellations two way quarantines or just playing dangerous. So the answer is I’ll be back but both New York and in California, but, but I don’t know when. Yeah.

DC: sooner. situation. I know. I mean, I’m beginning to feel I need to get back to Britain. But it’s, yeah, I know. I just have 14 days corrente when you get there and then same money come back does really when you know exactly. Hey, well lovely to talk and I’ll let you get your wife and well, I wish you luck. Good fortune with this new venture. Thank you.

MS: Thank you.

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