| 0:37 | Intro. [Recording date: May 26, 2026.] Russ Roberts: Today is May 26th, 2026, and before introducing today's guest, I want to let listeners know that we'll be doing an EconTalk Book Club around The Iliad by Homer. The first episode, with Ido Hevroni of Shalem College, who has been teaching the Iliad for over a decade, will air July 6th. It will provide some useful context on the book to help you get started, and I hope inspire you to read it. Additional episodes--I don't know how many--will air in the weeks to follow, at least one, maybe two. And, we'll be using the Fagles translation, but there are many others to choose from. And now for today's guest, economist and author Philip Auerswald of George Mason University. Philip was last here in September of 2017 talking about populism. Our topic for today is his latest book with the delightful title, A Phone Is a Cow: How Pioneers of the Mobile Revolution Helped Millions Lift Themselves Out of Poverty. Philip, welcome back to EconTalk. Philip Auerswald: Thanks so much for having me. It's a pleasure. |
| 1:40 | Russ Roberts: So, let's start with the title of the book. What does that mean, A Phone Is a Cow? Philip Auerswald: So, A Phone Is a Cow comes from the story of Iqbal Quadir, who is a central figure in the book. And, Iqbal is the founder of Grameenphone, which is today the dominant provider of mobile telephony services in Bangladesh. And, Iqbal faced the challenge of creating a mobile phone company in Bangladesh at a time when per capita income in Bangladesh was about $400 a year, which was the same price as a mobile digital handset at the time. So, it was a daunting undertaking. Iqbal is featured along with Strive Masiyiwa, because they were really the first two people to see mobile phones as a potential device for really everybody, including the rural poor in places like Bangladesh and Zimbabwe. So, Iqbal was trying to understand essentially the business model to make mobile telephony work at the rural level, and he drew inspiration--in fact, partnership--with Grameen Bank. And, so, Grameen Bank is famously known for micro loans to women in villages to essentially use those loans for productive assets, including, say, a cow. So, the loan would really pay for itself through the productive use of the asset. And, Iqbal's really central insight in terms of making mobile phones viable in a place like Bangladesh in the mid-1990s was that a phone could be a cow. A phone was essentially a productive item, a productive asset, and not, as it really was seen in the West at the time, as a consumption good, a luxury good. So, that's where A Phone Is a Cow comes from. Russ Roberts: And one of the things I love about this book, we hear his story, which is--to call it a roller coaster doesn't do justice to it. He and the other entrepreneur you mentioned, Strive, overcome unbelievable business hurdles, technical hurdles, regulatory hurdles; but the fundamental hurdle is what you just mentioned. You have a desperately poor country, and you have an item that is a year's worth of income, if not more, for many, many of the people who are going to be the customers. So, it's a fool's errand on the surface. What's beautiful about it, of course, is that since that gleam in his eye, the price of a cell phone has fallen dramatically, and per capita income in Bangladesh has gone through the roof. For Bangladesh, it increased dramatically, let's just say it that way. Philip Auerswald: Yes, yeah. Russ Roberts: And, the reach of that product is absurd, to the point where now, Bangladesh, even though its per capita income has grown dramatically--it still is not a rich country--but there are more cell phones than there are people in Bangladesh. Philip Auerswald: Yeah, yeah. No, I mean, exactly. And, I think one of the things I really loved about delving into Iqbal's story, I mean, he and I have known each other for 20 years, so it was really an opportunity for me to work with him and really understand the details, the particulars of how that came about and situated in this kind of full context. But, one of the details that surfaced was that he and his brother had a previous business idea, which was to develop a Bengali character set for the Macintosh--the earliest Macintosh. And, at that time, a Macintosh computer cost about $4,000, and the per capita income in Bangladesh was $200. So, it was basically roughly 20 to one. So, really, the obstacle was seeming completely insurmountable. Now, I think perhaps at the time they started Grameenphone, now that I think about it, may have been more like $300. The handset was $400, so it was a little bit more than one-to-one. But, what Iqbal was looking at was not the absolute number, the one-to-one, but it was the change: that it had gone from 20-to-one to one-to-one. And, that trend on the cost side, there was every reason to believe that the cost, due to Moore's law, which Iqbal was very well aware, would continue to drop exponentially, and that income would grow. And, so, he foresaw exactly the phenomenon that you described, and that was really what the vision for Grameenphone was based on. |
| 6:51 | Russ Roberts: But besides the profitability--which ultimately came--there was an idea that this was going to make the world a better place by allowing people to have the freedom to pursue some things they might not otherwise be able to do because they were able to communicate. And, one of the themes of this book is the power of communication and connection between people; also the power of connecting different products together in innovative ways. But, how did the phone help make the people of Bangladesh more productive? In other words: It's true that once he had the idea, eventually Bangladesh got much wealthier, and the cost of the cell phone fell, which made it a more viable business proposition. But, the beautiful part of this story is that part of that transition was helped by the phone, because the phone allowed people to do more than just chat with their relatives in far-away places. How is the phone in a poor country more than just a consumer luxury? Philip Auerswald: Yeah. I think one of the difficulties of situating this book--particularly in contemporary U.S. discussions about the mobile phone--is that we see the mobile phone not only as a consumer device, but as a pernicious consumer device-- Russ Roberts: [inaudible 00:08:17]-- Philip Auerswald: A time sink, a distraction engine. And, the idea that the mobile phone could be a productivity enhancer seems anachronistic, or, if not just completely made up, right? That's just not our lived experience. But, there's something that you and I, and I think probably everybody else, knows, which is, the United States is not Bangladesh. The lived experience of a consumer in really what is, on average, the top 5% of the global income distribution, is not the same as it is for the other 95%, and certainly not for the bottom quartile. And so, what does a mobile phone mean? What did a mobile phone mean in Bangladesh? Actually, Iqbal's brother started the dominant provider of mobile financial services in Bangladesh, so they're a brother pair that have brought not just communications, but banking. So, what's the point there? The point is that the phone is not just being able to talk to people. It's not just being able to make deals, and to understand what prices are, and understand market conditions, and save yourself a day's travel--as occurred with Iqbal in the 1970s. One of the reasons that he saw that his favorite phrase, 'Connectivity is productivity.' And, he recalled an episode where he walked half a day to buy some needed medications for one of his siblings, only to find that the pharmacy was closed. And then walked home. Now, he's a kid; what's his time worth? Not much. But, it's a day of time that you would save--literally a day walking back and forth--that you would save just by a phone call. And that experience was reinforced over and over again: that connectivity is productivity. So, just simply the fact of telecommunication service can be just an incredible time saver, and saving time is saving money. Saving time is increased productivity. And, beyond that--that's what I get to in later chapters of the book, I only get to mobile financial services--but, the phone has been the delivery mechanism for an array of essential services that simply were not accessible--that did not exist--to the rural poor before mobile phones, just as telecommunication services did not exist. Landlines never came close to reaching the majority of the world's population. And so, it is because we have this abundance of services, abundance of options, abundance of infrastructure, this accumulation of a century of depth of investment in our environment, that the mobile phone seems superfluous. But it is anything but superfluous to the majority of people on this planet. |
| 11:26 | Russ Roberts: And the book is about--in some sense--it's nominally about the mobile phone, but it's also really about the role of entrepreneurship in our lives and in growth. So, part of the book traces the rather unknown story, or not well-known story, of how the mobile phone came to be. And, you asked the question: Who is responsible for the mobile revolution? And that's not an easy question to answer. But, talk about why that is and, to the extent it is answerable, who is responsible for it. Philip Auerswald: Well, that is not an easy question to answer, and that's really the question I sought to answer in this book. So, who is responsible? Entrepreneurs are responsible, inventors are responsible, farsighted government bureaucrats allocating budgets to unlikely projects are responsible, consumers who are willing to try something, adapt to something, are responsible. And, really, the list goes on. My good friend and somebody who has been an inspiration in my work for 30 years now, Sid Winter wrote an article two decades ago in which he really explored this question of: Who is responsible for a radical technological discontinuity? And, he used the mobile phones as his example. I didn't even know that when I started the book, and I came across it. And so I quote him and cite him at length in the book on exactly this case. But, so, we've talked about Iqbal, and really, that's later in the story--the market pioneers who did what you might say, 'oh, the last-mile delivery.' But it's not just 'last-mile.' It's to the majority of people worldwide. It's not a trivial thing to bring a frontier technology to most people, and that has not been done for many technologies. So, that's where we began. We began with those, what you might say, last-mile pioneers. But then, you trace it back; then there had to be the initial mobile phone companies in the United States, and those faced a lot of obstacles. There had to be the inventors. So, you have the Marty Cooper. I tell the story of Marty Cooper at Motorola. Which was hardly an upstart, but it really was the challenger to Ma Bell [Mother Bell] at the time and not the obvious candidate for having developed the first mobile handset. And, Marty Cooper's story is tremendous. Marty is still alive--the guy who made the first call on a mobile handset. Actually, Iqbal and I did an event with him on the day of the anniversary--50th anniversary--of the first call placed on a mobile handset. So, there's Marty Cooper's story and the whole story of how Motorola developed the first mobile handset. And then, you go back again to AT&T[American Telephone & Telegraph], Bell Labs, and this notion that Bell Labs was possibly the greatest single institution responsible for invention in human history. It's a claim that one can credibly make. And, mobile telephony is just one technology that really originated across multiple dimensions, not just the transistor, but the network and extension. And, then, of course, we go back to--where did the name Bell come from? Alexander Bell. Alexander Graham Bell. So, that's actually where the book begins, is at the Centennial Exposition in Philadelphia, 1876, America's first World's Fair, where Alexander Graham Bell debuted the telephone. |
| 15:40 | Russ Roberts: So, you know, I was thinking when we were talking: 'What an interesting idea that the mobile phone would be transformative.' Well, the landline phone could have been equally transformative, but you'd have to be able to take it with you. So, the shortcoming of the landline phone is that it's landline--it's in your house, and it stays there. So if you're not in your house, it doesn't help you be more productive or happy or anything else. And, it just struck me--you know, when you made that list, one name you left off--two names you left off--which I want to mention, are Claude Shannon and Steve Jobs. So, Steve Jobs had this idea that, as you say, we're not as happy about it maybe as we once were, that we have a computer in our pocket at all times. But what an extraordinary visionary. And, if it was just a phone--if it was all it was was a way to talk to other people--it would be nice and it would be good. But the productivity--to turn it into a bank, as you point out, it's more than a cow, it's a bank, and many, many, many other things that make people more productive--took a different kind of vision that he brought. Claude Shannon laid the intellectual foundations for much of the digital revolution. And, although Anthropic, as far as I understand, it does not say that Claude is named after Claude Shannon, he presumably is the namesake of their LLM [large language model]. So, here's a question I want to ask, having introduced with that. When I was a little boy in the, say, late 1950s, early 1960s, I loved books about explorers. They were very popular for adults to give books to children about--exploration--Vasco da Gama, Balboa, Drake, Scott, Columbus, you name it. Philip Auerswald: What could be better, right?-- Russ Roberts: Yeah. Ocean voyages and dangerous missions and so on. And, we learned that later sometimes they had a dark side that we didn't know much about. We weren't told all that when we were seven years old--maybe for the best, maybe not. Philip Auerswald: No, not back then. No. Russ Roberts: I'm not saying anything about that. But, here's the question. They were figures of romance. Why is it that the intellectual explorers of the 20th century are so obscure? Why is Claude Shannon only a household name to people in the most, more arcane parts of the digital intellectual landscape? D.H. Ring, a name you mentioned, who envisioned cell phone service. Philip Auerswald: Yeah, known to absolutely nobody. Russ Roberts: Almost no one. Somebody named Jett, J-E-T-T, you mentioned. Philip Auerswald: Yeah, E.K Jett, yeah. Russ Roberts: Why aren't these people honored and celebrated and used to inspire young people the way physical explorers were? In many ways, they're as, if not more, transformative of our daily lives. Any thoughts on that? Philip Auerswald: Well, there's so much in that question, Russ, I don't even know where to get started. I mean, you've picked out obviously two very significant names that I did not reference, and just to the point of how many contributors there really were to the mobile revolution. But, let me-- Russ Roberts: You reference them in the book. Philip Auerswald: No, no. [inaudible 00:19:05]-- Russ Roberts: You didn't mention in that little-- Philip Auerswald: of course, just now. Russ Roberts: Yeah. Philip Auerswald: No, of course. I mean, there's a lot about Claude Shannon, something about Steve Jobs. So, I want to start by directly answering your question, which is that: I don't know. One of the phrases I developed kind of for the marketing material in this book--I think it's in the introduction someplace--is: 'We too often confuse high net worth with net impact.' And, we're in a culture where we do celebrate entrepreneurs, and these entrepreneurs these days, at least from my vantage point, from how I see things, now have a little bit of a complicated public persona. When we think about an Elon Musk or a Mark Zuckerberg or so forth and so on. So, a decade ago, it was a little simpler. I remember 15 years ago when Silicon Valley seemed a pretty nice place everyone was excited about. But these sort of tech titans, as we're thinking about them--there's a tendency, and it is a very flawed and mistaken tendency, a deeply flawed and mistaken tendency, to identify entrepreneurship with those few people--these few very wealthy, Silicon-Valley-situated success stories. That is not entrepreneurship. It has never been entrepreneurship. It will never be entrepreneurship. It is a very small fraction of what the entrepreneurial process is. Strive Masiyiwa and Iqbal Quadir also are not representative. And, as we know, most entrepreneurship is a single proprietor: It's anybody who takes initiative to build something, create something in the world. So, it's a huge phenomenon, it's a global phenomenon. I think it's a very significant phenomenon. But, why do we not celebrate these stories? Now, you went beyond entrepreneurship. You talked about E.K. Jett, who was a government bureaucrat, but who wrote an article for the Saturday Evening Post that was really about the future of mobile telephony, and he wrote it in July 1945. And, so, it was the same month that Vannevar Bush wrote, As We May Think, talking basically about the Internet. So, these two visionaries saw the mobile phone and the Internet at the same time. Now, Vannevar Bush is known-- Russ Roberts: A little bit-- Philip Auerswald: more than E.K. Jett, but so it wasn't just entrepreneurs you talked about. And then, Claude Shannon. I mean, if anybody deserves to be a household name in the United States and anywhere else, it's Claude Shannon. What an incredible figure. What a remarkable individual. And, to be able to contribute to adding to that [?]--I mean, of course people do write about Claude Shannon, he is remembered, but, so I don't know the answer to that. I don't know the answer to that. But that's certainly one of the reasons I wrote this book. Now, if I could just go on one more moment-- Russ Roberts: Sure-- Philip Auerswald: about Steve Jobs. So, one of the aspects of this story, when we think about--there's a lot of the book, about first third--focuses on Iqbal Quadir's story. And so, why so much about Iqbal? And then, Strive. And I think they do merit that. So, Iqbal started working on what was Gonophone and then became Grameenphone in 1993--and we already talked about where Bangladesh was at that time. Iqbal exited Grameenphone. He sold his position in Grameenphone at the same time that Apple was beginning to think about the iPhone. So, that gives you a sense of how early Iqbal was. It was certainly not the iPhone that influenced Grameenphone. Grameenphone was in a previous generation. Nonetheless, I'm not saying that Steve Jobs doesn't merit his reputation as really one of the great consumer tech visionaries of the last century. And then, Shannon--we could just go on; that could be an entire different podcast around Shannon--but Shannon is a foundational figure in not just mobile telephony, but computing and communications, generally speaking. And, somebody to which we owe--whether we want to blame him or thank him--but a lot of the world we exist in was at least significantly advanced or would not exist without Claude Shannon. Russ Roberts: Yeah, we're all living in Claude's world. I think that's what it comes down to. Of course, my other thought--I asked the question; I didn't think about an answer. I guess the other part of it is that what Claude Shannon understood about the world is harder to convey to a seven-year-old than Balboa. So, that's definitely part of it. But, I think you're right: I think a lot of it is the money. For the great explorers, the glamour of risk and discovery, at least for European eyes. But for the Internet, the glamour is the money. And that's a shame. But as you say, that's another story. |
| 24:42 | Russ Roberts: Let's talk a little bit about Adam Smith, who plays a role in this book. Philip Auerswald: Yes. A person about whom you've done some thinking. Russ Roberts: Yeah, a little bit. Philip Auerswald: you have some understanding--just a little bit, yeah. Russ Roberts: A little bit. I don't pretend I'm an expert on Adam Smith, but I do find him fascinating. But, Iqbal Quadir, this person who really laid the groundwork for Bangladesh's access to the mobile phone, was very influenced by Smith. Talk about in what way, and what role Smith played, say, relative to the academic side of development economics. In some sense--you know, we say Adam Smith was the first economist--you could argue he's the first psychologist. I like to say he was the first social scientist. He sat in his armchair and he tried to figure out how the world worked, right? Philip Auerswald: Yeah. Yeah. Russ Roberts: But, academics--they do that, but they also worry about getting papers published and their CV [curriculum vitae]. But, Smith was just trying to figure stuff out. And, why is that still useful today? And, how does that, at least in your mind or Iqbal's, contrast with the academic literature? Philip Auerswald: So, there are a lot of different types of entrepreneurs, and I'm not at all going to make the claim that Iqbal, who as I indicate and as I describe in the book, I know well, is typical. I don't necessarily think he's atypical, either, in the specific regard that I'm about to mention, which is that: Above all, he's an economic theorist. He is somebody who, from the very beginning, was interested in ideas, interested in history, and focused on the practical application of what he learned from studying Smith and Hayek and works of history that he engaged with very deeply in his 20s and 30s. And, that didn't just inform, but really formed his notion for Grameenphone. So, Grameenphone is a expression of an understanding derived from theory, and a successful one. And among the theorists who was most influential in this was Adam Smith. So, now let's sort of contextualize Adam Smith. I certainly do not claim to be an expert on Adam Smith, but any of us who is in the field of economics, we're all fans or influenced one way or the other. My favorite book about Smith is actually Albert Hirschman's The Passions and the Interests, which is barely about Smith at all, but is about the couple of centuries of economic thinking that led up to Smith. And, for anybody who has not read that book, I would say that is one of my top five favorite books in economics and just is full of really great insights that I believe are actually directly relevant to A Phone Is a Cow. And, so, one of the beautiful things about, I think, the way that Iqbal was influenced by Smith, is it makes us rethink history as we understand it. So, just: quick digression. This year we are celebrating the 250th Anniversary of the founding of the United States of America, or at least the Declaration of Independence. And so, one of the hallmark events that leading up to the Declaration of Independence was the Boston Tea Party, and that was a reaction to taxation without representation. Right? So, the Crown imposed taxes on the colonies, and we did not have a role in that. A question that's not asked, often, is: Why were those taxes imposed to begin with? And the reason is: The taxes were imposed to finance Britain's colonization of Bengal. Which was in some ways the economic center of Asia and a crossroads of the world. Bengal--the textile revolution began in Bengal and actually then migrated to the United Kingdom. And so, Bengal was a place of tremendous importance and significance and was Britain's first expansionary colony, the colony of subjugation. The United States was a colony of colonization, Bengal was a colony of subjugation. And that required tremendous expenditures to maintain. And, that's the reason we had the American Revolution, was because we were taxed to finance Bengal. So, there's a complete--we only think about Bangladesh. You know: Concert for Bangladesh and the famine and the revolution and the miserable history of Bangladesh in the 1970s. Most people in the United States have not gotten past that idea. That's still where we think about Bangladesh: desperately poor place; Muhammad Yunus, Grameen Bank, all the rest of it, right? Well, there's a lot more to the story of Bangladesh and to Bengal. And Smith saw that. Smith wrote about Bengal as this sort of crown jewel. And, he also wrote about Bengal as a place whose wealth was derived from its communications network, going back to what we were discussing about earlier, but where, in the case of Bengal, the communications network consisted of rivers and channels and waterways that connected the country as a delta country--it's the delta of the Ganges River. That, they connected the country in an exceptional manner. And that allowed commerce to flow from the coast to the interior. And so, Smith wrote very eloquently both about Bengal's wealth[?], and also about its subjugation. So, to see--to discover--as a young Bengali at Wharton in the readings of the writings of Adam Smith, to see Bengal reflected and celebrated was tremendously empowering for Iqbal. And, from then forward, I think he really reinforced his notion that the misery that he knew of his country was not the totality of the story. That there was a before and there would be an after. And he was committed to being part of that after. |
| 31:31 | Russ Roberts: Yeah, it's very beautiful. The other part you talk about, which I find very inspiring, is the power of human agency. The ability of people to imagine a future for themselves or for others through products they might bring to the world, and make it happen. And of course, it doesn't always happen. When it does happen, it's not always successful. But this idea that we have some control over our destiny--which is a very American idea--but it's also a very Smithian idea. And it's an unappreciated idea for its novelty, because through most of human history, people thought of themselves as pawns. And of course, in the Marxist viewpoint, you're a pawn of your class: you're oppressed often. Most of the world is in that viewpoint. The idea that you have a choice and the ability to make something that isn't there before of yourself, or to do something for other people that's not charity but will actually benefit them--and you--through their purchase of your product. I never really appreciated, as a Smithian idea, this idea of self-interest in its sense of destiny and molding your future. Philip Auerswald: Yeah. Well, I mean, Russ, I won't exaggerate things or seem to pander excessively by saying that I wrote this book just with the intent of appearing on EconTalk. It's a lot of effort, more than five years, just for this hour--which, by the way, I do enjoy and appreciate. But, this is one aspect of the book that I really thought you singularly would appreciate, because we don't have that many philosophers in economics. And, I'm not saying we should. I mean, it's become a very technical discipline. And, what constitutes a big idea in economics from the standpoint of the history of economic thought is not a very big idea. And so--but this is a big idea. Predestination and agency, juxtaposed, is a big idea. It's a bigger idea than me, it's a bigger idea than you. It is among the biggest ideas that exist that we have. Right? Choice, free will, or destiny? God's will, or our own agency? And so, that's the third level. Right? You talked about--the first level is the mobile phone, and Iqbal and Claude Shannon, and this detailed history--which I just loved getting into. And to me, that was the fun of the book. Right? And then there's this next level of the history of technology: How do we think about economic development, theories of economic development? And so, there's a kind of like a theory level, but then it occupies. And then, there's this philosophical level. So, the closest I get to that is talking about Tolstoy's second epilogue to War and Peace. And actually, Tolstoy has a--this is one thing I bookmarked--so, it was a long passage, but at the end of it, Tolstoy writes, "Reason gives expression to the laws of inevitability. Consciousness gives expression to the essence of freedom." And so, he juxtaposes this notion of inevitability--which could be technological inevitability. How much does it matter that we had Iqbal Quadir or Strive Masiyiwa? Right? Once you had the building blocks of a mobile phone--once you had the value that a mobile phone creates--it was going to get to Bangladesh. Does it really matter that one or another person did it? Do we have any choice at all in our technological future? Once something is created in a planet of eight billion people, someone's going to figure it out. And, if someone decides not to do something, somebody else will do it. Nuclear weapons, whatever it happens to be, these things are all inevitable in some sense, in some way of thinking. Our reason tells us that. Our minds tell us that we really have no way of controlling these forces that are beyond us. And, the political philosophy of inevitability is Marxism. And, it's Marxism, not in a derogatory term. It's not to say, 'Oh, it's bad Marxism.' It's thoughtful Marxism. It's thinking about history as, very specifically, class struggle; but beyond that, simply an inevitable force in which human beings play no significant part. And then we have the opposite: the Great Man theory of history. Right? And, it could be the Steve Jobs, it could be the Iqbal, it could be the anybody. It could be the Mother Teresa. These exceptional people who, without whom, nothing that we see would have occurred. I just said that about Claude Shannon, right? You said we're all living in Claude's world. And, so, how is this resolved? And, in my view--and I've held this view for a very long time: if there's a single idea that's motivated my intellectual interest for the last 30-plus years--it is the notion that they're both true. It's just not that hard a problem. I mean, it's made out to be a hard problem. The whole struggle between Socialism and Capitalism is made out to be a very hard problem. Is everything inevitable, or are we these just sort of capitalist, free-will people, Ayn Randian creators: Is it one or the other? It's both, it's just both. And, that's what I loved about Sid's piece. Even though it's just a couple of pages, it's very simple. It's both. We have entrepreneurial initiative, we have free will, and we exist in a world in which a lot is predetermined. They simultaneously--they coexist in this sort of magical way. At least that's the way I see it. I can't see it any other way. And, that's really what I'm intending to say in this book. That's what the book is fundamentally about: is to explore this duality of truly exceptional people who have capacities that other people do not have, who have determination that other people do not have, who deserve to be celebrated in just the way you said earlier. We should be telling these stories. And, at the same time, there's this combinatorial progression of change over which we have not that much control, and these things exist simultaneously. |
| 38:39 | Russ Roberts: Yeah. I would just put a little footnote to that. It's not so much that we don't have control. It's that the sense in which individuals contribute to it is a little more easier to predict. The incentives are overwhelming, and they will win out. Those market forces are going to push us to certain outcomes. They will be enacted by individuals making choices. The speed at which they happen will depend on individuals. Philip Auerswald: Who they benefit, how they benefit people at certain points. Exactly. Russ Roberts: But, the idea of how we should look at our fate and how much of it is up to us: Obviously, it depends on where you live and where you're born, who your parents were, and so on. But, the idea that Smith saw self-interest--which I think we think of usually as grasping, or as how I come down when I'm faced with a choice, say in a negotiation whether to leave money on the table or not, should I put myself first, and so on--there's such a broader view of that self-interest that you[?] capture that is about our desire to remake the world in our own image, to forge it, to craft it, and your view that that's really what growth is about. It's not this inevitable 3% a year most of the time--it's sometimes two and a half--but rather, this extraordinary range of options and endowments that we have of products that already exist and asking, how might we combine some with others to make something that isn't here yet? And, some of those things might take a very, very long time to be imagined if an individual didn't come forward with it at a particular time. Philip Auerswald: I appreciate your qualification, and you phrased it better than I did just now. It's a little bit of a subtle thing to articulate. And, I was just looking in the book--you know how it is with books, you finish a book and then I'm well into my next book, and then you get the book-- Russ Roberts: I just read it today, mostly, so it's a little fresher. It's a little fresher. Philip Auerswald: I actually, I read it yesterday. I read it yesterday, and I thought, this is pretty good, I like this book. But, that's one of the things I love about--this is not my first experience with this--that when you discover a book, you get the physical book and there's just something about the physical book. I'm old school--something about a physical book, even your own physical book, that when you read it, it reads differently. So, I have to say, full disclosure: I like the book. I mean, I feel like it's probably the best thing I've done, such as it is. But, so, I did say that by way of, I wanted to find the specific quote. Russ Roberts: Yeah, let's find it. There's a nice quote from Smith. Philip Auerswald: Well, the quote from Smith, it was a very specific quote. Yes, here it is. I found it, amazingly. Russ Roberts: Oh good, because I was looking it up on mine. Go ahead. Philip Auerswald: So, this is about agency: The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security is so powerful a principle that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations.... [Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, B.IV, Ch.5, paragrah 82] Russ Roberts: Magnificent. And of course-- Philip Auerswald: Wealth of Nations, Book Four. I mean, I almost wanted to read it again, it's so beautiful. Russ Roberts: Yeah, it's pretty great. No, it's pretty great. And, I think I've read that quote before, but reading it highlighted like that in the book, it grabbed me in a way it hadn't before. |
| 42:53 | Russ Roberts: But I want to talk about another economist you mention in the book. And, I thought I understood this paper ["Do Real-Output and Real-Wage Measures Capture Reality? The History of Lighting Suggests Not," by William Nordhaus--Econlib Ed.], but I learned something I hadn't thought enough about. And, it's a simple thing, but you point it out in a way that forces you to think about it. And it's, I think again, a very extremely profound idea. So, one of the more extraordinary achievements of human beings is to have illumination available at lower and lower cost. And, by lower and lower cost, we don't mean to say the monetary price, because that's not the right way to think about it--and it's different currencies in different countries, and it changes over time, and there's inflation. But the right way to think about it is: How much does a person have to work to be able to, say, read at night, or watch a play, a musical, at night? And, that's fallen in unimaginably large ways. It's gotten incredibly cheaper for human beings to enjoy light. And, I thought, yeah, that's cool. And, the size of it, the magnitude--what's fun about the paper is he [Nordhaus] tries to measure it, and it's crude; doesn't matter. It's the enormous improvement in the human experience. But, your insight, which I thought was incredible--which I missed when I think about that paper--is, it's not just that the candle got brighter and cheaper. It's that we sequenced a set of radically different technologies. In one of them, you go and you kill a whale and you take the innards of the whale and use it to create illumination-- Philip Auerswald: To light streets-- Russ Roberts: Yeah, and that is really different than how my lights are working right now. And, it's not just like, 'Oh, it got better and better.' That's not what happened at all. It radically changed over time as people thought of new things. I think that's really--well, the part that I think about a lot is how hard it is to measure standard of living, and that's because the transformation is so dramatic. It's not just that, 'Oh, the light's a little cheaper, so you have more purchasing power.' Philip Auerswald: Which is central to that paper-- Russ Roberts: Right. So, that part is in there, but the idea that--and there's a quote which is a one-sentence way--I'm not going to get it verbatim; you'll help me if you know it by heart--that captures this insight. And it's, I think, an incredibly deep insight for business. It relates to Clayton Christensen and The Innovator's Dilemma, which you've talked about recently on the program. It relates to Development Economics. It's the quote from Henry Ford, which is, 'People didn't know they wanted cars. They thought they wanted faster horses.' Philip Auerswald: Right, right. Yeah, right. Russ Roberts: And, what they really wanted was to move more quickly; but the only way they could think about it was, 'I wonder if we could feed a horse something, he could move his legs quicker, and I could get across town quicker.' The idea of a car is not just like, 'Well, that's a faster horse.' It's not. It's not a horse. But it is a better way to get across town. And that is the human experience. I'm getting romantic about it because I think it's incredibly profound. Philip Auerswald: Yeah. I mean, I guess a few of us economists who are specialized in the economics of technology and innovation--I guess any subfield probably talks their way into thinking, like, 'This is the only subfield that matters.' And, so, with deference to all the other subfields in economics--and then when you talk about the economics of Production Theory, which is really my technical area--that's, like, 12 people that care about production. That's a settled problem: nobody is thinking about the production function. But to me, that's an interesting thing to think about. So, the Nordhaus paper. The Nordhaus paper perfectly encapsulates what we were just discussing about free will versus inevitability. And you also referenced GDP [Gross Domestic Product] growth. We could talk about diffusion--technological diffusion, S-shape diffusion curves. Right? And, you look across any technology, there it is: there's the S-shape diffusion curve. Everything is so regular and smooth that it's hard to imagine that there's any discontinuity, any insight, any moment of particular significance underlying it. And so, Nordhaus's paper traces out this incredible decrease in the amount of human effort required to illuminate at night. And so, on its surface--and it's a very powerful paper; and one of the things that it goes back to one million B.C. You talk about the long view, it's in terms of-- Russ Roberts: It's a fire, it's a wood fire-- Philip Auerswald: Yeah, a wood fire. Yeah, fire, going back to fire. So, in terms of the long view, in terms of the work that's been recognized by the Sveriges Riksbank--the Nobel Prize of Economics, so-called--it's kind of unique. But then, and I guess if I was trying to imagine what might have been new in this book about that paper, maybe I would have guessed correctly, which is the discontinuities underlying that. I can't really improve on the way you characterized it. I was pulling up the table, but you remembered off the cuff a lot of the highlights, and I think that the jump from whale oil to electrification is a terrific example. And, we can attack the fossil fuels industry, and of course we're very concerned about climate change and all that, but before that, we were burning fellow mammals. And that was worse. So, I think this-- Russ Roberts: And, burning down forests to stay warm at night-- Philip Auerswald: And burning down forests, exactly-- Russ Roberts: Much more than to illuminate, but just to stay alive in certain climates. Philip Auerswald: Just to stay alive. So, when we think about technological progress, what seems like regress in some sense--there's always these paradoxes of progress. We don't see the way in which we have improved across multiple dimensions, not just efficiency dimensions, but also ethical dimensions, as you were just referencing. So, anyway, yes; that is a core point of the book and it's reflected in that paper. And, I guess the big idea is that human progress is about new technologies coming into being and becoming widely used, and that's what this book is about. It's not just technologies coming into being. It's not just innovation--what Schumpeter talked about as innovation, a successful market demonstration. The landline was a successful innovation. It reached hundreds of millions of people. But it didn't come close to reaching the majority of people worldwide. The mobile phone did. And so, it's a combination of creating new technologies--what Schumpeter talked about--carrying out new combinations. That was his phrase for entrepreneurship, 'Carrying out new combinations.' It's to bring those market innovations to people. And that's what Iqbal Quadir did, that's what Strive Masiyiwa did. That's really the focal point of this book, although there's a lot of other elements to the mobile revolution. And, I will maintain--given my areas of interest and expertise, I will maintain that there is no comparably important question in economics. Because, this is the question of human progress. This is the question of human wellbeing over the period of millennia. Everything else--about resource allocation, about policy, about macro--everything else is a footnote to this larger question of how new things come into being and how they reach most people. I cannot see it differently than that. Russ Roberts: Yeah, it's beautifully said. |
| 51:41 | Russ Roberts: I want to bring Hayek in, and when you said--when you were talking about the diffusion of technology and innovation, or in this case it would probably be invention--that allowed, say, a filament to bring illumination relative to whale blubber-- Philip Auerswald: Right-- Russ Roberts: I've never thought about this before, I think, but when you frame it earlier--as we've been doing and in terms of inevitability versus agency--if you think about the Nordhaus insight, that the price of illumination has fallen steadily over time: It's an emergent order/invisible hand argument. It looks like, if you look at it, that someone must have decreed that this should be-- Philip Auerswald: God's will-- Russ Roberts: God's will. Or, it's a natural law, which is not--it's a different way of saying that's similarly. And it's similar in the sense that the key point here is the inevitability idea. And, your insight that it's both--the predestination-inevitability combined with individual agency--so they're both happening at the same time. What's driving the illumination is that people like to do things in the dark. So they want light. They want to eat meals at night, they want to go to shows, they want to go to concerts, they want to read, they don't want to be afraid in the winter starting at 4:30 in the afternoon. And, that fundamental human urge has allowed thousands of people over human history to better themselves by creating cheaper and better ways to banish darkness. And, it's both. There is an inevitability, which is driven by the human desire for illumination; but you couldn't have that inevitability without the crazy insights of people to come up with crazy ways of achieving that, which couldn't be predicted until they happened. And to say, 'Well, eventually I knew someone would have figured out a cheaper way to do it,' it's easy to say. But it's not gravity. It's not inevitable. It requires, at the same time, incentives to be in place for people to profit from that innovation and that invention. And, that's really a beautiful thing. We talk about Moore's law, and people would ask the question, 'What kind of a law is it?' I mean, why should it be that we can always expand the capability of chips at a certain rate of computer chips? And you have the answer, and I've never heard a better one: Which is this combination. It looks predestined. It's not. You could kill it. You could kill it easily with the wrong legislation and the wrong set of regulatory rules. But if you keep the incentives there for improvement, people will develop ways to do it, even though you may not know how they will. And, that's the Nordhaus story and it's a Smith-Tolstoy story, if I may be a little bold. Philip Auerswald: Absolutely. And, actually, you went in a direction--and it was part of your question I didn't answer. But, it's another way of thinking about not just the core contribution, such as it is, of this book, but actually of my last three books--my only general-audience books going back to 2012. There's sort of a trilogy, and underlying that is this idea inspired by Schumpeter, that entrepreneurship and innovation are the carrying out of new combinations. And, this was 1911; and you know, Schumpeter, before we had evolutionary biology--before we understood DNA [Deoxyribonucleic acid] [Deoxyribonucleic Acid], before we really understood the fundamentally combinatorial nature of life itself, not to mention technology--he had that insight, that there was something combinatorial about innovation. Now, the great Marty Weitzman had--whose contributions span so many different fields, almost to Kenneth Arrow, I would say, very close--had a paper called "Hybridizing Growth Theory," which is my favorite paper in the growth literature. And, it also borrows from this notion of innovation being fundamentally combinatorial. My friend and mentor, Stuart Kauffman, with whom I wrote some early papers, is known for his insight about the 'adjacent possible,' that Steven Johnson then picked up on. And, the 'adjacent possible' is fundamentally combinatorial. When you have a set of Lego pieces and you arrange them in a certain way, then given the configuration that you're holding in your hand, there are certain kind of imminent next steps based on the combinatorial nature of the thing you've created. That you add one piece, subtract one piece: that there's kind of an imminent next possibility in the combinatorial nature of technology that doesn't exist when we think just in terms of scalars. And, so, we lose something fundamental when we reduce just to the number line--that technology isn't reducible in that way: it is fundamentally combinatorial. And so, this idea of the adjacent possible is a way of understanding the combination of this paradox of, how do we have free will and inevitability? And, the way that the adjacent possible and the combinatorial nature of innovation does that, is that the search space for combinatorial innovation is hyper-exponential. It is simply impossible to think about in multiple lifetimes of the universe exhaustively searching everything that God has given us as possibilities. So, we must choose a path. And, this whole notion of path dependency that Brian Arthur--somebody else who has been very influential in my work and my career who I had the opportunity to meet in 1993 at the Santa Fe Institute Summer School along with Steven Kauffman--that this idea of path dependency originates in this combinatorial nature of technology. And it is the way in which, what I call combinatorial foresight--free will operates in long-term economic growth. Someone has to choose something to try. Someone has to try it. Someone has to test it out. It's what Ricardo Hausmann, Dani Rodrik wrote about, is, economic growth is self-discovery. It's the same phenomenon. It's that somebody has to get out there and be that pioneer, be that Vasco da Gama. And for every Vasco da Gama, we know there's a bunch of people we never heard of who were sitting at the bottom of the sea. Right? All those people had to do something. And so, to me, when you see life--and Shannon wrote about life and combinatorics. I mean there was--Schrödinger wrote about it. It was very much imminent at the same time that the mobile phone was being created. These are the same set of ideas. They're not different ideas. There's the same set of people and ideas who understood the combinatorial nature of technology and who understood the importance of combinatorics in other areas of creation. |
| 59:47 | Russ Roberts: But I want to put an asterisk or a footnote on that. And, again, I learned this from you in your book. It's true: you write that if you have 20 Lego pieces in a certain configuration, you have two you can add onto it, it's really different than if you have two Lego pieces and two to add onto it. Once you have a larger and larger stock that you're endowed with, the possibilities do become exponentially--which barely covers it--larger. But, I like your other point, which comes from the Nordhaus insight--your emphasis of the Nordhaus insight--which is: It's true that there's an inevitability about how I'm going to probably add these two pieces when I have 10 already. But, I might want to break up those 10, start from scratch, and with those 12 pieces, achieve the goal I wanted to achieve in a totally different way. So, for a while, you're trying to harvest whales more and more effectively. Philip Auerswald: Yes, yes, yeah. Russ Roberts: And, because of property rights, it gets complicated: That has a certain asymptotic, if not negative, impact after a while. But, you do that for a while because that's the easiest game is to rearrange. Not to rearrange: is to add on, is to combine the model you're given with some new stuff. But, the genius who comes along and takes it to another level is the one who says, 'You know, I think I could rearrange all the pieces and create something that hasn't been here before.' It's still just a rearrangement, it's still a combination-- Philip Auerswald: Right, right, right, right-- Russ Roberts: But, 'I'm going to bring a new way of achieving my goals with this new combination.' And that's the visionary. Philip Auerswald: Well, yeah, that's right, that's right. And, I think you probably remember--I believe it was 2005, so roughly 20 years ago--the final discovered paper by Schumpeter, by Joseph Schumpeter, was published. And, if I recall correctly, it was called Development, and it was one of the last papers that Schumpeter wrote. And it was on the question of novelty. And so, here, I've been citing Schumpeter as essentially somebody saying that economically meaningful invention--which is to say innovation, carried out by entrepreneurship--is the carrying out of new combinations. This was Schumpeter's great vision and insight, and I've just been talking about that. But, toward the end of his life, he was really struggling with this idea of novelty: that, if that is true, then under what circumstances can we say something is truly new to the world? And the one thing that is in that category in my book, the one element of the mobile phone story that I believe is in that category, is the transistor. The transistor was something that was just imagined and discovered--the properties of semiconductors, the possibility of the transistor. And, so, going from the vacuum tube to the transistor was one of these discontinuities. But, the transistor itself was useless. You can't do anything with a transistor, right?-- Russ Roberts: Yeah. Yeah-- Philip Auerswald: You have to use it for something. And, it was a decade before, first of all, they figured how to make them at any kind of scale. And, second of all, what are you going to use it for? Like, it's going to be useful for everything: we know that. But it's got to be useful for something before it's useful for everything. So, the transistor was this incredible new Lego piece. Right? Once you have this Lego piece, then you get to the point of, like: Wait, whoa, whoa. Everything we're thinking about computation is different. Everything we're thinking about ultimately of telephony is different. Everything we're thinking about--a refrigerator is different. Everything becomes different once we have this thing that becomes the chip, right? It becomes the chip. So, to me, that's another kind of piece of this, is that once we have enough Lego pieces, almost all of invention--I mean, sorry--almost all of innovation, almost all of entrepreneurship, the overwhelming majority is rearranging new pieces. And a lot of it is just bringing existing stuff to markets that don't have it anymore. Iqbal did not invent anything; he barely innovated anything. But he had to create a new way of thinking about something that existed in a new context. Which was its own innovation. And so, I think it's this interaction of true novelty--which is just fascinating how that can happen--and then this whole Lego-piece/combinatorial thing. |
| 1:04:42 | Russ Roberts: But there's this last piece, and we'll close with this, which comes from a paper of William Baumol and rent-seeking, and how we should think about the wealth of nations, and where is it productive to spend your time in creating new products that help people or in creating new regulations that hamper your competitors? And, when you read the story of the rollercoaster of Iqbal and Strive--what's his last name? Philip Auerswald: Masiyiwa. Russ Roberts: Masiyiwa--you are forced to realize that the romantic story of the business person who has a vision--which they both did--and then forces the world, molds the world to accept that vision or brings that vision into reality through a set of decisions, maybe with a team of talented people, say, is only part of the story. Especially in poor countries with bad governance. Because, the temptations of rent-seeking to hamper innovators is so depressing and so important for understanding why certain countries stay poor. And, it's really hard to remember how many setbacks there are, because you step back as an observer of, say, of Apple and you say, 'Yeah, well, Steve Jobs came up with this idea of a phone and he had to figure out a way to have a screen to enter the numbers.' Would it be like you'd punch a little keyboard or what? Etc., etc. There are all these decisions that get made. But, as you say, Iqbal's not an innovator--excuse me--he's not a technologist. Philip Auerswald: He's not an engineer or technologist. Russ Roberts: Not an engineer. Philip Auerswald: Yeah, exactly. Yeah. Russ Roberts: And yet, what he overcomes through persistence and drive to bring, help, ultimately lead to people in Bangladesh having more cell phones than people, is a part of the human experience and a part of the business world that is neglected--because it's not romantic, and it's depressing, and it's frustrating. And, it inevitably shows you the importance of persistence and drive as much as technology and vision of that kind, to bring things into the world that didn't exist before so that people can actually enjoy them and use them. Philip Auerswald: Well, I think that's--I mean, you know what you're doing, so I'm not surprised, but I think that's a great place to close. And so, there are a couple of things I think of real significance in what you just raised. First of all, the Baumol paper. Actually, I have a collection of books that inspired me, and Baumol really was a very significant figure. This is Baumol's Microtheory of Entrepreneurship, recommended to everybody. But anyway, this specific paper of Baumol, it resolves a kind of an issue that I think a lot of people--general public type people--have with entrepreneurship, with elevating entrepreneurship. Right? Intuitively, they kind of know something wrong with that picture, right? And Baumol--it goes directly at that. Human trafficking is entrepreneurship. And, I just read a great book about lobbying called The Wolves of K Street. Right? That's entrepreneurship. Sure. It creates absolutely nothing and probably is net destructive, right? But, there's a lot of effort--and a lot of reward, a lot of financial incentive around that activity. Russ Roberts: Sure. Philip Auerswald: And, that is pure rent-seeking. And, it is entirely an artifact of the construction of the regulatory environment, the governance environment. The fact that the state has the monopoly over the use of force, and that extends to a lot of other dimensions of economic and social life. And so, there's a lot of ways that very creative, diligent, imaginative people can devote their efforts that are net destructive or, at best, indifferent to human wellbeing. And, it's not at all guaranteed. I mean, another big question in entrepreneurship--and I don't have a really firm view on this; I don't think it's something that it's sensible to have a firm view on--is: Are entrepreneurs created or made? I mean, sorry, made-- Russ Roberts: Made or taught. Created or taught-- Philip Auerswald: Made or taught, exactly-- Russ Roberts: [inaudible 01:10:29] Born or created. Philip Auerswald: Born or created. Russ Roberts: Whatever. Born or made. No: born or made. That's what it is. Philip Auerswald: Born or made. Everybody knows what we're talking about, but okay. Okay: Are entrepreneurs born or made? I don't particularly care. I think they're at least partly made. There's some genetic aspect. It doesn't matter. But, Baumol really lands pretty hard on there's a certain subset of people that have these capabilities in any society. It's not everybody. And so, how the society is organized will determine whether they become involved in human trafficking, whether they go into lobbying or in some other ways rent-seeking activities, or whether they become creative entrepreneurs. And so, that's the one part of the institution story--the how nations fail story--that I buy. I mostly don't buy that at all. I mostly find-- Russ Roberts: You're talking about the-- Philip Auerswald: Acemoglu and Robinson. Russ Roberts: the Robinson book-- Philip Auerswald: Yeah. And, for a lot of the reasons that we just talked about, right? I think it goes much, much too far in the institutional predestination direction and misses human agency almost entirely, at least as I read it. There's parts of the book that get into human agency, but I feel like it fails to resolve that. So, but there is a piece of predestination, I think, that Baumol really hits on it. It's how entrepreneurs allocate their talent. And then, the second part of what you said-- Russ Roberts: It's the rules of the game. You set up-- Philip Auerswald: the rules of the game-- Russ Roberts: bad rules, you're going to encourage people to do bad things and-- Philip Auerswald: you're going to encourage people to do bad things. Russ Roberts: It's just a piece of predestination with human agency layered on top of it. Philip Auerswald: So, now, as for the second part of what you just said, having to do with the centrality of persistence, of grit as we often sort of talk about in entrepreneurial success, as evidenced in particular in this book and the stories of Iqbal Quadir and Strive Masiyiwa, but also Nick Hughes and Susie Loney and M-PESA [Mobile-Pesa (Pesa refers to money in Swahili)], and Shivani Siroya, who is more recently the founder of Tala--a great story. In every case, this determination. And, I feel like that's really the kind of takeaway from this book that I feel sort of resolves this born-or-made story about entrepreneurship. We can all be inspired by stories of people who have exceptional determination. Right? And, Strive Masiyiwa, his initial idea--he left the country; he had the opportunity to study in England. And there was a revolution going on to overthrow the white supremacist government in Rhodesia. And, a cousin of his was part of that, and he said, 'I'm going to come back and fight in the revolution,' as he was doing with Mugabe and his allies. And, the cousin said, 'We're going to win. Don't do that. You'll probably just get killed. Stay in England and study something that will be useful after we win.' And so, Masiyiwa gets a degree in engineering. And so, you think the story is going to be he comes back and starts a mobile phone company. But no, that's not the story. The story is that he comes back and gets a job in the government telecommunications monopoly, because that's the only jobs that exist. And then, you think he's going to leave that and start a mobile phone company, but that's not the story. He wants to build a house and he gets a loan for the house, but the quotes he gets for the construction are twice the amount of the loan. So, in order to manage the project himself, he has to create a company. That's the only way. He has to actually create a company in order to get around these extremely high construction bids. So, that company becomes very successful. It's a construction business--has nothing to do with telecommunications. And then, out of that, he creates Econet. And then he runs into one obstacle. He runs into another obstacle. He's abducted and threatened. There's all these stories. Ultimately, he first sues the government--and loses--and then he appeals to the Supreme Court. He appeals to the Supreme Court on constitutional basis. So, he not only sues the Mugabe government and loses, he actually makes a constitutional case that it is a right of the people of Zimbabwe to have telecommunication services. And, the heroes of this story actually is the Supreme Court. It shows the importance of an independent judiciary, because over and over the Supreme Court ultimately rules in his favor. That's why he's able to succeed. But it's just part of the story. It goes on and on. I mean, the amount of determination. And, he enlists his evangelical colleagues. He gets ministers who are in Zimbabwe in conversion missions that actually sign up for Econet service even though it doesn't exist yet, to kind of subsidize. And, his students showing up--4,000 students show up in protest, in favor of Strive Masiyiwa because it's really part of the second stage of independence. It's the personal, the market independence. They've received independence from white supremacists, but now they have to create that internal independence. So, this--what are we going to do? What are we going to do when we wake up in the morning in a reality where so much is predetermined, so much seems out of our control? And, what this book says to me, what these stories--that I did not create. I didn't create the stories in this book. They were lived by other people. It's a nonfiction book. I discovered the stories and I did my best to tell them. So, when I say that they're great stories, I didn't create them. Right? I mean, I just identified them and tried to relate them. And they are great stories; and they're great stories about how we actually make a difference. What we do makes a difference. It can make a difference, it will make a difference. What will be is not predetermined. We play a role, small and large, and I truly believe that. And I think it is a deep misunderstanding of history, philosophy, religion, and certainly economics to believe otherwise. That's really the point of this book. |
| 1:16:18 | Russ Roberts: But, I would just add that we make a difference, but poor Strive Masiyiwa could have made a much bigger difference if he lived in a country that didn't try to crush him to enable Mugabe in order to enrich his cronies. So, it's a tragedy that a man of that talent had to devote so much of it to being allowed to do what he could do. Philip Auerswald: I just want to add one thing to that. Russ Roberts: Yeah, please. Philip Auerswald: It's an interesting thing, because years, years ago--I mean probably early 2000s--I was with Iqbal and the engineers from Telenor that had helped Grameenphone come into being. And this was just after Iqbal--just as Iqbal was exiting Grameenphone. So he still was part of the company. And, I said this, I was, like, 'It's incredible that you were able to achieve what you did in the environment that you did.' I mean, and both of them--both the Telenor folks and Iqbal--said, 'Well, actually in some ways it was easier. I don't think we ever could have done what we did with Grameenphone in the United States. Because everything was unregulated.' The way that you know that Strive Masiyiwa and Iqbal Quadir were first, was that they didn't pay for the licenses. Within years--within just a few years--the licenses spectrum for mobile telephony, even in poor countries, was going in the tens and hundreds of millions of dollars. Right? Mo Ibrahim became a billionaire by aggregating those licenses--that instantly become very valuable once the market test was passed. But, in Bangladesh, it was just a question of: Yes, there was a bidding process, but the licenses themselves were given away because nobody thought that they were worth anything. So, yeah, I mean, there was something about this absolute lack of appreciation of what the possibilities would be that allowed them to bring together the resources in a way that in a regulated environment would be very difficult. So, in some ways, entrepreneurs in a place like the United States have a harder time, because the incumbent power is so entrenched or at least can be, and regulations are so well-defined. All the building and other restrictions that we talked about that are very significant. So, it's not totally clear that it's harder in these environments that we live in. Russ Roberts: My guest today has been Philip Auerswald. His book is A Phone Is a Cow. Philip, thanks for being part of EconTalk. Philip Auerswald: It's been a real pleasure. |
Can a phone be a cow? It could in 1990s Bangladesh. This was the insight of a small number of mobile phone market pioneers who helped catalyze the spread of the greatest technological revolution in human history. Listen as George Mason University economist Philip Auerswald speaks to EconTalk's Russ Roberts about how the extension of connectivity to traditionally excluded populations led to wide-scale transformations in productivity. They discuss the role of little-known entrepreneurs such as Iqbal Quadir and innovators like Claude Shannon in bringing the mobile phone to the entire world. Other topics include William Nordhaus's paper on the cost of illumination as a powerful metric of human progress, Schumpeter's notion of innovation as new combinations, and what Auerswald calls the most important question the field of economics can ask: How much of human progress is inevitable, and how much depends on the determination of remarkable individuals?
READER COMMENTS
Eric
Jun 26 2026 at 2:22pm
One of the most deeply profound insights from this discussion comes during the discussion of free will when Philip Auerswald points out …
This insight has many applications, not least of which is that material nature’s causal toolbox of Chance and Necessity is woefully and inherently insufficient to account for the origin of life. To start with, the combinatorial explosion of the search space means it cannot be explored by chance attempts. By 1966, we already knew about “The Demise of the Role of Chance” well before it was summarized in the first edition of The Mystery of Life’s Origin in 1984. Chance is examined more closely in Chapter 9 Specifying How the Work is to be Done, reaching this conclusion.
The existence of life requires the distinct causal influence of Choice, which is an aspect of a choosing mind.
Auerswald mentions the influence of
For a time, theoretical biologist Kaufmann did try to seek to develop a natural explanation for the origin of life, focusing especially on pursuing ideas of self-organization. However, that did not yield any explanation for the coded information that life requires. It is not possible for coded information to self-organize. (Try to imagine letters self-organizing into a meaningful text.)
For the encoding and decoding of coded information, the choices of a choosing mind are required. To borrow Auerswald’s phrase, a mind “must choose a path.”
Luke J
Jul 8 2026 at 10:17pm
My darkhorse candidate for best 2026 episode. There are so many brilliant and nuanced spots in this conversation.