Ep760: Johan Norberg – We Have to Fight for Capitalism

Andrew Stotz 00:01
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning. This is Andrew Stotz from Ace thoughts Academy and I am bringing you a special edition of the podcast today, broadcasting from Sasson School of Management at Chulalongkorn University, where I happen to be in a room because I got a class I'm going to teach in just a bit on finance. And since we're talking about the subject of finance, I just want to mention about my guest today, and I think this is going to be a fun discussion. When I was in university, in my final year, there was an amazing woman who taught me a course called capitalism, democracy, democracy, socialism, and what was it communism. And that lady was amazing. And she had me read the Communist Manifesto. And I really dug into that to try to understand what was going on. And, I learned a lot from that. And I learned a lot about opposing views to capitalism, and it definitely made me think. But today, finally, somebody has come up with the title, the capitalist manifesto. And so I want to bring on Johann Norberg, who is the author, and a lecturer and historian of ideas from Stockholm, Sweden. He's written books on economics, politics, histories, they've been translated many different books into 30 different languages. And if you haven't read it, I really challenge you to read the Communist Manifesto. And Johan, welcome to the show.

Johan Norberg 01:48
Thank you for inviting me.

Andrew Stotz 01:50
Yes, well, it's, it's interesting to get you on. And I've been, you know, in Asia, here, capitalism, saved Asia. In fact, you talk in your book about, you know, China, and the developments that capitalism brought to China. And yet I see in Asia, people questioning capitalism, I understand it in the West these days. But I just would love for you to give a little background on why you wrote this book. You know, it's a progression in your thinking over time, and maybe just give the listeners a little tidbits of what you think, are the best parts of the book for them to then consider reading it?

Johan Norberg 02:34
Yeah, well, you know, I started to be obsessed with what economic freedom can contribute to human potential. Because once upon a time, I didn't believe in it myself. And it was really studying history, and specifically the history of my own country, Sweden, that taught me that got me to ask the question, Where would I have been without free markets and free trade? And the answer is probably nowhere, I would probably not have been alive today, because it was only with the advent of higher productivity, open global markets and free enterprise and Sweden, that took us from misery and hunger into becoming one of the richest countries on the planet. And this what I'm trying to remind people of that this is a process that happens all over the world, when you start to give people a bit more freedom to seek out opportunity to innovate, come up with new business models, and to exchange their best to with the best of others, then you can come. It's an machinery to reduce poverty and hunger around the world. And we have to be reminded, because we often forget it, it's that old saying he that has satisfied his thirst turns his back to the well and forget about where all these opportunities all the wealth comes from. But it's not automatic. It's dependent on these, this economic openness and all those pity capitalists out there constantly adapting and improvising to create a better world. And

Andrew Stotz 04:12
how have we lost sight of you know, the benefits of capitalism? I think about my, my great, great, great grandfather came from Germany in 1839, to the US, and then he, you know, had nothing and it was very hard, you know, in the beginning, and then eventually, my great grandfather started an architectural firm, and then his, his sons ran it. And, you know, they weren't super rich, but they survived through capitalism and the opportunity. So there was no doubt I think, in prior generations the benefits that capitalism brought, but seems like you know, we've we've lost our way and sometimes I think it's like, it's like a kid who's got mom and dad have have saved and invested over 50 years they have have a kid, there's million $2 million in a safe, it's open, and the parents are gone. And the kids at home and friends come around and everybody comes around, Hey, can I have some of that? And they hand out all the 2 million, not realizing what it took to get it, and not realizing how difficult it's going to be to get that back? How have we lost our way?

Johan Norberg 05:22
I think that's exactly what happens is once you reach a certain threshold, once you take wealth and opportunities and technologies for granted, then you forget where it came from. And you just start to think that, well, why don't we use this, all these resources in a better way, that's the mistake we did in Sweden in the 1970s, when we're already one of the richest countries on the planet. And we just thought we gave, we can do anything with all this wealth and just redistribute it, it's the kind of temptation that goes on lots of countries around the world, electing populace to just say, let's just use this wealth without realizing that it's not a pile of cash that just happens to lie around. If we were just to stop producing and innovating and just consumed the redistributed the wealth that's already here on the planet, all of it would be gone in around four years, all of it. So we have to create it growth is something that has to be invented, created every day by hard work. But it's easy to forget, if you didn't do the hard work if your if your parents did, or the previous generation did, and, and then sooner or later you come up against that hard wall of shortages and deficits and debt accumulation. And that's a very brutal reminder that you have to contribute something to that pile as well.

Andrew Stotz 06:56
You know, one of the things that annoys me the most when I look at debates, and people talk about capitalism, is what I would call government capture of capitalism. You know, and you've talked about that. But the idea that the collusion between big government and big business is such a profitable thing. And so many people say, well, there's capitalism for you. And my answer to that is no, there's politics for you, the politicians that we're electing, we're expecting to represent our interests. And if they're not, and we can't demand that, then you know, they give it away, or they do this collusion, but what is your How do you explain, you know, that when people start thinking about, you know, bringing together the idea of government and capitalism, and then it all gets, you know, messed up?

Johan Norberg 07:52
Yeah, no, that's a great point. Because, you know, profits and making a decent profit on what you're doing is a great thing, not just to you, but to everybody else, if you do it on a free market, you've done good. By, you've done well, by doing good to others. That's how it happens. It for a business to make a profit, that means you have to make all the other groups happy, before you become happy, you have to make customers satisfied giving them something that they value more than the money, they hand over to you. But you also have to pay your workers, lots of employees who expect to pay even if you don't make a profit, even if the product doesn't sell. And then of course, you have to pay your suppliers, you have to pay those who lent you money. So and then, and only then if you made all these groups happy, and there's something left for you, which will be heavily taxed, of course, that's your profit. It's a wonderful thing. And the bigger it is, the more good you've done to society. However, some people make a profit, not by competing over having the best goods and services, but by having good connections with politicians and with governments. And they by getting subsidies, tariff protection, and much of this the active industrial policy that everybody's talking about is about taking actually picking the pockets of taxpayers and handing them over to businesses and that's the opposite of free market capitalism that's cronyism, and it's a it's a horrible thing and we should stop that and how do you stop that you know, and stop that by stopping businesses? You do it by stopping politicians from entering the game of business and picking winners and deciding who gets what.

Andrew Stotz 09:46
Yeah, the other way of handling attitude is really encouraged small and medium sized companies and innovation. I worked for Citibank a long time ago and I if if there was no protection from the gutter MIT for that bank or many other banks, they would have portions of their business, let's say the mortgage portfolio, the credit card portfolio, would just be taken from them by Innovative smart startups that maybe even coming from Citibank and saw the problems and redesigned the software and came up with new ways of servicing and bringing value to customers. But because of the too big to fail, and all that, basically, we're in this situation where there is almost no innovation, able to be able to, no one player in the banking industry is able to really innovate and take off relative to the others. And that's one of the reasons why from an investment perspective, you know, I don't invest in the banks, because not only that, but also they've now become an absolute arm of the government in getting data and information on the population. But I'm just curious, like, could could societies do more? Could people demand more that support for small and medium sized businesses? Is that enough? Or, you know, what are your thoughts about that?

Johan Norberg 11:14
I absolutely agree with the way you're facing this whole problem. Some, oftentimes, the political logic goes something like this, people are dissatisfied with some of the big businesses who control a large share of the market. And then they say, Okay, let's get the government involved, let's start to regulate these businesses. And then what happens, of course, is that the biggest ones, they are the ones with the whole divisions of bureaucrats who go can go through all that paperwork, and just treat it as a cost of doing business. Whereas for the small entrance into the market, and potential competition to them, it's a nightmare. And that's why big tech and big finance they love regulation, because they can deal with it. Whereas it's, if you start out as an eccentric in your garage, it's not a cost of doing business, it's a prohibition on doing business. So really, this, this whole attitude of trying to control business is really the one thing that stifles competition and makes it easier for the big guys to to stay in charge, the natural cause of events is that you constantly face new competition from innovators outside, we all know how difficult it is to reimagine your business model and to innovate, because it's a threat to the old way of doing what you're doing. And the bigger you are and the larger share of the market. You've got. It's the Kodak phenomenon, you might you, you will be destroyed by the digital camera. And then the fact that the first digital camera was actually developed at Kodak doesn't matter. Because you're afraid of it, it ruins your own business model. That's why we constantly need this influx of new crazy dreamers and eccentrics who have nothing to protect. But they have an idea about what the future can hold. And the one thing we need then is an open playing field, making sure that we have vs open competition and free trade so that any entrant with a brilliant idea can access funds and then start competing.

Andrew Stotz 13:30
When I was in university, I graduated in 1919 89, from my undergrad, and at that time, they they had some students in free enterprise and they had some organizations that were really fighting for small businesses and all that, but it seems like I just don't see those types of organizations fighting as hard anymore. It's like, I think, you know, what you can say is that we do have like a startup ecosystem where everybody's, you know, in that startup world, one of the things that's interesting about startup is product market fit, like that's the core of capitalism, like product market fit, I've gone for years with ideas that I can't get value to the market, and they do not pay me and anybody who's like, Oh, those greedy capitalists, it's like, go out and try to get product market fit with a new idea. And see how brutal it is. There's nobody handing out money for a small, medium sized business or a startup. But I guess the question is, yeah, organizations defending small and medium sized businesses these days are because I look at the regulation and everything. And I just think the big businesses are behind, you know, behind the scenes, like they love this regulation, you know.

Johan Norberg 14:48
Yeah, that's right. And the problem is, of course, that the future doesn't have any lobbyists or business organizations or trade unions to the defend them only the incumbents to and the over alternatives do so they will constantly tailor all the regulations and the policies to, to their needs and their demands. And that's why we get this kind of regulatory capture. Milton Friedman, the late great economist talked about the natural history of business regulation is always that you have at first the combination of people who want to do good they want, they see problems, and they want to improve upon things. So they want to regulate and make sure that it's in the need of society and people. But these very well meaning do gooders are often in an alliance with people who have a very real interest in their own business models and the trade unions and the business organizations. So in combination, they come forth with new regulations often tailor made to certain incumbents into what they are doing. And then the do gooders move on to the next field to the next sector, because they've, they've succeeded, right. But the ones who have a special economic interest in those regulations, they stay behind, because this is their sector, and they constantly tailor made it and adapt it more to their own situation and to keep the competitors out. And Milton Friedman traces this in sort of the railway regulations of the 19th century, but we can see it now in finance, we can see it now in tech regulation, access to information, digital data, all of these areas. And that's why it hasn't been we we really need some lobbyists to talk about defend the interests that aren't there yet. The what could be there, if we allow the policies to open up some space for what is completely unexpected and unpredictable. We need room for surprises.

Andrew Stotz 17:04
Yeah. One of the interesting thing, when you look at stock market, you know, let's just say that a stock market is kind of the centerpiece of a free market, because companies do their thing. And they're either bought or sold and pushed up or pushed down, you know, by the markets. And almost all of the growth in new companies listing in the stock markets has happened in Asia over the last 10 years. In fact, if you look at the statistics, it's been now almost 20 years, that the New York Stock Exchange and the stock exchanges in America generally have had more D listings per year than listings. And when you look at all the regulations that they've put on companies, and now they're overloading listed companies with their ESG crap, and with their, you know, the climate, you know, regulations and the things that they have to report, and anybody behind if you get any champion of ESG, and you get them alone in a room, they will admit that it's a mess. But the point is, is that, wait a minute, how could the center of capitalism, the stock market be captured like this? How does that happen?

Johan Norberg 18:21
Yeah, the price of having a dynamic and productive free market, this eternal vigilance, because otherwise, sooner or later, people are going to move in, and the bureaucrats and the special interests are going to move in and try to drag it in their direction and to pile lots of regulations and ideas that aren't necessarily related to the business idea at heart, and that that's dangerous. Because I mean, it's difficult enough to be a successful business, right? It's dangerous out there and anything can happen. It's the constant, the customers change their mind, the technology and technological dead ends. And then suddenly, interest rates go, boom, it's, it's difficult to create something that works. Now, if you also have to make others happy, coming in from with a completely non commercial interest in dragging these business models in other directions, you have to be an expert there as well. And that's incredibly dangerous. My take on all these ideas on ESG. And what's the business of business? It's that look, businesses have one amazing objective, and that's to make the world a better place by doing business by being a successful business with a profit motive. You do when you do that in a successful way. You make sure that the resources that we have resources natural resources, machinery, labor are being put to the best use being used in as an efficient way as possible, taking things that people valued less and turning it into something that people value more. And if you make all these involved groups, happy if they want to play along, voluntarily, you make all them happy, and you get something left, that's your profit. And the bigger the profit, the greater the, the, the better. You've been at fulfilling this one objective. So when people say that, Oh, so businesses, successful businesses, they have to give something back to society, as some sort of apology for being successful in making a profit. I'm trying to tell them that, no, but the fact that they made a profit is proof that they've done something for society, Let's not ruin that. That's difficult enough in itself.

Andrew Stotz 20:54
Yeah, that's just the existence of a prophet is so hard. And it's proof that you brought value. You know, I teach finance. And I have a class that I'm teaching tonight, in the last time we met, you know, I talked with him about how, you know, value is ultimately created at the time that the customer is willing to pay above what it costs you to make the product or service, everything up to that point is just a cost. And you may get it right, you may get it wrong. It's just a cost. But value ultimately starts to be created at that time. But it also brings me to something that I've gotten annoyed with, and I have people are like, Well, you guys are just focused on profit, profit, profit, profit, maximize profit. And as I explained, that's wrong. And anybody who hears that argument that's listening. Now, here's how you handle it. The objective of a business is to maximize value. And when we look at the value of a business, we calculate the value of the business by looking at the cash flows that that business generates in the future. And we discount it by some risk factor. So it's the profit and the risk. If a company decides that they're going to break the law, and bribe politicians or government officials under the table, you may say, oh, there, See, there you go. greedy capitalist. Well, first of all, they're breaking the law. And, you know, that is the first thing, that's a problem. That's not a greedy capitalist, it's just a law breaker. But the second thing about it is that eventually, when that comes out, which people are doing things in secret, not just capitalists, communist and socialist, do things in secret, too. But the point is, when that comes out, the hit on the value of that business could be massive, it could even bankrupt the business, as we've seen, in many cases. So my point, and I'd love to hear your thoughts and how you, you know, discuss it. My point is, the objective of a business is to maximize shareholder value, and that includes risk in it. And therefore we follow the law, and we do all the things that try to reduce the risk in the business. But what are your thoughts on that?

Johan Norberg 23:19
No, I think that's a great way of phrasing it the yes, there are instances when business people lie and deceive. And he breaks the company, if you're new medical device is fake. Well, the moment people learn about this view are destroyed. That's not a way of creating value to you or to the shareholders in the long run. But that also tells us something else, it tells that this that this is not the regular state of affairs in our economy, because otherwise people wouldn't be so trustful. They wouldn't continue to believe the statements of businesses and the reports the they get the fact that they are destroyed, once you begin to doubt that they're sincere, if they've broken the law, or something tells you that most of them do not. And it's the normal state of affairs is that it's a system built on trust, and no deal ever happens unless both parties really think that they will benefit from being a part of it, and not otherwise. So I think it's a caricature of capitalists to say that it's all about deceit. And you'll always find examples of that. But then the market is brutal against those people and they're sorted out instantly. So that's the feedback mechanism. That's what market evaluations are about. That's what these voluntary trades are all about. Now compare that to politicians whom we know often have a long track record of not always being completely honest about what they're up to or what they're going to do after the next election. But keep being elected again and again. And to me, it tells me that these feedback mechanisms that we have on the market should be something to envy and try to emulate in other spheres of our society, rather than as be healing.

Andrew Stotz 25:29
You know, another area is war. And one of the things when I moved to Thailand in 1992, Cambodia was coming out of the disastrous times Myanmar has been in and out of, you know, troubled times for a long time. And I took many trips around Thailand, where I went to the border. And there's an amazing phenomena there. And that is, people from both sides of the border, wake up every morning, fill up their cards with goods and services, and you know, noodle carts and products that they've gotten from their country, and they come to the border, and they exchange in peace, and there has to be some trust. And what I like to tell people is that capitalism is for peace. The only people that benefit from war, are politicians, and companies that make weapons of war. I suspect they're the main ones. But how can we help people understand that capitalism is about peace and voluntary exchange and trust?

Johan Norberg 26:40
Yeah, yeah, no, that's a great point. It's, it's, it's not just peaceful capitalism is peace, because it's the first economic system where you only get rich by enriching others, where everybody's free to walk away from any deal. Compare that to any kind of economic system that we've experimented with in our past, slavery, feudalism, communism, fascism, they're all based on taking value, extracting it, stealing it from those who produce and create capitalism is the first instance where well, you want the resources of others, then you'd better give them something that they value even more. That's peaceful exchange by definition, and they pressures US forces us to constantly come up with better ways of satisfying other people and taking their will into consideration as well. And, and that has an effect on mentality in a broad way, as well, we have this Swedish tradition of, you know, the Swedish and Danish kings, they always made war with one another. But people in the border regions, they made secret peace, because they wanted capital trade and fish trade to continue across the border. And there was the saying that the oxen made peace, they didn't want to fight with each other. Because the first rule of good business is don't kill your customers and don't, don't kill your suppliers. And I think that pressure is on in market based societies as well. People want to trade peacefully, and they have their best ideas and suppliers and markets in other places, as well. Only the dictators and the rulers want to make war. And that's really something we can see that now in Russia as well. Seems like not many more people than Vladimir Putin himself really wanted a war with Ukraine. And it seems like one of the reasons why he started it was this long pandemic when he was isolated, even from the sort of, you know, the brutal monopolistic oligarchs and stuff even they didn't want war, because they know this will just destroy value. But while Putin was sitting there in his bunker and having a two week quarantine, demand from anybody who got to see him well, businessmen couldn't stay away for two weeks. So we only got to meet the weird philosophers and historians who they were very happy to destroy value to destroy a neighboring country. But people working on markets understanding how you create wealth, they don't.

Andrew Stotz 29:22
Yeah, and I think that, you know, history is such an important thing to learn from. I remember reading Genghis Khan in the making of the modern world, which was such a fantastic book, I listened to it on Audible. I probably listened three times to that book, but you just realize, like one of the things that really woke me up was there's two things. First, men would attack other villages and abduct the women as their wives basically. And it was such a brutish thing is hard for me to really reconcile with the I see the world today. And the second thing is when Genghis Khan would go into a city, and literally kill, let a small number of people escape and go to the next city. Meanwhile, he's massacred every single soul in that city, and just the harshness of what the world was. And then I was just thinking about the Rolling Stones, Sympathy for the Devil, where he says, I watched, you know, the devil watched in glee. While you know, the kings and queens fought for 10 decades, for the gods they made, it's easy for us to forget that the world is just has been such a brutal place. And this, you know, how capitalism is such a much better system, you know,

Johan Norberg 30:49
ya know, the I always remind myself when I think that the world is going to the dogs, and it's easy to get that impression, when you study the headlines of what goes on in the world. Well spent five minutes just glancing through a history book. And you realize that there was a completely that our ancestors went through such horrible conditions that we couldn't dream up. It goes for violence. Definitely. And I think if you adjusted for population, the Mongol invasions were more lethal than even the First and the Second World War. absolute horror. But also, of course, when it comes to wealth and to living standards, you know, if people think that we live in a difficult era, just remember that for 300,000 years, life expectancy was stuck at around 20 to 30 years, nothing much happened. And then suddenly, in 150 years, everything took off. And suddenly we live to 70, even 80, in the richest countries on the planet from 30. That's you, we should count our blessings just having been born in this era, 200 years ago, some 80 to 90% of the world's population lived in extreme poverty, today, less than 8% Do, which means that even in the richest countries on the planet, 200 years ago, extreme poverty was worse than it is in Sub Saharan Africa today. So tells you that if we had a time machine, and could go anywhere back in to the past, just don't stay stick around. Because at least it's not the best possible of possible worlds, but at least it's the best one invented so far. Yeah,

Andrew Stotz 32:42
it's a good point. One of the other things that I teach an ethics and finance class here in Thailand, and I asked the students on the first class that I said, there's two imaginary companies, they're doing the same thing in the same, you know, they're in the same industry, they're in Thailand. And one of them declares itself to be a stakeholder capitalism company. And the other one, you know, announces itself as shareholder capitalism, or let's just say, capitalism company, and which one would you like to join? And Johan, unfortunately, they all go to the stakeholder company. And I think it's so seductive that it just feels good. And that they're now I then lead a debate and a discussion, that and then try to get them to change sides and think about it. But it's so seductive to be able to say, Hey, come on, be a stakeholder capitalist guy. Think about the world, think about others. Why is this a flawed way of thinking?

Johan Norberg 33:51
Yeah, who was it that said, if you go into a sushi restaurant, and it says this is non profit sushi, would that make you more eager to try it out? Or it's suspicious? Thing is that stakeholder ism sounds nice because you can kind of fill it with anything you're interested in, and anything that makes your heart beat, yes, doing that, rather than looking for a profit. That sounds nice. But precisely for the same reason, it's a little bit disconcerting, because anyone can fill it with anything, it often means that we just lack these few rational transparent indicators on how we are really doing that is what happens when you when you're actually looking at the bottom line, you know what you're doing, you know how well you are doing, whereas if it's a stakeholder thing, you can just say, Yeah, we were doing well according to the You know, you hit anything, the way to always hit the target is to throw the dice first, and then you call whatever you hit that target, because you're always doing something that could be interpreted as doing good for for somebody else. But the real way of making society a better place and to improve the lot of stakeholders in the long run is to make sure that our resources are being used in a good decent way, and not being wasted. According to people's pet projects. It's not might not always be your pet project that wins out in the end. And so and no matter what your objective for society long term is, it's a better thing to be wealthy using resources in an effective manner and being more productive. That's the way in which we get the resources and technologies to deal with environmental problem. This is the way to improve the lot of workers and people generally, not by thinking about the specific stakeholders in this particular company. But by making sure that we all become more productive constantly. So that we can churn out better goods and services and technological capabilities at a lower price, thereby raising the purchasing. Power of everyone in every place. So to me, stakeholders might actually be a way of narrowing your concerns, rather than thinking about the long term health and wealth of society entirely.

Andrew Stotz 36:38
Yeah, it's interesting, I think we should start a movement and maybe the movements already out there to require that any company that is a stakeholder capitalism company, clearly state that in their bylaws, and make a public declaration that they are optimizing for stakeholder capitalism. It's not enough just to submit all your reports and get your ESG score. Put it in your company documents, declare it? And let's see how it goes. Of course they won't, because they know the risks of that. That's the first thing I think we should you know, demand that people who are declaring to be stakeholder capitalists, that they really make it very, very clear, a lot like a nonprofit sushi restaurant, which the minute you said that I thought I don't want to go to that. Is there any movement? Or do we need to start? Now?

Johan Norberg 37:39
I think you're gonna have to start that right now. Because I can't see that yet. there yet.

Andrew Stotz 37:45
Well, the other thing about capitalism that I thought about is that if your supplier to a company and they declare themselves to be stakeholder capitalists, then I would suggest that you immediately increase the price of your product. And you renegotiate your contracts, because you are now recognized as part of that company as a stakeholder. And you certainly have a right to stand up and say, I'm a core stakeholder, and you haven't been following stakeholder capitalism all this time. And now you are, therefore you're claiming that you're going to give to others besides shareholders in the company, and therefore, I want a piece of that. And that, is that irrational demand?

Johan Norberg 38:33
No, I don't think it is. This is the problem with stakeholders, and that I think you will lose focus on what you're actually doing. Yes, you should take the needs and the interest of your workforce into consideration. Who doesn't if you want to run a decent company? Of course you do. But it can't be the one primary objective. Because then okay, allow them to keep on working, even if you don't need their particular services anymore. Will Yes, that would be better, to some, for some of them. But you lose what the business shouldn't be about trying to create something that's a value to other people. You should take the needs of the local community into consideration. Of course you do, because they're sort of your customers and they are part of what makes your company successful as well. But if that's your primary concern, what does that mean? If you can make another relocation would be more productive and create greater value in the long run? Should you stick around just because of that, in that case, you're hurting others in other places, so I just I just can't make any sense out of what really shouldn't be the, the transparent indicators of whether you are doing good or not, when you and I think to some of them, of course, that's part of the temptation, because it means you can, you can be slightly less transparent than you were before.

Andrew Stotz 40:18
The other thing is that people when people listen to this conversation, or when people talk about their like, you don't care about the environment, and you don't you know, you that that type of thing, but I think one of the things I'd like to hear from you about is the idea of what's the difference between capitalism and the political system? You know, for instance, yes, one of the things that's interesting about ESG is that it's, you know, it's an agenda that's being pushed by a group of people, not through the political space, but through the business space. And, and I would argue that what really should be happening is that those decisions should be going through the political space, so that in the political space, in a democracy, everybody has the ability to vote on it, and choose their representatives, and decide what it is as a society that they want. And then companies have to follow that ultimately, and if you don't want to, you've got to lobby and try to get other politicians in. But when you go around the political system, it seems very dangerous. How should people think about capitalism versus, you know, the political system?

Johan Norberg 41:36
Yeah, that's a good question. And let me just first point out that we are actually solving environmental problems. Constantly. We live in a much less polluted world in rich developed countries now than we did 3040 years ago, because of generally, of course, more environmentally friendly technologies and filters and scrubbers, and now electric cars, and what have you, but, but also for the simple reason that we constantly in decent businesses, we try to make use less inputs to produce more value. So we're constantly in this struggle to reduce the energy, the natural resources that we need to create our products. Eventually, most of them become ones and zeros, digital systems. Compare that to the planned economies, you know, the Soviet economist realized in the 1980s, that they Oh, look, it seems like we're using twice as much resources and metals and minerals and paper and cement and energy to produce the same value as the American factories, simply because they weren't on this competitive pressure and of the pressure from the price system to constantly improve what you've got. Now, these different forces in combination means that we are actually dealing with some of the worst environmental problems daily, the absolute absolute carbon dioxide emissions have been falling in absolute terms in around 40 countries around the world, which ones the most market based and richest capitalist societies on the planet, this combination of internal pressure from just becoming a more effective company, combined with political pressure, which is where I think there's a role for politicians to internalize externalities, if you pollute somebody else's lungs, and forests and lakes, you should pay for it. And this creates this pressure as well. That's how we solve environmental problems, not by generally just trying to be better people. Because I don't think that that would be, then the problem is that the ones who are trying to abandon certain production, just to be more greens are the ones who have to pay the price completely and lose out by doing it. This is some work, it's really important to have a division of labor between politics and economics, I think.

Andrew Stotz 44:17
Well, I think also, I think what you're getting at too, is that there is a role for an NGO, there is a role for a person who finds wrongdoing a whistleblower, or someone who discovers that a particular product or chemical is hazardous or whatever, and bringing that to the government and then trying to get some legislation to address it. And I think that that's where I think the role of government you know, there is a role I think when, you know, I would call myself probably pretty libertarian, but one of the things that I hear libertarians say that never made sense to me was that, that government is a form of theft or taxation is a form of theft, when in fact, we have a compact between each other that hey, we're gonna I pull our resources to make this hospital or build this road, or have this intersection with a stoplight and a policeman directing that traffic, because it's beneficial, and we're willing to contribute to that. So, you know, that's to me is the role of politics in the whole thing. There. I don't want to take much more of your time. But there was an interesting guy, kind of, kind of famous guy that tweeted something about your book and chapter four, and all of that. Maybe you can tell us like, Who was that guy? What happened when he said that? What did you think when you heard that he had tweeted it?

Johan Norberg 45:42
Oh, yeah, that was a fun moment, because I was actually on stage doing a video recording about subjects like this. And suddenly, someone in the audience just yelled, Elon Musk just tweeted about your book. And we had to take a break instantly. So Elon Musk of Tesla, and SpaceX, and next fame and so on, tweeted about how the capitalist manifesto was something like an excellent description of not just how capitalism makes us wealthy, but why it's also a moral system. And, you know, he's, he's kind of an influencer. So he has some 150 million followers or something like that. So you could see that in the sales instantly. And I think on Amazon's Economic History Top list, I was the number one best seller and the number seven, best seller, depending on the sort of the hardcover and the softcover after he tweeted that. So that's interesting, because it tells you that nowadays in the book market and many other markets, it might not be reviews in the traditional media that really drives attention and sales, but suddenly, it's just having the right person picking up the book at the right time. So that was a fun moment.

Andrew Stotz 47:04
Yeah, congratulations on that you've written something, you know, I just want to say for the audience, you know, if you haven't read the capitalist manifesto, get it I, I listened to it on Audible and really enjoyed it. And it definitely woke me up to kind of, I think sometimes we are swimming in capitalism, and it's like a fish swimming in water, you lose, you know, you don't recognize what water is. And sometimes, we don't recognize the strengths of capitalism. And I think this book helps us. The second thing I think that's valuable is that it's easy to get distracted as a businessman or a woman, when you're in your startup or running your business, because there's people pulling you in all different directions. But ultimately, your objective is to maximize the value of your business, and particularly also to try to maximize the profit within the rules of the game and the laws of the land. And this book really helps, you know, to, to understand that more clearly. And I'm gonna have a link in the show notes and all that for the book as well as you know, to follow you. But maybe why don't I let you wrap it up by just kind of what would be the message that you want to get across to the listeners and the viewers who have maybe they haven't woken up? They're on the fence, they need to hear something from you, what would you tell them?

Johan Norberg 48:29
I tell them that, look, I understand why people think that the world is in a mess right now. And we've had 20 Awful years full of financial crises, and how inflation, inflation and the interest rates. peaking and we've had chaos in the Middle East Putin's invasion of Ukraine and the great pandemic, it's easy to despair about the world. And yet, these 20 horrible years have also been the best 20 years in human history. If you look at objective indicators of how people are really doing 130,000 people being lifted out of extreme poverty every day, infant mortality being almost half during this period. And it happens in the places that begin to open up integrate into the global economy and giving people a little bit more freedom to produce to work to innovate and to trade with the rest of the world. And that's what capitalism does. It's like you say it's like, fish in the water. We rarely see it and we see the headlines about the world going to the dogs, but this is something that happens. Pismo individually and the millions and millions of people who constantly adapt and improvise and innovate our way out of all these problems that war and politicians keep on piling on top of us and that's what capitalism does and it deserves a manifesto. I think it deserves some praise because it's tough work. It's difficult to create wealth and opportunities to people. And it doesn't help if people tell you that you're ruthless exploited to bloodsucker, sometimes you need to know that these you're a hero, if you actually create value for other people, that's what I tried to do. Well,

Andrew Stotz 50:17
what a great way to end it. You're a hero. Think of all the startups out there, all the small and medium sized business owners that are struggling with product market fit, how to figure out how to deliver their products at a reasonable cost, how to improve their products, how to improve their services, how to beat their competitors, who are coming after them. All of those things together, make you a hero. So I just want to thank you for coming on the show and sharing a little bit of that. I don't have the voice of Elon Musk, but I can tell all my listeners get this book, read it, listen to it, and start to understand that we have to fight for capitalism. And it can be lost if we don't fight for it. So this is your worse podcast host Andrew Stotz saying I'll see you on the upside.