Welcome to Macrihyde Conversations with Bilal Hathiz. Macrihyde uses natural and artificial intelligence to educate investors and provide actual insights for all markets from rates, effects to commodities. For our latest insights visit macrihyde.com. Before I start my conversation with this episode's guest, I have three requests. First, please make sure to subscribe to this podcast show, Apple's Otify, or wherever you listen to podcasts, leave some nice feedback and let the friends know about the show. My second request is that you sign up to our free weekly newsletter that contains market insights and unlocked content. You can sign up for that at macrihyde.com. Finally, and my third request is that if you are a professional or institutional investor, do get in touch with me. We have a very high-obtain strategy and analytics offering that includes access to our world class strategy team, market views, AI models and much much more. You can email me at
[email protected] or you can message me on Bloomberg for more details. Now, on to this episode's guest, Dr. Tyler Goodspeed. Tyler shared the White House Council of Economic Advisers from 2020 to 2021, and during his tenure on the council, he also shared the Economic Policy Committee at the OECD. From 2021 through 2023, Tyler was a director and chief economist at Green Mantle, New York and London-based macro and geopolitical consulting firm. He's also the author of four books on economic history. He holds a PhD in economics from Cambridge University and a PhD in history from Harvard University. He's currently a senior fellow at the Adem Smith Institute in London and a member of the Geo Economic Council Advisers at the CISIS. All views are his own and not any of the organization. He is affiliated to now on to our conversation. Greetings and welcome, Tyler. It's fantastic to have you on the podcast. Show. Great to be with you. Now, I've been looking forward to this podcast. You've recently published a book, a recession, the real reasons economy shrink and what to do about it, which is a really good read. I'll urge all of our listeners to get a hold of the book. But before we go into that, I do like to know something about the origin story of my guests. So, be great to hear in your own words. What you study at university was inevitable. You'd end up in the Econ and some of your key career milestones. It certainly wasn't inevitable. I had a difficult time making up my mind during undergraduate years. Couldn't really decide between history or economics, even dabbled in engineering for a little bit. Ended up doing both history and economics. I thought I would probably proceed to Wall Street, but just before my senior year, I started working on a senior thesis, doing some RA and TA work for a labor economist and thought, well, maybe I should give this academia thing a try, applied to Cambridge and was very fortunate enough to be admitted with a scholarship. And during that year, it was only one year, but that was a pretty formative year for me. And so I proceeded on to postgraduate study, PhD in history, actually. For personal reasons, I wanted to go back to Cambridge, Massachusetts. I know the other Cambridge. And at that point, several prominent scholars in the field of economic history had recently retired from the Harvard and MIT economics faculties. So it seemed like history was where to be. And then shortly after I started Harvard hired and tenured several very high-profile economic historians. So economic history was suddenly back in a big way at Harvard. And so my committee ended up being half in history, half in econ. My first faculty appointment was then back across the pond at Oxford, which was a wonderful three years. And during that time, I started migrating a little bit more intellectually into the quantitative economic side of economic history. So having fulfilled the top requirements that Cambridge submitted a second application dissertation for a second PhD in economics from Cambridge. And then spent what was supposed to be a year in the policy world, working in the White House in 2017 to '18, but then a year somehow became almost four years. And then back to academia, out west at Sanford. And then since then, I've been in the private sector. And that's fantastic. Lots of very prestigious organizations that you've been associated with, and lots of PhDs as well as seems. Now going to your book, one of the way you framed your book is to talk about some of the myths of recessions, because obviously everyone does also theories about recessions. And a lot of people have their pet theories about recessions and people feel are convinced about them. So is there one particular myth that you really like to emphasize that is really a myth about recessions? So I think the core myth that we tell ourselves about recessions is that recessions and economic fluctuations generally are about boom and busts, that there's some excess, there's some malinvestment, there's some error in an economic expansion to which the subsequent contraction is the inevitable even necessary remedy. And there's a certain moral element to this, there's a parable that there is something wrong in an economic expansion, we should have known better, and to a certain extent the recession is penance for that error. But when you look over the broad sweep of history, and in the book I look at four centuries of economic recessions in both the United States and the United Kingdom, and the reality is that there's simply nothing in the height, the speed, the composition, or the duration of an economic expansion that can explain variation in the depth, the speed, the duration, or the composition of the subsequent recession. And that that sort of rebells against our evolved nature as humans, because we are pattern seeking mammals. We look for patterns to incoming stimuli, and at the end of the day recessions can be very painful stimuli. I mean we lose jobs, we lose income, it can be a painful process, and so we look to what preceded the recession to some proximate cause so that we can learn how do we avoid repetition of some of those activities, of those errors, so that we can avoid future replication of what came after, and also to avoid future guilt. So it's very much embedded in our pattern seeking nature, but the reality is recessions are what I describe in the book as apophony. So it's the opposite of an epiphany. Epiphany is when you recognize a genuine pattern in observed data, whereas an apophany is when you assign a pattern to where there is none, or where you identify a false pattern. And when the stories we tell ourselves about recessions are bound in apophonies. And one of the reasons that sort of the boom bus is very popular is that there's been a sort of popular canesian argument throughout the post-war period around demand management, and managing the business cycle, there's a role for policy makers within that. And then there's another side, the shimperter side of things where you kind of, you know, excesses build, then you need this cleansing of the system, creative destruction. How did those two philosophies tie into boom bus and the way you look at things? Right, and it's also so tempting the boom bus narrative, because it's not hard to look around and find lots of records. Record stock prices, record home prices, record building heights. There are many more records. I mean, each year of an economic expansion, typically the economy sets a new record in terms of economic output, in terms of employment. And so it's not hard to look around and find some record that subsequently declines, and to match that with an approximate recession. In terms of those intellectual theories that you describe, so there is a lot of hubris that one observes when it comes to economic fluctuations. Arthur Burns, who was on President Eisenhower's Council of Economic Advisors, he was an economic advisor to President Nixon. He became Federal Reserve Chairman. In his presidential address to the American Economic Association, he described essentially how we've learned to tame economic fluctuations, because of the rise of the state, the rise of automatic fiscal stabilizers during the Kennedy administration, economic policy officials in the economic report of the president even celebrated that they had tamed the business cycle. But the interesting thing is that, again, when you look over the broad sweep of history, the depth and duration of economic recessions has been remarkably stable over time, from the 18th century to the 19th century to the 20th century. And most economic recessions are over in about a year and the vast majority in about two years or less. And also, when you look at the duration of expansions, it is true that economic expansions has been living longer. And that's a really encouraging thing. But there's no specific break point in time when expansions broke toward living longer. It's a much longer term structural trend toward longer lived expansion. So for example, there was an break point with the Second World War or a transition from the end of Bretton Woods, some measure of central bank independence. So I'm just throwing everything at you here. Yeah, the hand you name, the prime suspects to target. And there are fortunately statistical tests that one can conduct to test for breaks toward longer expansions at specific points in time. So you can test whether 1913, the establishment of the Federal Reserve System in the United States, you can test 1946 in the United Kingdom with the Beverly
reforms, you can test all these different points of time and you cannot reject the null hypothesis of no break. You can also conduct unrestricted tests to basically have the chow test find breaks. And when you do that, the only possible break that I can identify was in 1785 in the United States toward longer expansions. Now if you think about what was happening in 1785, that's the conclusion of the American Revolution, which was itself a depression magnitude recession for the then American colonies of United States. And that was sort of a break from a lot of colonial wars in the 18th century that the devastating depression of the American Revolution once the US got through a very chaotic articles of Confederation period, it does seem that that was a systematic break toward longer lived expansions. But otherwise, it's a very long run structural trend. And you know, you seem to imply there what you do imply there that there's no relationship necessarily between the height or the duration of the boom time and the subsequent recession. So if you have a 10 year boom, however you measure that, that won't necessarily lead to a larger recession than a five year boom, say. Correct. And actually, I explicitly test for that in the book. And yes, the length of an economic expansion has no explanatory power when it comes to the depth or duration of the subsequent recession, which again, it does it kind of goes against, you know, everything one thinks. Yes. And there are some very elegant theories of this. And you go back to the interwar period in the 1920s and 1930s. And there were some very elegant theories, including by such luminaries as as Friedrich Hayek, that over the course of an economic expansion, these fragilities, these malinvestments, misallocations accumulate and therefore they render the inevitable cleansing more, more probable. More recently, some very eminent economists, the Nobel laureate Joe Stiglitz has developed these endogenous or self generating theories of economic fluctuations. I recently saw the very elegant paper on a forest fire theory of economic recessions that basically over the course of an expansion, firms are just acquiring the inputs that they can get to meet current demand because profits are high because it's an ongoing expansion. And so as that expansion goes on, the quality of contractual matches between the firm and capital inputs between the firm and labor inputs, those can be not great matches, no pun intended by that term. But the paper sort of then articulates that and drives that as those low quality matches accumulate, it's essentially more dry tinder that would render the inevitable recession more probable and more severe when it happens. But as I said, statistically, there's just no evidence of that happening. And again, there's an implicit moral argument to this theory that, well, maybe the occasional controlled burn is necessary to clear out this dry tinder and facilitate the creative destruction that you reference in regard to Joseph Schumpeter. And as I say in the book, there is no question. And the empirical evidence is unambiguous that creative destruction, labor and capital and other resources and inputs moving from less efficient enterprises to more efficient enterprises is a really essential part of long run growth. It's just that that process is impaired. As I find in the book, that process is impaired rather than enhanced by episodes of economic contraction. Now, you go back 400 years and you're trained as an economic historian. So, you know, you're very comfortable with the data. One question is, you know, when you go back that far, I mean, how do you deal with poor data quality? And then the other question is, isn't there something different about the world over the last 100 years? Well, at least in the free float, currency period or, you know, when a world where finance and technology are so different, you know, is it relevant to look back several hundred years? Great question. And so on the data part, I must first and foremost give a big thank you to my former Oxford colleague, Stephen Broadbury and his many co-authors who have done some fantastic work over the years, carefully, meticulously compiling macroeconomic statistics on a consistent basis back even beyond 1700. And so for the United Kingdom, that was a huge, huge help for me. There's still some instances in which you need to break a just series or, you know, you have one official statistic series that goes back to 1955 and you need to link it up with earlier estimates. But the United Kingdom, a lot of work has been done carefully over the decades. The United States is harder, especially when you get back, as you can imagine, into the 18th century. There are a number of studies that, you know, have bread and butter economic historians who have assembled trade statistics, which is the highest quality, the most reliable, because when you think back to the 18th century, that was something that the state measured very well, because it was a source of tax revenue. So the trade data is very reliable, but also I pieced together from various sources, monetary, money supply data, some price data, exchange rate data between colonial bills of exchange and London bills of exchange. And you then have to look for what appeared to be recessionary episodes in the data and then buttress that with qualitative evidence. What were people at the time saying, writing about commenting on? And then in terms of different regimes, sort of economic regimes, it is true that, and I think this is part of why economic recessions have become less frequent over time, is that our economies look different, that we have moved from predominantly primary or agricultural production in the 18th century, for which adverse harvest shocks and adverse winter weather events were major contributing factors to economic recession, to a primarily secondary economy, so manufacturing industry. And so in the late 19th century or into the first half, right through the first half of the 20th century, industrial action in the coal industry was a frequent contributor to economic recessions. And then now we have moved more into a tertiary economy, so more services based, services, consumption tends to be more inertial, it's less capital intensive, so it is less prone to some of the shocks that historically would have contributed to the generation of economic recessions. And I wanted to look at some of the recent recessions, which will be kind of more top of mind for our listeners. And if I just pick the last three big ones, there's global financial crisis, GFC, and the label we give them seems to imply there's a credit component to it, so that's subprime, these crazy financial products were created, and then there was Leibmann's bankruptcy and the whole system blew up, which then was associated with the recession, then there's the.com, you know, early 2000s recession, and then even 1990 people took the SNL, the same as the loan crisis property, then a recession. So we have three kind of recent, say, US ones and some of them overlap with the UK as well. And the nomenclature we use seems to link it to some kind of asset bubble or credit cycle. How do you respond to that? Yeah, I mean, rather like tropical storms, we tend to name recessions and we tend to name them after some ex post excess in the preceding economic expansion. Of course, a recent recession, I don't think you just mentioned, is of course the most recent, which was the 2020 pandemic recession, which was very much a bolt from the blue. But in terms of the second and third most recent recessions, the 2001 recession universally, we call that the.com recession. But in the book, I look at the different shocks impacting the US economy, because remember, this was a US recession. It was not a UK recession. The UK economy actually powered through that recession, grew by about one and a half percent during that time period. They were adding about 20,000 jobs per month, which is a pretty healthy rate for the UK economy. In the book, I identify at least four shocks that were impacting the US economy in 2001, of which the decline in tech stocks was quantitatively the least important. So when you look at empirical estimates of the effect of changes in financial wealth on consumer behavior, those estimates just can't explain the decline in economic activity that occurred in 2001, especially when you consider that a lot of tech stocks were owned by international investors. And also the ownership was skewed very much to the higher end of the income and net worth distributions. And those investors tend to be less responsive to changes in financial wealth. Moreover, the recession started in April. The Nasdaq had actually already started to recover. The second shock that was impacting the 2001 US economy, but not the UK economy, was as East Asia recovered from the 1998 East Asian recession, there was an energy-prite shock in the United States. It didn't really affect the UK because the UK was sourcing its gas from the North Sea at the time. But this was the summer of rolling blackouts in the state of California, which is the largest economy in the United States. A third shock was that in October 2000, the United States implemented permanent, most favored nation status with a multi-trillion dollar non-market economy, China. The immediate impact of that was a precipitous decline in net hiring in industry and manufacturing in the United States.
And that's actually a defining feature of recessions. In the first instance, they're typically not characterized by a sharp increase in the rate at which firms lay off workers, but by a very sharp decline in the rate at which they hire workers. And then the fourth shock impact in the US economy in 2001 were the terrorist attacks of 9/11. And in fact, all of the output decline during that relatively short recession was during the quarter that included the terrorist attacks, the constant closure of US air space, widespread consumer concern, and fear. And for the eight-month recession as a whole, the US economy actually expanded because during the first quarter of the recession, the US economy grew. And 08, we forget that the highest price ever for energy in the post-war period was not in 1973. It wasn't in 1980. It wasn't in 1990. It was in the summer of 2008 for a variety of supply and demand reasons. And so in June 2008, the average American household was having to spend about $2,000 more in real $20, $24 than they were just a few years prior at the same time that they were having to spend about $800 more on mortgage interest payments as their adjustable rate mortgages reset higher. And remember, but I'll, at the end of the day, after taxes, the bottom half of the American income distribution has no savings. So faced with that, something sort of had to give. And for a small minority of American households, they determined that, well, I gotta get to work. I gotta drop my kids off. I've gotta heat and cool my home. And so what gave was that a small minority of American households were late on their mortgage payments. And the rest is they say is history. Absolutely. I mean, you talked about energy prices there in 2008 and also the 2001 recession. So it seems like, and you could say an external shock of some kind of commodity shock, you could say. I mean, is that something that is a common trigger for recession across the last 400 years? I'm again, I put my sort of patent recognition glasses on here. So what's interesting is that there are basically two different types of recessionary shocks. One is a macroeconomic shock that basically affects all sectors of the economy, relatively equally, even if sectors aren't particularly linked. And it's easy for firms and households to find substitutes for key inputs. So think pandemic. There's another category of shock, which is sector specific, that is directly impacting only one sector. But that sector may have very high linkages to a lot of other sectors. And it may be very difficult for households and firms to find substitutes over, say, a 12-month time horizon, which, as I said, is the median duration of a recession. And so energy has certainly been one. And this goes back four centuries. I mean, you can look at recessions in the 18th century and read of turf famines because of adverse winter weather events, flooding, drought that would cause a shortage of turf or biomass. Because remember, primary form of transportation then was draft power. So harvest shocks were, in effect, energy shocks. And I already mentioned industrial action and coal in the 19th and early 20th century. But it's not just energy. There have been a number of recessions that were contributed to in a major way by, for example, the automotive industry. So there was a relatively brief, relatively mild, 1927 US recession. This single biggest cause of which was the complete shutdown of Ford Motor Company as Ford retooled their factories from producing the model to the model lab. There was another relatively mild recession in 1960, a major contributing factor to which was a large scale steel strike in late 1959 that generated a lot of steel shortages in 1960. If you go back to the 19th century, a perennial contributor was cotton. So you think about how essential cotton was to a lot of other industries, not just textiles. So in 1862, that severe recession in the United Kingdom was called a cotton famine. I mean, the Lancashire Cat Cotton industry basically shut down. And throughout the 19th and the early 20th century in the United States, harvest failures to cotton, whether from bowl-eval infection, infestations or drought, would in effect lower US net exports, which would mean an external drain of US bank reserves, which would impart a deflationary impulse to the rest of the economy. So even though these shocks, whether it's energy, automotive, steel, cotton, even though they're directly affecting only one sector, the linkages are so great and the ability to substitute in the near term very limited. I mean, they sound a lot like mainly supply side shocks. Is that fair characterization or is it too crude to say that? I think that's an accurate summation, a lot of supply shocks. But remember, these things are, they're supply shocks that aren't moving along a static demand curve. Because when you have production that can't take place, when you have economic activity that can't take place because of some critical choke point or bottleneck, then there's hiring that doesn't take place. And when there's hiring that doesn't take place, then people are having to remain in unemployment for longer, then they start cutting back on consumption. So these supply and demand shocks can move together. And also, there are lots of mechanisms historically through which supply shocks, which ordinarily we would associate with higher prices can often become disinflationary or even deflationary. One is that people start cutting back on expenditure. But another is they start withdrawing bank deposits. Because if I'm out of work or I'm worried I might be out of work, I'm going to take out some of my money so I can meet near term expenditures. You also have bank insolvencies because of local supply shocks. This was actually a perennial contributor or amplifier of US recessionary shocks. It was because we had this very fragmented banking system with tens of thousands of small under capitalized, under diversified banks. So supply shocks could very often and do very often become dynand shocks. And then on the other side in terms of recessions, is there a framework we can think about recessions? Because it seems like on the growth side, it seems like they could be long, they could be short, but it's very hard to try to call the end of a growth period. But recessions on the other hand, is there like some recurring empirical patterns? Is there something that your studies find around that? Great. Great question. So first data, then anac data. So the data is that whereas economic expansions don't die of old age and never have economic recessions do die of old age and always have. So the longer a recession has endured, the more likely it is to end in renewed economic expansion. The anac data, and unfortunately one can replicate this for earlier periods because Google trends only goes back to 2004. But if you look at Google trends and look at search intensity for specific terms, and this is something I cover in the book, the search intensity for a particular term surged as you entered 2008. And that term was layoffs. And it reached its peak, I think in sort of autumn 2008, all-time peak. Never has search intensity been higher than that, except it was matched, as you might imagine, in March 2020 during the depths of the coronavirus pandemic. Search intensity for layoffs then started to come down by spring 2009, just as search intensity for another term or two terms search to its all-time high. And that search term was green shoes. Similarly in 2020 in March, as the economy shut down, there was a surge in search intensity for layoffs by May that came down sharply just as search intensity for reopening reached its all-time high. And I think this does speak to the anecdote that speaks to something that Nobel laureate Robert Schiller discussed in his American Economic Association presidential address, which is we're storytelling mammals. So we don't just look for patterns and store those patterns. We embed those patterns in stories. And a defining feature he found both in the early stages of a recession and then in the early stages of an expansion is just the shift in narrative from doom to cautious optimism. So that's great. I'm thinking about this from a different angle from the policy makers angle here, because it almost sounds like policy makers should not necessarily try to manage the expansion. You know, many central banks, including the Fed, have both the growth and inflation mandates. And what they try to do is they say when they start to see growth pick up or certain excesses build up, they start to raise rates and they try to manage the cycles, you know, to reduce the amplitude of the boom bust. I mean, what's your prescription then to policy makers given your work? So my prescription would be twofold. First, when it comes to recessions, while greater intervention by the state may not be able to end recessions, contractionary fiscal policy during recessions can make things much worse and contractionary monetary policy. So we saw that during 1929 to 1933, the Great Depression. And we also saw it really in devastating form in the 1840s in the United Kingdom, where for bond market reasons, the UK treasury and the Bank of England had to
embark on pretty contractionary fiscal and monetary policy at the same time that there was a human catastrophe ongoing in Ireland during the Great Famine. And there is evidence that that made things much worse. Now that said, while economies may recover in the aggregate from recessions, that doesn't necessarily mean that every individual or every household does. And so there is an important role for targeting relief to where it is needed. And so that's why we do have some of these automatic stabilizers so that you have programs to target relief where it's most needed. So that's part one. Part two is that I think the book would caution policymakers against excessive hubris that they can prevent recessions or that by medicating or otherwise sedating economic expansions that fundamentally die innocent and healthy. The nature of recessions being about shocks is that the economic expansion was healthy and it was innocent. So I would caution, I think the book would caution policymakers not to presume that they can essentially abolish history. You know, there's really, really good points. And just a question from another angle, which is many of our audience are investors and they spend a lot of time kind of reading the tea leaves to try to predict a recession or boom time and things like that. So given your framework, I mean, would there be a set of indicators you'll look at to say okay, when these start to flag red, then we should get worried about recession or does that kind of go against what you've been saying? Right. So it does kind of go against what I've been saying. But that said, I've written this book in which I find that a lot of these, even which I find that recessions are fundamentally unforecastable and a lot of the standard indicators or leading indicators of recession have a lot of false positives, a lot of false negatives. You can't really predict them. But that said, despite having written this book, I'll still take a peek at the yield curve or see what the SOM rule is indicating. Same way, I don't believe in astrology, but I'll still take a peek at my horoscope now in that. But I would say, for investors, what the book says is that recessions are unforecastable. That doesn't necessarily mean that asset prices are unforecastable. I mean, the random walk and I mean, yeah, efficient markets, I'm a big believer, but I don't dispute that savvy investors can correctly predict the direction of certain asset prices and predicts. You know, we're going to have a tech stock decline or predict we're going to have a housing price decline. But that is a distinct prediction from the related, potentially related, but separate prediction that therefore that will cause a recession. Now some very smart investors may be correct on the first prediction, but the book would say that more often than not, they are incorrect on the second prediction. You may get a recession that may be contemporaneous with some asset price decline, but more likely the asset price decline is a casualty rather than a cause of a recessionary shock elsewhere. I mean, one of the things we talked earlier is about commodity price surges, 2008 you said, obviously go back to the 70s. These are all shocks that tip the economy into recession. Now, with the US becoming a net energy producer now, does that change something for the US? Does that then mean that you have to take into account the status of a country's energy production in order to understand if a shock will have an impact same with the UK and the North Sea? I think it's helpful here to look back to the 1970s when there were perennial energy supply shocks that contributed to recessions. And I do see differences, not necessarily in terms of where the supply is coming from, although that is a factor because you can look, the core OPEC supply is a smaller share of the global market in the 2020s than it was in the 1970s. One OPEC supply is much more elastic than it was in the 1970s because of the rise of unconventional. And it's a more diversified energy stack than in the 1970s. And also we learned a lot of lessons from the 1970s. So we now have strategic petroleum reserves that provide a buffer in the events of that versus supply shocks. And generally speaking, you look over the broad sweep of history. And I think the case for optimism is that we are getting better at absorbing the kinds of shocks that historically would have been major contributors to economic recession. And diversification writ large, not just energy, but diversification writ large is a big part of that. Now, I mean, you've written a whole book on this topic and you've made very convincing arguments so far. So let me kind of push it back to you. I mean, the books be now at least for a few weeks now. And I'm sure inversions of the analysis were out beforehand. I mean, what are some of the most the strongest criticisms or things that you think, ah, that's actually a good critique of what I've argued. So let me push it back to you to critique your own work. Yeah. So the conclusion about which I am least confident, I'm confident, I wouldn't publish anything that I didn't have at least a 90% confidence in. But it's that a few years on from a recession, economies typically look pretty darn similar to how they would have looked had the recession never happened. And there are various ways you can measure this. But generally speaking, economies exhibit remarkable fidelity to long run trends, including in the composition of the economy. So if you look at the sectoral allocation of labor, the sectoral composition of output, at the end of a recession and at the end of the subsequent recovery, the economy looks pretty similar to how it would have looked at a continued uninterrupted, long, long run trend. Now the thing that gives me pause to that is the two most recent recessions. So the coronavirus pandemic, we're still a little bit more good, so oriented than services oriented on the eve of the pandemic. We're still working from home more than we were. There is could still continued convergence back toward pre pandemic trends, but it doesn't look, you know, we're five, six years on from that recession. It doesn't look exactly how it would have looked. And then also the aftermath of the 2008-2009 recession when the UK in particular had sort of a slope change in its growth. But the issue there, I think, is that there was a major policy regime shift after 2008-2009 on both sides of the Atlantic, but one that disproportionately impacted Europe, including the United Kingdom and also Canada, because those economies were much more likely to be impacted by the post-GFC change in the financial regulatory environment. Because they were much more reliant on banks, particularly for small, medium-sized business lending, much more reliant on banks on average. They have fewer but larger banks, so more likely to be treated by the new regulatory framework. So that doesn't necessarily rebel against the thesis of the book because there was a policy, a major policy change. But if you ask me, you know, in which conclusion of the book do I have a 90% confidence rather than a 99% confidence, it would probably be that. Now, the last question from the book is, you have a day job and you writing this book presumably, how painful was it to write this book? So fortunately most of this book was written when I was still in academia. Let's just say my family and I are looking forward to having my evenings and weekends back. That's good to hear. Now I did want to ask just a couple of questions. I always ask all my guests. One is, you know, the world's changing a lot and we do have some younger people listening to the podcast and they often ask when they graduate this year, what should they do after they leave university? You know, there's AI, you know, politics, you know, is going through some transitions at the moment. What advice do you give to youngsters, you know, when they think about their post-unilife? So there's no substitute for perspiration. You've got to continually be upgrading your skills. I mean, one of the things with this book, it's kind of old school now with AI, but in previous projects, you know, I would do a lot manually in Excel and one thing I realized was that with a project of this scale, I needed to make sure I did everything in code so that when I was updating the data sets, minimizing the risk for manual error, it makes linking data sets much easier. So I used to always want to do that, but sometimes you get frustrated. You don't know how to do it in status. So you're like, okay, I'll just do it in Excel for this one job, but I was really diligent about doing all of this code and learning the additional things I needed to learn, engaging in new literatures because it's constantly evolving and you got to keep pace. The second thing is whether you're in finance, whether you're in academia, whether you're in the public sector, is finding good mentors. I've been very fortunate in my professional career to have some amazing mentors and they're helpful for bouncing ideas off for suggesting this seems like a fruitful path that maybe I'd avoid that, but finding good mentors, I think, is really, really important. I imagine you're a big reader as well. So what are some of the books that you've liked or have influenced you? Well, I would have to say, first, a paper, even though I, in the book, demonstrate why he was wrong in his business cycle theory. One of the most brilliant papers of the past century, I think, was Hayek's Use of Knowledge in society about how knowledge is not just
No, one individual possesses all information, but a price incorporates a lot of discrete, dispersed information about supply demand preferences. And in that sense, it's a remarkable coordinating mechanism. So it's a wonderful little 1945 paper in the American Economic Review. In terms of books, as you said, I'm both an historian and an economist. So I would certainly recommend the Pity of War by Neil Ferguson, a history of World War I, in which she tackles a lot of myths about World War I, including some economic and financial myths, but really sets up what he describes as counterfactual history. Because a lot of history is very contingent, and we tend to think that great historical events require great historical causes. Therefore, World War I was inevitable, but he demonstrates a lot of the contingency in July 1914. And then the second one I would recommend on the economic side is Angerson Pishke's mostly harmless econometrics, which I think is a great resource. Just to help, even if you don't go into academic economics, it just helps prepare the mind when you're reading about a social science study in the newspaper or a medical study to start asking, okay, what are the potential statistical biases here? How might I correct for those biases? How might I design if I could go back in time, a randomized controlled trial? What would that look like? What would the control group be? So two very different books, but again, you're asking an economist and an historian. So that's really good. Now I would urge all about listening to get hold of your book recession, the real reasons economy shrink and what to do about it. Where can they get hold of the book, Tyler? Amazon, either UK or US, Barnes and Noble, Hatchet book group. Yeah, it shouldn't be hard to find. And they have water zones. Great, that's great to hear. So with that, Tyler, thanks a lot and you know, congratulations once again for the excellent book and good luck with all your other endeavors. Thanks Bill, I'll great talk with you. Thanks for listening to this episode. Please subscribe to the podcast show and Apple Spotify. You're a real reason to podcast. Leave a five star rating, a nice comment and let other people know about the show. We'll be very, very grateful. Sign up for our new newsletter at macri-dot-com. Macrive limited. Macrive retains all ownership, title rights and interest in this audio in video and all related content, including audio transcripts, thumbnails and descriptions. You may share links to this publication and embed it using platform native features. You must not, whether in whole or in part, download copy, repute, redistribute, reupload, edit, client, or create derivative works from this content without the express with an authority of Macrive. This audio and video is made available to you for general information purposes only and does not constitute the recommendation of any investment product to act or not to act in any way, whatsoever and does not represent an offer or the solicitation offer to buy or sell any securities, financial products or related financial services or to adopt an investment strategy. To the fullest extent, permitted by applicable law, Macrive excludes all representations or warranties of any kind, including any implied, warranty, of merchantability, satisfactory quality of fitness or particular purpose. To the maximum extent, permitted by applicable law, Macrive excludes all liability of any losses, whether direct or indirect that may be suffered as a result of reliance on this audio or video. Unless otherwise stated the views, information or opinions expressed during this audio or video are solely those of the speaker do not necessarily represent those of Macrive or its staff. Copyright 2025 Macrive Limited or Rights Reserved [Music - Garvel Demo]
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