EconTalk |
Michael Eisenberg on the Start-Up Nation, Storytelling, and the Power of Technology
Feb 14 2022

41x1HRT9P4S._SX334_BO1204203200_-202x300.jpg Michael Eisenberg, venture capitalist and the author of The Tree of Life and Prosperity talks with EconTalk host Russ Roberts about the secret of the Start-Up Nation, the role of principles in investing, and why he's optimistic about technology's contribution to humanity.

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Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.

READER COMMENTS

Shalom Freedman
Feb 14 2022 at 8:36am

This conversation between Russ Roberts and Michael Eisenberg was fascinating for me in a number of different ways. First it explains some of the reasons why Israel has been successful in the start-up world. Eisenberg speaks about the military background of many of the hi-tech people, the culture of cooperation fostered in the Army, the democratic character of the society which enables younger people to challenge the older authority figures and develop new ideas.

It was also fascinating in enabling me to understand a bit more about Eisenberg himself, what he has done in developing his own business model as venture capitalist. His description at the end of the podcast about how he finds economic wisdom in ancient sources, primarily the books of the Torah also suggest how original and innovative he is in his thinking.

I was however a bit startled by Eisenberg’s total optimism about the long-term future of Technology and Humanity. Technology is of course responsible for major improvements in the situation of humanity but it is also responsible for a long list of current ills, and present and future dangers. Globalization and its woes are part of the story as is global warming but there are also the real dangers given by the interconnectivity of systems and their possible disruptions not only by hostile states but even by rogue individuals. I too would like to share Eisenberg’s optimism about Western society in general and Israel in particular but the threats specifically to Israel are immediate and great, especially from the fanatical hatred of Iran. As for the long-term future of humanity this is a different subject but it is certainly not something which considering our scientific knowledge of the development of the Universe we should be singing too loudly about.

I apologize for sounding like a grumpy old man. In truth I enjoyed the conversation  respect both participants greatly and look forward to listening the next time they speak.

 

 

 

Rick Baker
Feb 15 2022 at 8:17pm

I found your opinion on gmail vs outlook really interesting. I used outlook for years and then ended up using outlook. I thought outlook was fine but I didn’t think it was clever – it was just designed like any sane person would design it. But then I used gmail and it was/is terrible. It seemed to me it must have been maliciously designed to be bad – I just could not fathom why you would decide to make it so hard to use. So, good call not to get your college to change – they would hate it and perhaps have second thoughts about this their president!

Tom Murin
Mar 12 2022 at 10:39am

While I enjoyed the talk, I take great exception to his assertion that “…insurance companies [are] incentivized to reject your claim, because they make money by rejecting your claim.” I’ve worked in the industry handling claims for over 30 years and have never had an incentive to deny a valid claim. Additionally, there are a large number of insurance companies that are not structured to be for-profit (e.g. reciprocal exchanges like USAA and mutual insurance companies). This greatly undermines his credibility to me. Furthermore, Lemonade has not been shown to be a fundamentally sound insurance company. Their business model hasn’t been proven to work and the company has been losing a lot of money. There’s a bit too much storytelling here.

Comments are closed.


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AUDIO TRANSCRIPT
TimePodcast Episode Highlights
0:37

Intro. [Recording date: January 25, 2022.]

Russ Roberts: Today is January 25th, 2022, and my guest venture capitalist and author Michael Eisenberg. He is the co-founder of the venture capital fund Aleph, here in Israel. That's A-L-E-P-H in English: Aleph, here in Israel. And, his latest book is The Tree of Life and Prosperity: Ethical Economic and Business Principles from the Book of Genesis to the 21st Century. Michael, welcome to EconTalk.

Michael Eisenberg: Thank you so much for having me, Russ. Great to see you.

1:06

Russ Roberts: And, just to let our listeners know, we're going to be talking about venture capital, investing in a small market like Israel, Israeli economic issues. And, I think we'll also get to, eventually, by the end of the conversation get to talk about what we can learn from the Book of Genesis.

Now, despite your appearance on the YouTube version of this conversation, where you look to be about 26 years old, somehow you have been a venture capitalist for almost 30 years. Defying age, it appears. What's your philosophy of investment? What motivates you and how do you think about where to put the money you're entrusted with in the charon[?].

Michael Eisenberg: Yeah. Great question and thank you for the compliment of my parents' genetics. So==and maybe of of my wife keeping me young.

So, I have to divide between the beginning of my career and kind of what I've learned over 25 or 27 years at this business.

When I was getting started, I didn't have any philosophy of investment, for what it's worth. I like to say that I do before I think--which is sometimes dangerous, but oftentimes has some upsides. And so, I just went where there was open whitespace, which was the Internet.

In 1995 in Israel, there were very, very, few people who knew anything about the Internet, and I was fortunate enough that in college I got exposed to it. And so, I guess I was an early investor in the Internet.

But, the most important thing I learned about investing is that it's about networking. And, you've got to know a lot of people, and see [?seal?] a lot of deals, and be trusted in a way that--money trust you, founders trust you, investors trust you.

And, so, the core of my investment philosophy starts with people.

I want to invest in special kinds of people. I want to network and develop relationships with other investors and people in corporations, and founders, and interesting technologists. And, that's how I see deal-flow, and that's how we move these companies ahead. And, then you build management teams the same way. So, that's at the core of the philosophy.

More recently--and I've pinned a couple of blogs about this--apparently some article today in the Hebrew Press, which I haven't see, they called me a bit of a loudmouth for expressing my opinions on blogs. But, one of the things I said was that belong to humanity. And, I think we're in a turning point.

This was already true a few years ago, where I want to invest in products and innovations which empower other human beings to be successful economically and realign business in a way that wasn't previously aligned. This is not, for whatever it's worth, some ESG [Environmental, Social, and Governance?] or kumbaya, or anything like that. This has to be core of the business model of it.

And, I've tried to do more and more of that over the last bunch of years. And that's become a big theme I've been investing behind.

Russ Roberts: So, long on humanity means you want to invest and you're optimistic. And, short means you think they're not going to make it. We'll come back to that in a minute.

4:07

Russ Roberts: But I want you to talk about an episode in your book where you talk about the business that you wandered into in 1995 that had this crazy idea about sharing photographs. And, it reminded me a little bit--I'm trying to think of what the analogy would be as--it is Ben Franklin flying his kite? And I can't--it's only 28 or whatever it was--27 years ago--and it's like, it's ancient times. It's a horse run carriages and the Pony Express. I don't know. Talk about it. Talk about what it felt like at the time, and now looking back on it, how it feels.

Michael Eisenberg: Well, the really strange thing is, to your point, is: today this investment feels totally trivial because things have moved ahead so quickly. In 1995, I was two years having made aliyah--which is immigrated to Israel. I came from New York. Our family was in New York. And, I got introduced to a guy named Yacov bin Yacov--Jacob the son of Jacob, translated to English. His parents had a good time with that name, I guess. I get introduced by a guy who I barely knew and I go see him in his in his attic in a town just outside of Jerusalem. And, he shows me this thing where you could take a negative--people, I assume on the show, know what a negative is still--or maybe not--

Russ Roberts: Maybe not--

Michael Eisenberg: You used to put film in cameras. It was like a physical object; and out of that, you'd take it to a one hour photoshop or a three-day photoshop, and they'd make a negative out of it, and then print you some pictures.

So, anyway, you took this negative and you put in--it was called a negative scanner at the time. So, everyone knows what a paper scanner is today. But then they had also negative scanners. And it would then upload this digitized image from the negative onto a computer. And then you kind of hit send, and could take a couple of minutes to paint it on another computer screen--by the way, two feet away but, you know, maybe it went over the Internet so maybe it went 6,000 miles away and then back to the same room in Jerusalem. And then I would go, 'That's amazing.'

And, being the father of a young daughter at the time--a baby and family abroad--'Man, I can send pictures of my daughter instantaneously,'--not really--'across the Atlantic.' That's amazing.

And, I thought that'd be an empowering innovation. And, that's actually the first investment that I enabled or did. It's more complicated than that.

And, I learned a huge amount from it. One is: Everybody said this couldn't be done. Like, this was not physically or physics-wise possible, you know, to transmit that amount of data over these tiny modems. And so, it couldn't be done.

And, two, the arc of technology is such and the velocity of technology is such that if you get a secular trend to start to build on itself, it accelerates. It's not just Moore's law. It's: there will be more bandwidth; there will be more computing, because people want this to happen and it'll focus a lot of engineering effort on it. For what it's worth, by the way: I think that's true of cryptocurrency today. That's where the bright engineering minds are going to.

And so, more and more people would get focused on this and it would get better. And then the third lesson, was in addition to--kind of silly, and this will get better--is stuff that gives human beings a positive emotional response to a technology get adoption and gets noticed. The press notices it. And, I think that matters a lot.

One of the underappreciated facets of great entrepreneurship is storytelling. And, this was a great story to be told--and Yacov and his partner, Phil, and Elliot got a hand on telling the story; and I think that mattered a lot, in particular in the early days of the Internet. When you're in the early days of an industry, in general now, being able to tell a story is probably the most important thing an entrepreneur can do. By the way, witness Elon Musk.

8:00

Russ Roberts: Yeah, it's funny because I've talked on the program recently about how I got seduced by driverless cars. I also got seduced by Theranos and Elizabeth Holmes. I thought--this is because I'm so long humanity, at least until recently; and I'm getting a little pessimistic. But in general I'm an optimistic guy, and I love, love, love the human creativity that transforms the world and our lives. But your observation about storytelling is so important, because of course I knew nothing about driverless cars. I got seduced thinking it's imminent: In a few years we're going to have no more driving. All cars will be autonomous. There'll be no more accidents because cars will be able to use their sensors to talk to each other. We might have smart roads where cars can go 120 miles an hour, equivalent to a train but linked together, but safely. And that'll change how cities are organized. Roads will be narrower. We don't need parking spaces. We'll have fewer cars. We won't be producing as many cars. The workforce will be liberated; the cab--I mean, I had a beautiful story, very much driven by my understanding of economics and the classic economist question of: And then what? And, I just kept thinking of all the social and cultural changes. You'd go to dinner with your wife and instead of taking a car or a taxi, this thing would show up at your door. You wouldn't have to drive. You'd have a glass of wine on the way to dinner. There were just so many beautiful stories that I was seduced by that, I think, without knowing any knowledge of the technology, and even talking to very smart people on this program, we said, 'Well, the cars don't really think. It's more like they're on a train track.' You know, 'The Google technology is not that good,' and 'Oh yeah, but they'll fix it. They'll just keep working at it.' Like you said: they'll keep making it better.

And, they will and they have, but I found--I think that storytelling aspect of this is so powerful, and I don't think I appreciated how it spoke to me as an outsider. I never invested my own money into a driverless car. It'd be a different level of storytelling that would be required. But, I think the storytelling aspect of it is incredibly insightful.

Michael Eisenberg: I think one of the interesting things--this is something I learned from Gavin Baker, who is an[?] investor who used to be at Fidelity now as a firm, a trade [?], is one of the differences between being an investor and having to commit capital and anything else is you actually have to put it on the line. So, you need to test the limits of the story. And, I propose[?]--doesn't matter if it's driver's cars or something else--any time you got to take out a shovel and move some atoms, it slows everything down dramatically and introduces endless complexity into it because there's a lot of people with, quote-unquote, "rights of way," or who aren't[?] using economics, are rent seekers on those atoms.

And so, I think there's a lot of complexity that then gets introduced into the story. And, I think that's, by the way, one of the differences between what I call popular media and actually having to invest money in it is you've got to be aware of the limitations, the gotchas, the hard realities of life.

That having been said by the way, because of Point One, which is: things that sound silly, many of them end up happening. Sometimes in rare cases, you need to just suspend a disbelief to get after that and maybe we'll get into the difference between risk and unknown at some point in this conversation, that [crosstalk 00:11:38]--

Russ Roberts: That's true. Sure, but that photograph story, which is absolutely absurd, the idea that you could share a image of your child with a loved one across the ocean is a ridiculous idea. It's a ridiculous idea. I mean, it's silly. It's not going to happen. It's a scam; it's a way for somebody to take your money and pretend to invest it in a technology that obviously isn't going to work. And, if it does work, how many people are going to have a modem that's going to be strong enough to do that and they're going to sit there and wait for minutes after minutes.

So, you're right. At some point there is inevitably a story that someone has been suckered into that actually comes true. It reminds me of when I used to put my case [crosstalk 00:12:25]--

Michael Eisenberg: It makes you feel like a sucker, now.

Russ Roberts: Yeah, exactly. Well, I'll say you're like a freier--a word that came up in a recent conversation with Tyler Cowen--a word from, an Israeli word. There's a dispute whether it's Russian. I just assumed it was Yiddish. Do you know?

Michael Eisenberg: I don't. I just know it means a sucker.

Russ Roberts: Yeah. Okay. And, you don't want to be one. Oh, boy.

But, I used to put my kids to bed every night, with my wife, and one of them would say, 'Daddy, tell me a story.' We'd usually tell them a story, read them a book. There's a whole routine. And, I'd say, 'Okay, here's the story. Once upon time, there was a little boy and he went out and he was really strong and then he came back home and he went to sleep.' 'Oh, Dad. Come on. That's not--' 'Yeah, that's a story.' So, I think--and they wanted a real story. And, I think this distinction between, let's call it a bedtime story, which is: Driverless cars are going to change the world. 'Oh, okay. That's interesting. I'm going to think about that.' Versus: You have to put X percent of your life savings behind this idea that this person's telling you, and when that person says, 'Driverless cars are going to change the world,' you probably should say, 'You better tell me the full version, not that little quick bedtime story version.'

Michael Eisenberg: Part of what I try to do in this is, is what I call backcasting, which is the inverse of forecasting. Which is: I like to imagine that driverless-car world and then ask, 'Okay, what do we need to do in order to get there?' And, 'What's in control? What's out of control? What needs to go right along the way in order to get there?' And, I find that's kind of a useful framework for how you figure out whether this new story or vision of the world has an option happening. My partner at Benchmark, Bruce Dunlevie, used to say that the venture business needs to ask the question of 'What can go right?' And, if this goes right, and that goes right, and that goes right and that goes right, well, then we got a big outcome. The odds of each one of those going right, like, 5%.

But, you want to check to make sure there aren't blockers on the way that are immovable or that something doesn't elongate the steps so much that you can't topple the domino on the way to what can go right and what go right and what can go right?

And so, I think, those are my frameworks I use for getting at this. There's back-casting and looking at that and going, 'If this goes right, and that goes right, then how do we get there?' By the way, I haven't bought into autonomous vehicles.

Russ Roberts: Say that again?

Michael Eisenberg: I haven't bought into autonomous vehicles because I don't think we'll get there for a long period of time.

Russ Roberts: Okay. I was going to ask you. That's great.

14:51

Russ Roberts: But, you alluded to rent seekers and rent seeking earlier; and obviously one of the challenges which you don't want to see is that kind of barrier--the idea that: someone might regulate your innovation out of the marketplace before it has a chance to be tested by the customer, instead is ruled out of bounds, is vetoed by government regulation--is obviously a disaster. And, I think one of the challenges--you and I both now live in a country, Israel, that has a Socialist past, a very strong Socialist past, where the general outlook is you ask for permission, not forgiveness. And, yet somehow the Israeli venture scene and the startup scene is extraordinary. Do you find that strange? There's so many parts of this economy where you, not only you have to ask for permission, you've got to ask for permission more than once--maybe five or six times in different government offices. And, yet there's something magical that's happened here, startup-wise. Talk about that cultural seeming-disconnect.

Michael Eisenberg: Yeah. I actually have a slightly different perspective on that. Meaning, factually everything you said I think is correct. Which is: Israel has a lot of what I would call bureaucratic regulations and hoops you need to run through to get a lot of things permitted, but most of Israeli innovation and the startup scene comes out of the military. And, ironically, we have the least hierarchical military, I think, on the planet, where anyone can kind of speak up; and if you're 22, you're--forget that, when you're 20--you're commanding other people and expected to speak up to your commanders. I teach some courses in the military here. I see it live where more junior folks in the room are encouraged to challenge other people. And, they're taught this at a young age. And, the technology units in the military, they know the answer is not at the top: it's most likely in the younger people. And they've kind of diffused that.

So, ironically, this is an ask-for-forgiveness culture from where the high-tech economy is bred. That's Point One. Even in the what I would call the more regulated parts to this economy, building permits. Let's just say that building without a permit is still a well-known phenomenon in the Israeli economy. And, I think there's an ethos--candidly, one I don't like--but it is an ethos of: Can I get away with this? And, more often than not--because the other part of the Israeli bureaucracy is enforcement is terrible here--and so because of that, I can get away with a lot. So, people actually figure out their way around regulation and know they won't get caught. And, that breeds an ethos also of rule-breaking; and then I wouldn't say asking for forgiveness, but actually pleading for forgiveness and don't fine me as much as you really wanted to.

Russ Roberts: And, I would think I'd be interested in the arc of your investment career and observer of the Israeli scene, the arrival of million of people who grew up under a Soviet bureaucracy and had a very dismissive attitude toward it must color some of the tech--of the attitudes of Israel today. I've talked on the program a little bit, I think, about--I think Israelis are very patriotic, certainly more patriotic than Americans on average--having just come from America--but that Russian contingent wasn't very patriotic. They were not exactly--they did not view government as their friend--certainly and rightfully so. And they come here, to Israel, and they bring that attitude with them. Do you think that's a factor? Is that an issue?

Michael Eisenberg: I find myself recently distinguishing a lot between the government and state in general. And, I think in Israel, in particular, whether you like the government or don't like the government, you are patriotic to the state and its people. And, I think one of the miracles of the absorption of the Russians, the 1 million or so Russians who came to Israel, is they've been absorbed into the state. And, even with some of the--it's not the topic of this podcast, some of the religious or conversion issues that happened in this country, still they've been absorbed in the military. They've been absorbed into society at large--which is what raises the conversion issue--at an unbelievable pace. I'll say even more than that: native Israelis had to make a real sacrifice to absorb those 1 million Russian immigrants in that time period. And, I think that's a core tenet of Israeli peoplehood, is that willingness to sacrifice for a longer-term goal. And, by the way, economic prosperity, because those 1 million Russians drove a lot of economic prosperity.

Russ Roberts: You should let listeners know. There's two great secrets about Israel that listeners should know. One is we've got about 9 million people here right now. When the Russians came, it was maybe five and a half.

Michael Eisenberg: Five and a half, I think.

Russ Roberts: So, this was a 20% increase in population. A group of people coming with basically very little or nothing--a lot of human capital, of course. Israel immediately became a better chess-playing nation, Olympic competitor, and a whole bunch of things that they hadn't been necessarily at the top of. I'm sure we had some good chess players before. But it's an enormous amount. A million sounds like a big number. It's a really big number, because it's 5 million people who were here before.

The other thing you should know about Israel that I think most people don't know is how big it is physically. I think people think it's--well, anway, it's about the size of New Jersey. It's a small place relative to some other places; and many of the--much of population lives in a handful of places.

Michael Eisenberg: But, the thing about this, you have to build 20% extra housing in no time. Right? And find jobs for 120% of the people that currently have jobs. It's an enormous effort.

Russ Roberts: And, of course, the more market economy--the more market-oriented the economy is, the less you'd have to worry about it. But, in Israel there was a lot of top-down activity to accommodate that population. They weren't just a--the markets weren't just allowed to figure that out, quote, "on their own." There was a lot of government edicts, and so on.

The other thing we should mention just to be clear is--again, some listeners will know this--I'm looking at a quote, I think maybe I got it from you, from your book. So, Israel has no natural resources, surrounded by military threats, has to have a very active army as a result. It says that--this quote is in the Washington Post; I don't know if it's accurate, but could be--'produce more start-up companies than Japan, India, Korea, Canada, or the United Kingdom.' [Quote is possibly from Start-up Nation, by Senor and Singer--Econlib Ed.] So, it's not just when we say, 'Oh, it's pretty successful in the start-up world.' I think they have more NASDAQ [National Association of Securities Dealers Automated Quotations] here: they have more NASDAQ companies than Europe. I don't know if that's true. But, the conduit--to go back to your earlier point--between the military and the startup community is quite extraordinary. It's not just like, 'Yeah, they're pretty good at it.' It's an extraordinary environment.

Michael Eisenberg: Yeah. By the way, I don't know if that's true anymore. It definitely was true three or four years ago, that quote. There's been an explosion, obviously, in technology companies in Europe and India and places like that. And, some of them have become more successful in IPO [Initial Public Offering] to NASDAQ. So, I tend not to follow these statistics. They feel like vanity statistics on some level. But, the trend is true.

I'd add something: I think the military pieces is not just important because you take 18-year-olds and train them at the cutting edge of technology--which is what state complexes and militaries have access to. But, even more importantly, we're forcing kids to sacrifice on behalf of something greater than themselves. And that creates an esprit de corps, that creates patriotism, that creates comradery and collaboration that I think is missing in a lot of places. And, I think it creates a force and an empowering force in an economy of mutual responsibility to empower other people to be successful as well. And, I think that's really core to the ethos here. It's part of why I'm so bullish on Israel, by the way.

23:53

Russ Roberts: So, a lot of people, of course, romanticize entrepreneurship. And, I don't think we do enough of it to be honest, but we tend to have to romanticize it as the lone genius, the Steve Jobs or Elon Musk that you mentioned earlier. You're suggesting, with this point about the military, that the teamwork aspect of startup life is underappreciated--at least by me--and undervalued; and that Israel gets a head start on that because a group of friends who have served together in a very demanding environment of military training and preparation are then able to take that set of networks, relationships they built with each other, and be successful doing something technical. Is that your argument?

Michael Eisenberg: Yes. I'll add two other things to that just for global perspective. Number One, the data shows, even though the storytelling doesn't, that companies founded by two or more people are more successful than those funded by sole founders. And, the reason we forget that is things like Elon Musk or Michael Dell, as an example. But the vast majority of venture-backed companies are founded by two or more people and that makes them successful. By the way, even Microsoft, for which Bill Gates is known, he had a co-founder, right? Paul Allen.

Russ Roberts: Steve Jobs had a co-founder [crosstalk 00:25:12], Steve Wozniak, yeah.

Michael Eisenberg: Steve Jobs had a co-founder Wozniak; and Larry and Sergey at Google.

So, complementarity of teamwork and collaboration, I think, is a core feature of entrepreneurship, even though it's under-spoken about. And, so, that's Point One. A

And Point Two is, I think as technology becomes more multidisciplinary--which has happened over time--this becomes an even bigger feature, because you'll need a mix--whether it's synthetic biology, which is a mix between biology in digital, or cryptocurrency, which requires you to have cryptography backgrounds and networking backgrounds, etc.--you need a mix of skills. And therefore, having collaboration and years of working together or working across the table from each other is very valuable.

Russ Roberts: And, I like to make the observation that people who would like food do not necessarily make good starters of restaurants. And, this is so unintuitive to most people because they think the restaurant's about food. Well, actually, it's not. It's about managing people, managing inventory more than anything else, figuring out a way to have a decor that attracts people and then training staff to treat people well enough that they want to come be in your business home for anywhere from 20 minutes to two hours, and figuring out how to price things. I mean, it's an enormously complex set of skills and no one person has all those. So, the founder of that restaurant is good at one of them. It might be supply, sourcing, and inventory control so that they do that really well and figuring out who to hire for the chef to make it work well.

But, then, they mess up eight other things--the accounting, the--you name it; and they sometimes just run out of money because they can't do everything at once.

And, a team of people can bring a set of skills. Every business has that demand, and we think of the tech genius--the coder, the innovator--as the centerpiece. And they might be, but if they're not surrounded by other pieces, they're not going to make it. It's impossible. It's a variant on the, 'Oh, I thought of that idea. I thought of the idea sending photos over the Internet.' 'Really?' Well, it's worthless. The execution is everything.

Michael Eisenberg: Absolutely. Execution is so under-appreciated in the world because we think a world of geniuses. Tim Cook, for what it's worth, I think has increased the market cap of Apple more than Steve Jobs ever did. And, he's a relentless executor. And execution matters a ton. And, it's the difference between a good idea and a great company.

Russ Roberts: Yeah. It's a good distinction.

27:44

Russ Roberts: Let's talk a little bit about the industry you're in of venture capital [VC]. Having spent summers in Palo Alto for a long time before I moved here, I had some relationships with VCs there; and I assume some of them inevitably by the nature of your work. Do you see a difference in the culture of your industry? Not the tech part, but just the investing part. Is it different here? Or is it the same--if you had to move to California, would you be able to use the same things? I assume you would. Many of the principles are timeless and immortal. Or is it--what's different about the smallness of the Israeli VC world, physically? It's just in a smaller--Silicon Valley is small, but it's surrounded by Austin, and Boston, and a thousand other places. Whereas here it's kind of small. Does it matter?

Michael Eisenberg: Yes--and no. So, broadly today, there's what I would call two versions of venture capital--is what I call the venture capital superfund and the cottage industry. Roughly the cottage industry at this point in the history of venture capital is practiced by very few. It's like Benchmark and First Round Capital. I think us at Aleph, etc. And, many others have grown into big purveyors of money and venture capital. It doesn't mean they're not venture capitalists, but these are larger organizations.

So, I always speak for our kind of organization. I came from Benchmark Capital to start Aleph, my current fund. And, I think roughly they're similar in decision-making and approach, in culture: both equal partnerships, small focused, and local.

Now, there are a couple of very significant differences. I think if you grow up in Israel in a country of whatever it was 8-, 9-, nine and a half million people, your view of 'large' is significantly smaller than someone who grows up in California or Texas, for example.

And, the venture capital business is driven by outsized, large, grand slam, home run outcomes. And so, finding Israelis to be a partner in a fund to have a view of 'large' that's significantly large enough to produce grand slam, home run outcomes is actually challenging, if they haven't had exposure to a 350-million-person country like America is and know what Texas looks like. And so that's kind of Point One.

Point Two is: Silicon Valley roughly started 60 years ago at this point. And, the Israeli venture scene is 28, 29 years old. And, that three decades matters a huge amount for a few reasons. Number one, Israel is getting into what I would call the first generation of scaled up-management: early [?] from Israel were small; nobody experienced being at a large company, scaling up, etc. in the first decade.

In the second decade and a half-ish you start to get scaled-up companies out of Israel--Check Point, Wix, and a bunch of others. And, now you have a cadre of management that has experienced scale that start to pepper around. But, not having a lot of those companies means we don't have a lot of those managers. And so, bringing that talent in to the companies locally is still a challenge. So that's Difference Two.

Difference Three is: Every company in Israel is an export company from day one, because nine and a half million people is not a market. And so, you need to really understand, as a venture capitalist here, that you can go across--that your entrepreneur can go across culture at day one. But it also puts an onus on the venture capitalist to help cross that cultural chasm for the entrepreneur, because they've got to go to another market to sell: this market doesn't produce much of anything, at nine and a half million people. That's another one.

And, the last one is everybody--there's not six degrees of separation in Israel. So, if in Silicon Valley there's three degrees of separation, in Israel there's one degree of separation. I can get a reference on an entrepreneur from his kindergarten teacher in one phone call. And so, sifting through that and making it work and having proprietary access to deals because of that is tricky. And, we're in a world where there's a lot less proprietary access to deals anywhere at this point, even in Silicon Valley: everyone's bidding on the same deals right now. In Israel, it's a little different. On the one hand, there's more proprietary access to deals because of these tight networks, etc., and people self-reference. On the other hand, there's no secrets in this country for real because it's so small and so it's harder to do.

Russ Roberts: You and I both have been seen at the Grand Cafe, which is a place to eat on Derekh Beit Lekhem. It's about 15 minutes here from my office. And on a typical day, I've been here six months--talking about six degrees of separation--I've been here six months; most of the times when I go there, I know a few people there already. And they're not people I knew from America. They're people I've gotten to know here. It's a very small world, and you have to talk quietly there because somebody nearby is going to either know you or know about you or share something that maybe you don't want shared. So, it's an awkward setting, but it's a very pleasant--it's a lovely place.

Michael Eisenberg: Hey Russ, because my main office is in Tel Aviv, but having been at the Grand Cafe with you and other people and not being able to finish the sentence before people coming over, I literally today just took an office in Jerusalem for the one, one and a half days a week I'm in Jerusalem, so I get some work done. And have quiet meetings.

Russ Roberts: I look for--do me a favor? Get a really good coffee maker there so we can meet there next time. And, I'm happy to come see you. A competitor of yours I will not name has some good coffee at his place. So, it's like you said: there's a lot of competition for the deals.

33:39

Russ Roberts: Let's go back to your big observation that you introduced this whole conversation with--this part of it--and then we're going to move on. You say you're 'long on humanity.' As a grand statement, it sounds nice. Yeah, it's great. What does that really mean in practice?

I mean, a lot of technology has come along the last 20 years that's changed our lives, changed our kids' lives in ways that are, to be honest, something of a mixed bag. I was a huge--I talked earlier about the seductive[?] power of storytelling. I love technology. I love gadgets. And, some of those gadgets that I've come to love, I start to think I'm worrying a little bit whether they're good for me, whether they're good for our democracy. How do you--do you have any of those worries? And if you do, how do you reconcile that with the 'long on humanity' part, and how do you think we're going to deal with that?

Michael Eisenberg: Okay. Bit of a complex and longish answer. So, Number One, I don't think there's anyone who would really want to trade places with somebody who lived 1500 years ago at this point. So, if a pandemic came across--

Russ Roberts: Talking to the choir, Michael.

Michael Eisenberg: Okay.

Russ Roberts: You're talking to the choir. But go ahead. Sorry.

Michael Eisenberg: No, it's okay. So, the pandemic came across the landscape maybe in 1918, the odds of getting a vaccine were pretty small, especially in this short order. And, I think in general, the amount of information sharing and--I was going to--I just finished Matt Ridley's amazing book called Viral--Matt Ridley, Alina Chan--on the origins of the pandemic, by the way. You see the sleuth work done by drastic and others on Twitter to uncover the origins of this is stunning. Stunning. In the past, the cover-up of it might have gotten a lot of easier. And so, there are a million things like that. And so probably you don't want to trade places. That's Point One.

Point Two: Any time we introduce new technology--and it doesn't matter if it's a printing press or anything else--we have perturbations. It's just what happens.

And, I think we're living through those now. The watershed moment, as far as I'm concerned, is the introduction of the smartphone--the iPhone in particular. And, it takes time for us to assimilate those technologies. And, alongside of that, because of the smartphone, we've also gotten acceleration in bots and AI [artificial intelligence] and a million other things. And we weren't ready for it. And we weren't ready for it, and there's no way to slow it down and it happens; and we shouldn't try to slow it down. But, my view is that after that comes the humanization of this: How do human beings deal with this? How do we make this better for humanity?

And, that's the point of my thesis, which is: we've gone into a new phase of this, which there'll actually be a lot more computer-to-computer work done. But, if we can't make it work for humanity, humanity will rebel against it because we've kind of found our footing. And, so, innovation that will lead the next trillion-dollar company will inevitably improve the economic viability, the economic output of humanity, the health of humanity, the wellbeing of humanity. And, that's the investment thesis. It's not just optimism. It's also a view of where we are in the trend line of technology and these latest generations of it.

And, for what it's worth, the pandemic has brought to light bio safety. No one was talking about that before. Right? And I've probably seen 10 deals around protecting AI models. And I think that's all part of it.

37:13

Russ Roberts: Yeah. I'm a pretty--as my listeners know--pretty hardcore free market person. But I have been somewhat uneasy about the nature of corporate innovation that is so--that's a little bit unusual. So, part of my--the part of me that wants to agree with you is that: we figure all this stuff out. We always do. You know? The car comes along, the phone comes along, railroads come along, agriculture, you name it: human beings find a way, just like you said, to shape it according to how we think it will serve us best. And, it's a decentralized, bottom-up process. And, through a lot of human history, recent human history, it was somewhat unmitigated by regulation and the rent-seeking we mentioned earlier.

The current technology that is revolutionizing our lives that we normally[?]--you mentioned the printing press--it's not so competitive. Now, it could be--that's not important. It could be. Well, new competitors will come along. We think these giants like Google, and Amazon, and Apple are immortal. They're not. We thought IBM [International Business Machines] was immortal; it actually got--it was dethroned. We thought Microsoft was immortal. It got dethroned. These companies will be dethroned as well, just like people thought Sears Roebuck was going to run the world. That was really--people don't understand the power of competition.

I worry a little bit about the nature of the competitive process, and the sources of the innovation we're talking about, and the power of the current network system that can reduce the ability of competitors to come along and dethrone these companies.

Now, regulation may help. There may be some changes in property rights and other things that'll make this more feasible down the road. But, do you worry about that at all? Or, do you still just kind of--again, I'm optimistic like you; I think we should mainly leave them alone. But I'm a little worried that this time might be different.

Michael Eisenberg: With your permission, I'll back up. My point is not even a free market point. I think that today, because of technology, business is the best purveyor of positive change in the world. Period, full stop.

Russ Roberts: Bold statement.

Michael Eisenberg: It's not a free market point, per se. It's: Government right now, both because of the fractiousness of politics and because its operating system is still the Pony Express, can't keep up and therefore the friction created by it, not just from an economic perspective, but from a management perspective. I mean, so much so you see people like Katherine Boyle and Andreessen Horowitz and I don't think this is malicious[?]--I think this is factual--saying, 'If we want to rebuild American dynamism, we need it to startup entrepreneurs.' I don't think that's an accident.

Russ Roberts: I'm sorry: We need more startup entrepreneurs?

Michael Eisenberg: No, we need rebuilding American resilience to come from entrepreneurs.

Look, America's in the space race today because of Elon Musk. Period. Full stop. America hasn't delivered a meaningful program like the New Deal or the Apollo in 50 years. Country has gotten bigger, government's gotten more out of touch and more overwhelmed by technology. Again, they have an operating system like the Pony Express. So, to the extent that we want resilience and dynamism, and to the extent that we want humanity to get better, we need to rely on entrepreneurship, innovation, and business.

Now, I think we all have a prevailing sense--that I think you're expressing--which is: Something's still gone wrong. Right? And, there's abuse of information, abuse of technology, and abuses by business at the same time. And, people are searching for solutions.

So, you get things like common-good capitalism coming from people I think is like Oren Cass or Marco Rubio. Subsidiarity coming from Paul Ryan. And, on the other side, you get Bernie Sanders saying the state will take this over, or AOC [Alexandria Ocasio-Cortez] saying we need a Green New Deal.

And, candidly, I don't think for the Progressives, they stand a chance of having the state doing any of this, because it's too unwieldy and operations on the Pony Express operating system.

And, on the Right side, I don't think they found the 'why'. I think they're dancing around for--you know--Capitalism is really good. The libertarian approach is struggling right now because we're losing large parts of the population. And so, we're casting around for new ideas. Some of it clicked in Christianity, for what it's worth. I think that's the common-good capitalism.

And so, where we are, I think, in the economic cycle right now is we must rely on business and innovation entrepreneurship for advancement. Number One.

Number Two--and this I advocate for in the book and I'm actually slowly putting a manifesto together on the topic with some naming that think it's better than common-good capitalism, for its worth--that we need to align business to empower more people to be successful rather than divide people. And, we have a lot of businesses that are misaligned on their business model and that what needs to be disrupted.

Maybe I'll take examples from the portfolio--and you and I have talked about this before--because I think it's a valuable example. I invested in a company called Lemonade, which is an insurance business, fastest-growing insurance company in the world. Started to call[?it cold?]] five and a half or so years ago. I was fortunate enough to introduce the founders and be around the starting of the company. Now, by the way, from a regulatory perspective, it was a no coin flip on the we'd get a license or someone would try to block us out of this market, whether it's the regulator or other insurance companies.

But Lemonade had a couple of fundamental insights. Number One, brokers were incentivized to sell policies, not necessarily to deliver accurate information on the insurerees in the process, without casting aspersions on them. It's just an incentive system; and incentive systems work. And that's kind of Point One. So, if you used an app on a phone, you can capture a lot more data about people and get to better underwriting.

But, Number Two, fundamentally the insurance model is broken. Why is it broken? Dan Ariely is fond is saying that if you wanted to create abysmal [?abyss that?] brought out the worst in humanity, it looked like insurance. It's really simple. In your time of greatest need, the insurance companies [?are] incentivized to reject your claim, because they make money by rejecting your claim. That's just what it is. The combined ratio is that, right? And so, we ask, 'Could we align the business model?' And alignment is really fundamental to a lot of what we're talking about.

So, Lemonade takes a flat fee from the premiums for running the pool, basically, and is not incentivized to reject your claim. And they'll pay out quickly in order to do that because they want you to be a happy customer and talk about their product. And, all we wanted to do was to get the better and better underwriting.

And, by the way: leftover premiums go to charity. Now this is not some sort of corporate social responsibility. It's core to the business model because if you know, when you file a fraudulent claim, that you're really screwing in the American Cancer Society, you may want to think twice about it. And so, it better aligns all the actors in the system.

And, I think this creates better long-term growth, which I think is core to some of the questions we're asking ourselves in this current moment in capitalism, which is: One, how do we think more long term? Two, what sacrifices in the short term are we willing to make to grow the pie for more people and create better alignment in business? We've got this funny situation today where corporate social responsibility has grown. Well, it has grown because people think corporations are terrible, so they kind of create this balancing act. And so I got to do two sides of the scale: 'Okay. I do a lot of crap. So, I'll put some weights on the corporate social responsibility side and [?] leaving itself out somehow.' That's nonsense.

And so, what we really want to do--and by the way, it comes to this dichotomous world where 'Render unto Caesar what is Caesar's or render unto God, which is God.' But we don't have to think that way. And, I think Jewish thought is not that way, for what it's worth. And it's--and we need to get these businesses aligned and we can do this. And, by the way, Israeli kids make a three- to seven-, eight-year sacrifice where they get under-market pay for long-term growth of the country and the economy. It's called the military. And, the American ethos, which I think mostly--has lost that in large measure. And I think that trickles down--that's the core trickle-down effect into the economy.

46:49

Russ Roberts: So, let me disagree a little bit about the alignment issue because [crosstalk 00:46:54]--

Michael Eisenberg: [?] Now we love conversation.

Russ Roberts: Well, I like what you said about incentives. But you sort of said it as a throat clearer or sort of a parenthetical aside. You said, 'Incentives work.' And of course, that really is, I'd say, the most simplest insight of economics. Not necessarily the most important, but it's a simple one that's quite important. Incentives matter. It's not just monetary incentives. It's also non-monetary incentives like you're referring to about sacrifice or creating something greater than yourself or working with other people. It's not just how rich you're going to get. Although, that matters. It's not the only thing that matters, though.

So, incentives matter. And I think the challenge of some of the things that go wrong in business is that the incentives are not well-aligned--as you suggest. But, the way we have fixed them, traditionally--in the idea of a market system--is you don't have to worry about the incentives because they naturally align. They align organically. And they align organically through competition.

So, you say business people do some bad things that are shameful or they abuse power. The usual check on that, it could be regulatory. It could be social norms. The third is, of course, you lose your customers. You lose your investors because they're offered a better deal somewhere else by somebody who doesn't abuse them.

And, so, one of the challenges I think of the insurance model that we have--and economists will tell you, it's--we're not going to get into it--but for whatever reason, the insurance model is a regulatory model. And the whole--it's structured from the outside, from the top down, not bottom up. We used to have insurance that was different. Maybe it couldn't have survived in a free market way. But it hasn't. For whatever reason, it's heavily--in America at least--heavily run--and in Israel I assume it's heavily run--by government regulation.

The prices are set. Certain parameters are set. And those are not allowed to emerge. They're decreed.

And so, I think the challenge--I hadn't really thought about it this way--but the challenge with the current large firms that are success in America gets back to what I suggested earlier. They don't really live in the competitive environment that would normally really constrain them. There are some constraints. They're not full monopolies. There are other sources.

Just to take one example, a lot of the appeal of social media is just entertainment. There are a lot of places you get entertainment besides flicking through your phone on YouTube or Instagram or whatever. And so, they're in a competitive environment. I don't want to suggest that they're in control or they can do whatever they want. They can't. But the nature of competition is different in this world.

And, I don't think economists have come to grip with it very well. Certainly my friends in the free market community haven't. They just assume it will all work out again like it always has. I like to think that's true. I'm not sure.

But, if you want to, then--if you say--if you're on the Left for sure and if you're not a free market ideologue, for sure--'Well, we can't trust capitalists or competition to produce these kind of realignments you're talking about, Michael. It's going to have to be a panel of experts or the government or whoever,' how you going to get there from here without the corruption of rent seeking and other problems that me and my free market friends would point out?

Michael Eisenberg: So actually we agree: the free market argument doesn't apply in an era where, like, banking insurance, etc., where it's hard to get a license, and we got to file endless rates and forms. But, that's exactly where a better--one of the great things about the Internet, and mobile, and getting rid of intermediaries is: you can talk directly to customers. So, despite starting with a massive disadvantage, Lemonade talks directly to customers. Customers tweet positively about insurance, which you wouldn't see anywhere else. And so, you're able to frictionlessly aggregate customers in that way--once you get over the hurdles of getting the license. And so, it's not a perfect free market solution, but it is better than where we've been in the past in these industries. And, a panel of experts wouldn't solve this. Maybe we've had things run amok in a couple of areas. Right?

But, people are free will to get off Facebook. Or, people are free will to get off Snapchat. And, people are free will to get [off of?] all this. Netflix took a beating in the stock market this week, right? Because Disney came out with a better product. And their content matters, and more people go onto Disney+ or something like that.

And so, I'm not suggesting that the market will work out all of this. I am suggesting that we're entering a phase where consumers--because they have so much transparency, because there's a lot of friction in the system--we're going into what I would call a very uncertain time for a lot of these things where we can see a lot of change driven by this technology, and we need to let it unfold. And, I think we are seeing more and more entrepreneurs who are the drivers of those change care about the thesis I articulate as long[?] humanity empowerment.

And, you look at things like Andela, a company that takes African programmers and makes them available to U.S. companies. It's pretty stunning. Some business couldn't exist--who would--if you were to roll out of bed one day and say, 'Oh, let's improve the lot of more people living in Africa and get them U.S. salaries for this.' Amazing. No panel of experts would've come up with that.

'Let's get us into space faster, cheaper, better.' No panel of experts did come up with that. For what it's worth.

How do we get a vaccine out quickly to fight this pandemic? Not a panel of experts.

And so, you know, people want to work on these hard problems. And more and more, I see engineers who want to work on these hard humanity problems. So, I think we're going to get there.

And, you also have like little nascent[?] initiatives like Eric Ries's Long Term Stock Exchange. Part of the pressure of quarterly earnings right now is exactly that. We're asking people to make short term-decisions.

I'm sure the SEC [Securities and Exchange Commission] thinks it's a really great idea for transparency. At the end of the day, I'm not certain it's a great idea. And, it takes a unique guy like Bezos to kind of say, 'You know, I don't care what you're thinking about the quarter. I'm going for the long term.' You built a behemoth doing it.

And so, I think we're headed in the right direction, but we need to coalesce this around a framework that explains the short-term costs and long-term benefits to growing the pie and the prosperity of doing this, and to get people to act a little less like individual actors and more like empowering actors.

And, you know, to change a little bit up on Adam Smith here. I know he thinks that the baker is doing a baker's job and the cobbler is doing the cobbler's job will make the whole thing work.

What I argue is: The baker doing the baker's job and enabling three other bakers to do the baker's job very successfully is more effective in growing the pie. And, if we can help people understand that when the pie grows, we all win, we can do that.

Now, again, I think a lot of that's cultural and is an ethos that exists here in Israel, which is again why I'm so bullish on it.

54:29

Russ Roberts: So, that's really interesting. I'm going to--I've often longed for the idea that cultural norms, social norms, an ethos would solve some of our problems and that we would use non-government solutions like shame and other things to incentivize people to, quote, "do the right thing." In fact--I haven't talked about this episode a long time--but about 100 years ago in the early days of EconTalk, probably it was 2007 or 2008, I can't remember, but I had Paul Buchheit on, and Paul was the lead person on Gmail. And, I came to Shalem College a few months ago and my whole staff uses Outlook. And, I hate Outlook. I can't stand it. But, hey, I'm a new president. I can't really tell my staff, 'This is a big mistake. We are going to stick--.' So, we're sticking with Outlook right now. But Gmail is much better. It's really a lot better. It's a phenomenal--I love Gmail. Many, many things I like about it, especially after I started using Outlook.

But, when I talked to Paul--and it's, again, a long time ago, different time--I asked him what constrains Google from not abusing the power that a lot of people have migrated? Not everybody--like you say, we're free not to use it. There are wonderful options, they're out there. I think it's called Proton, I tried that for a while. And other things that are much more decentralized, less profit-oriented. I said, 'Well, what keeps Google from abusing its incredible base of--and information it has access to--that I'm happy to give most of the time; I don't think about it.' I think he said to me that their motto is: Don't be evil. And, I think I laughed out loud. I'm pretty sure. I mean, I'm not proud of it, but I'm pretty sure if we go back and listen to the tape, that's really not usually what restrains people, is the motto. It's the incentives. So, if those incentives don't change, your vision of a business ethos that empowers humanity isn't going to change. I don't think.

Michael Eisenberg: So, part of changing incentives is changing metrics. And so, I'm hard at work now actually on trying to build a set of metrics around this. When we're not on EconTalk, I'll check your economist head because I barely have a degree in anything. But I think what we measure matters over time.

And so, I did a project at the beginning of corona around economic resilience in Israel, where we created a new metric of household economic resilience. And some of the government would go, 'Well, that's really interesting. How come I've never thought about that before?' The OECD [Organisation for Economic Co-operation and Development], one of my least favorite organizations on the planet because I think they measure all the wrong things. GDP [Gross Domestic Product], which is a terrible measurement of economic output today, and human resilience. And, I want to be clear: I'm talking about making more money, now. I'm not talking about, like, some nairy-fairy[?], you know, communitarian approach. I'm talking about improving economic prosperity; and you've got to measure the right things to improve economic prosperity.

And, your point about Google is important, but it's also important to understand the structure of the industry. Ben Thompson has put this front and center: the government is after all the wrong things, so they'll never be able to regulate it. So, important--when you have a frictionless system like the Internet, he who controls the demand, controls everything. And the way you control demand, by the way, is not through monopolistic power today. It's by creating the best user experience.

You said it yourself: I use Gmail because it's the best user experience. I stay on Instagram--I don't have an Instagram account for what it's worth; I've never been on it--but people say on Instagram because it's a great user experience.

WhatsApp is not that popular in the United States because iMessage kind of works in people's friends of iMessage, but it's a great user experience, you know, here in Israel and across the world.

And so, the government actually can't regulate that problem of great user experiences. And so, we need to talk about the values and the competition. And, if you think Google is evil or abusing their power, so say so, and stand up and explain the actual costs of doing that.

You know, funnily, when we started Lemonade, I asked a question: Why do people buy from State Farm today? You know what the answer is? Because their father bought from State Farm. And so, the convenience of having the local agent who is a State Farm agent is what did it before. The convenience of a great user experience on Google is the same. So, we've got a lot of things that look like this in the prior economy. We just don't think about them the same way.

So, Ben Thompson has talked about aggregation theory, which is: if I have the most frictionless user experience, I aggregate the users; and then we need to move the users off. And so, you can move the users off through better experiences. You can move the users off by enabling portability. So, can I port my social graph off of Facebook or Instagram or whatever it is? We can do that. No one's talking about it, for what it's worth, in Congress--so we're not going to get there.

And, so, we need to look at these things in the context in which they're created. Nobody ever said, 'Fire, shoot, the State Farm agent, because he sold multi-generational policies to people,' even though he had capture and may not have been good for the customer. And, we shouldn't have said that by the way, to be clear. And, we shouldn't do the same, I think, to Google. We should enable, though, freedom. So, I should be able to port my graph to get out of there.

Russ Roberts: When you say--when you say 'port your graph,' what do you mean?

Michael Eisenberg: So, right now my social graph on, for example, Facebook or WhatsApp, belongs to Facebook.

Russ Roberts: When you say 'graph,' though, what do you mean?

Michael Eisenberg: Well, I'm connected to my friends. Why do I stay there? I stay on Facebook because a great user experience, because my friends are there. I'm not that active on Facebook--whatever; you get the point.

If that was portable and I could take it to a different application that belonged to me, you know, that would matter.

For what it's worth, by the way, some of the promise of Web3 and crypto [cryptocurrencies] is exactly that. It's an interesting question, whether it's actually accurate, because, like, for example--and this is really getting into the weeds--but, you know, Open C, which is the leading platform for NFTs [Non-fungible tokens] deplatformed a couple NFTs recently. And so, there is still a platform in there.

So, there is an interesting question whether Web3 in promise and reality is really the same and crypto really enables me to own my data on my graph. But, at least theoretically, that's one of the solutions of the blockchain and Web3.

1:01:29

Russ Roberts: Yeah. You know, exactly. I think that's the--in a way it's a tiny change. It's a property rights change, right? It says, 'I have x-thousand followers on Twitter.' A Twitter competitor comes along. It's better in whatever way--don't know; don't have to specify it. Let's say I want to be on there rather than being on Twitter.

It's true that I won't get to enjoy the stream of people on Twitter that I can get now because it has so many users I'm interested in. But, the other side is that my ability to reach the people who are interested in me disappears as soon as I go to this new platform and I've got to recreate my follower base.

And, not only is that going to be hard because they don't know I'm on the new platform: They are not on the new platform yet because they are stuck--and, happy or not, doesn't matter--on Twitter.

So, obviously, if there was a way to say, 'Hey folks, I'm on Twitter and you can follow me there just as easily'; I could port them, as you say, take my with me, take my tweets with me by the way, which you could argue are mine but right now they're not: they're Twitter's. Can't take them at all. I can copy and paste them one at a time. And my dream has been, from the beginning--and I think we're close with the Web3 thing in the blockchain although I haven't followed it closely--my dream from the beginning is a social network company will start that says, 'We are going to let you port your stuff.' That's competition. 'We're better than the places you've been hanging out with your friends because we'll let you take them with you if we don't do a good job. So, come try us. Maybe we even pay you for a while to come because we understand you got all this advantage at those old places.'

So, I do think that is the preferred method to cope with this. I don't think that's the way we're going to head. But we could. It could work out that way.

Michael Eisenberg: Yeah. It's not the same as local-number portability, which you just take your phone number with you. It's more complex than that obviously, much more complex than that. And, whether we get there or not, I don't know.

My point is that we need to contend with it on its own terms because the Internet is different than the rest of the economic system we have. And, again, part of the problem is just in these government interactions with Facebook--they don't know the material. And so, I don't expect them to come to a good solution. Hopefully, they'll learn it sooner rather than later. But, what I do is I sit down and encourage entrepreneurs all day: Go compete with LinkedIn on different terms, go compete with Twitter on different terms, go and make it more human first. I think ultimately human beings want to be treated like subjects and objects; and that's part of a good story, too.

Russ Roberts: Yeah. I agree with you 100%.

>
1:04:16

Russ Roberts:Well, we're over an hour here. Enjoyed every minute of it. But, we didn't talk at all about the Bible side of your book so I want to give you a chance to plug it. The book is an interesting approach to both the Bible and to economics. It notices--which I think is extraordinary--how much economics--and by that I don't mean my kind of economics of rational choice, emergent order, that kind of stuff--but more like the business side of life: economics as in the financial side, the way it's often--sometimes the word is misused, but it's the way people use it often.

Jacob and his family are a family business. We tend to think of it as a bunch of sibling rivalry but as you suggest on the book, a lot of that sibling rivalry was financial. It was material. It was a family business. Joseph's extraordinary experience in Egypt, empowering Pharaoh during a time of famine to survive it and then become even more powerful than before with political power and economic power is an important part of that story. I think most people would [?wouldn't?] know that; they say it in passing. But you put it front and center.

So, I want to give you a chance just, before we close, to talk about why somebody who doesn't believe in God and is not a religious person--Jewish, Christian, or Muslim--why they should read the Hebrew scriptures, the Hebrew Bible, the Book of Genesis? You're planning a set of commentaries on each book of the Torah--the Hebrew Bible. And, this first one's on Genesis, which has a lot of interesting interpersonal stuff. But, as I said, a lot of financial stuff. Why should I read that? Why should I read the Bible?

Michael Eisenberg: We'll have to do, by the way, another hour because--

Russ Roberts: I was going to say--on one foot--

Michael Eisenberg: We have to do another hour because both on the book, we didn't get to talk about the geopolitics--you wanted talk about my views on risk and uncertainty. We'll have to get that another time.

But so, this is the first of a quintology on the Bible. The first three books have actually [inaudible 01:06:29] in Hebrew already on Genesis, Exodus, Leviticus, and the fourth one on Numbers is due out in April in Hebrew. And, your point, The Tree of Life and Prosperity is out in English now for about five months. And, in fact, a large percentage of the audience that's gotten the book are investors, entrepreneurs, and technologists who have purchased it. I just got a note today from a investment bank that they're purchasing 200 books for their private wealth conference and they wanted know if I had sign them. And, they don't know who audience is.

So, let's go straight to your question of why someone who is not necessarily God believer should buy the book. And, so I'd say three things. Number One is the Bible--the Hebrew Bible--has stood the test of time. For 5,000 years, it probably has the most unique users of anything on the planet, even more than Google. And, I think principles and narratives that stand the test of time probably have a lot to offer us as people.

Number Two, when I released the book in Hebrew, a local rabbi, Rabbi Benny Lau[?], who wrote a foreword to another of my books, said, 'You know what I learned from your book? People haven't changed in 3000, 4000 years.' And, the kind of struggles of Adam in Garden of Eden with Universal Basic Income--as I call it there--or Noah and his innovation of the plow and Alfred Nobel, or Abraham and how he deals with wealth in society or negotiates a business deal, or Jacob in the family business. And, I go on in transitions and generations, like we talked about before, between agrarian societies and shepherding societies, or industrial societies and technology societies.

These are enduring principles and people are people. And so, there is a lot to learn from these interactions and how we translate them into a modern context.

And, that's the third point, which is: We're in a very fast-moving world right now, from a technological and economic perspective. And, we think, like, every day we're a lot smarter than the people who came before us--which may or may not be true. But, what we're missing is a translation layer from what Balaji Srinivasan called, reference to my book, 'wisdom of the ancients for moderns.' It's not just the Bible, the Hebrew Bible. There's a lot of smart insights and people who've come before us and if we can just translate their wisdom into modern times, we can deal with a lot of the challenges you were talking about earlier.

And, so, the book has found an audience--by the way, for what it's worth, I think it's mostly with non-believers rather than believers, who are shocked: 'No one ever talked to me about the Bible that way, the Hebrew Bible.' And, 'No one ever talked to me about the economy that way.' And, it's been extremely gratifying. I hope it's launched a conversation. And, as the book series evolves--because I've gotten feedback--I hope it's getting sharper as time goes on.

And, like I said, I'm in the middle of writing a manifesto right now, kind of, on this topic. I'm attempting to define different models of capitalism as we go forward into the 3rd decade of the 21st century, especially after we've had two decades of free money in the market, and what that's kind of wrought with American capitalism in particular.

And, at the same time, we have a Chinese kind of form of an economy, that we can no longer call socialism. It's some other form of capitalism. And I'm going to attempt to articulate a third way forward from that. And, a lot of it is drawn from biblical understandings of an economic reality, I think is equally as applicable today.

Russ Roberts: Well, I look forward to having you back, we can talk about it. My guest today has been Michael Eisenberg. His book is The Tree of Life and Prosperity. Michael, thanks for being part of EconTalk.

Michael Eisenberg: Russ, thanks so much for having me. I really appreciate it. This was super.

Russ Roberts: Yeah. It was a blast.


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