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Today on plain English.
We are busting economic myths with Morgan.
Morgan is the best-selling author of the book, the psychology of money.
But first, I want to do 100 seconds on the Omicron variant.
And when I say 100 S.
I mean, literally, at this very moment.
I am putting one minute and 40 seconds on my iPhone timer, and when this thing hits zero, I’m done.
Okay, so, three, two, one, go.
This thing is a wildfire, the evidence coming out of South Africa, Denmark, Netherlands, New York City, London.
Is all pointing in the same direction.
No, variant is an anywhere close to this.
You look at the NBA.
You look at the NFL.
They’ve had vaccination rates upwards of 90%.
They test way more than any other institution test and it is everywhere in those leagues.
That tells you the two shots of vaccine Is Not Great protection against infection itself, but infection itself is not the only thing that matters that leads to a big question of the moment severity.
If people get infected.
How sick do they get?
I would characterize.
The evidence here is optimistic with caveats.
I think we’re seeing pretty clear evidence from both the studies in the Real world data that Omicron is better than past variance and breaking through but not as likely to cause severe illness.
What does that mean?
It’s kind of confusing.
Here’s a metaphor.
The vaccines aren’t just one layer defense, think of them like a medieval castle, you have a wall.
That’s your neutralizing antibodies, that block the virus, and then you have nights inside the castle that can do the killing, like your killer T cells, which fight the virus, even when it gets past.
The neutralizing antibodies Omicron is like a medieval Army that specializes in scaling walls, but not in fighting nights.
Okay, so it’s breaking through all over the Is getting into the castle key, but then the killer T cells and adults with vaccines or natural immunity seem to be okay after they get infected.
What does it all mean?
I am very worried.
This is going to be a huge problem for groups without any immunity whatsoever.
There’s a lot of unvaccinated people in America and around the world, the global South.
I think I am mostly concerned for this group.
If you’re not boosted, please get boosted with the booster shots do is they increase the number and the quality of your neutralizing antibodies.
That’s kind of like rebuilding your castle walls.
You don’t have to worry about the performance of your nights inside of Of the wall.
Number three covid presents.
A much higher risk of disease to older and immune compromised individuals.
So there we go.
Almost made it.
Please take extra caution.
When you’re mixing with households as holiday season, get your hands on as many rapid test.
As you can, please be cautious about mixing households among those who have the greatest risk from this disease.
It’s not just about Omicron.
It’s about Omicron plus Delta.
This thing is still killing thousands.
Thousands of people a week, please.
So that is Omicron.
The rest of this podcast is about economic myths.
There’s an idea in media criticism, the journalist like me or just chasing clicks and sometimes that’s true.
But broadly speaking, most of my best red pieces are not about chasing trends at all.
They’re about busting Trends, there, about exposing popular ideas in the news as In villages empty vessels total pieces of bullshit.
So, for example, my best read article in the Atlantic last year was an article that I wrote about a phenomenon.
I called hygiene theater.
I said, it’s remarkable in this pandemic.
How many companies and schools and offices are obsessed with scrubbing, down surfaces to stop a virus that spreads almost entirely through the air.
Like we’re waging this multibillion-dollar ground war to fight an aerial.
This isn’t science.
Since its theater and like most theater, it is based on a piece of fiction.
So today, Morgan and I are going to comb through the economy for mids myths about inflation, the great resignation robots.
And finally, retirement.
It is a great conversation and I really hope you enjoy it.
I’m Derek Thompson.
This is plain English.
Morgan, welcome to the podcast.
Thanks so much for having me Derek happy to be here.
So today we’re going to do economic myth-busting.
I have two big myths that I want to talk to you about and I asked you to bring me to have your big economic myths.
Did you do your homework?
Do you have your man?
I did, I did.
A little bit of homework and we’re only doing for, but I feel like you can I could do this show for about seven days.
Straight and keep coming up with Miss over and over again.
Yeah, unfortunately a we’re going to talk about Supply chains.
The supply chain of economic maths is extremely healthy.
The myths, just keep coming.
It is deep.
There are no blockages at the Los Angeles and Long Beach ports for that.
So I asked you to start by myth-busting the inflation news because inflation really touches everything that’s happening right now to set the table here in November.
Consumer price index.
That is the official inflation rate rose 6.8%.
That is the highest annual inflation rate in 40 years, Morgan, you believe there is something mythical about this number Enlighten us.
Here’s here’s what it is.
I think there is no other economic number, that is as controversial as the Consumer Price Index, whenever it’s reported.
No matter what the number is, you’re going to have a lot of people on Twitter, on the news on CNN, all over the place who say This doesn’t feel right.
These numbers are manipulated.
This is not actually capturing what people are feeling in the grocery store and its controversial in a way that like other economic numbers aren’t.
And I think there’s actually one very good reason for this and it’s not because the numbers are rigged.
It’s not because someone is trying to hide something from you.
The biggest reason?
Is that what the Consumer Price Index is reporting is the inflation rate, waited on an average household’s consumption patterns.
But that applies to virtually nobody because everyone spends their money so differently.
And how I spend my money is going to be very different from how you spend it, which is very different from how a retired Widow in Iowa.
Spends her money versus a college student in Los Angeles, but that’s not parsed or reported when these numbers come out.
It is reported as one inflation rate.
And I think what we need to do that’s very difficult.
And more nuanced is become comfortable with the idea of my inflation rate and your Inflation rate and I’ll give you one Stark example of this, 48 percent of homes.
In the United States are owned outright with no mortgage.
They are particularly for, for older Americans who have paid who have lived in the house for more than 30 years.
They’ve paid it off.
That’s almost half of all homes.
Not because they’re owned by Black Rock not know not because they’re owned by Black Stone because people have paid off the mortgage half of homes in the Consumer Price Index.
The measure for shelter.
That’s measuring home.
Prices is 1/3 of the index.
That’s a Third of the weight in the index and if virtually does not apply to having country, great to say nothing of the Americans who have a fixed rate mortgage, which is a lot of people for whom, even if the price of homes are going up or down, it doesn’t impact their monthly payment.
So now, you can contrast, someone who is in the market for a new house or is in the market for a new rental and contrast that to someone whose monthly housing payment is completely stable.
They live in two different worlds.
And then if you think about someone who is in the market for a new car, Or eats a lot of red meat or is buying college textbooks or is paying for their own health insurance.
Go on down the list.
It’s very different from person to person and we’re going to go on down the list, but for I think it’s useful to just pause for a second and play out how exactly the federal government calculates National inflation.
So first the federal government has a survey called an expenditure survey.
We use interviews.
We ask Americans to fill out Diaries.
We literally ask Americans to fill out Diaries and then from tens of thousands of interviews and Diaries, we build and you alluded.
This a basket of goods and services.
That is representative of the typical American, but like, if these 60,000 Americans, the 60,000 surveys say that all they buy is, you know, she’s it’s used cars and dental floss.
That’s what the baskets going to be.
It’s going to be all Cheez-Its and dental floss.
Americans are normal people.
They’re not weirdos.
So they have a more normal basket.
And the actual basket is essentially taken by the Bureau of Labor Statistics and the BLS records, price changes based on.
On whatever is in that basket of goods that we learned from the interviews and the Diaries.
So they say every month.
The American basket is getting today.
Seven percent more expensive.
But this is your point.
Everyone has a different basket.
Mine would be over indexed on Greek yogurt, whiskies and slippers because my dog is very diligent about eating my slippers every month, but that’s just me.
So I like I went down the inflation list.
Some of the numbers are just really eye-popping the gas.
Relation was 58% rental, car.
Inflation was 37% hotels. 26 steak, 25 bacon, 21 percent.
So if you are a meat love and American currently on a road trip, driving hotel to hotel in a recently bought car and your daily breakfast is steak and eggs with a side of bacon like holy shit.
I am so sorry.
Your personal inflation rate is like 30% year over year right now and you are going to notice that meanwhile on the other Our end.
Rent inflation is 3.5% watches 1% girls apparel girls clothing 0.4%. - so if you’re an urban dad renting, in the city, buying close to your daughter and like getting a watching your spouse, you are living at a totally different country from our meat, love and cross-country, trip, and American.
Pick your fighter.
What life are you living?
Are you are you driving across country this winter, rib eye and one hand side of bacon and the other or are you more like art?
Ben watch Dad.
Well, here’s what’s here’s.
Here’s an interesting twist to that at different points.
In my life.
I have been kind of close to both when I was in college.
I lived in Orange County, but I went to school in Los Angeles and if you’re familiar with that, it’s not a short drive and the price of gas to me during this time was really critical if the price of gas went up.
I felt that because I was driving so much.
I drive, like, I barely drive at all anymore.
Like, most of you listen to this, I work from home.
I don’t really go anywhere.
I hang out with my kids at home the price of gas, if the price of gas doubled, I wouldn’t necessarily Really feel it, which is nothing to do with incomes.
Just I don’t buy a lot of gas.
And so right now I I told someone the other day, I’m pretty convinced that my personal households inflation rate is probably something like 2% when I try to go go on down the list and look at it and try to back into.
Here’s how I spend.
My money is fry, something between two to three percent, something like that.
Now the headline is 6% but I don’t think that number is wrong.
It’s just, doesn’t necessarily apply to how I spend my money, right?
It’s just a difference between the aggregate American Experience, the individual American Experience.
I think a People sometimes juxtaposing Aggregate and individual.
See this discrepancy and say the discrepancy is a conspiracy.
It’s proof of a government conspiracy and you’re saying no, it’s proof that America exists as an aggregate of 320 million people, and they’re all very different.
There’s a debate within the inflation space that I wanted to touch on.
So it centers around this word, transitory earlier this year.
A lot of economists, a lot of media people predicted that Action would be transitory.
And I think that prediction has been proven wrong to a certain extent or at least transitoria, sticking around for now, in a very on Transit or a kind of way.
And I wonder what you make of the transitory argument.
How, what are you looking at to determine whether we’re going to continue to see 67 percent inflation for the next few months?
And quarters or whether you think this is something that might dissipate in 2022.
It’s really it.
This gets into the semantics of what we’re talking about, but it’s really important words like bubble and hyperinflation and transitory don’t have well-defined definitions.
So you can Define it any way you want.
So you just said something interesting which is that it is was that are we going to have inflation for a couple of months or a couple quarters?
Or is it going to disappear in my personal view if we have high inflation for a couple quarters and then it went away in my view that would be transitory that.
It just depends on how long you’re talking about.
So if you’re if you’re deaf, Ignition of transitory is one month.
The know we’re already well past that if it’s two or three quarters, then that that might be the case.
So that’s, that’s how I think about these things.
Do I think we’re going to have high inflation for the next five years?
But could it stick around a year, two years, like sure, like, that, that makes sense to me, the best analogy to where we are in the economy.
Right now is not the 1970s.
It’s probably the years immediately following the end of World War Two.
When Supply chains were totally broken.
There was a ton of stimulus job.
Was very thing, it all these workers coming back looking for work and you had bouts a very high inflation double-digit inflation 26 and for a couple months, that’s right.
A CNN would collapse and then it would spike again and it went on like that for a couple years and then we started getting into the Korean war was kind of like screwed things up.
Again in the supply chains.
That’s probably what we’re closest to right now.
Now, when people look back at that, I think they consider that transitory as opposed to the 1970s that stuck around for years.
You have high inflation from the mid 70s to the early 80s that Was more enduring, but in the late 40s, early 50s, it was these bouts of, you know, six months of high inflation, that would collapse.
And then come back again.
If there’s, if there’s probably a historical analogy to where we are today.
It’s that, I think you’re probably right.
I think 1946, 1948 probably is the closest analogy.
And the analogy is, is, is actually really, really close.
So during WWII, just so, you know, refresh people, the federal government wouldn’t let Americans by certain stuff like you couldn’t buy a car for General Motors.
They transitioned their entire production.
Toward you know, making tanks and bullets and guns.
Then the war ends.
The federal government is like, okay, we did it.
The Nazis are gone.
You can go buy cars now and Americans are like great Nazis are gone.
We’re gonna go buy our cars now, except Ford and GM, couldn’t transition toward peace, time, production fast enough to meet all of that car, demand.
And so with all of this car money, chasing too, few cars.
Boom, you have inflation.
And that is kind of really similar to what’s happening now, like, last year was not World War Two, but it was World War Two ish.
And that the Economy was warped by a shocking external event and the shocking external event meant that people were afraid to do normal stuff and buy stuff in a normal way.
But now you have a lot of Americans that are spending more money than ever, and they’re like, okay, the pandemic was awful.
But now I have savings.
I want to buy a car.
It’s like well, great, but there’s a semiconductor Supply crisis in Asia because of their Delta wave and we don’t have enough semiconductors to actually finish the cars and sell them to Consumers.
And so sorry like cars are just more expensive now and then sometimes they’re like, okay then I want to go to a restaurant and The restaurants are struggling to hire enough people and so prices are rising there as well.
So I agree.
I think that the late 1940s is very similar to what we’re going through.
And I think that providing it’s really politically important.
We have to go too deep into Political implications, but like, for buying.
And I think it’s really important because he came into office saying he was going to be FDR and he’s governing is early Truman, right?
People thought that we were getting this sort of heroic figure coming into a, the aftermath of a Great Depression who’s gonna transform the economy with a liberal agenda and remakes, you know, American social democracy for the next generation.
He’s just been early Truman.
He’s been thwacked by a lot of global circumstances that are outside of his control and he doesn’t seem to be on top of it.
So the fact if inflation does last for another year, it’s not great for the white house because it continues to suggest that they don’t have their hands in the till.
Do you have any advice for the White House in terms of what to do or just how to talk about, what they can’t?
When it comes to inflation, well, if you want to manage expectations as a president, don’t ever compare yourself to managing like FDR.
That’s the first thing I gotta get it.
You got it.
You gotta get a manage, your expectations, a little better.
I’m not sure.
There’s that much they can do.
There’s no, there’s no quick policy.
There’s no lever to pull in the way that you can pull a lever with monetary policy to ease Financial conditions.
I don’t think that exists to fix Supply chains right now.
I think it’s working through and it’ll take time to work through but there’s there’s not much, there’s not much that we can do in order to do that.
Just like Like in the 1940s, you can’t switch a Ford factory for making tanks to going back to making car.
You can’t flick you can snap your fingers and do that.
It took a couple years to figure it all out.
And I think it’s the case here.
It’s always the case that whenever there’s a big economic shock, a big economic crisis.
There’s going to be a period of a couple years of just figuring out like, where everything fell and had a piece of yourself back together, that was true in 2008 where it really wasn’t until 2010, 2011 2012, that we started figuring out like, okay, we’ve healed After we can start getting back to business and I think it’s true right now.
I’m not sure there’s that much we can do but this is where I don’t envy politicians, who are on a two-year campaign cycle.
It’s a really tough thing to do when a lot of economic Cycles will last many years.
Okay, let’s move on a myth.
If myth, number one was about inflation.
Number two is about the great resignation.
So the great resignation one of the buzziest economic stories of 2021.
But I feel like the more people talk about this term, the more I wonder whether or not they know exactly what they’re talking about.
So let’s start with what’s true.
It is true that a lot of Americans are leaving their jobs and the government calls these departures quits.
We broke the all-time quits record in April, then we broke that record again in July.
Then we wrote that.
Occurred in August, then we broke that record in September.
There are a lot of people quote, unquote, quitting their jobs, but here’s what’s not true.
The great resignation is not really about resignations.
It’s about what is colloquially called job switching.
So you look at, say the restaurant and hotel industry.
This is a sector that has seen more quits than any other part of the economy.
This is Ground, Zero of the great resignation, and if you use it, Sort of colloquial term to clear idea of what resignation means you’re like.
Oh my God, they must be they must be bleeding jobs.
They’re not this sector which the BLS calls, accommodation, and Food Services added two million employees in 2021 more than any other sub-sector.
I could identify like one out of every three Net jobs have been created in essentially restaurants and hotels.
So does it make any sense that the industries hit hardest by the great resignation?
Also added the most jobs, it does not if Only think of it as a great resignation.
It does make sense.
If you think of it as a great reshuffling because here’s what’s actually happening.
Someone works at a small restaurant in Utah.
They work for 12 bucks an hour.
They’re driving to work and they see a hiring sign it say it says work at this restaurant for sixteen dollars an hour.
So what does she do?
She switches jobs?
That’s what the great resignation is.
And what it means is.
This isn’t really a great resignation like a big quit.
It’s more like the Big switch or the great reshuffling.
How do you feel about great resignation?
Number two, feel like it’s difficult for a lot of people to comprehend because for basically all of our Lives Derek workers have not had that much bargaining power.
And for most of the last 40 years.
The bargaining power has been with the boss.
And if you don’t like this job, go somewhere else too bad.
There’s it’s there’s been an assumption in the American labor markets, that there is an abundant supply of cheap and willing labored lining up at your door and you can snap your fingers and tell them Men and pay them Bare Bones wages and that’s how it’s worked for most of the last 40 years.
And I think what we saw in the last two years with covid is very quickly that pendulum swung to the other side.
And now it is the workers who have the bargaining power, and I feel like a lot of bosses.
A lot of CEOs.
A lot of managers have not come to terms with that fact.
And it seems crazy to them, that they’re going to have to keep jacking up wages in order to attract the amount of Labor that they want.
So you have this reshuffling of people say, go, you’re not going to pay me $15.
Now, I got down the street.
Paying me 17 and it’s like that and that Dynamic has not existed in probably 40 years and it might take a couple of years for people to come to terms that.
This is the case, but it obviously if you’re a worker this is great news.
There’s a long history of a pendulum swinging between workers and managers labor and capital swinging back and forth in the 1920s.
It was Capital that had all the power and then in the 30s 40s and 50s, it kind of swung back towards labor.
And then, you know, they kind of swung by a little bit too far in the 70s with and then in night from the 1980s and through until the dawn of covid.
It was Capital that had most of the power.
Not all the cow the power but a huge portion of it and I think it just swung very quickly back in the last two years.
Let me interrogate that’s because I think I think I somewhat agree with you.
But I also I talked to Jason Furman the former Obama Chief Economist and I gave him my optimistic theory about the future of working Arrangements.
I said, this could be not just a great.
Nation and a great reshuffling.
It could be a great reset where labor for the next few years.
Maybe even the next few decades enjoys more power, more bargaining power.
They get higher wages.
They get better, benefits the better time overall to be a worker and he said, maybe that’s true.
But what I really look at the two things that I really look at to determine the power of Labor in this country are number one, productivity rates and number two unionization rates and not.
Of those seem to be moving in a way that is clearly beneficial to American workers.
It’s not obvious.
That productivity is soaring as definitely not obvious that unionization rates are reversing was basically a 40 50, 60 year, steady decline, especially in the private sector.
So how do you weigh the evidence from unionization and productivity with the hope for or other evidence for this moment?
I’m kind of great reset that’s that’s a fair interrogation of it.
I would say two things.
One is that productivity has become much harder to measure in the age of Technology harder to measure than it was in the age of widgets.
In during the the factory age for most of the 20th century way harder to do at a technology company.
The second I would say is, if you are a worker and you have seen your wages go from $10, an hour to $15 an hour or 15 to 20.
Do you necessarily care whether you are unionized or not?
I don’t mean that rhetorically.
The answer might be.
There’s much more that Could gain in terms of better health insurance, keep on going down the list, but I have a feeling that a lot of workers in the last year, feel like they do have control and power over their careers in the way that they didn’t for the most most last 40 years.
So even if they’re not unionized, if they have power to raise their wages, power to get a better job Howard and move on to another job that provides better hours, better wages, whatever it might be, they probably feel empowered in a way that they haven’t in a very long time.
It’s both a fair criticism and it’s possible that if you I are talking in five or ten years.
We will be looking at a new boom of unionization.
Yeah, I just think it’s so what’s happening to work right now?
I think is so interesting.
We’re in such a liquid moment for work between remote work.
What’s going to happen a corporate offices?
What’s happening to sort of Labor’s power versus capital.
I just think it’s so interesting.
The possibly one of the most long-term impacts of the pandemic could be in our working arrangements, and it’s just a really fascinating, I think, historical reminder, that crises have Unpredictable Ripple effects.
Like, if you were in Chicago, in 1872, like six months after the fire destroyed, everything, would you say?
I think that, when we build back, we’re going to design a new kind of construction called steel, skeleton, construction and invent skyscrapers and the largest buildings and monuments that ever been built in human history will be right here where the the ashes are still smoldering.
No, but like that is what happened like arguably the single most significant.
Result of the Great Chicago Fire of 1871 was the construction of skyscrapers in the 1880s and 1890s and like, we just could optimistically now.
I may be huffing My Hope IAM here.
But um optimistically.
I think we could take a lot of positive lessons for the labor force from from from this from this pandemic that that’s somewhat.
Builds me a bridge to myth number three, we’ve got inflation.
We’ve got the great resignation.
I wanted to talk about a myth that I am guilty of propagating.
And that is the idea that we should be worried about robots, taking our jobs.
So a few years ago.
I was very worried about Automation and AI.
I wrote a bit cover story for the Atlantic called the end of work.
About the fear.
That automation a, I would eat into a huge part of the labor force.
This was during a Time Morgan.
I’m really glad you mentioned this that there we had a kind of glut of Labor.
We had really high unemployment rates.
There were a lot of people looking for work who couldn’t find.
I work, we had more unemployed people than we had jobs, we could put them in and it’s result.
I was terrified that automation could come in and take even more work away from Americans.
But what does the world look like in 2021?
Is it a glut of Labor know?
It is a labor shortage.
We cannot find enough workers to staff restaurants to teach to drive trucks to work ports to work in factories, a huge reason.
Why the economy is dealing With the problems we’ve talked about like inflation and supply chain.
Snafus is that we cannot hire fast enough to fix these problems.
This is partly because a lot of older Americans seem to have retired early in the pandemic and they’re delaying the return to the economy, partly, for the very understandable reason that they don’t want to get into a job, that’s going to make them sick, but it leads to a world in which we need more total work.
And if that work cannot come from people because of Ale, A shortage then we should welcome that.
It come from robots.
We should welcome that.
It come from Automation and new technologies of productivity.
And so, whereas, like, maybe it’s seven years ago.
I would look at like the automated checkout machine and say, oh, my God, this is replacing the most common job in America.
Now, I look at these automated checkout machines and I say, we need more of these.
We need more total work done in this country and if that work is done by automation.
And and can freeze some people to do, you know more interesting jobs.
It’s a future that I now find myself rooting for rather than rooting against.
Do you agree more with a 2014 2015?
Derek or 2021 Derek?
Let me read you a quote that says, quote.
There’s also considerable discussion about the new science of Technology Rafi which holds that new Machinery has replaced many men in Industry who will never find a job.
Again, that quote was written by a lawyer named Benjamin Roth in. 32.
And I just bring that up because this idea of Technology, stealing your jobs is nothing new.
It’s been around for centuries.
It first really started going when when we move from an agrarian economy, towards a mechanized economy with manufacturing, and as people started moving into the manufacturing jobs, you had a whole generation of farmers.
Whose kind of said, I don’t know how to do.
I don’t know how to work in a factory.
I’m a farmer and the kind of fear that they were left behind and then you had it again.
When you From the factory economy towards the information, knowledge economy and you had a whole other generation who says, I don’t know how to do that and we’ll had a boat.
I’m going to be left behind in many ways that fear that you have had.
In the last couple years, is nothing new.
And the first two little quirks behind this.
Is that it’s one thing to say.
Well, look what happens when you have Innovation, is people find new things to do?
They find new jobs.
And that is true.
If you are of an age in which you can go out and find new training and new education and learning new skills.
Kill, but if you are a 58 year old factory worker, it’s just not practical in the slightest, to say, go learn how to code.
That’s just not a practical realistic way to expect most people to make that transition at that phase in their lives.
So it is true that over time that these people find new things to do over time.
That’s that’s the key word and in all those situations whether it was farming in the 1930s or manufacturing workers in the 2000s.
There always is a group.
People who do feel like they are.
Even if aggregate in in aggregate over time, those people do find new creative better jobs to working and overall, you know, looking sort of casting your eye over the history of work in America work is just more or less gotten better.
I mean, you look at the kind of jobs that people were doing in, say the late 19th century.
Most people were farming on local farms.
If you were lucky quote-unquote, you got to work in a city but like a lot of these jobs like Like the job of like wailing for example, was one of the most common professions in New England.
Whaling is ridiculously dangerous and then if you’re lucky that you catch a whale your you cut open its brain and crawl into it to pull out the valuable stuff.
Like this was a shitty shitty job and I think you know Finding ways to essentially automate whale blubber which we did.
Thank god with electricity is a Mitzvah.
The fact that it, you know, replace some of the Ishmael and Captain Ahab jobs is is a good For workers, not necessarily A a crisis for them.
So I suppose we are in agreement.
When it comes to routing, now for for robots to take more work.
And this is a subject that I want to talk about more on the podcast because I think that I think that Automation and a I have always stirred up as you just pointed out with in 1938 quote they’ve always stirred up these fears that the next wave of technology is the one that will finally disemployment half the country or all of humanity.
And it just never does.
In fact, for the most part, when you can find ways to compensate people, for the short term trade offs, the short term complications of leaving an industry that’s being revolutionized.
It turns out better for most people.
I want to move onto myth.
This is a retirement myth you write so much and so well about investment and retirement.
What is your myth number four, the myth that I’ve always found interesting is this idea this Nostalgia that we used to have a better retirement.
I’m back in the 1950s 60s 70s.
When quote, everyone had a pension, the Golden Age, the golden age of retirement, and if you dig into the data, you don’t have to dig very far either.
It is so clear that that Nostalgia is fake and there was no golden age of retirement.
There’s two things that really summarize.
This one is that up until about a decade or two after World War 2.
The vast majority of workers worked until they died.
That was the expectation.
That was the reality, the idea of having spending.
A decade or two in a dignified.
Retirement did not exist.
The other thing is that when we talk about the age of, when we flippantly say, everyone had a pension you dig into those numbers and that’s was never the case either.
It really peaked in the early 1990s.
That’s when the percentage of retirees, who had a fixed income, pension Pete, the 1990s, and it was about four out of ten workers, which means, 60% of retirees, did not have those pension.
And then we have to think that things like the 401K really did not come into use in any significant way.
Told the 1990s.
The Roth IRA did come into use until 1998, like not that long ago.
So this whole the whole structure that we have with the expectation that you are going to have a retirement that you deserve a retirement and the way that we pay for it.
It’s like one generation old.
And if you go back to our parents generation, it just did not exist.
And there’s some really interesting stats behind this.
If you go back into the 1950s, 57 percent of men over age. 65 were still working.
We’re still in the labor force and this gets back into the vast majority of people just working until they died.
There was no retirement at age, 65 for the majority of people.
You just kept going as long as you could and if you look at the average inflation, adjusted Social Security benefits, not that long ago in the 1960s and the 1970s adjusted for inflation.
The average social security check with his was about six hundred and forty dollars.
That’s adjusted for inflation today.
It’s more than twelve hundred dollars.
So it was not that long ago that even when you had Social Security that was not providing anything close to a dignified life.
That was just kind of like a bare-bones like like break the glass emergency in case you need this money, but it was not know anything close to a pension.
And the best way to actually measure this, in terms of how people are doing is it’s looking at the poverty rates of people over age 65 and back in the 1970s and 1980s.
You had fifteen percent of people over age 65 in poverty.
It’s well under 10% today.
So it’s just a dramatic decline in how older Americans are living these days.
And then so we when we have this Nostalgia for what it used to be like, it’s just that it’s remembering a world that actually never existed.
One of the big takeaways from this that I think is most important is that there’s a lot of criticism that people are not saving enough for retirement.
They’re not doing it.
Well, they’re not investing properly, which is can be accurate criticism, but I think we have to reflect and remember that.
The idea of saving for your own retirement and investing your money on your own that idea is literally like, 25 or 30 years and there’s been no generational knowledge transfer about how to do it and how to do it properly.
Most people, their parents, teach them, how to drive a car and their parents taught them, how to drive a car.
There’s a generational knowledge transfer about how to be an adult.
And for saving for retirement, that does not exist Baby Boomers were the first generation that had this idea that I’m going to retire at 65 and invest on my own.
To do it and they just kind of stumbled their way through it.
Trying to figure it out as they go.
And that’s what I think.
It’s not a surprise that we’re not very good at it and we’re probably ill-prepared for it given how new this is.
So let me try to break down what I think you’re saying, because it’s a compelling point.
So there’s a lot of people today that have sort of that suffer from Golden Age syndrome.
They look into the passion, say the 1950s.
That’s when things were really better.
That’s when things were really better.
And you’re saying, let’s look at all the ways that retirement.
Has gotten better over time, rather than moving away from some make-believe golden age, social security.
Number one has clearly reduced poverty, rates of seniors.
Number two, you’ve had more options for retirement Vehicles.
Like the Roth IRA is an invention of like, you know, the end of the Clinton Administration.
This is a very recent invention and Boomers who are ironically the most likely to look back to the pit of the 20th century and say, oh, that’s when I could retire with the golden, you know, Rolex, watch are interestingly.
The Vanguard of a new movement of retirees, who have more options to invest their money the way they would like to.
But that there might be sort of complexities about that freedom, that that freedom, I come with anxiety because they have money that they can invest released more than previous generations.
They have way more anxiety about how exactly they should do.
So too, you know, some people might hear your case and here your myth-busting and say, you know, is this moving toward happy talk, you saying that?
There’s like no retirement crisis that everyone.
Just basically fine.
How do you sort of way the anxieties that people have about making sure that they have an estate, they can retire in with the fact that look, there is decade over decade progress in terms of people having more control over their money and having just more Assets, in general.
I definitely want to call it happy talk, because the criticism that most Americans are ill prepared.
For retirement is accurate.
You most most of the stats is that, is that a retired couple at age?
65 will need three hundred thousand dollars during During the retirement years just for healthcare just to pay their health insurance bills over and above what Medicare will pay for them.
Three hundred thousand dollars.
When you compare that to what they actually have set aside in their 401K in their IRAs.
It’s completely inadequate.
So it’s definitely not to say oh everything’s fine and happy talk.
It’s not that in the slightest.
You can say that there is a require a retirement crisis.
I think that’s an accurate statement.
My point is that’s always been the case and even if we are still in crisis mode, today, we are a fraction of the crisis of what it used.
And if it felt better in the past to the extent that that statement is true.
It’s just because our expectations were so much lower in the past.
And the idea that you would work until the day that you died was true in our parents generation and their parent star is this is not.
This is not ancient history that we’re talking about.
So it’s I think one big thing that’s happened in the American economy in the last 80 years is that expectations have risen faster than results.
So even if the results have gotten much better and we by and large have higher incomes higher, net worth Earth.
We are more prepared for retirement Better Health going down the list our expectations.
For those things have risen by even more and is easy.
Therefore to look back and think that we were better off back then in the 1950s and the 1960s, even if we were so clearly not.
But since our expectations were lower back then relative to where they are today.
It feels like we’re worse off and I think that’s where a lot of economic pessimism and cynicism comes from today.
So let’s say someone comes to you and they say, look, I agree that expectations are rising faster than our ability to fulfill.
But at the same time, I also believe in all of the retirement crisis elements that you pointed out.
What is what is something that can be done at a policy level, to begin to rectify the, the retirement crisis of 2021 and what’s something that individuals can do to begin to, you know, prepare themselves for what’s likely to be, you know, a longer retirement than is historically normal, because people are not working till the day they die.
And they’re also overall, and hopefully this continues living longer than they used to be.
So, the public policy answer.
And the individual answer, I love the idea that’s been passed around by several people of something.
Like for every child that’s born.
They get a thousand dollars.
Put into a Roth IRA baby bond.
That is that is left there.
A baby bonnets left there.
They can’t touch it until they retire.
They can’t cash it out to buy a PS3.
It’s not for spending.
You have two halves to compound over the years.
There’s a bunch of complexities in that, in terms of like, well, who gets that money.
Where is it invested, everyone on Wall Street is going to line up to want your baby Bond.
So there’s some complexities there, but I think just getting that tiny Head Start.
Makes so much of a difference if someone has a thousand dollars invested in their name at Birth, but the time, they’re 65 years old.
It’s going to be real money like compounded when you can pound for that long.
It’s real money.
I love that idea.
From the, from the policy perspective.
I also think, you know, at the individual level.
We just, we’ve probably under we have we’ve probably under informed people about what is an adequate savings rate.
And for a lot of people, it has been put forth that, oh, if you can say five percent of your income for retirement because they say, 10% that’s incredible.
For a lot of these people that over time given when they start saving when they come into some extra money in their thirties and forties when their income starts Rising the numbers really just are not going to add up to that much and I think there is a lot of like big number shock in retirement to to wear.
If you are in your 50s and you have two hundred thousand dollars save for retirement on one hand, two hundred thousand dollars is a lot of money relative to anything else in your life.
Two hundred grand is a lot of money relative to supporting yourself. 25 years in retirement during which your health is very likely going to be in Decline.
It’s not a lot of money and therefore, I think a lot of people feel like they are adequately prepared for retirement.
And once they hit their 70s and 80s, they realize oh shit.
This is actually not going to last me.
What I thought it would.
We’re gonna have one last question for you.
This is about New Year’s resolutions.
I do you have a New Year’s resolution for next year.
Do you make New Year’s resolutions for yourself?
I’m always thinking about things that I want to do better.
I don’t know if those become more prominent on January 1st, but I’ll tell you one that I’ve wanted to do for a while, but I’ve kind of struggled with, I want to spend less time on Twitter and more time with books in my perfect life.
It would be so clear that I would check Twitter like twice a day and I would spend the rest of the day reading books.
That’s my ideal because I get so much more insight so much more value is much more deep thinking from the books that I do from Twitter.
I love Twitter.
I think it’s wonderful, but the algorithm is so persuasive to me.
And I am, So hooked and the dopamine just floods my brain.
Every time I log in, that’s probably been my resolution for a while.
I’ve had back in 2016 and 2017 and 2018 II, probably gotten a little bit better at it, but it’s still not to the extent that I was like, that’s what I look forward to trying to do again, for the fifth year in a row in 2022.
All right, before we go, why do you give us?
And hopefully this helps accelerate your advancement toward the resolution one book recommendation.
Yeah, let me think.
Got this for a sec.
So I get so I get a good one for you.
I got one so much of history is focused on the big men, the president’s, the generals the big names.
So if you’re looking at modern US History, FDR and Truman and Eisenhower, there’s actually like the second and third tier of leaders in American.
I think are the most fascinating.
They don’t get very much attention, but they were so consequential to history.
So I just read a book on George Marshall, who was Chief of Staff of the army during World War Two.
He went on to become Secretary of Defense, Secretary of State.
He’s not He’s here.
It’s not that, he’s a recluse, like, a lot of people know about it, but he did not get nearly as much attention as the big names during this period.
But he was so consequential to America during World War Two and after it, and the Marshall Plan and rebuild the show plan.
Exactly rebuilding Europe.
And I think what sticks out from George Marshall is, I don’t think there was anyone else in modern history, who was completely selfless in his willingness to just want to protect and serve the United States and completely Sudol personal gain, never wrote A Memoir, never gave it never gave a paid.
Talk never took a big endorsement deal after his political career was over.
He thought, and he has these quotes where he says, like look, we like it is the solemn duty of people in the military to prove to the American people that they are there to protect them.
And they are not there for any sort of personal gain.
And it’s just such a refreshing, and great.
Look at someone who did not get that much attention by his own, by his own.
Will he say, says, I guess, Spielberg movie like one of those movies.
That’s like, it’s almost too perfect to be true in terms of its our conclusion and the fact that he was so selfless in, it means he did not give that many interviews.
He didn’t write Memoirs.
So there’s not that much that’s necessarily known about him.
So this this biography that I read by David roll, it’s called George Marshall defender of the Republic.
That’s one of the best books that I’ve read recently.
I love it Morgan.
Thank you so much.
Happy New Year, and we’ll talk to you soon.
Same to you.
Thanks are planning.
This with Derek Thompson is produced by Devon.
Thank you so much for listening.
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