It's a Numbers Game: Oren Cass on Financialization—How Wall Street “Grifts” the Real Economy
2/18/202656 mincomplete
0:00This is an iHeart Podcast.
0:02Guaranteed human. Welcome back to A Numbers Game with Ryan Gerdusky.
0:09Thank you all for being here.
0:11Did you know that airlines make more profits from credit card partnerships with loyalty programs,
0:18often acting as the primary driver for profitability instead of ticket sales?
0:24Now, you know I didn't write that sentence because the way it came out.
0:26But basically, airlines are acting more as banks than they are as airlines, as people
0:35who fly all the time, which would explain why certain things about air travel are
0:40not improving and other things are getting actually a lot easier.
0:43I know you're probably thinking, Ryan, what on earth are you talking about?
0:46It's called financialization. It's how investment banks, hedge funds, private equity firms, cryptocurrency platforms are
0:53increasingly a larger part of our economy and our guest today, Oren Cass, says it's
0:59a grift. He'll be on a little later to discuss before we get into financialization.
1:04And I try to, by the way, make it as easily obtainable and palpable for
1:08people with my level of intellect, which is on the lower end, than people who
1:15are smarter than, you know, people who read the Wall Street Journal and can sit
1:19there and argue with the paper themselves every day.
1:21I want to discuss what happened over the weekend with me because I went out,
1:26I'm in New Orleans, obviously.
1:28Happy Mardi Gras for those who celebrated.
1:29I'm taping on Tuesday, you know, happy Ash Wednesday.
1:32It's Lent for all my fellow Catholics out there.
1:35If you haven't thought of something, I give up.
1:36Now's the time and no meet on Fridays.
1:38But I was in Mardi Gras over the weekend in New Orleans and I'm in
1:44the city and I run into a British friend of mine and he's out with
1:48a bunch of Brits and he works in politics.
1:50He's super fun, super interesting.
1:51He's, let's get, you know, lunch together.
1:52I said, okay, sure. We get lunch, me, him, and the other Brits.
1:56And one was a foreign war correspondent.
2:00And I was so fascinated by him because I'm like, what's, you know, where have
2:03you been in, you know, in conflict zones?
2:06And he was telling me how he was in Libya while Qaddafi was being overthrown.
2:11Actually, what I did ask him, because, you know, I'm me, I sat there and
2:14said to him, what's the worst nation you've ever been to and why is it
2:17Pakistan? He did laugh at that joke.
2:19But I said to him, what was, you know, Libya like under the overthrow of
2:22Qaddafi? And he's talking about, you know, you know, lines of supplies falling apart and
2:30the bombings and, you know, hearing bullets whiz past his head.
2:34And then he said this was the case why Western countries should have intervened more
2:40and at larger lengths, at greater lengths than they did.
2:44But, you know, and in the last, obviously, 15 years or 20 years since Qaddafi,
2:49I guess 15 years since Qaddafi's been overthrown, Libya is a failed state.
2:53It's been through civil wars constantly.
2:55And I argued, no, actually, what had the West not intervene, had Qaddafi been able
3:02to destroy the rebels, which he would have done had not America started bombing his
3:08tanks, less people would have likely died, then died out of Western compassionism for overthrowing
3:16a dictator in Africa, right?
3:18Because more than 30 ,000 died in that conflict, 15 ,000 died since that conflict.
3:22And it's unloaded wide levels of, you know, instability in Northern Africa.
3:30Libya, as I said, is a failed state.
3:32They're practicing slavery again. And also Europe.
3:34Europe dealt with a tremendous unstable situation because they had to deal with Qaddafi to
3:40keep, you know, hordes of third worlders trying to move from Africa, move from Africa
3:46to Europe away. And it was a disaster.
3:49You know, they ended up going to Italy and then from Italy going to Britain,
3:52Germany, Sweden, and the rest of the places.
3:56And they said, you know, they went back and forth and they were like, no,
3:59intervention was the right way, the right plan.
4:02And we should have intervened more in Syria and Libya and Egypt and got boots
4:07on the ground. And I finally was like, who?
4:09It's all these Brits. I was like, who?
4:11Who should have done this?
4:13Because I know you're not talking about the British military, which is the size of,
4:18you know, a booth at Denny's.
4:21And like, what's European countries?
4:23In what fantasy world? And I really like these people.
4:26So I was, I was not, this was not a fight.
4:29Like I never spoke to them again, but I just sat there and I was
4:31like, in what fantasy world do you believe that the old victors of World War
4:36II can get together and, you know, run a show and recolonize the entire world
4:43or spread democracy? Like what vision and alternate reality are you living in?
4:47Because it's the US and the UK and who?
4:50It's not Russia who fought in World War II.
4:52It's not Russia who's helping us.
4:53Is it the French? The Germans who, you know, have a miniature army?
4:57Is it Italy who has the largest standing army?
4:59I mean, best of luck winning a war when you only got the Italian military.
5:03And which groups of Muslim youths, the children of immigrants or immigrants themselves, are you
5:09going to convince to join Her Majesty's army and fight against Muslims in Libya?
5:15Like what, what lie are you telling yourself now to believe that you have the
5:20recruitment of capabilities and you haven't traded in?
5:24Or not had, I guess, and all these people had children, by the way, traded
5:28in like the youth of Britain for, you know, young Pakistanis who have no interest
5:34in joining Her Majesty's Army, His Majesty's Army.
5:37You know, you're more Muslims in the last decade joined ISIS than joined the British
5:44military. You're all being delusional.
5:46And I said, what you're saying is I want Americans, I want white boys from
5:51farms in Iowa or Alabama or wherever to go service an ideology, which has never
5:59proven very successful, and go fight and possibly die in countries where marrying a 14
6:06-year -old cousin is more encouraged than Christianity.
6:09I was like, I'm sorry, but no, like, no, you're not, you're, this is, no,
6:13we would, Europe would have been better off had these situations of nation building and
6:18foreign intervention not taken place and spending a decade supporting Al -Qaeda in Syria to
6:25continue a civil war against a dictator who didn't persecute Christians.
6:28I was, I'm sorry. And then at that point, it was taking a while to
6:30get drinks. At one point, my British friend, to kind of diffuse the situation, said,
6:34he goes, I knew an hour or two of getting drinks, Gurdusky would start defending
6:38African dictators. But whatever. It was, it was, it was funny and it was interesting.
6:42Then we ended up changing the conversation.
6:45But it happened, I thought it was interesting that this conversation happened.
6:49It happened, my conversation with my British friends, around the same time that Secretary of
6:53State Marco Rubio went over to Germany and had a lot of the same sentiments.
6:59I mean, I've criticized Rubio a lot in the past when he was a senator,
7:03especially a young senator, but this speech was phenomenal.
7:06It was, if he would have closed it by sitting there saying, and that's why
7:09I'm running for president, not only would the Europeans have clapped, but most Republicans would
7:13have clapped. He celebrated what unites Western people, Western civilization and Christianity, and that we
7:19are all kind of in this together.
7:21The speech, the speech is too long for me to play, you know, but look
7:25it up. I mean, it's like 30 minutes long.
7:26But if you have something to do, you're doing dishes, look, listen to the Rubio
7:29speech. It is absolutely brilliant.
7:32And I think that it goes into a deeper conversation of who Westerners, those in
7:41Europe, those in America, those in the Anglo world of Australia and Canada, who we
7:46are, because for so long we have been beaten down that our connection is some
7:53kind of disgusting, dark history rather than its glorious moments.
7:57And our glorious moments haven't just come in the shape of, you know, promoting liberty
8:05to some third world country.
8:06Our glorious moments have been achieving freedom, prosperity, expanding the Christian ideology in our own
8:16countries, right? No one looks at Notre Dame Cathedral and thinks, think of all the
8:22money that could have gone to, you know, roads in Libya had we sat there
8:27and not built this cathedral over again.
8:29No, we celebrate our own culture.
8:30And what makes, it creates the basic tenets of our civilization.
8:35Anyway, it's, the Rubio speech is fabulous.
8:38And the conversation was happening around the same time.
8:41So it reminded me of that.
8:41And I was like, you know what, let me bring it up to my audience
8:43because, and I have European listeners, but like, this is such an important point that
8:50needs to be really thought about currently when it comes to what unites us and
8:56why we should not be ashamed of what has united us.
9:00Why we should not be ashamed of our collective history.
9:05And we concluded the lunch by, I think, talking about Hasidic Jewish birth rates versus
9:10Amish birth rates. It was very, very, you know, it was weird, but it was
9:12great. It was great. Okay, next up is my guest, economist Oren Kass.
9:17He's here to talk about the economy and why over -financialization is bad for it.
9:22Stay tuned next. Oren Kass is the chief economist and founder of American Compass.
9:30It's a think tank in Washington.
9:31Thank you for being here, Oren.
9:33Oh, thanks for having me.
9:34So, like many people who read the Sunday New York Times, I was very interested
9:40in your op -ed from two Sundays ago.
9:43About the financialization of the economy and how it's a grift really hurting both capitalism
9:49and the overall country. Can you start by just explaining what financialization is?
9:55Yeah, that's an important place to start.
9:58We were well into the editing.
9:59We were well into the editing before someone was like, we don't actually have a
10:03definition of financialization in the piece.
10:05That's a good point. You know, there are sort of technical academic definitions of it,
10:11but I think generally what it means and what I have in mind when I
10:15use it is it is a shift in the orientation of the economy toward financial
10:21transactions as ends unto themselves.
10:25Because I think it's important to say that, like, I think financial markets are incredibly
10:29important. I am here because I think capitalism is a very good economic system.
10:33I think we need financial markets.
10:36I think we need people who bring capital together and deploy it, and they are
10:41entitled to a good return on investment when they do.
10:44What we have seen in the U .S.
10:46in recent decades, though, is something very different, which is that financial markets and the
10:50financial sector have... exploded as a share of GDP.
10:54They're now the largest source of corporate profits by sector.
10:58They attract a lot of the top talent from business schools.
11:02And yet that's not because they are doing ever more of that important thing of
11:06deploying capital productively. In fact, productive deployment of capital has been going down.
11:11And so what you're seeing instead is this industry that sort of more lives almost
11:17parasitically off of the real economy, taking those real operating businesses that are creating products
11:24and services of value, creating good jobs for Americans, and just treating them as financial
11:29assets and trying to figure out how to extract value out of them, trying to
11:34figure out how to trade stuff around in circles to speculate, to generate fees and
11:38profits in the financial market, totally unrelated to anything productive happening in the real world.
11:45And something I've noticed recently, I mean, I think we're around the same age, so
11:50it's not recently, but it's people who were college graduates when I was supposed to
11:54be going to college like 15 years ago, is that a lot of people who
11:59had the brains to become engineers or doctors went into the financial sector because you
12:05can make a lot of money in a relatively quick time.
12:10Do you think that there is a brain drain of sorts where other, you know,
12:15we constantly say, why are we graduating more engineers?
12:17Why are we graduating more doctors?
12:18And because the financial incentives to work in finance are so overwhelming compared to those
12:23other fields. Oh, that's that's absolutely the case.
12:26Both that just descriptively, it is true that the financial rewards are higher and you
12:31can see it in where people choose to go.
12:34And it's not just that this is where people from top business schools are going
12:39first and foremost. It's also where engineers are going.
12:43And so you look at, you know, places like MIT, you look at people who
12:47are even pursuing education and degrees in technical scientific engineering fields, even they are much
12:58more so than in the past, then heading to Wall Street.
13:01And I think it's important to say, you know, this there's nothing well on the
13:07fringes. There may be illegal things going on, but but the core problem here isn't
13:11illegality, right? It's not a scam where people are being sort of, you know, ripped
13:17off and lied to. It's a system that we have set up and blessed and
13:21promoted where these are the places where the biggest returns are.
13:26And we just can't expect capitalism to work well if the best way to pursue
13:30profit is to either, you know, offshore stuff that that is here or go work
13:37on Wall Street and find ways to buy it and sell it and trade it
13:41around in a circle. Right.
13:43And the crazy thing for me is a while ago, I had a relative who's
13:47got young boys tell me that the financial sector was investing in youth sports.
13:53And I kind of didn't believe him.
13:55But then it was brought up in your article and I read more about it.
13:58How is how is the financialization economy working in the sense that like Wall Street
14:04would never get involved in like youth travel sports, but there's a lot of money
14:07to be made almost everywhere.
14:09So they're getting to places in the economy that you or I would not think
14:13of and definitely wouldn't be there 15 years ago.
14:16Yeah, that's that's certainly right.
14:17And it's a phenomenon that I call moral arbitrage.
14:20You know, the idea of arbitrage generally is purely in financial markets.
14:25You go find things that you can buy at a lower price from one place
14:29and sell at a higher price in another.
14:31And what's going on with moral arbitrage is you're basically looking for businesses, industries that
14:38have not typically been run for maximum profit that you wouldn't want to see run
14:42just for maximum profit. And you're saying, hey, if we buy up a bunch of
14:46these things based on what they're worth, not run for maximum profit and then run
14:51them for maximum profit, we can sell them for more.
14:54Yeah. And travel sports. So like if your kid's a travel hockey player at 12
14:58years old, the chance of going to the NHL are very minimal.
15:01But parents will spend instead of $3 ,000 a year, $10 ,000 a year is
15:06what you're saying. Right. And it's, you know, you see it also in a lot
15:09of health fields. So not just hospitals and doctors offices, but then nursing homes, then
15:14veterinarian practices. A fascinating recent one is, you know, services for volunteer fire departments, right
15:20there. There are all sorts of places where you can find people who have been
15:23running good businesses, making a good living, but not squeezing everybody as hard as they
15:28can and say, well, I bet we could generate more profit if we squeeze everybody
15:33as hard as we can.
15:34Yeah. And yeah. And yeah.
15:36And you put a lot of family.
15:37I know when my own grandparents, when they got dementia and they were too sick
15:41to be on their own, it was, I mean, like I think $12 ,000 a
15:46month to put them in a nursing home that was anywhere half decent and are
15:50a facility to take care of them.
15:51And it is, I mean, the elderly care for, I mean, people are living longer,
15:58but elderly care for people who are not like on death, on their deathbed, but
16:01just too old to live on their own is wildly expensive.
16:05Yeah. No, that's right. And I think there's, you know, it's important to say like
16:09there's a very difficult policy and societal problem here, completely independent of Wall Street, right?
16:15About how do we want to go about supporting those folks, making sure.
16:19have good care, making sure it's affordable for families.
16:22And those would be challenges whether Wall Street got involved or not.
16:27What's so remarkable and what kind of makes this, I think, sort of a flashing
16:31red light on our economy's dashboard is that you basically have a situation where in
16:40no rational sort of objective analysis would you say, hey, you know where like the
16:44most money, you know, like the best place to go really make a lot of
16:47money is like nursing home care, right?
16:50And so if that's what people now think is the case, something has clearly broken
16:56down. And, you know, part of the problem is we have a kind of ideology.
17:02Certainly it's an issue on the right of center.
17:04It's an issue in the field of economics with folks who work in these in
17:07on Wall Street, in these financial firms.
17:10There's this idea that if you've generated a profit, you must have created something of
17:14value. So if I buy up the nursing home, squeeze it for efficiency, maybe at
17:22the cost of worse patient outcomes and whatever else, and therefore generate higher cash flows
17:27and can sell it at a profit, there is a very strong line of thinking
17:33that says, but that profit signals I've done something good and I can therefore declare
17:39this to be success and we should therefore want more of this to happen and
17:42we can all feel good about it.
17:44When that is simply, there is no support for that either in, you know, the
17:49ideas of Adam Smith or anybody else about capitalism, nor does it align in any
17:55way with common sense. Well, it's also certainly politically unpopular.
17:59And I know you worked for him or you were helping on his campaign with
18:02Mitt Romney, but his career definitely haunted him in a lot of places of the
18:06fact that they accused him.
18:07And I don't know if it's true or not, but the accusation is always where
18:09he would fire people, strip it down to, you know, the bare minimum and sell
18:13them businesses. And it definitely is extremely unpopular with voters.
18:17So I read, so after reading your great op -ed, very interesting and thought provoking,
18:22I read a lot of criticism from, from the usual suspects, right?
18:26National Review, Manhattan Institute, The Wall Street Journal.
18:28And I wanted to ask questions that they were posing that I thought was interesting,
18:33right? So how does financialization actually make the American economy less competitive than other economies?
18:40If we're such a thriving economy, how does financialization make us less competitive?
18:45Well, ultimately because it misallocates resources.
18:49And part of that is it misallocates capital.
18:52So something that you see is, you know, it is much harder to get capital
18:56investment into long -term risky asset intensive activities when you can get a higher return
19:06starting a hedge fund or, you know, trading crypto or whatever else.
19:12And so, you know, we have seen a lot less - in a bubble that
19:16doesn't set. So I saw, I saw an AI mattress for sale and I literally
19:22was like, oh, this entire thing is fake.
19:24Yeah. Like, right. I mean, so that, you know, there's a really interesting discussion to
19:29be had about how AI connects to all of this.
19:32Because one thing people are now realizing is, look, we went to this entirely asset
19:36-light, software -driven model. Software is going to eat the world as, you know, the
19:40saying went. And that's where all the returns are going to be.
19:43Now, as the big tech companies are finding, wait a minute, our success in what
19:47we want to do is actually dependent on a robust physical layer in the economy.
19:54Oops, we don't have that anymore.
19:57So whether it's, you know, we don't have the ability to build out energy production
20:01rapidly. We don't have the gas turbines.
20:03We gave up on nuclear power.
20:06We can't make the transformers to expand the grid all the way to, we can't
20:10make the chips, right? Because we said, well, we'll just design chips.
20:13Someone else can make them.
20:14And so at every step where you have, first of all, where you have a
20:20mental model that says, well, whatever is most profitable is best.
20:23You're going to see, and we have seen much less investment in those really important
20:28industries that might not be the most attractive things in all cases to invest in.
20:35At first glance, but are critically important, you know, to national security and resilience to
20:40growth and innovation and all of these things.
20:43And so when, when you have a high degree of financialization, I think you, you
20:48both have the problem of sort of people are just looking at how do I
20:52get them? What gets me the most cash quickest?
20:55And you then have a problem that a lot of the best people who could
20:58be building new stuff are instead working on the question of what gets the most
21:02cash the quickest. Okay. So America is though the most innovative economy on the planet.
21:09Are you suggesting that we'd be more innovative if this didn't exist the way it
21:14is? It's like holding back from greater prosperity.
21:17Is that your argument? Because we are very innovative as an economy and as a
21:20country. We are very innovative in, in certain areas.
21:25So, you know, one study that it's one of these ones where it's kind of
21:28so arresting that now everybody cites it.
21:31And it's by no, by no means a perfect study, but you know, I think
21:36gets at the point that if you look at who is actually leading in front,
21:39what it defines as frontier technologies, you know, the U S used to be leading
21:43in virtually all of them, 60 or 70 different technologies.
21:47China now leads in virtually all of them.
21:50So, yes, we do still lead in designing frontier artificial intelligence models.
21:56We do lead in some stuff in biotech.
21:59But if you're asking, you know, who is actually leading, whether it's in electric vehicles,
22:07whether it's in shipbuilding, whether it's in drones, whether it's in actually producing semiconductors, whether
22:12it's in, you know, pick your field, there actually aren't nearly as many places where
22:20the U .S., at least commercially, is leading.
22:22And I think that's a really important distinction because certainly our universities, you know, at
22:27the basic research level are still generating a lot of the most important knowledge.
22:32But that almost underscores the problem.
22:34It's at that translation from idea to actual commercialized business that we no longer have
22:42the focus, the talent, the capacity to do the commercialization, the scaling, all of that
22:48stuff. And one piece of that is the financialization.
22:52And of course, the other piece of that is the globalization, where we said it
22:56doesn't matter where that stuff happens.
22:57And a lot of other countries said, actually, it matters a lot where that happens.
23:01We'll take it. And so that's where it is now.
23:03People who generally hate the United States were jumping at it.
23:07The other thing that was brought up was that, you know, compared to historic numbers,
23:14our unemployment rate is relatively low.
23:17Has financialization economy affected employment in any way?
23:23So I think what financialization affects is the quality and productivity of jobs, not the
23:29quantity of jobs. And, you know, there's sort of a formal way to make this
23:34point that, you know, what people would say is basically it's our monetary policy that
23:38determines the unemployment rate, right?
23:41You can always kind of reduce interest rates and heat up the economy and get
23:46more jobs created. But the question is, what kind of jobs are they?
23:50Is the productivity of the typical worker improving?
23:54Is the quality of their conditions, what they're being paid improving?
23:58And that's where, you know, before we get to the financialization piece, it's just important
24:02to say there's a real problem.
24:05There's no question the unemployment rate is low, that there are many more jobs in
24:09the economy. But if you're asking, what do those jobs pay?
24:12Do they allow you to support a family and provide middle class security?
24:17Have they kept up in their wages with overall economic growth and with wages at
24:21the top? The answer on all of those fronts is no, not even a little.
24:27And a big part of the problem appears to be just that you haven't seen
24:30the productivity gains, that you have seen productivity gains at the very top, but that
24:38the kinds of jobs we offer, the way that businesses operate simply isn't geared toward,
24:44you know, if you want productivity, you also have to make a lot of investment.
24:48And they're not geared toward sort of investing in creating higher quality jobs or succeeding
24:55in industries that are likely to have those kinds of jobs.
24:58And so, you know, it was funny, I think it was David Bonson, maybe, who
25:04raised this question, the unemployment rate.
25:07I'm quite certain my essay does not mention the unemployment rate.
25:10No, it doesn't. No, but I was criticizing my herd and I was like, you
25:13know, I should ask him about that.
25:15I don't, you know, it's, I listen, I didn't go, I didn't get a degree
25:18in anything, but I look to people like you and others and even critics of
25:22yours and sit there and say, okay, where is the truth of why Americans feel
25:27like they are financially not getting ahead, but the markets are doing phenomenally well.
25:32And there has to be something that is not talked about.
25:36And I'm a very simple person when it comes to my understanding of economics.
25:39So I like to sit there and kind of, you know, I try to make
25:44sure that I've covered every hole for people who hear your argument and say, wow,
25:48it's really, really smart. And then hear a couple, couple, you know, people throwing punches
25:51from us from the other side of the intellectual aisle.
25:55And then they say, well, there you go.
25:57It must all be a lie.
25:58I want to sit there and, and, and, and that's why I was asking about
26:01this. I know your article didn't bring it up though.
26:03Yeah, it's, uh, I mean, that, that dynamic again is a really important one and
26:08something I've been, you know, frustrated by though, but really not all that surprised by
26:13since the article came out is that, you know, I'll be the first to say
26:17a lot of the arguments that I'm making are, you know, highly contested.
26:20There are all sorts of arguments on all side of them.
26:24Um, and, and so I think it would be great to have somebody come out
26:27and say, you know, look, here are, here are some of the reasons this, you
26:31know, we think this overstates the impacts of financialization.
26:34We think this thing he says is bad is actually good.
26:37Like, you know, here are studies showing this other, like, that would all be great.
26:41Those would be really interesting arguments.
26:43And, and what's very frustrating about the, you know, the, the legacy right of center,
26:49what, what we're increasingly calling sort of the old right is that, I don't know
26:54if they're just not interested in doing that or that, that they're not equipped to
26:57do that, but the arguments that come back tend to just sort of be, uh,
27:03you're stupid and you don't understand anything and everybody knows that's not true.
27:07And like a very sort of like per se, like, well, as we all know,
27:13markets work and. you know, people only pursue profit and make money if they're doing
27:17valuable things. Therefore, anyone saying anything else must be wrong.
27:23Like QED, end of story, you know, move on to various insults.
27:28And it's just, you know, partly it's just striking me that like it's incredibly ineffective.
27:34I mean, like, be my guest.
27:37If that's how you want to sort of approach the argument, you're not persuading anyone
27:41like that. But I think it also just isn't very good for the right of
27:47center broadly and the sort of debates that that we do have to have in
27:50conservatism. It's so funny because this is actually my next question to you was while
27:55reading a lot of your critics, they were bringing up leftists, leftist economists, lefty economists,
28:02not you, and dismantling their arguments, associating you with them and dismantling their arguments.
28:07But they were not actually talking about your argument most of the time.
28:12And there were some times I was reading, I was like, well, he never brought
28:14that up and he never brought that up.
28:15And I find that as somebody who is not among the quote unquote traditional right
28:20on a lot of subject matters and was always kind of out there on immigration
28:25before it was popular or foreign policy or whatnot.
28:28That is always their go -to thing is, hey, let's reference Nazism or World War
28:35II or the Cold War or some other argument that we're having on immigration, on
28:39Irish immigration from the 1800s.
28:42Talk about that. And then that answers any kind of criticisms towards whatever.
28:46And that was what a lot of people, do you find that's what people do
28:49on the right to you all the time?
28:51It's like, hey, let's bring up what a communist said.
28:54Say they both wear glasses.
28:55Therefore, Oren is just like a communist and then dismiss the communist argument because it's
28:59not it's not the same thing.
29:01Well, I think that's exactly right.
29:03And I think it gets at a much broader dynamic within the right of center,
29:08you know, not just on this financialization question where you had such an entrenched orthodoxy
29:13for so long. I think you sort of have an entire generation of, you know,
29:20commentators, researchers, publications that just got so comfortably in the habit of like, this is
29:28the set of arguments from the left of center that we rebut.
29:31And this is that, you know, this is what we're here to do.
29:33Um, and as the world actually changed, as new arguments came forward, as new evidence
29:41came forward, as, you know, applying conservative principles to the world's problems brought up new
29:47ideas, they either just out of habit or because the muscles had atrophied so badly,
29:55don't actually seem to engage with what the new argument is.
30:02It's like, oh, like, let me kind of like, you know, look through my file
30:04folders for the thing I pull out and say when somebody says something about financial
30:09markets. Let me go to my insult cue card.
30:13And what I think was since Trump really got elected and I always, because I
30:17work in politics, I always equate this being political.
30:20And then I worked with Bill Kristol at the time of his election.
30:22So I was really comfortable.
30:23Um, I, I say it's like a rabbi in ancient Israel, you know, 2000 years
30:30ago, who was like walking down a road, sees Jesus resurrecting the dead, and then
30:33has to make a choice.
30:34Am I going to convert to something I see?
30:37Or am I going to double down in something that's not working?
30:40And that's not a perfect analogy, but that's one that so many people who, who
30:46really ran the roost and their heirs, their heir to, ran the roost for decades,
30:51almost without any criticisms. And it was extremely easy to silence critics.
30:56You could just take them out of the major newspapers and they, or the three
31:00television stations. And there you go, they're out.
31:03They, they've never been trained to really have a discussion from the right that is
31:08without, that's outside of their orthodoxy.
31:10Yeah, it's like, I, I guess I, I could poke a couple of holes in,
31:14in this specific analogy. Not a perfect analogy, but just the one I've made up.
31:20But I'm, I'm actually glad you went to the, the religious context because, you know,
31:23I often refer to a lot of this opposition as market fundamentalism, which, you know,
31:28in some senses obviously doesn't have a great connotation, but I mean, in a very
31:33sort of precise descriptive sense, like a fundamentalism is a type of ideology that, that
31:39relies on kind of very strict adherence to a sort of absolute, absolute set of
31:44dogma structured typically in, in a way that, that does not intentionally does not fit
31:51all that well with, with the modern world that is designed to create a kind
31:56of privileged class of interpreters that sort of get to say in all cases, what
32:02is right and what is wrong.
32:04And by the way, that is typically premised on a, you know, at least accidental,
32:09maybe intentional misinterpretation of the, of the original texts.
32:14Right. And you know what, it's so funny, Buchanan, sorry to cut you off, but
32:17Buchanan always used to tell me when, when I was doing, I did his, I
32:21did his show for a while, Buchanan would say conservatism is not an ism.
32:26He's like, we should never add the ISM to it because it's an antithesis to,
32:31to an ism. An ism is an ideology, libertarianism, socialism, communism.
32:36They are a political religion.
32:38We are the antithesis to that as a thought process.
32:42You just brought that up, and it just kind of had a flashback, and it
32:45was very profound for me at the time, and a lot of it comes from
32:48his readings from, like, you know, Russell Kirk and others before him, but he said,
32:52if something doesn't work, we don't have a religious doctrine or a political religion to
32:57sit there and say, these must affiliate all of the solutions.
33:01You know, ours is much looser than that strict ideology of, like, libertarianism or socialism.
33:06Yeah, no, I think that's exactly right.
33:08You know, I wouldn't describe it as looser so much as just more pragmatic.
33:12And, you know, this is saying that going all the way to Burke, sort of
33:15the emphasis on prudentialism was so important.
33:19And I think you're right.
33:20It's partly if it's not working, like, you don't have to keep doing it.
33:24It's also sort of the flip side of that, which is that just because something
33:28was true at one time doesn't mean it is true for all times and all
33:32places. And you brought this up.
33:34A great example is, like, in these immigration discussions where it's like, well, let me
33:38tell you how we approached the Irish potato famine.
33:40I mean, it's like, like, that is absolutely true.
33:44And, like, there is there are many strains of thought that would say, like, that
33:48established some principle for all times that we can apply perfectly in the situation.
33:53But but that is obviously not conservative.
33:55The conservative thing to do would be to say, OK, like, well, what were the
33:57circumstances? You know, why did that make sense in those circumstances?
34:01What are the circumstances today?
34:04Let's you know, maybe it turns out that we should the same reasoning holds, but
34:08it certainly doesn't hold automatically.
34:10Right. Why are Somalians and Irish not the same?
34:14Why is 2025 and 1865 not the same?
34:18Yeah, that's a great point.
34:19There's just a lot different.
34:20And I think the other thing that, you know, the phrase preaching to the choir
34:24sometimes gets gets overused because, like, there's nothing wrong with preaching to the choir.
34:30Right. Like, if, you know, if you have National Review and National Review has an
34:36audience that sort of has a particular point of view and it wants to sort
34:39of equip them with the best arguments for advancing that point of view, like, that's
34:44an extremely legitimate function in our political system.
34:48The problem is that what what a lot of these entities are increasingly doing is
34:54not so much sort of preaching to the choir as, like, policing who can come
34:59into the church. Right. Right.
35:01It's much more intended to say, like, you are in the right place here, like
35:06the people outside are bad and like, like, please don't get up and go.
35:10Like, by the way, what is that like?
35:13Unfortunately for them, a kind of rapidly dwindling congregation.
35:17It is a sort of ideological enforcement mechanism more than anything that I think you
35:22see really comes out in some of the responses to this financialization piece where there
35:28really isn't even an attempt at, you know, let us equip you with reasoned arguments.
35:32And it's just let us sort of remind you of the dogma and assure you
35:38that anybody saying anything else must, you know, is is a crazy person.
35:42So also what you're calling for and what you're prescribing is not extraordinarily radical.
35:50You're not saying the conservative case for abolishing property rights.
35:54I mean, this is not like and there were National Review.
35:57We so famously always publish like the conservative case for some liberal position.
36:01Yeah, I have a very odd question for you.
36:04And if you don't have an answer, it's really fine.
36:05I just thought of it.
36:06But what like you're a founder of American Compass.
36:10What guides you in terms of saying, like, here is something that's going on in
36:15our country that my political brethren have not looked at that solution from this angle.
36:22We have not examined the economy from this perspective or this thing from this perspective.
36:27Do you have a certain like starting point that you usually go to when examining
36:32big issues and say this this group is not being looked at properly?
36:37Yeah, I think I start from what I at least would define as conservative principles.
36:43And of course, there's a never ending debate about even, you know, what what conservative
36:48principles are. But but I think, you know, they start from as we were talking
36:51about that prudentialism. You know, I think they start from a skepticism of of broad
36:58issues that, you know, broad efforts of social engineering, a preference for limited government, a
37:04recognition in all of the failings of human nature.
37:07And I believe that you probably can't change those all that much and so on.
37:11You know, we could enumerate all of the things.
37:13But but then I think it's very important to apply those to the world as
37:19it is. You know, one thing that I think the right of center is going
37:23to stray on and the left of center has its its parallel version of this
37:27is trying to argue about diagnosis and what in what even is or is not
37:32a problem for fear that if you acknowledge some problem, then somehow you have to
37:37kind of grant the other side its its preferred solution.
37:41And so, you know, on a lot of these economic questions, it seems to me
37:45that that conservatives, because they were so committed to this kind of market fundamentalism and
37:52not just limited government, but, you know, drown government in a bathtub kind of mindset
37:57has tried so hard to make the case that everything is great and therefore there
38:04is no need to do anything.
38:06And, you know, you see this on specific issues like I used to do a
38:09lot of work on. change where it was like, like, well, if we admit that
38:13climate change is a problem, then we're going to get the Green New Deal.
38:16So like, let's stand our ground on like climate change isn't exist, you know, doesn't
38:20exist or or won't cause any problems, which, by the way, in addition to not
38:25being especially honest in most cases, is just like not the right ground to be
38:29fighting on if you want to win.
38:32Because then once you lose that argument, then truly all that is left is is
38:36the other side's ideas. Right.
38:38I think you've seen that on a lot of these core economic issues where there
38:44is so much effort made to sort of find a way to show in the
38:47data that, in fact, everyone is doing great for fear that, you know, or that
38:52our financial markets are working well and all of the outcomes are really efficient for
38:56fear that if you admit that there's a problem there, like, well, then you just
38:59then you get Marxism or whatever.
39:02And so I think it's there is a tremendous amount of constructive work to be
39:07done on the right of center just in being willing to try to look clearly
39:12at at the actual challenges we have and then say, well, once we understand those,
39:18good, now let's talk about how we would apply conservative principles to trying to do
39:22something about them. Would you say I mean, a lot of people on the right
39:25say that college and media and social media brainwash people against capitalism.
39:30Would you say that the financial sector is turning capitalists against people against capitalism?
39:38The way it's not the principle, but the way it's being done?
39:42Yeah, I think it I think there I think there's a huge problem there.
39:46And, you know, one piece of it is in the kind of what they're doing.
39:50Right. Like if you are doing lots of stuff and making lots of money in
39:54ways that are not productive, people are going to look at that and say, wait
40:00a minute, this this system isn't working well and lose confidence in it or I
40:06can't afford the things my parents could afford.
40:09Well, and so that's yeah.
40:10So that's then I would say is the second problem is then like also if
40:13you are operating the system and advocating for a system that in fact is going
40:17to produce bad outcomes, then people are going to turn against a system that does
40:23not deliver on what was promised.
40:26And so I think that's where, you know, I these pieces these days end up
40:32with different titles in print and online online and so on and so forth.
40:36But one of the headlines for this New York Times piece was saving capitalism from
40:40the capitalists, because I think there's sort of there there is nothing worse for capitalism
40:46than standing up and saying my high frequency trading hedge fund is capitalism.
40:52Like and what's bizarre is that I think it was Judge Glock at at the
40:57Manhattan Institute wrote a piece for City Journal.
41:00I read basically doubled down on this and said, like, investors making profit is just
41:05like that is a synonym for capitalism.
41:08Well, he was the one I was referencing in the fact that he literally didn't
41:12even talk about your your I was I said I mean, he's a fine he's
41:16a fine writer. But I was like, he's he's he's debating somebody who's not or
41:20in chaos. He's debating Zora Mondani or somebody and saying, therefore, they are the same.
41:25And it's I was just that's was that's what kind of got because you're not.
41:30And I think this is so important for people who are like it.
41:33It's like they're frightening their brain saying, if you have any criticisms at all, you
41:37must be a socialist where you're like, yeah, there is a little more gray than
41:41you're offering. Although I have to say, I am less offended by the the kind
41:47of combining and confusing of positions than I am with just how bad a job
41:53they do of defending their own position.
41:55Right. Like if you are if you think you have a better case to make
41:59for capitalism, for goodness sake, don't make it by saying this capitalism is just another
42:04word for investors making money.
42:06And then and I think he concludes the piece by noting that, you know, I
42:10complain that a lot of the profit made on Wall Street is is extractive.
42:15And he responded by saying like, you know, like companies extracting money like that's just
42:22what profit is. And it's like, no, that's that's completely wrong.
42:27You can earn a good profit by creating new value.
42:31It's not does not have to be a zero sum game.
42:33You only end up with extractive profits under the conditions of well, you can you
42:38can end up with all sorts of extractive profits.
42:40The ones we're talking about here exist because you have a financialization where people are
42:45trying to generate profit without creating anything of value.
42:49But that's that is not the heart of the capitalist system.
42:52That is a disfigurement of it.
42:54And there used to be I mean, back in the 19th century, I'm not an
42:57economic historian, and I'm so off topic from what I but there but I've read
43:01about I read a biography of Mr.
43:03Rogers and Mr. Rogers's family, I think was from Western PA.
43:06And it used to be a thing where if you were a wealthy person in
43:09a region, and you were probably gonna be there generationally, it was you felt it
43:12was your responsibility to invest only not only into your company, but your community.
43:17And then there was an upstate New York, they had the four squares or four
43:20square plan where it was to improve life, the life of the employees overall.
43:26There was a bit deeper attachment to a lot of things than there are currently,
43:31I think financialization makes all those things a lot worse.
43:33I have two last questions.
43:35I know I'm so far over than I wanted to keep you, but you're so
43:37interesting, and this is the first time we ever spoke.
43:40I have a very strange suspicion over the financialization with AI, and we'll talk about
43:45it in a second, but for every company that is being invested in that will
43:49become the next Amazon, there are like a million that people are just passing money
43:54around to invest in, in things that don't ever make profit and very rarely ever
43:59make real product. What is your position on this, on the way that like hedge
44:08funds are increasingly just buying shares to prop up businesses that I don't think will
44:13ever become Google, Amazon, Palantir, you name the successful one, there's a million pets .com
44:21version of AI going on right now, in my opinion.
44:24I mean, what do I know, but that's my opinion.
44:26Well, I think there are a couple of different issues to separate there.
44:29One is the sort of speculative bubble problem.
44:32And, you know, we saw this, of course, with the .com bubble, which has kind
44:37of two lessons, right? You had this new internet technology taking off, rapidly diffusing.
44:42People realized it was going to be a massive economic opportunity, was going to mint
44:47new trillion dollar businesses. And so you had people basically placing bets on all of
44:53them. And anytime that happens, a whole bunch of stuff ends up not working out.
44:58And then some of it does.
45:00Like the funny thing is, right, like compare the value of the NASDAQ today to
45:04the NASDAQ at the very peak of the .com bubble.
45:06And you'd say, actually, the people buying at the top of the bubble, if they
45:10could wait long enough, were exactly right.
45:14And so, you know, that's actually something you tend to see across what you might
45:18call bubbles historically. You see kind of rapid overinvestment in a sense, but it's not
45:25actually irrational and it actually provides a lot of benefits.
45:29So, you know, you even saw back in the days of like wild overbuilding of
45:32railroads did not work out well for a bunch of the people who were overbuilding
45:37the railroads, worked out great for a country that then had lots of railroads.
45:40We saw that with broadband rolling out.
45:42And so I think it's fine to say that, you know, where you do have
45:46what I think is certainly an important new technology like AI, seeing lots of entrepreneurs
45:51placing lots of bets on it and knowing a lot of them aren't going to
45:54work out is a perfectly fine step in the capitalist process.
46:01One thing you worry about is just given that, you know, the bubble is also
46:05going to deflate at some point.
46:07Do you have any sort of systemic risk that, you know, one of the things
46:12that was so different about the financial crisis in 2008 was it wasn't a stock
46:16market crash. It was the actual financial institutions and their solvency collapsing.
46:22And so if what you have is a whole bunch of these companies kind of
46:26pumping up and three quarters of them are going to end up worthless and that's
46:30fine. The people who invest, you know, bet on those lose money and the people
46:34who bet on the winning ones win money.
46:36There's nothing wrong with that.
46:37If you get to the point where, you know, you have banks and financial institutions
46:43and retirements and all of these things overly exposed to those bets, you know, you
46:50get to the point where sort of most of our stock market value is actually
46:54tied to these bets instead of it just being kind of one piece to the
46:58side. Yeah, there's no diversification.
47:00Yeah, that's when you have to worry about that.
47:02And we're not there yet, you don't think?
47:04I don't think so. I think, you know, certainly it's important for people to understand
47:09that a large share of the run -up in the stock market recently is driven
47:13by that. And that if and when that corrects the paper value of your equity
47:18holdings, right, what your 401k says is going to be lower than it is now
47:22in all likelihood. And, you know, but that doesn't equal, you know, and that could
47:28even give you a recession.
47:29I mean, we saw a recession after the dot -com collapse.
47:31That doesn't kind of give you economic meltdown.
47:34I think, you know, what concerns me more in this space is two things.
47:38One, what you're seeing is kind of very common in bubbles is increasingly circular behavior,
47:43where there isn't actually the demand necessarily in the business model for what people want
47:50to do. And so they're kind of passing things around in a circle.
47:53NVIDIA invests in OpenAI, who invests in Amazon, who invests in NVIDIA.
47:57I mean, that's not the exact circle, but this kind of stuff.
48:02And if that then gets tied up with, you know, you have what's called the
48:05private credit market. So a lot of the data centers being built out are being
48:09financed in part by these other institutions that have borrowed a lot of their money
48:12from banks and so forth.
48:13So that's where you start to worry more about it.
48:17I think at this point, we are headed for something that looks on the AI
48:21side, something that looks more like the dot -com bubble than, you know, something that
48:25looks like a financial crash.
48:27Right. But Oren, where can people go to read more about what you do?
48:30Where can people go to reach American Compass?
48:32You're so smart and you're such, you put out very thought -provoking pieces.
48:36Oh, well, thank you. I appreciate that.
48:37We, you know, AmericanCompass .org has all of our research.
48:41We publish a magazine called Commonplace.
48:44You've written wonderful stuff. Yeah.
48:47So whether you like Ryan or you want more of this, you can subscribe at
48:51Commonplace .org. We put about three or four good things a month.
48:55We do, or excuse me, three or four things a week.
48:56We do a weekly podcast.
48:59And you can always find me on X at Oren underscore Cass.
49:03All right. Thank you for coming on the podcast.
49:04I appreciate it. Yeah. It was great.
49:05Good to see you. Now it's time for the Ask Me Anything segment.
49:11If you want a part of the Ask Me Anything segment, email me ryan at
49:14numbersgamepodcast .com. That's ryan at numberspluralgamepodcast .com.
49:18And I will get to them.
49:19First question comes from John.
49:21He says, hi, Ryan. I really like your podcast.
49:24I don't really expect you to have to answer this, but since it's Ask Me
49:27Anything, I thought I'd give it a shot.
49:29Is Congressman Brandon Gill as hot in person as he appears on TV?
49:35This guy looks like Clark Kent's hotter, younger brother or hotter brother.
49:40I even like his Vogel Fry and I don't like Vogel Fries.
49:44Well, keep up the great work.
49:47Great question. Great question, John.
49:51I do. Brandon is extremely attractive, extremely handsome, very tall.
49:57His wife is also extremely attractive, extremely pretty, very sweet, extremely sweet.
50:03I have told him a million times, by the way, to dress up like Clark
50:07Kent and with the Superman underneath it for Halloween and saying you should do them
50:11while running for Congress. So it's very funny you brought that up.
50:14I will pass along the message.
50:17But yeah, he's a very good looking guy.
50:19Okay. Next up comes from Michael.
50:22Michael says, why does the Mormon church have $100 billion in AUM and the Catholic
50:27church is broke? It's just settlements from abuse scandals or reduced giving.
50:31Both my kids went to Catholic school and my daughter graduated from BC and my
50:35son from Notre Dame. I don't know what BC is.
50:37I give more to the schools than I do the church.
50:40Okay. Well, that's good. And it's good that you brought that up.
50:44It's a very complicated question.
50:46First of all, the Mormon church is obviously much smaller than the Catholic church is.
50:49And a big thing that happened to the Catholic church over the recent decades is
50:53that when many Catholics immigrated to the United States, they built their own ethnic enclave
50:59churches. So it wouldn't be, it was considered normal that an Italian ethnic enclave church
51:06and an Irish ethnic enclave church were like blocks from each other.
51:09So there was an overabundance of churches and parishes, which I think led to extremely
51:15high costs with maintenance and keep upkeep.
51:18And that is part of the reason.
51:20It's obviously not the whole reason, but that's part of it.
51:23Secondly is the abuse scandals.
51:24I mean, the Catholic church paid $5 billion to survivors of sexual assault in the
51:30last 20 years. I mean, that's absolutely hurt the church.
51:34And then there's the stupidity of bishops who have thought that pews, you know, butts
51:42in the pews matter, no matter who they are.
51:45And having an endless supply of poor immigrants fill churches and giving less because they
51:56can't give as much is more important than trying to retain religiosity among communities who
52:03could give more. And Catholics have done a very poor job at, you know, giving
52:09higher amounts at church. I think the average Catholic gives about $1 ,600 a year.
52:14The average practicing Catholic gives $1 ,600 a year.
52:17The average practicing mainline Protestant gives $2 ,750 a year.
52:23So there are fewer Catholics going to church.
52:25They're giving less. For some reason, and this is maybe for my fellow Catholics out
52:29there, there was like this notion growing up that you had to give a dollar
52:33at church a week. There was no idea of tithing.
52:37Like I was never brought up on tithing and I never hurt anyone who was.
52:41And I guess because I grew up in a poor family, like $1 was all
52:44my grandparents could afford to give.
52:46So their children were doing it.
52:47But like some grew up to be multi, multi millionaires and I saw them still
52:52giving $1 a week. That always irritated me.
52:55Lastly is the immense cost from retiring priests and nuns.
52:58The healthcare costs for elderly people is very expensive and you have a lot of
53:02priests and nuns and they are all getting to an age where they have to
53:06be taken care of. So all those things are manifesting.
53:10And this caused 500 parishes to close since 2000 and there's a lot of mergers
53:15and the Vatican is not responsible for those things.
53:18It's not like the Vatican will sit there.
53:21Usually they fund money to the Vatican.
53:23The Vatican doesn't bring money down.
53:26They're responsible for their own parishes.
53:28So yeah, all those reasons.
53:30Okay, last question for the episode.
53:31I know this was a long episode.
53:32Goes for Daniel. He says, I think the assassination of Charlie Kirk was a 9
53:36-11 type moment for mainly the conservative movement.
53:39Do you remember where you were when you found out he got shot?
53:41Yes, I was working from home and I started getting messages that there was a
53:45shooting. Like shots rung out of Charlie Kirk event, which I did not assume meant
53:52anything. I just thought that there's shootings everywhere in America.
53:57And then I went to walk my dog and I saw a flurry of text
54:00messages saying, and one of my employees, my employee Aiden called me and said, I
54:04think Charlie is dead. I think he was murdered.
54:07And I also, I just, you just dismissed it.
54:10I was like, that cannot possibly be true.
54:12And then I saw the video and I talked to Buck Sexton and Buck was
54:16talking about the veins in your neck.
54:17And he was like, if it hit this artery, he's not going to make it.
54:21And there was a lot of miscommunication.
54:23A lot of people saying that he was alive and he was making a recovery.
54:26And I remember really wanting everything to work out.
54:29I remember calling my press person who knew someone who knew and he was like,
54:33I don't know. Thank you.
54:33him and they said it was not looking good i sent andrew culvert a text
54:37message i said you know i'm praying for you guys i know the whole world
54:40was and then i just basically was hooked on twitter and megan kelly you know
54:45broke the news on so me anyway i'm on on the feed i was watching
54:48her live feed and um she said yeah so i texted a few people from
54:52um that you know he was very important to the jd vance campaign in 2022
54:57so uh a lot of my colleagues on that campaign knew him well so i
55:02started talking to them and um you know wishing them condolences i wasn't that close
55:06to him but they were so it was uh pretty terrible it was pretty terrible
55:10that's i remember it yeah very very well so um well way to finish up
55:15the episode on a positive note daniel thank you for that message i'm just joking
55:19thank you guys so much for listening love you all for listening thank you guys
55:22i hope you have a wonderful wonderful ash wednesday and please if you like this
55:26episode and like the show like and subscribe on the iheart radio app apple podcast
55:29wherever you get your podcast and please subscribe on youtube it means the world to
55:32me i will talk to you guys on friday this is an iheart podcast guaranteed
55:38human