EconTalk Host Russ Roberts on Key Economic Concepts for Founders

Russ Roberts: Welcome to the podcast!

Hey, correct, great to be here! So, you, for those who don't know, are the host of EconTalk, a research fellow at Stanford's Hoover Institution, and the author of several books including "How Adam Smith Can Change Your Life."

So, to start off the podcast, I want to talk about one of your previous episodes, the one with Jonah Goldberg. You pulled out a passage from his book "The Suicide of the West" where he wrote, "Capitalism cannot provide meaning, spirituality, or a sense of belonging; those things are upstream of capitalism."

I really enjoyed your conversation, and I kind of want to talk about it in the context of startups. So, what are your thoughts on meaning, spirituality, and a sense of belonging in regards to creating your own company?

Well, in a previous life, I was at a business school, and one of the things I did there was to connect MBA students with entrepreneurs. We had something called the hatchery, and entrepreneurs would come in front of the students, present their ideas, and the job for the students was to write a business plan for that idea. Meaning, the course today, that I met with a lot of entrepreneurs because obviously we couldn't take everyone who was interested.

I got to find out what they were interested in, what they cared about. One of the things that was very moving—and I actually stole this, fictionalized it, and put it in one of my books—was the non-financial motivation that founders have. And obviously, there's a financial motivation. If you're not gonna make money, it’s probably not going to get investors, and it may not keep your attention, and eventually you won't be able to pay your workers. So you do have to make money, and you have to think more than you spend to have a viable business. That's a beautiful thing.

But I was struck by how much people care about the, what I would call, the spiritual part of it. I have a memory of an entrepreneur who started a software company, and I remember him. I don't know if he choked up or teared up, but he definitely had an emotional moment when he said to me, "You know, I wish my dad had seen my company," because his dad had passed away. He said, "I wish my dad had seen what this product is," and then he stopped and he was brought up short. He said, "Not even like my dad."

I thought, well, that's one of the deepest things I've ever heard. Right? This incredible primal desire—first of all, to please your father or make your father respect you, earn the respect of your father— but the role of a startup, or anything you create, not just a startup, or anything you create, the mark you make on the world that you want your parents to see is way beyond, I think, the monetary part of it.

So, the money counts, but I think, obviously, starting a business, creating something that can sustain employees and pay them is definitely about making your mark in the world in your own way. That’s just, it’s the way we make our mark, and I think that's a really beautiful thing. I think it's a phenomenal thing that, in America, it's relatively easy to do, and I think that's really important and part of what makes America what it is.

Mm-hmm. And was that your intention behind EconTalk, to make your own dent?

I just have, before I answer that, I want to go back to the Jonah Goldberg quote about extreme capitalism. I just, I think it’s, you know, I think it’s bizarre how capitalism bears the burden of human nature.

Yeah, so people say, for example, assume that you mean that capitalism is based on greed. And is a Milton Friedman thing? He'd say, "Oh, as opposed to what? What system doesn't have greedy people in it? Every system may be not greedy, just at least self-interested."

But to go back to your question, you know, when I first started podcasting in 2006, I was invited. Before I started, the reason I got into it is somebody invited me to be on their podcast, and I asked them how many people would listen. I figured it’d be 80, 100. He said about two or three thousand. I thought, "Whoa." If you told me that at two o'clock tomorrow afternoon, we were going to be in a large theater and there's two chairs on that stage and you ca...