If you didn’t know, China has had negative population growth for the past 4 years. Japan has had negative population growth for the past 15 years. The public and economists both have some decent intuition that a falling population makes falling total output more likely. Economists, however, maintain that income per capita is not so certain to fall. After all, both the numerator and denominator of GDP per capita can fall such that the net effect on the entire ratio is a wash or even increase. In fact, aggregate real output can still continue to grow *if* labor productivity rises faster than the rate of employment decline.
But this is a big if. After all, some of the thrust of endogenous growth theory emphasizes that population growth corresponds to more human brains, which results in more innovation when those brains engage with economic problems. Therefore, in the long run, smaller populations innovate more slowly than larger populations. Furthermore, given that information can cross borders relatively easily no one on the globe is insulated from the effects of lower global population. Because information crosses borders relatively well, the brains-to-riches model doesn’t tell us who will innovate more or experience greater productivity growth.
What follows is not the only answer. There are certainly multiple. For example, recent Nobel Prize winner Joel Mokyr says that both basic science *and* knowledge about applications must grow together. That’s not the route that I’ll elaborate.
The title is excellent, given that the author Brad Jacobs did in fact make a few billion dollars.
The book itself is fine to read, but also fine to skip if you aren’t yourself burning to build a billion dollar company through excellent management and mergers and acquisitions. I certainly don’t care to, which Jacobs says would make me a bad hire for one of his companies:
I only hire people who are motivated to make a lot of money…. If an candidate says to me ‘I’m not motivated by money’, I suspect either they’re not being candid or they lack the hunger that’s necessary to succeed
The book has plenty of hard-driving sentiments like this that you’d expect from a self-made billionaire:
Fire C players
For the first time ever, an American company, Exxon, had reported quarterly earnings in excess of $1 billion. The words “obscene profits” flashed on my TV screen, and I remember thinking “That sounds pretty good! Maybe I ought to check out the oil sector.” [This part I agree with, economic theory predicts that entrepreneurs will enter the sectors with the highest profits and its what I’d do if I wanted to make money, though in practice I think it is surprisingly rare for would-be entrepreneurs to choose this way -JB]
“The CEO trait most closely correlated with organizational success is high IQ” [specifically more important than EQ]
But Jacobs balances these ideas with some surprisingly hippy-like attitudes. Jacobs went to Bennington College and almost had a career as a jazz keyboardist. Chapter 1 is titled “How to Rearrange Your Brain”, and emphasizes the importance of meditation. Page 21 is basically “have you ever really looked at your hands, man… do it, it’s a trip”
I don’t want to spend even one hour around people who are unkind. An organization is like a party. You only want to invite people who bring the vibe up
Though perhaps this hippy/anti-hippy balance shouldn’t be surprising for someone who says one of the main things he asks about potential hires is “can this person think dialectically”.
Strongly recommend the book if you want to follow Jacobs’ path; weakly recommend it as a general management/self-help book or way to learn about markets.
Have you ever looked up and wondered where the time went? One moment you’re living your life, and the next moment you realize that you’ve just lost time that you’ll never get back? That’s what happened to Japan’s economy at the turn of the century in an episode that’s known as ‘the lost decades’. It was a period of slow or null economic growth. Economists differ with their explanations. One cause was the prevalence of ‘zombie firms’.
Japan’s Economy
Japan had a current account surplus from 1980-2020, which means that they had more savings than they effectively utilized domestically. Metaphorically, they were so full of savings that they exhausted productive domestic investment opportunities and their savings spilled out into other counties in the form of foreign investments. This was driven by high household savings and slow growth in domestic investment demand. The result was the Japanese firms had easy access to credit. Maybe a little too easy…
Private corporate debt ballooned throughout the 1980s. That’s not intrinsically a problem. In the 1990s, households began saving somewhat less, and most firms began to drastically deleverage… But not all firms. The net effect of the mass deleveraging was that interest rates fell. The firms that remained in debt were the ones that risked insolvency. Less productive firms had slim profits and their Earnings Before Interest, Taxes, Depreciation, and amortization (EBITDA) was slim. So slim, that they couldn’t pay their debts. Faced with the prospect of insolvency, firms did what was sensible. They refinanced at the lower interest rates. Firms went to their banks and to bond markets and rolled over their debt, which they couldn’t afford, and replaced it with debt that had a lower interest rate. This occurred across industries, but especially in non-tradable goods and services that were insulated from international competition. Crisis averted.
Except this process of refinancing, while avoiding acute defaults and a potential financial crises, ensured that the less productive firms would survive. Not exactly failing and not exactly thriving, they could sort of just hold on to something that looks like life. Well, high debt and low profits aren’t much of a life for a firm. It’s more like being undead – like a zombie. Between 1991 and 1996, the share of non-finance firm assets held by zombie firms ballooned from 3% to 16%. The run-up differed by industry: Manufacturing zombie assets rose from 2% to 12%, from 5% to 33% in real estate, and from 11% to 39% in services. These zombie firms linger on, tying up valuable resources with low-productivity activities and drag on the economy.
China’s Economy
I’m not prone to China hysteria generally. However, I do have uncertainty about the plans and actions of the Chinese government because I don’t know that domestic economic welfare is its priority. That makes forecasting more political and less economic and outside my expertise. Regardless, the Chinese economy is a constraint on the government, whether they like it or not. And there are some echoes of the Japanese economy’s lost decades.
Economists overwhelmingly see tariffs as clearly welfare-reducing. Tariffs on imports result in higher prices, fewer imports, less consumption, and more domestic production. In fact, it is the higher prices that solicit and make profitable the greater domestic production. We don’t get the greater domestic output at the pre-tariff price. We can show graphically that domestic welfare is harmed with either export or import tariffs. The basic economics are very clear.
However, the standard model of international trade makes a huge assumption: Peace. That is, the model assumes that there are secure property rights and no threats of violence. All transactions are consensual. This is where the political scientists, who often don’t understand the model in the first place, say ‘Ah ha!. Silly economists…’ They proceed to argue for tariffs on the grounds of national security and the need for emergency manufacturing capacity. But is an intellectual mistake.
Just as economists have a good idea for how to increase welfare with exchange, we also have good ideas about how to achieve greater or fewer quantities transacted in particular markets. This is not a case of economists knowing the ideal answer that happens to be politically impossible. Rather, if it pleases politicians, economists can provide a whole menu of methods to increase US manufacturing, vaccine manufacturing, weapons manufacturing… Heck, we can identify multiple ways to achieve more of just about any good or service. Let the politicians choose from the menu of alternatives.
The problem with tariffs is that they reduce consumer welfare a lot, given some amount of increased production in the protected industry. Importantly, this assumes that the tariffs aren’t hitting inputs to those industries and are only being applied to direct foreign competitors. The below argument is even stronger against imperfectly applied tariffs, like the US tariffs of 2025.
What’s the alternative?
The alternative is a more focused tack. If the government wants more missile or ship production, then what should it do? There’s plenty, but here’s a short list of more effective and less harmful alternatives to tariffs:
Last week I drove an hour south to help an acquaintance with constructing his retirement home. I answered a group email request, looking for help in putting up a wall in this house. I assumed this was a conventional stick-built construction, so I envisioned constructing a studded wall out of two by fours and two by sixes whilst lying flat on the ground, and then needing four or five guys to swing this wall up to a vertical position, like an old-fashioned barn raising.
But that wasn’t it at all. This house was being built from Structure Integrated Panels (SIP). These panels have a styrofoam core, around 5 inches thick, with a facing on each side of thin oriented strandboard (OSB). (OSB is a kind of cheapo plywood).
The edges have a sort of tongue and groove configuration, so they mesh together. Each of the SIP panels was about 9 feet high and between 2 feet and 8 feet long. Two strong guys could manhandle a panel into position. Along the edge of the floor, 2×6’s had been mounted to guide the positioning of the bottom of each wall panel.
We put glue and sealing caulk on the edges to stick them together, and drove 7-inch-long screws through the edges after they were in place, and also a series of nails through the OSB edges into the 2×6’s at the bottom. Pneumatic nail guns give such a satisfying “thunk” with each trigger pull, you feel quite empowered. Here are a couple photos from that day:
The homeowner told me that he learned about SIP construction from an exhibit in Washington, DC that he attended with his grandson. The exhibit was on building techniques through the ages, starting with mud huts, and ending with SIP as the latest technique. That inspired him.
(As an old guy, I was not of much use lifting the panels. I did drive in some nails and screws. I was not initially aware of the glue/caulk along the edges, so I spent my first 20 minutes on the job wiping off the sticky goo I got all over my gloves and coat when I grabbed my first panel. My chief contribution that day was to keep a guy from toppling backwards off a stepladder who was lifting a heavy panel beam overhead).
We amateurs were pretty slow, but I could see that a practiced crew could go slap slap slap and erect all the exterior walls of a medium sized single-story house in a day or two, without needing advanced carpentry skills. Those walls would come complete with insulation. They would still need weatherproof exterior siding (e.g. vinyl or faux stone) on the outside, and sheetrock on the inside. Holes were pre-drilled in the Styrofoam for running the electrical wiring up through the SIPs.
From my limited reading, it seems that the biggest single advantage of SIP construction is quick on-site assembly. It is ideal for situations where you only have a limited time window for construction, or in an isolated or affluent area where site labor is very expensive and hard to obtain (e.g., a ski resort town). Reportedly, SIP buildings are mechanically stronger than stick-built, handy in case of earthquakes or hurricanes. Also, an SIP wall has very high insulation value, and the construction method is practically airtight.
SIP construction is not cheaper than stick built. It’s around 10% more expensive. You need perfect communication with the manufacturer of the SIP panels; if the delivered panels don’t fit properly on-site, you are hosed. Also, it is tough to modify an SIP house once it is built.
Because it is so airtight, it requires some finesse in designing the HVAC system. You need to be very careful protecting it from the walls from moisture, both inside and out, since the SIP panels can lose strength if they get wet. For that reason, some folks prefer to not use SIP for roofs, but only for walls and first-story flooring. For more on SIP pros and cons, see here and here.
This restlessness and energy likely has something to do with us being currently in the lead for the race to AI. Ho hum… building God while still having the equivalent of the GDP of a small country to drop on Halloween trinkets.
Aspiring writers might believe that only writing is creative. Only words you specifically order and set in stone can last, it might seem.
Motions made at committee meetings and cheers for children on the soccer field are creative, too, actually. They leave an indelible mark on the world, even though the specifics of your performance are quickly forgotten.
There are two main questions. Will AI companies need to pay compensation to authors they are currently training off of? Secondly, how important is it for human writing to be a paying career in the future, if AI continues to need good new material to train from?
There is more at the link but here are some quotes:
If human writing ceases to be a viable career due to inadequate compensation, will LLMs lose access to fresh, high-quality training data? Could this create a feedback loop where AI models, trained on degraded outputs, stagnate?
This case also blurs the traditional divide between copyright and patents. Copyrighted material, once seen as static, now drives “follow-on” innovation derived from the original work. That is, the copyright protection in this case affects AI-content influenced by the copyrighted material in a way that previously applied to new technology that built on patented technical inventions. Thus, “access versus incentives” theory applies to copyright as much as it used to apply to patents. The Anthropic settlement signals that intellectual property law, lagging behind AI’s rapid evolution, must adapt.
This is post coauthored with Jack Cavanaugh, Ave Maria University Graduate of 2025.
Say that you want to become a successful lawyer. What does that mean? One possible meaning is that you are well-compensated. Money is not everything, but it does give people more options for how to spend their time and resources. Law degrees are a type of graduate degree. So, what bachelor’s degree major should one choose in preparation for law school? We lack rich administrative data on college majors and LSAT scores.
Luckily, the 2023 American Community Survey (ACS) comes to the rescue. It has all of the typical demographic covariates, income, occupation, and college major. So, if we make the small leap that well-prepared law school students become high-performing lawyers who are ultimately paid more, then what college major puts you on the right path? What should your major be?
We don’t look at an exhaustive list. We place several occupations into bins and examine only a few alternative majors. Any unlisted major falls under ‘other’. Below are the raw average incomes by occupational category and college major. Note two majors in particular. First, Pre-law literally has the word ‘law’ in the name and is marketed as preparation for law school. However, it is the undergraduate major associated with the lowest paid lawyers. For that matter, Pre-law majors have the lowest pay no matter what their occupation is. Second, Economics majors are the most highly paid in all of the occupations.
I suppose I’m sold on their claim that most kids can learn basic facts and some academic skills from an iPad app. Listen all the way through if you are going to listen at all, because even some cracks in the tech product are revealed after the big pitch in the beginning.
I have been using Duolingo to review my high school French and Spanish. I think the few minutes a day I spend have helped drag some vocabulary back out of long-term storage. Although, as I recently heard a comedian say, “All my friends who have Duolingo are still speaking English to me.”
Folks should consider whether AI learning apps is just MOOCs again. Essentially, they need to get kids to watch (short, this time) videos of lecture content. MOOCs were longer lecture content videos. Maybe shorter is the key, combined with personalized feedback. Maybe not, for getting cheap effective comprehensive education that scales.
About half an hour in, Liemandt asserts that anyone in America would agree that kids learn life skills through “sports” not school. That’s an oversimplification, but I agree that sports ranks higher than “math class” for developing leadership ability.
Since they at Alpha School believe that have solved quickly learning facts, it’s interesting to hear how they do the rest of “education.” The school must fill enough time that the parents don’t have to see their kids half the day and also teach leadership/ communication/character. Alpha school is expensive ($40,000 a year) and there are many paid adults involved who are called “guides and coaches.”
My students at Samford are especially good at taking on leadership roles and creating a thriving community. Residential college provides a good testing ground for leadership and there are real “market tests” of success for things like sorority events, as the Alpha school encourages for older kids.
I applaud people trying to innovate. I think we’ll see more educational apps in schools, and that will be great. I’m not trying to dump on Alpha School. I just think the underperformance arc of MOOCs should temper our enthusiasm.
Economist Writing Every Day 