Transcript

Nick Romeo

Srini Rao:

Nick, welcome to the Unmistakable Creative. Thanks so much for taking the time to join us. Yeah, it is my pleasure to have you here. So you have a new book out called The Alternative, How to Build a Just Economy. And it's kind of funny because I was just talking to AJ Jacobs about his book, A Year of Living Constitutionally. I said, wow, so one day I'm going to tackle the government and the economy somehow. Yeah, exactly. Well, I wanted to start by asking.

Nick Romeo:

Thanks for having me.

Nick Romeo:

An ambitious day. Yeah.

Srini Rao:

What is one of the most important things that you learned from one of both or both of your parents that have influenced and shaped who you've become and what you have ended up doing with your life?

Nick Romeo:

That's an interesting question. My parents were both classical musicians and I'm also a classical pianist. I think broadly speaking, importance of attention to detail, persistence over long time horizons, the fact that perfection is a kind of infinitely receding mirage that you never quite get to. These things all fall out pretty naturally from trying to get to a high level on an instrument.

They map onto journalism, but probably onto lots of pursuits pretty closely. So maybe the musical training is more important than I've ever realized, but I haven't thought about that much. It's a good question.

Srini Rao:

Well, I was a musician in high school, so I get it. Like I played tuba, got into USC School of Music. Your parents both being classical musicians, like with Indian parents, music as a career was kind of off the table. They thought it was a bad idea. And given that tubas are not exactly in high demand, they were pretty spot on. My dad talked me out of going to the USC School of Music and he put it pretty clearly. He's like, you're going to spend the next four years in a practice room with a piece of metal. And I was like, that sounds like hell. I don't like it. But the training I got.

in the process of doing that to this day has been invaluable. But I'm curious, like, were there, like, did they teach you anything about making your way in the world? Did they either encourage or discourage music as a career, both being classical musicians?

Nick Romeo:

You know, they were pretty clear -eyed about the likelihood of a remunerative, you know, career in classical music. So that being said, I guess they left it pretty wide open. I didn't major in music in college, although I did spend a lot of my time in college in practice rooms, kind of hanging out and playing chamber music, reading through repertoire. So a lot of my college experience actually was pretty musical.

My first job after school, actually, I worked at Carnegie Hall on their editorial staff, which was amazing. I saw free concerts four or five nights a week. I also got to kind of get my feet wet as a journalist by interviewing conductors, composers, musicians. So yeah, you know, my parents, they were open to having me pursue music, but they were also not kind of delusional about the odds of making it big time as a classical pianist.

Srini Rao:

Yeah, absolutely. Well, I'm curious as far as the discipline, the habits, the stuff that comes from practice, like how that has applied to your own life as a journalist and a writer. Like how does that play out day to day?

Nick Romeo:

That's such a good question. I think there is a really strong parallel where if you're working on a Chopin etude or a Beethoven piano sonata, one of the things you simply have to do to get better is learn how to listen to yourself and take a kind of critical attitude where in almost reverse engineering way, you figure out what's going wrong, how can I fix it? And...

how can I kind of detach the ego from the process such that, you know, if I'm not perfect right away, I'm also not going to despair because of that. I'm just going to kind of analytically perceive through a series of steps until I can improve. And I think that's so vital for writing, you know, unless you have a kind of Mozartian talent for composition and the first draft flows out perfectly, you have to develop the ability to be edited by yourself, by others.

And just to recognize that sort of not being perfect the first time and kind of precisely analyzing how you're falling short is in fact the bulk of the work. It's not some afterthought, it's the work itself.

Srini Rao:

Yeah, like you saying that reminds me of preparing for my All -Region band auditions. Like I bought the All -Region Orchestra and my band director brought me back and he's like, all right, he's like, here's what we're going to do. He's like, we're going to play it at a quarter of the tempo that you do this, did it before. And he was like, and that's exactly how you're going to audition. And I was like, what the hell? And he told me, he was like, look, what's going to matter here is accuracy. It doesn't matter. And it was kind of amazing because in that time,

He, I didn't realize what he was doing until, and funny enough, because of what he did, I ended up being second chair. The only kid to beat me was a senior and I was a freshman. And then when, you know, the all state auditions came around, he's like, all right, now we're going to do it at tempo. And for some reason I was able to do it. Um, but now you're just, you haven't told me you're a pianist, something else makes sense here. Like I realized why your book was so easy to read. Um, I, I felt that pianists or people who are writers, who are musicians.

always, I don't know if this is the same for you. But for me, when I look at words on the page, I hear sound first, like, before I see words, to me, I'm like, how does this sound? And I felt that like most of the writers who I've talked to, Danny Shapiro, probably being the best example of this in her book, still writing, who have been pianists have a way of making music with words almost.

Nick Romeo:

That's really interesting. Yeah, I think there are kind of intuitions about rhythm and flow and cadence that must transfer from music to prose. I mean, it's a little hard to prove that, but that sounds totally right.

Srini Rao:

Well, tell me how a guy who starts his career as a journalist at Carnegie Hall goes on to writing a book about building a just economy. Like, what in the hell led you down that path?

Nick Romeo:

That's a good question. There are a few ways I could answer it. I'll try kind of a combination of both, both kind of personal and intellectual. So, on the personal side, I was at Carnegie Hall for a year and then I actually worked in finance right around the time of the 2008 crisis. And so had something of a front row seat. I wouldn't say I was exactly front row, but I was part of the industry in some...

general way while it was collapsing. Now, I went back to grad school for ancient Greek philosophy. I'd been very interested in philosophy since the time I was an undergraduate. And my way into economics was through philosophy. I mean, as you know from the book, a big argument is that econ has misunderstood itself as a natural science when in fact it's a branch of political philosophy. And this perspective would have been...

totally natural to some of the major figures, everyone from Adam Smith to John Stuart Mill and into the 20th century as well. John Maynard Keynes, I think, is very sympathetic to that kind of location of economics within the broader intellectual landscape. And, you know, when I was studying ancient Greek philosophy, some of the richest questions have to do with the nature of justice, the nature of happiness, human nature. And it was kind of a...

a revelation to see that economics itself makes all of these assumptions on these philosophical questions, often in a kind of casual way or in a way that's not particularly defensible. And so my way into the book, on one level, it was this kind of intellectual background. On another level, just as a journalist, you know, I'd been covering kind of policy and ideas for the New Yorker. And I was fortunate enough to have an editor there who

who gave me a pretty long leash to explore interesting new economic models. So for the past three or four years, I've been writing in that space and I had the freedom to kind of explore some articles at considerable length. So that was another sort of way into this topic was just through my reporting. But I think the intellectual background is relevant too.

Srini Rao:

Yeah, absolutely. Well, you know, I think that just from reading this, one of my first thoughts, and we'll get into it because you have a whole chapter dedicated to academia, was that this is not how I was taught about economics. And I went to Berkeley where you had, like, the Clinton economic advisor teaching introduction to economics at one point. And you say that economics must explore not just how humans produce and consume resources, but also the fairness and desirability of these arrangements for individuals, nations, and natural war.

world and our descendants. And I think it's that last part that's almost left entirely out of the way we even learn about economics.

Nick Romeo:

Absolutely, yeah, I mean, I think that's been true for some time and it's starting to change. The first chapter of the book focuses on efforts to reform economics education within the academy. And there are a lot of people doing a lot of interesting work trying to foreground some of these normative and political questions so that people studying economics.

understand the implications of some of their choices and models. But yeah, I mean, it seems like a kind of odd thing to study economics on analogy to the natural sciences. I mean, a lot of the best economists completely reject that analogy, but it's been so influential that I think, you know, the media is not innocent here either. A lot of people in the media write about economics as if they're describing some kind of natural system where human choices don't actually matter very much. And we describe

the economy as if we're talking about the weather. And it's just like, here's what it's doing today.

Srini Rao:

Yeah, one of the things you say is indoctrination Masquerading as education still shapes too much of our cultural common sense for alternatives the current status quota seem viable and adopted more rapidly a different style of economics education is essential and the funny thing about this is to me like this is a deeply personal issue because I've got a mountain of student loan debt that I'm just like Wow, how am I ever gonna get out of this? Like there's you know, it's like I've become rich or die trying is kind of the way I see it

And I know that's not what this is about, but I'm curious, like when you think about this from the standpoint of a just economy, like this is a problem. You worked in finance, so you should know. It doesn't take a genius to figure out that you can't keep lending money out and not getting it back before the roof at some point caves in. Like how has that not happened yet to the entire educational system?

Nick Romeo:

Man, yeah, I think it's a good question. And it's still early days, I guess I would say. It's quite possible, I think, that within the next 10 years with the demographic cliff that a lot of people have noticed, meaning just that the crop of 18 -year -olds in the next few years will be smaller and that is expected to continue. People have had fewer kids. So I think there will be a lot of schools, especially maybe some of the kind of

second tier liberal arts colleges where they're charging, you know, 70, $80 ,000 a year, but they don't really have the same reputation as some of the top liberal arts schools. I think it's not unreasonable to predict that some of those will close. You know, more broadly, it's a disgrace what's happening with student debt and the way so many people not only are there,

Career choice is dramatically constrained by the debt they take on. But of course, what they study is itself constrained. I mean, if you think about college only from a return on investment framework, then it's reasonable to look up your major, look up the average salaries of people with that major and decide accordingly. So then the whole idea of a liberal education where you gain the ability to understand a broad range of subjects, a broad...

range of analytical approaches to the world, this starts to disappear. And that's kind of a terrifying thought if you, I mean, not only for the kind of democratic implications of having an educated citizenry, but also just, you know, if you care about ideas, culture, history, some of these things you think are valuable, then the student debt issue, I mean, I think it should be much more prominent, I guess, in conversations among academics, right? I mean,

Srini Rao:

Mm -hmm.

Nick Romeo:

It's not enough to just say, look, poetry is beautiful, come study poetry. You have to think about these structural forces that are constraining the decisions of young people.

Srini Rao:

Yeah, without a doubt. I mean, my dad is a science professor. I mean, it kind of takes us right back to the beginning of our conversation about choosing not to study music.

Nick Romeo:

Absolutely, that's right. That's totally right.

Srini Rao:

Well, let's talk about this idea of true price. You're an entire chapter dedicated to this concept of true price. And I'd never even heard of this, but you say that most sustainability levels labels address individual issues like pesticide use, habit loss or worker treatment, but minimizing negative impacts in one domain offer ignores major problems in other areas. Your organic bananas could have an enormous carbon footprint, be grown by workers who don't earn a living wage and come from a farm made by destroying a biodiverse rainforest.

Nick Romeo:

Totally, yeah. I mean, so that quote that you just read really introduces the intuition behind true price, which is that rather than having a patchwork of partial labels, what if we had a single comprehensive tool that let us understand exactly what impacts a given product has from its inception? For a banana, I would say it's growth, but this could also apply to a smartphone, so maybe it's manufacturing.

Srini Rao:

Yeah.

Nick Romeo:

all the way through its transportation, the workers involved in that, to finally its consumption. And this could be extended to its afterlife as well. Does it take 500 years to decompose or all of which will involve leaching of toxic chemicals? Or is there a more environmentally friendly way to get rid of this product? So TruePrice just says, let's try to quantify these variables and include that in the price mechanism.

perhaps in a consumer -facing label, but perhaps also as an internal auditing tool for companies or as an analytical tool for legislators and regulators.

Srini Rao:

Yeah, I just like my first thought was like, can you imagine getting your iPhone and say, by the way, somebody at Foxconn, you know, jumped into one of the suicide nets for you to have this phone.

Nick Romeo:

That's exactly right. I mean, it's a bit dramatic, but if we had a clearer sense of the human suffering and the environmental degradation involved in a broad range of products, I think many people would be less inclined to consume those products. Companies themselves would be incentivized to change the way they produce and transport those products. At some level, the ambition of TruePrice is just to give us more information about what we're consuming.

Srini Rao:

Yeah. Well, so where would you find pushback on this? Because I think that, you know, naturally you said, I think you even gave examples where people actually were okay with paying higher prices because I don't think most of us, like when the Amazon prime truck shows up, think about, okay, this guy basically works at a place where they've been known not to even be able to take bathroom breaks and rumor has it pee in bottles just so they can make their deliveries on time.

Nick Romeo:

Well, yeah, I mean, I guess it sort of depends on what issue we're discussing, right? I mean, there were people at this grocery store in Amsterdam who paid higher prices. There was some market research by another grocery store in Europe where people indicated a willingness to pay higher prices. That being said, you're right that a lot of Americans and a lot of people around the world are addicted to cheap products and they're in the habit of kind of ignoring the work

working conditions and the environmental impacts involved in that cheapness. So one way I like to think about true price is that it sort of shifts the way we conceive of an environmental externality. Even the word externality implies there's some border and then beyond that border stuff is external and we don't care so much about it. So if you expand that border and you internalize some of those costs that were previously externalized, you know,

Srini Rao:

Mm -hmm.

Nick Romeo:

It's not that those costs are just not being paid when you get your cheap good from Amazon. It's just that you're making someone else pay them. You're making the guy who doesn't get a bathroom break, pay them. You're creating more trash that will go in a landfill that will produce pollution that your grandkids will suffer from. So someone will pay the price. Once you accept that the price is not invisible just because you're closing your eyes, then I think it opens up a lot of interesting questions.

Who should pay the price? Well, it's true that a lot of consumers are already squeezed and that it would be tough for them to do so. That doesn't mean that there are no other options though, right? I mean, we could have corporations themselves pay for more of those prices. They could have lower profit margins. So I think, you know, true pricing, it's powerful as an analytical tool. In my view, the consumer facing model may not be the ultimate

manifestation of it that can change the world. It may occur more as a kind of analytical and auditing tool where, you know, imagine if you adjusted stock prices on the S &P 500 to reflect some of these externalities. Again, the profitability of many companies would be exposed as kind of a mirage because it depends on simply excluding many of these externalities, right? It's a kind of false accounting.

Srini Rao:

Yeah, absolutely. Well, you say that if Amazon stock price were adjusted to reflect the underpayment of workers and the enormous environmental costs of packaging transport, its frequently allotted success would appear much less impressive.

Nick Romeo:

Absolutely, that's right.

Srini Rao:

Well, speaking of price, I think that makes a perfect segue into talking about this idea of a living wage. And I think that, you know, you said it well, you said defining a living wage is a double challenge. There's the moral and political task of deciding what constitutes living and the empirical question of how much it actually costs in America or around the world. The empirical question presupposes political and ethical judgments about what living involves. And, you know, it's.

Funny to think about this, but like I, if I remember correctly, you're in Berkeley. Like I was a Berkeley undergrad and then I moved to San Francisco and the apartment that we lived in across the street from Golden Gate Park in the inner sunset, which wasn't the like bougie -ous neighborhood. That place was $1 ,500 a month for a two bedroom and it had a parking spot and carpet and all that other stuff. I, one of my old roommates, she looked it up once and she said, you know how much it costs to live there now? She said it's like $4 ,500.

Nick Romeo:

Oh man, wow. When was that?

Srini Rao:

That was in the early 2000s, so probably 2003 to 2007.

Nick Romeo:

Yep, yep. That's a crazy increase, isn't it? Yeah.

Srini Rao:

Yeah. Yeah. I mean, so let's talk about this idea of living wage and what the reality of it is for the overwhelming majority of people.

Nick Romeo:

Sure, yeah. So, you know, the concept of a living wage has deep roots, but in America, it's kind of articulated forcefully in the early 20th century by a Catholic priest who has a very generous conception, at least relative to how it's defined today. So he included things like savings for old age, savings for a rainy day, right? If something goes wrong, something breaks, you have an accident.

Also, enough money that you can afford to do enjoyable things, take a short vacation, go out to dinner. This was all part of the concept of living, and it wasn't just this one Catholic priest, John Ryan, it was also very influential people, including Teddy Roosevelt. So fast forward 100 years, and the conception of what a living wage should enable has constricted dramatically.

All of those elements I mentioned are just excluded, right? Savings for old age, savings for your kid to go to college, going out for an occasional meal, taking a short vacation. None of these things are factored into the standard calculations of a living wage. So when you hear a company say, hey, we're an ethical employer, we pay living wages, there's a certain skepticism that should immediately be activated. Now,

On the empirical question, how do we calculate it? A lot of people are actually really good at that. I talk a lot in the chapter about an economist at MIT. And to her credit, she has really granular data on things like rental costs, food costs, all of these kind of local data sets from around the country. And this is really useful. The problem is the definition of living is way too narrow. So she gets regular emails from people saying,

hey, I actually can't live on what you're calling a living wage. And the company is patting themselves on the back and saying, yeah, yeah, we pay a living wage. They're not letting me live. So what gives? And I'm pretty sympathetic to those workers and those people.

Srini Rao:

Yeah, well, this really caught my attention. You said that even Adam Smith made a claim about this where he says, no society can surely be flourishing and happy of which the far greater part of the members are poor and miserable. It is but equity besides that they who feed clothes and lodge whole body of people should have the share of the produce of their own labor as to be themselves tall, be well fed, clothed and lodge. That's it's when you read that it's kind of almost.

It's disheartening. It's kind of appalling to think about this. Like when you think about, you know, Jeff Bezos versus the average Amazon.

Nick Romeo:

Absolutely. I mean, I thought that was so striking as well. I mean, here we have Adam Smith, the kind of patron saint of free market economics, at least in the popular imagination. A lot of people think him in that way. And yet he's saying, essentially, you should not be boosting profits at the expense of workers. You know, they need to have a decent standard of living. And that, you know, that does change over time. Before there were smartphones, a living wage did not include enough money to buy a smartphone, right?

Other things are more constant. I mean, enough money to buy healthy food, enough free time to pursue interests outside of work. I mean, these are things that maybe there's some historical variation, but there are also some universals across time and space.

Srini Rao:

Yeah. Well, it's funny because like we have so many of these sort of iconic thought leaders, people who have these great books on creativity, you know, and talk about meaning and purpose. And the thing that I think became really apparent to me after going to my, going to India for my sister's wedding and then taking a, we took a trip to the mountains. I went back about six months later and the driver who drove us,

We were asking him about like, what is week is like, and he told us, and keep in mind the mountain roads there are God awful. So what is about a three hour drive in most places takes 13 hours. And we asked him, he was like, how many times a week do you do this? And he said, four times a week, back and forth. He usually sleeps in his car because the hotels are up there too expensive. Even when we would go to dinner and he would say, Hey, can you guys figure out where you want to go to dinner? So I can go get my food. Cause he couldn't afford to eat where we were going to eat. And I kind of started to realize that.

so much of what we talk about, you know, even on their show, like so much of it is only applicable to people who come from privileged circumstances.

Nick Romeo:

That's so true. Yeah, absolutely. And, you know, I think that's one point of connection between true pricing and living wages. You know, living wages would just be one of the elements that true prices would track, but they're an incredibly important one, you know, to the extent that our supply chains now reach around the world. I don't think it feels particularly good to imagine the difficult lives of people making cheap products that we enjoy. I mean, I think that.

That's uncomfortable for a lot of people. They wouldn't like to think about that. They would like to change that if they were given an option to. But again, there's this kind of information problem where we have a general sense that, you know, okay, conditions are not good in a lot of Chinese factories, but what if we actually had specific real -time information on the products we were buying and the true cost of those products?

Srini Rao:

Yeah. Well, I think the other thing that struck me in this chapter was saying that, you know, tax fund or paid social programs benefit businesses by shifting onto the public, the cost of alleviating the suffering caused by inadequate compensation. And like you basically say that that's not really, you know, a viable intervention.

Nick Romeo:

Well, yeah, I mean, I think it's, it's a kind of well established fact at this point that a lot of the people who rely on supplemental nutrition assistance programs and other, other forms of social assistance are, are many of them are full -time workers, you know, and they're working full -time at household brands like Walmart, Amazon, McDonald's. And when you allow compensation to,

be completely unrelated to the cost of living as we do in America. The minimum wage has not been updated since 2009. I mean, it's kind of an extraordinary state of affairs when you think about how much more expensive life has gotten. But yeah, that ends up shifting the burden onto these public programs. And so it's a kind of irony that even people working full -time jobs are stigmatized as beneficiaries of so -called handouts, right?

Srini Rao:

Mm hmm. Yeah. Meanwhile, we're handing billion dollar bailouts to banks.

Nick Romeo:

Absolutely.

Srini Rao:

Well, let's talk about the gig economy. This was really kind of appalling. It just made me think, it's like, damn, this is how badly these companies treat their employees. You said companies such as Uber, Lyft and DoorDash spent over $200 million campaigning for Proposition 22. I think just to give people some context, as I understand it, it was the proposition to provide them, to deny them benefits such as paid sick time and unemployment.

Nick Romeo:

That's right. Yeah, yeah. So that was a huge, huge deal in California and they had a very large war chest that they spent and they prevailed. And so it was all about the classification of their employees as, you know, employees or not, right? And so it was important for the companies to try to limit the benefits and the kind of liability that they had around.

around these part -time workers, some of whom are not part -time, of course.

Srini Rao:

Yeah. Well, I mean, what would it look like, for example, are you saying basically Travis Kellnick wouldn't be as rich if they had actually done the right thing here?

Nick Romeo:

Yeah, that's certainly true. That's true in a few ways, right? I mean, one of it is just employee compensation. Another is following the law. I mean, there was a huge investigative series in The Guardian that quoted a lot of senior people at Uber in which they described very openly just the kind of strategy of violating local laws in markets around the world and dealing with the consequences later. The idea is to gain market share.

And then kind of if there are consequences from breaking laws, disregarding regulations, maybe that can be dealt with later. The key thing is to gain a foothold. So I think a second way in which the value of the company and his compensation would be reduced is just if they had followed the law, right? So yeah, I'll pause there.

Srini Rao:

Well, so you provide an alternative, which is to basically create public versions of these private platforms. What does that actually look like and how feasible is it?

Nick Romeo:

Yeah, so I was pretty fascinated by some of the people involved in this space. The real visionary here is a guy named Wingham Rowan, who has had this idea for several decades now, and it's finally starting to really get some traction around the world. There are trial projects in California, there's interest in Canada, and the concept is to have a public option for

for gig work or for part -time work of any variety really. So gig work, it can mean delivering food, driving a car. Of course, it could also be things that are sort of considered more white collar like architecture, legal services, any kind of non -standard employment relationship. The public option would simply mean that we don't have private platforms that own.

digital infrastructure that enables these kinds of employment opportunities, right? Because the downside there is that they can take an enormous cut of every transaction. They can take 30 to 50 percent, whereas a public option you could have a much, much lower fee per transaction, maybe two to five percent. The challenge, of course, would be to aggregate enough supply and demand on a single platform such that it was really useful both for job seekers and for people

hiring those folks.

Srini Rao:

Yeah, absolutely. Well, so let's talk about the concept of cooperatives, because I think this really struck me, like, because I mean, most of us are so used to seeing, you know, what we think of as private corporations, like, why do people start companies and build startups, because they get equity and most of them get, you know, if their company succeed, it's the equity that makes them into billionaires.

Nick Romeo:

That's right. I think the cooperative movement in America, it is strong, but it's sort of a little splintered at the same time. A lot of people in America who have some form of ownership in the company where they work, the way they have that is through what's called an ESOP, an Employee Stock Ownership Plan. They are partial owners of the company, and then when they retire,

Or when they move to another job, they can cash that out and they get a big payday. So ESOPs are kind of one main way that Americans do profit sharing. And of course, there are stock options, especially in the tech world. Another option is actually a worker owned cooperative. In the book, I talk about the Mondragon co -ops in the Basque country of northern Spain. Every worker there

accumulates money in a capital account and this fluctuates in value based on how the company performs. So there are different ways to structure it. And, you know, on the question of the kind of motivation of founders and like, would people even start businesses if they knew that their employees would own part of them? I mean, I guess my sense is that they still would. And in fact, the motivation argument kind of cuts both ways because

people who work at these cooperatives, I mean, even if your view of human motivation is that we're only activated by the seeking of money, which I think is a little bit of an impoverished view, but even if you took that seriously, there's still a strong case for enfranchising employees and giving them equity stakes because they'll work harder, right? Based on that same premise, they are going to want to improve the company. They're going to want to make it more efficient, more competitive, et cetera.

Srini Rao:

Mm -hmm.

Srini Rao:

Yeah, absolutely. So what are the advantages here? I mean, obviously from what I read, I gathered that, you know, CEOs and executives are going to take a lower cut. You know, their salaries are not going to be, you know, isn't the United States like one of the worst in the world in terms of like the average worker to the CEO compensation. It's like 300 X what the average worker makes.

Nick Romeo:

That's right. Yeah, we are an outlier in that regard. I think, you know, they're different figures depending on how you slice it. I've seen 350 to one. And, you know, that's changed a lot even in America in the last 50 or 60 years. It was much lower in the 50s, the 60s, the 70s, the sort of... The explosion really dates to mid 70s and 80s and it's gotten much worse since then.

So one benefit of cooperative ownership structures is a compression of inequality. And I think it's interesting that there are two sides to that equation. There are models that only try to bring the people at the bottom up. And then there are also models that try to bring the people at the top down. So in Mondragon, for instance, in Spain, the executive to lowest paid worker cap is six to one.

So they definitely have a ceiling at the top end. You don't go more than six X your lowest paid worker. So it's pretty striking to think about how corporate executives in America would be compensated if you just took their lowest paid worker and then multiplied by six. They might make a few hundred thousand dollars a year, many of them. So I'm sort of attracted to the model that limits the ceiling as well as raises the floor, but there are also, you know,

kind of pragmatic considerations. And I'm certainly not opposed to the kinds of models that say, look, we're not gonna touch the executives, but we are going to give the work and file some participation and upside when the company does well. I mean, I guess I think that's a start, but it's maybe not as attractive as working on both sides of the equation.

Srini Rao:

Yeah, absolutely. Well, let's talk about participatory budgeting because I think this is like one of those things when I read about it. I mean, I remember reading it somewhere else because I'd spent a significant amount of time in Brazil. You saw the basic premise of which PB is simple. Since citizens are a source of public funds and users of public services, they deserve a direct say over how some of this money is spent. And it.

Makes me think back to the Michael Moore documentary, Where to Invade Next, where he shows like when you get a paycheck in France, it shows where every bit of your tax dollars go. Whereas here you get like one line and you have no idea. And he said that most people found out where all that money was actually going. They may not be that incentivized to pay their taxes.

Nick Romeo:

That's so interesting. Yeah, I think that's absolutely right. And I mean, PB is a really powerful mechanism precisely because it does give you both visibility into how public funds are spent, but also voice. I mean, you can directly shape particular projects by voting for them, by proposing them. In the city I focus on in Portugal, where they were inspired by the model in Brazil where PB originates,

But they've sort of developed a lot of refinements to the actual mechanisms of participatory budgeting. And one of them is a negative vote. So if you really don't like a project someone else proposed, right? If someone's saying, we're going to build a skate park right next to your house, you can vote against it too. It doesn't get used too often. A lot of people are just voting for things. But more broadly, there's a kind of democracy building element here where

you have to form coalitions with other people. You have to talk to people who may not agree with you, who may be from a different economic or demographic background than you. But in order to succeed in a participatory budget process where it's competitive, different people propose things, and there's a finite number of winning projects, you have to form coalitions. I mean, another thing that's really crucial about the success of participatory budgeting in Cascade Portugal,

is that they really do spend a lot of money. It's not just a kind of trivial rounding error on the city budget. It can be 15 % of the annual investment budget is allocated through PB. This is tens of millions of euros over the last decade. And they're actually doing major infrastructure projects. They're breaking ground on construction. They're building things. And people actually trust the process because they see it changing.

the texture of the city and the quality of their life.

Srini Rao:

Well, I think the key word here is participatory. And did you know, just thinking about that, I remember watching this documentary with Barack Obama. It was a vice news documentary where he said that we have one of the lowest voting rates of any democracy on the planet, which is kind of shocking. And I think that that to me was kind of indicative of the fact that that may be the greatest challenge. Like, what is the challenge of having this in the United States? Does it exist anywhere in the United States? Because I think like if I,

went and saw how the government was spending most of our tax dollars, I'd be like, this is probably.

Nick Romeo:

Yeah, you know, it's a great question. It does exist in the United States. New York has a participatory budget program. Chicago does. Unfortunately, most of the programs in America are limited in a few key ways. One is that they don't really spend that much money. So compared to the program in Portugal that I write about in the book, it's just a very, very low level of funding.

So there's less motivation for people to kind of come out and campaign when the amounts of money and also the types of projects are just very limited. So the fact that it tends to be a little bit superficial and cosmetic in the States, I think limits its potential. You would really need politicians probably at the city level to commit to spending significant money and to really build an entire process around PB. When you do that, people...

People tend to get really energized and excited. And I think it is a democracy strengthening technique, but it requires commitment and investment. And unfortunately, the American models that I've come across tend to be pretty limited and pretty superficial.

Srini Rao:

Well, let's finish this up by talking about ownership. And you open this by saying, private ownership of land is justified only so long as there is enough and as good left in common for others, one implication of this proviso quantitative. We should have some weakening of property rights as human population density outstrips the supply of land. So the thing I thought about was something that somebody had told me once that one of the sort of keys to being able to preserve

any amount of wealth over generation is home ownership. And like I'm in a generation, I think they like they can say maybe we're the first generation that can't, that might not be better off than our parents. Like I look at my parents' house and I remember growing up, you think, yeah, you know, you guys aren't rich. I want to be rich. I look at my parents' house now and I'm like, you guys live in a palace and that's like buying a house like that. I can't even fathom that. And when they bought it in Riverside, I think it was like,

three or 400 grand and now I think that house is for my dad said even if we sold it for a million dollars he said we won't be able to get a house this big in a town like Riverside California which is like the armpit of Southern California.

Nick Romeo:

Yeah, no, I mean, it's really striking how things have changed, absolutely.

You know, that quote that you have is from John Locke, so English political philosopher, in some ways, one of the founding figures of liberalism. I mean, he's associated with the idea of defensive private property, limited government that primarily is securing safety, public order, and property rights. And so I thought it was so striking to find John Locke arguing that...

property rights are really justifiable only insofar as there is as good land left for others and enough land left for others. So, today land is still very valuable, like your example with real estate shows, but there are also lots of other forms of property ownership today, right? I mean, so many assets are not tangible anymore, obviously shares, equities,

etc. So I think if we think about what would it take to make sure that there was enough left for other people and how would that affect property rights? I mean, one of the things that that last chapter of the book is arguing is that today ownership is kind of the new property. So by ownership, I mean ownership of capital.

right, not of land. And so if you take that premise on board and you say, look, it's no longer possible, if it ever really was, to just go find some empty land and homestead it. So how could we update that model for a new century? I mean, one proposal is employee ownership, where workers just, the kind of default assumption is that you gain equity in the place you work. Everyone who works for a company owns a part of it.

Nick Romeo:

That would be a pretty dramatic shift, but it's conceivable and there's a lot of momentum around employee ownership. Another proposal for really broadening access to capital would be something like a citizen's dividend. I mean, people have proposed baby bonds where everyone in a particular state or region, just kind of by virtue of existing, they get some capital account that slowly appreciates over time.

I think these are all worth considering and it is striking that even John Locke, who's very much a defender of private property, says, look, you know, there are limits, right? I mean, it's going to depend on the conditions and the population size and how much land is left for everyone who doesn't have some at birth.

Srini Rao:

Yeah. Yeah. I think that like, for me, the real core takeaway from all of this is something that I wrote a while back that sort of thing, you know, we live in an interdependent society and individual actions as much as we don't realize it affect collective outcomes.

Nick Romeo:

That's so true. No, absolutely. And I mean, I think the sort of implication of that is that the hyper individualistic model on which American capitalism is premised really requires a reexamination. And that was definitely one of the ambitions of the book.

Srini Rao:

now. Well, I gotta ask, like my first thought was like, have any government officials read this? And if so, like, what has been their reaction, response, resistance to these ideas?

Nick Romeo:

Yeah, you know, so far there have definitely been a lot of private sector readers. So there have been folks who are approaching retirement age and are trying to think about what could they do with their business or their money that's kind of pro -social. So converting your business into a purpose trust in which you enfranchise workers and give them some ownership stake. I mean, those kinds of responses to the book have been really encouraging.

The government stuff is a little harder. I mean, there are a few things that I probably shouldn't talk about that I've kind of heard off the record that are encouraging where, you know, people are considering some of the proposals in the book, especially the gig stuff, the public option for gig work. I mean, that has gotten some attention from government figures. I can definitely say that at a pretty high level.

Srini Rao:

Fair enough.

Nick Romeo:

That being said, you know, they're really strong headwinds and it's unclear what will happen in November. And so I think it's early days to know how much some of this stuff might be taken on board. You know, more broadly, though, it's it's pretty well established that a lot of people on Biden's team are interested in industrial policy. You know, they see a more active role for government in shaping some of the

the economic sectors that are vital to American security and in creating jobs and building a more sustainable and green economy along the way. So I think there's this sort of general.

perspective in the book that is not foreign to some very powerful people in the Biden administration, but on specific policies, it's maybe early days to know.

Srini Rao:

Yeah, absolutely. I kind of wondered when I think about it from the standpoint of Silicon Valley, where it's kind of at the end of the day, everything is driven around investors getting these huge returns on their investment. I heard somewhere usually what a fund is looking to do is find the one company that returns the entire value of the fund. They're looking for a 100X return.

Nick Romeo:

Yeah, I mean, that's just that's kind of wild. And it's not surprising that.

a lot of really, really important work, not only tech work, but sort of basic scientific research. A lot of important businesses are struggling to find funding, right? Because that's a crazy expectation. So the need for patient capital, I think that's another area in which, you know, both public and private sectors have something to offer.

Srini Rao:

Mm -hmm.

Nick Romeo:

I mean, so much of Silicon Valley came out of public sector investment with the space race in the 50s. I mean, Mariana Mazzucato has written on this really brilliantly, but it's pretty widely accepted now that many, many core technologies that enabled the computing revolution ultimately traced back to government investment. So when you think about the next 30 years and the range of sort of research and technological

objectives that are going to be crucial to a green transition. I think it's worth looking back to some of that history and wondering about sources of patient capital, you know, people who are not expecting 100X return, but who are more, you know, just interested in creating really good products that fill an important social need.

Srini Rao:

slowly. Well, this has been really interesting and insightful and thought provoking as I expected it would be. So I have one final question for you, which is how we finish all of our interviews with the unmistakable creative. What do you think it is that makes somebody or something unmistakable?

Nick Romeo:

Wait, sorry, what was the question?

Srini Rao:

What do you think it is that makes somebody or something unmistakable?

Nick Romeo:

Ooh, yeah, that's a really good question. You know, OK, so.

Maybe I'll try to bring it back to how we open the conversation. I mean, you'll probably understand what I'm talking about as a musician, right? Like if you put on certain composers, you can tell from a very small sample who you're listening to, right? Like you can listen to a few seconds of Beethoven or Chopin and you'll know who it is. So what is it that makes them unmistakable? I mean, I haven't answered you. I've just sort of given an example of the fact that

at least in an aesthetic domain, certain composers, I think about this with novelists a lot too, there's such a clear sensibility. And I think at some level you can kind of search for patterns, right? Like there are algorithms that will compose music in the style of JS Bach. Of course now large language models will write sonnets as if they're Shakespeare. They're not as good typically. I mean, they haven't actually...

perfectly mimicked or discerned the basic pattern. So maybe the thing that they're missing, I don't know. I mean, maybe it has to do with the kind of the motivation as well as the sensibility. I mean, I don't know. I mean, it's such a good question. I feel like we could go on for another hour on that. But no, I think about that a lot. Like how do people...

Srini Rao:

Yeah.

Nick Romeo:

who are doing something extraordinary, like whether that's writers or musicians or anyone else, how are they identifiable? And I mean, I guess another thought is that probably they're not trying to be. So there's something very unselfconscious about it. They're not saying like, how can I compose in the style of Beethoven today? Right? There's probably, that's probably just a post -hoc analytical thing that other people do to figure it out. But from their perspective, it's just like,

of response to some kind of organic, deeply felt creative impulse. So maybe that's another component here.

Srini Rao:

Yeah. Well, yeah, I mean, I completely agree. I think that that's pretty much my own definition of it. Well, this has been really fascinating and I can't thank you enough for taking the time to join us and share your story and wisdom and insights with our listeners. Where can people find out more about you, the book and everything else you're up to?

Nick Romeo:

Well, thanks so much for a great conversation. On the book, you know, it's the alternative, how to build a just economy available online, kind of wherever books are sold. And, you know, you can, you can check out some of my articles on my website. And that's, if you just Google Nick Romeo, it'll, it'll come right up.

Srini Rao:

Fantastic. Well, for everybody listening, we will wrap the show with that.

Nick Romeo | How to Build a Just Economy

Nick Romeo

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