63 - Austrian Economics for Middle Schoolers
Too Hard For The Radio ·
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00:00:00
Transcript
SPEAKER_00
00:00:00
What's going on? It's time for another episode of Too Hard for the Radio, transmitting from the future free state of greater Idaho. I am the one arm madman. And with me today, we've got John Foster. John, it's a pleasure to have you here. How are we doing?
SPEAKER_01
00:00:13
Hi, Nick. It's a pleasure to be here. Thanks for having me.
SPEAKER_00
00:00:16
No problem. So you have got a really interesting job. When I read your pro, I heard you on towards anarchy a couple of weeks ago and I was like, man, this guy, he's really, he's really got, got a good deal going on right now. So why don't you explain to everybody what it is you do?
SPEAKER_01
00:00:33
Well, I have a company called Middle School MBA and it's exactly like it sounds. It's an executive MBA for middle school kids. So we teach business, economics and entrepreneurship. And the cool thing is that we're truly blended in that we do the curriculum, we send software, across the web, but we don't go to the kids, we go to the teachers. So we do a mind meld with the teacher and, and the teacher delivers classes and activities and experiments to, to their class. And so the beautiful thing there is that, you know, when you, when you do normal, what people mostly think of as online education, you're going directly to the student. You have no idea who that student is. And so you're forced to come in at the sort of the lowest common denominator. And that means that any kid with two brain cells is bored out of their skull.
SPEAKER_01
00:01:39
Sure. But the way we do, we come in super high and then we, we rely on the teacher to, to bring kids up at the, at the optimal speed for those particular kids. And it just works like a charm. It's, it's, I love sitting in the back of the classroom and watching a teacher take our tools and, and use them in their classroom. It's just really beautiful.
SPEAKER_00
00:02:02
That's cool. Cause I would imagine most teachers probably don't know much about business and economics. Like based on my experience, I just got done with a two year degree here in Idaho that I never would have, I always have to disclaim this. Like I never would have paid to go to college, but when I got hurt, they paid me to go to college. So I figure, you know what, I'll go learn about the enemy firsthand and get some, some up close personal experience. That's cool that you go to the, the teachers. So like my, my little brother just went on homeschool and I was talking to his dad about it the other day. And, and he goes, you know, it's going all right. Like he's in and out, it's hard to keep his attention. It's really been tough on me. Like I'm having to read books and like, cause I don't want to teach him the wrong way, you know? And, and he knows now that he was taught the wrong way. So it's an interesting thing, getting somebody like capable of teaching something the right way.
SPEAKER_01
00:03:01
But you know, there's a, there's a lot of help out there. Oh yeah. You probably know. Oh yeah.
SPEAKER_01
00:03:07
The homeschool space is amazing. And yet, you know, there, so I don't know what age you're. He's
SPEAKER_00
00:03:17
11.
SPEAKER_01
00:03:18
11. Oh, awesome. Awesome. Stanley Schmidt writes a bunch of books called The Life of Fred. And Fred is a, I think a four-year-old professor who's three feet tall. Nice. And, and Fred goes around doing various things and Stan writes about everything, chemistry, logic, personal finance, just, I think he's written some like 80 books.
SPEAKER_00
00:03:53
Oh, wow. And,
SPEAKER_01
00:03:55
and any of them, if, if, you know, that's your subject, just go grab The Life of Fred and, and it's, it's phenomenal. They're funny. They're, they're light, but I'm amazed at how well he learns every subject. But then he, he, he brings it to you in a, in a very clear logical sort of way.
SPEAKER_00
00:04:18
That's cool. Now I've got some, some last minute stocking stuffers I can pick up.
SPEAKER_01
00:04:22
Yeah. Yeah. Yeah. Go, go for that, man.
SPEAKER_01
00:04:25
They're all great books for whatever you want to do.
SPEAKER_00
00:04:27
So now what kind of, I guess, are you going to public schools, private schools, charter schools, all of the above, homeschool?
SPEAKER_01
00:04:36
All of the above. You know, the, the beauty is the, like you said, the teacher doesn't need to know any business or economics, just like most adults don't know any. And we just drop right in. They need an hour or so to prepare, but we've, we've got our tools make it so clear and simple that, you know, adults just get it right away. And then we give them everything they need to, to deliver it to their kids. So it's, everybody feels like they're punching above their weight. Everybody's happy about it. It's a cool deal.
SPEAKER_00
00:05:12
Yeah. I'm sure you guys use interactive videos and stuff like that. Like one of the coolest things I think about, like learning and job, I was a motocross racer growing up, so like I didn't care about school or any of that type of thing. So I didn't really like look for any academic things. Like now I love audio books. I listen to audio books every day. I love them.
SPEAKER_00
00:05:32
I've listened to like 200 of them since I got hurt. If I'd have known that was out there when I was a kid, you know, I could have had a whole lot more fun while I was in school. But, you know, they, they really, they really do a terrible job on economics in schools. When I was in high school, I had my senior year, I had one, one class that was half economics, half US history. We did, you know, half, half. So the second semester was, was economics and they went ahead and laid my teacher off before the end of the year and just had him finish out the year. So he was just like, you know what, do whatever you guys want. So I came out of high school literally knowing nothing about economics. And, you know, at the time it was like cool, easy class. I'm out of here. I never really thought about like how that would affect my life. And I didn't learn anything about economics when I was 30.
SPEAKER_01
00:06:35
Yeah. And, and, and, you know, so much of what they teach in, in high school economics is, is Keynesianism to begin with. So they may have done you a favor, but just let them off the hook.
SPEAKER_00
00:06:45
Yeah, right. That's actually another good point.
SPEAKER_00
00:06:47
Like I, my school, I went to, I was 5,000 people in my town, 400 people in my high school, very small. And they always complained to us, our schools are horrible. We need new books. We always need new books. You know, we got to get these new textbooks in here and then everything's going to be great. And now looking back on it, it was like, man, those old textbooks were the best thing that could have happened to us. Cause they would have got those new ones in there and they'd have been really bad.
SPEAKER_01
00:07:14
Yeah, it's true. You know, a lot of the, a lot of things they've made worse. They've made math worse. They've made, I mean, obviously they brought in a bunch of things, all the woke craziness, you know, they, they, they can't teach kids to read or, or, or do multiplication anymore, but they can certainly tell them exactly how many genders there might be, whether it's 62 or, or 190 or whatever it is. Yeah. You know, one, everyone can get that message. So they've, they've put a bunch of stuff in that shouldn't be to begin with and, and crowded out and diluted the stuff that they really should be doing.
SPEAKER_00
00:07:56
And the stuff based in communism, this is not like even Keynesian economics, what we're talking about. Like a lot of this stuff is straight up communism rules for radicals. Like you can go right into Marx and see what's happening in your eight year old's classroom, which is terrifying.
SPEAKER_01
00:08:11
Yeah, that's, that's totally true. And, you know, we, we do a lot of, a lot of work on Marx actually in our curriculum, because once you understand it, you can see it everywhere. You know, we do a strictly from an economics perspective. We, once the kids understand how markets work very well, then, then we juxtapose that to the Marxist system, you know, we actually go through Marxist theory, labor theory, exploitation, revolution, all that stuff, strictly no, nobody's thumb on the scale.
SPEAKER_01
00:08:47
You know, we, we, we, we give the exact Marxist line, but they can see how that's just completely antithetical to markets and, and why it doesn't work, you know, neither back in the day or, or today in Venezuela or North Korea or wherever.
SPEAKER_00
00:09:05
Yeah. So this is kind of the way I've, I've like, since I've learned about Austrian economics and, and the way I've kind of conceptualized it is, is one time I was in a math class, it was algebra, geometry, whatever, I was in high school, early on in high school, probably a freshman. And, you know, the teacher will bring you up and, and you have to solve the, the problem on the board. And I solved the problem and he goes, okay, why is that correct? And at that point, I hadn't really learned how to like back solve and stuff like that. I sat there for a minute and I just looked at it and I go, it doesn't have any choice. It just has to be that way. Right. And that's kind of the way I look at Austrian economics and economic, like this is it. This is the truth. This is how it has to be like, learn it the right way. And you're going to be better off for it. Yeah.
SPEAKER_01
00:09:52
The, the beautiful thing is that, uh, there, I, I told a group, uh, a few months back that, that, uh, economics is a mess. And it's always been a mess from, from the get go, because it's, it's this tangled web that's, that we've had to kind of try to figure out. And a lot of the nonsense has remained and new nonsense has been introduced, uh, probably on purpose. And so you have to dig through the clutter, but, but there's some real jewels in there about how things simply must be. And, and then also some borders around the edges of what we can know. So we can say, okay, we know for sure that, that a demand curve slopes downward to the right. We don't have a clue what that means for the price of wheat tomorrow.
SPEAKER_01
00:10:52
You know? So there, there are limits to what we can know, but understanding what the limits are is, is really important as well.
SPEAKER_00
00:11:01
Yeah. I, I, uh, that, that kind of like jogged my memory of a Mises quote where he said, you know, I'll, I know everything about money, but I'm never going to have any. And that's kind of that way, like you can know all about it, but you're, you still can't know what the price of wheat is going to be tomorrow. Right. And that's down to like individual human action based on modeling of groups.
SPEAKER_01
00:11:21
Exactly. And you know, the, um, I don't know how, how deeply you, you've dived into the Austrian, the whole Austrian deal, but, uh, you know, people don't, don't really realize that the Austrians have laid down some of the real cornerstones of economics. The subjective theory of value was the first one. You know, Carl Meagher was the first Austrian economist and, and he figured out subjective theory of value. And that's still hasn't been totally absorbed, uh, across the whole profession. All of everybody, everybody agrees. Oh yeah. Yeah. That's right. But, but it's full implications really haven't been absorbed, particularly by the, the neoclassicals, which are probably the largest, uh, school of, of economists these days.
SPEAKER_00
00:12:13
Yeah. What are, um, some of the economists these days, when I was in college, we had, we had this, uh, this assignment where you had to write about a New York Times journalist. And of course I picked Paul Krugman, you know, the villain of the times.
SPEAKER_00
00:12:29
And, uh, it was wild. Like in the initial post, it was like, this guy's a villain. He's a liar. He's wrong about everything. He never changes his mind, even when he is wrong about everything. And that was kind of the post. And then my teacher came back and me like, you were, this is horrible. This is the New York Times. He's an economist.
SPEAKER_00
00:12:48
Who are you? You know? And then I, I came back with like a whole page of just like, he said this, he said that, he said this, he said that this is all wrong. He knew this was wrong. This is clearly a lie. And by the end of the assignment, he sent me an email saying, you have, you have changed my mind against Paul Krugman. I was like, like, what a win, right? That was in high school? College. College. College. Yeah. Yeah.
SPEAKER_01
00:13:16
So you, you had smoked him out by then.
SPEAKER_00
00:13:18
Yeah, I did.
SPEAKER_00
00:13:19
Well, there's a great podcast that I used to listen to by Tom Woods and Bob Murphy called Counter Krugman, where they just used to read his article every week. And I loved listening to that. That was great.
SPEAKER_01
00:13:30
Yeah. Yeah. Those guys were great. I actually went on one of their cruises. Did you, did you ever go on a contra cruise?
SPEAKER_00
00:13:36
I have not this, that was kind of before my time, I think.
SPEAKER_01
00:13:40
Yeah, maybe so. Maybe so.
SPEAKER_00
00:13:41
Yeah. I didn't really get into this stuff.
SPEAKER_00
00:13:43
I guess it's been about 2016, 2017 is when I really started digging into this stuff. You know, I, I was a motocross racer. I didn't care about politics. I didn't care about economics. Like it was just death and taxes. You know, you pay the taxes, you don't complain about it. That's just how things are, you know? And one day I just ran out of things to watch on TV. I'd been sitting here for a couple years and it was just like, I've seen all this crap. I'm bored. Let's see what's on the internet. I'd never really been an internet guy. Like I didn't do social media. I didn't like it. Still don't like it. But I, I, you know, logged on and I started listening to podcasts and pretty soon I'm, I'm finding people like Tom Woods and Dave Smith and totally changed my life as somebody who grew up as like in a neocon family. We just didn't know anything. It wasn't like I was a neocon or, my parents were like, they didn't know anything. They couldn't have told you what the difference between a Republican and a liberal was. But you know, getting into my 30s, it was really frustrating to see the way the establishment, just the order of, you know, the, the elites, how they just push you to being ignorant. And then when you actually do find something true that can improve your life, they call you crazy for it.
SPEAKER_01
00:15:04
Yeah.
SPEAKER_00
00:15:06
Yeah.
SPEAKER_01
00:15:07
Yeah. It's a, it's, you know, the whole propaganda operation is extremely effective. And you know, part of it is, is giving you information that they want you to believe. And part of it is keeping information away from you that they don't want you to be aware of. And I've always, underestimated the effectiveness of it. It was, it really wasn't until probably the whole COVID regime that, that I was like, man, this stuff really works. This is amazing.
SPEAKER_00
00:15:40
Yeah. I'm, I'm with you. I was completely taken aback by the way the average citizen responded to the COVID regime, essentially. Like I was, I was a drug addict as a, as a, as a young man. And one of my first thoughts was like, well, they're like, the drug addicts aren't going to listen to this. Like you think COVID is going to stop them from going and getting heroin. Like that's stupid.
SPEAKER_00
00:16:06
Like if the normal citizen sees the drug addict who's like dying, walking, still going around, doing their everyday life, there's no way they're going to listen to this. But I was very, very wrong about that. Yeah.
SPEAKER_01
00:16:21
I have a different view of our society today as, as a result of that. And I was, I was really shocked at how people rolled over and, and not only just that, but also wanted to be part of it. Wanted to rat out other people and wanted to be enforcers and, and, and we're so sure that they were right, you know, that, that it was worth, you know, nailing your door shut or whatever they had to do to make you comply.
SPEAKER_00
00:16:54
Yeah.
SPEAKER_01
00:16:55
It's amazing.
SPEAKER_00
00:16:56
Yeah. It's crazy. So I grew up in Northern California around normal people, essentially. Like they weren't political in any way. This was in the early 2000s. Nobody really was back when I grew up there. And then I lived in San Francisco for five years before COVID. I think I was there from 2015 to, and it was a little less than five years, 2015, 20, 20, whatever. Anyways, it was amazing for me to see these people who five years prior, like were great people. Like I never had, nobody ever asked me. They all knew I was an oddity. I was from somewhere else.
SPEAKER_00
00:17:32
I rode a dirt bike. Like, you know, he's probably got guns, whatever. He's this crazy guy, but he's fun. We like him, you know? And now I live here in Idaho and it was like, because you live in Idaho, your opinion on COVID does not matter. It's like, well, why? Well, you live in a cow pasture. What you, what, what is true for you is not true for everybody else. It's like, guys, I sat in traffic for an hour and a half yesterday. There's a million people that live in the treasure valley. Like, what are we talking about here? And they just have this crazy view that it's like, you either live in the city or you live in the middle of a field. And if you live in the middle of the field, you're an idiot and you should not be listened to about anything.
SPEAKER_01
00:18:16
Yeah. You know, I, I had dinner a few months ago with a guy who grew up in New York and he lives in Dallas now and we were, we had dinner in Dallas and he told me, he said, you know, when I first came visit to Dallas, I was expecting to see tumbleweeds in Dallas. You know, crazy,
SPEAKER_00
00:18:39
right out of touch where the Cowboys play. Yeah. Yeah. It's like, you really think you're going to fill up a stadium every weekend when there's nothing but tumbleweeds. Like, come on people. It's yeah, it's wild. I, I, it was frustrating. It was very frustrating because it's like, I like you, you know, not, I'm not talking about like these people in San Francisco. It's like, I like you, but you're clearly insane and I can't do anything for you at this point. And most of them like wrote me off as, as literally being insane, not like, oh, he's just got these things wrong. Like, oh no, this guy got hurt.
SPEAKER_00
00:19:17
He moved and he went nuts and we should not talk to him anymore.
SPEAKER_01
00:19:22
And now that in the, in the course of time, you've been shown to have been correct about everything you said about COVID. Yeah. Still, they don't
SPEAKER_00
00:19:32
care, right? No, they go, you weren't right. You were just right by default. You were being difficult and it just turned out that they were wrong. You weren't right. They were just wrong and they weren't wrong because they were just idiots. Obviously they were wrong because they only had so much information to work with. You know, they only, you know, what were they supposed to do? And it's like, I was getting the right information.
SPEAKER_00
00:19:58
It's not like it wasn't out there, you know, like you could subscribe to two or three sub stacks and know like far more about COVID than Dr. Fauci.
SPEAKER_01
00:20:07
Well, you know, it's, it's, it's just standard procedure for, for me with, if, if I'm confronted with, with some thing, okay, some situation and, and, and person A says, okay, it's like this, then I say, well, all right, who's, who's the, the best person that takes the opposite position? What do they have to say? I want to hear that. Yeah. You know, but, but these people that's like, oh, just give me something to cling on to. And that's that. And I don't want to hear anything else. Don't, don't shatter my illusion.
SPEAKER_00
00:20:45
Yeah. You know, it's strange. I'm a UFO guy. I like UFOs like my, my guilty pleasure. And there's this new UFO story that's coming out. It's like this picture of what's supposedly that MH370 plane that disappeared years ago with three orbs spinning around it. You may have seen it on the internet.
SPEAKER_01
00:21:02
I heard that on your, on your podcast.
SPEAKER_00
00:21:04
Oh, excellent. Excellent. So interestingly, like I, at this point, I don't know if that thing's fake or real. Like I, early on, I thought it was pretty real. The guy was making a very convincing case. Now there's been some evidence that has come up that has maybe shown some light, but I just couldn't believe how fast these guys who are UFO people who don't trust the government, don't trust anything COVID was a lie will automatically fall back on, well, that guy who makes VFX for a living says that it's fake and he's an expert. So like, how can I trust you when this guy who's been doing it for 10 years? And it's like, when you go onto that guy's video and that guy may be right, the VFX guy, but he didn't do any research at all. All he did was look at the video and go, well, that's fake.
SPEAKER_00
00:21:46
And none of them even bothered to try to make it, you know? So it's interesting how even like anti-establishment people who have been vilified and called crazy for the past, I don't know what, 50, 60 years, automatically within a year will fall right back into the trusty experts fallacy, you know? And that was the most disturbing thing about it to me. It's like, we've all forgotten about Dr. Fauci already. And that was kind of the plan, you know, like, let's just get him out of here. Everybody will forget about it and we'll just move on. It seems like that's the case. And that was
SPEAKER_01
00:22:23
brilliant.
SPEAKER_01
00:22:24
No, it's just move on. Let's get some other things out in front and the past will just recede and here we go.
SPEAKER_00
00:22:32
Yeah. All right. I feel like we kind of got off the rails here. I want to learn a little bit more about your economics up here. So what are some of the key concepts that you guys teach?
SPEAKER_01
00:22:43
Well, okay, that's a great topic. So what we do is, you know, economics has got a very bad reputation with people. It's considered boring and out of touch.
SPEAKER_00
00:22:58
It's a dirty
SPEAKER_01
00:22:58
word. It is. It is. You know, what we like to say is that when you say the word economics to somebody, they're likely to fall asleep before the third syllable.
SPEAKER_00
00:23:13
You're just saying I'm boring.
SPEAKER_01
00:23:17
So we were really careful not to have anything about economics in the name of the company. That's why it's middle school MBA. But and it's also because we approach it from a business perspective. It's really the, you know, originally the first economist was Aristotle and he looked around and saw people engaged in commerce and tried to figure out what are the rules? What's the nature of this thing that people are doing? And voila, that was the first of economics. And he got some things right, but also a lot of things wrong. One of the things that he got wrong was the source of value. He bought into the labor theory of value, essentially. That, you know, the worth of something's worth comes from its inputs. What did we have to do to create this? You know, the raw materials and the human labor and whatever that imputes value into this thing. And now this thing has objective value that we can measure. And even at the time, people knew that there was a problem with it. You know, they were like, well, wait a second, that's true. Then how does the value change? How is it that you can make a painting and sell it for a hundred bucks and then die and suddenly it's worth a thousand bucks? Yeah. You know, or be worth, how can the value of things change once there's no more labor or anything put into it? So people knew that was a problem. And then there's some other problem with the return of capital. But nevertheless, that hung in there until even Adam Smith perpetuated the labor theory of value. That was 1776. So that was a couple of thousand years. And then, and of course, that's the basis of Marxism, this labor theory, right? Marx says, well, look, if all the value comes from labor and somebody else is getting the piece of the action, like this capitalist guy, then the labor is getting screwed. And since he's getting screwed, that justifies violent revolution to take back what was already his to begin with. And so it wasn't until 1871 that Carl Minger, the first Austrian economist, untangled this riddle and said, no, no, no, wait, that's completely wrong. Value is strictly subjective. It's totally in the mind of the beholder. You know, it's like beauty.
SPEAKER_01
00:25:58
It's in the eye of the beholder. And there's nothing objective about it. And once he came up with that realization, everybody, he explained it and instantly everybody says, yes, that's obviously right. It solves all the problems we had with the labor theory, blah, blah, blah. And so that marked the beginning of Austrian economics. And the Austrian structure springs from those insights. In fact, the whole world was becoming Austrian at that time. And largely until Keynes came along and took this big detour back toward a managed economy.
SPEAKER_00
00:26:42
Yeah, a very useful thing for the people in power.
SPEAKER_01
00:26:47
For the people in power.
SPEAKER_00
00:26:48
Yes. Yeah, I think that most people kind of have this abstract, like, Marxist view of value of prices, essentially. Like, the greedy capitalist sets the price. Me, the consumer, I have absolutely no say. I'm just over a barrel and I've got to give them what they want. Otherwise, I'm never going to get that product. And that's just not the case. Like, for instance, I rent rooms out in my house right now. I just had two people move out of one of my rooms that I get $900 a month for.
SPEAKER_00
00:27:24
I've had it on Facebook now for three weeks, getting nothing. So I can charge whatever I want for that room, but it takes somebody else to see the value and say, okay, that room has $900 worth of value to me. Here you go. Exactly.
SPEAKER_01
00:27:42
And frequently, the price is one of the least important things. How much time do you spend thinking about, well, what would a potential customer like in this room and on this property? And all these different materials that might make it valuable to somebody
SPEAKER_00
00:28:03
else, right? Not for you. Yes. I furnish the rooms. I'm one of the only people in my area that furnish the rooms. I have nice beds. I've got nice sheets and blankets. I bought a couch for in the room. Like, it's a nice room and I make sure that it's nice. I keep it stocked with cleaning gear so they don't even have to, like, I want it clean and I don't want to put you over at a barrel to where you have to pay for the cleaning gear. So I'm just going to supply it for you. Just keep my room looking nice, you know? Yeah.
SPEAKER_01
00:28:31
Yeah. So here you are staying up late at night trying to imagine what would make somebody want to live in my house. And so every entrepreneur, business owner is doing that. It's not just, okay, I go set up a price and people have to buy it.
SPEAKER_01
00:28:48
Not at all. You know, you have to please somebody.
SPEAKER_00
00:28:50
Yeah.
SPEAKER_01
00:28:51
So in the case of like prices, so we'll have kids negotiate, do negotiations and discover prices so they can see there's a lot of leeway here. You know, we have to find prices again and again and they're always changing. And so we'll start with something like that to discover prices and then we'll work them up through the theory to the laws of supply and demand, which is sort of the abstraction of this business principle of finding prices. And we just do that again and again with one topic after another. So we start really, really simple and build up to something profound.
SPEAKER_00
00:29:34
Nice. Now, do you teach kids about, like, how do you teach kids about, like, saving? So for me, one of the great concepts that I really locked in on right away was opportunity cost. I was a motocross racer.
SPEAKER_00
00:29:48
For me, like, I had to work in order to go out to the track. So every other thing, a piece of pizza, a pair of shoes, you know, whatever, a new hat, gas for my pickup, whatever it was, was measured against the opportunity cost of going and riding my dirt bike. Right. So how do you teach kids about saving and prioritizing their money and opportunity cost? That's a terrible question. So in
SPEAKER_01
00:30:20
the case of opportunity cost itself, we teach that in a lesson called factory fund. And in that lesson, the kids have a factory that makes four products. There's a maximum amount for each single product. And there's a total maximum that they can make. And so you have to decide what not to make. Right. And there's your opportunity cost happen. And when we teach that lesson, it's really fun lessons. You know, it's like, okay, you can make these four products. This is the most you can make of each one. Total has to be less than this. What are you going to make? First, we say, you know, we kind of go through the rules of the game and plug in numbers so they can see how they add up. And when you run out of bounds and, and then we go, okay, so how many different ways could you run this factory? And you're like, well, gee, at least a thousand, you know, I could make one less of this and one more of that. And then we say, well, let's figure out the best way to do it. And, and we give them information about what each product is for. Like movie stars like this one, this one, de-ices airplanes, this one is used in Orwell's. And then they argue about how to run the factory and nobody can agree. And then we say, okay, we're going to give you some more information. Here's the amount of profit you make on each, each product. Instantly, everybody's on the same page and there's one way to run this factory and everybody agrees about it. And then, then we'll, instead of giving them profit, we'll say, okay, well, here's the cost of these and here's the revenue from them. So they figure out the profit and they run the factory, you know, so we keep doing that and they get, they get super good at both understanding what is, what does profit mean and, and then optimizing to get the maximum product profit. And then we'll say, okay, so um, we have a project where we could spend a million dollars and make this much more product C.
SPEAKER_01
00:32:19
Do you want to do it or not? And so then they do a payback analysis on that and, and, you know, see how long it takes to pay back and decide, you know, what if that was $10 million, you know, and then, whoa, no, we don't want that one. So we, that's how we introduce opportunity costs and, and, um, optimization. And we just, we, there are so many different concepts that are,
SPEAKER_00
00:32:42
that
SPEAKER_01
00:32:42
are buried or conveyed in that lesson.
SPEAKER_00
00:32:45
Now I had to learn that lesson the hard way. When I was a younger man, I was into drugs, I sold drugs. And one of the first things I learned when I was selling marijuana is you've got different, you know, different, well, I learned this smoking marijuana, but you know, you've got different quality levels. You've got really good stuff. You've got really bad stuff and then everywhere in between. And you've got, you know, everybody wants that really good stuff.
SPEAKER_00
00:33:08
Like that's what everybody likes. It makes you look cool. It, it gives you that, you know, nice, shiny, bright sign, neon sign over your head, but you make the money on the nasty stuff. So it sure is nice that you're able to teach kids about this stuff and not have to like go out and learn about it. I feel like most kids don't learn about economics in the right way. Like growing up, I, in a lot of ways, like I got lucky in learning about economics through real world experience. Here's a question for you. Do you have better luck teaching kids that have zero experience in economics or have already been taught the wrong way? Cause as a bartender, I always loved hiring people from within that had zero experience. I want to teach you to do it the right way.
SPEAKER_00
00:33:59
I don't want to have to break any of your bad habits.
SPEAKER_01
00:34:04
Well, in our case, none of them have ever had any, because that was kind of my thought. Because nobody thinks you can teach economics this young. We're the, we do it younger than anybody on the planet with the, in the case of the teachers who were doing it, actually, everybody does a good job. You know, they don't, we don't need any kind of experience from the teachers because we've given them a really very straightforward path. The ones who have had some economics, actually, most of them, strangely enough, have been Austrian. So it's not an issue. And the few that have not been, have really tended to go on to the method, you know, say, wow, what a great way to get these points across. For instance, and, you know, we never, we never make a big deal about whether we have an Austrian structure or any other structure. We just, you know, we just use it.
SPEAKER_01
00:35:10
We developed a 3D model that follows the Austrian structure. You can see it on our website. And it's so much clearer than the circular flow diagram that even people who were trained on the circular flow diagram, they look at it and they go, oh, yeah, this, this is what actually happens. And I see exactly how to explain this to somebody else. So even teachers that have some other experience tend to find the tools so helpful that they just, they just glom onto them right away.
SPEAKER_00
00:35:48
My, my macroeconomics professor in college was a socialist. And she taught with socialists like the first week, it was okay, I want you to listen to this podcast on NPR. And I'm like, oh, boy, here we go. And I log on and it's some socialist economists. And I'm like, wait a minute, what the hell are we doing here? And it was, you know, it was, it was such a ridiculous class. It wasn't even a real economics class. It was listen to this podcast and, you know, fill out this thing that, that, you know, it was ridiculous. I, I was so disappointed because I was kind of looking forward to the economics. They did macro first and then they did micro second. And micro was better than macro, but the macro one, it was just the, the final, the final essay for the class was if you were, you know, the head of the Fed or the head of treasury, whatever your boss for the day, how would you balance the budget and kill the deficit? And it's like, well, you're going to ask me an impossible question and then expect me to write five pages on it. What are you talking about?
SPEAKER_01
00:37:01
Yeah, well, you know, macroeconomics was invented by Keynesians to
SPEAKER_00
00:37:07
exactly there. There is no macro. There's only micro. It's just human action.
SPEAKER_01
00:37:12
So the micro is essentially correct what they teach, but then they say, okay, now we're going to do macro and, and all the rules are different and nothing we said in micro applies anymore. You're like, well, wait, one second. So when, when I have, when I have one business, it has certain rules. When I have six businesses, there are certain rules. At some point there's some number, 6,000 or 600, where all of a sudden the rules suddenly shift.
SPEAKER_01
00:37:41
How many is that? And, and why does that happen? What's the, what's this mechanism between micro and macro? There's none. You know, it's a, it's a big fantasy. And one of my, one of my crusades is to replace the circular flow diagram with, with our model, which we call linking.
SPEAKER_00
00:38:02
What's
SPEAKER_01
00:38:03
that? The circular flow diagram was, is like I said, it's, it was built to justify Keynesianism just like the rest of macro. And, and it supports, if you want to be a socialist, it'll support you. If you want to be an MMT, fine, go for it. You know, it's, it's just really a distortion and a, and a mess.
SPEAKER_00
00:38:29
Do you see MMT making any traction or is this just going to kind of be an abstract thing that, that left us and socialists fall back on or is it going to make its way into the mainstream? I mean, it kind of already has, but not in the same way as like Krugman at the New York Times.
SPEAKER_01
00:38:45
Well, you know, MMT was really doing well until inflation hit four or five percent, because, you know, their story is, well, just keep printing money, keep printing money. And, and it's not a problem unless there's, unless you have inflation and then you raise taxes or something to reduce inflation. And it's, you know, it's, it sounds, I don't know, it's, it's, it's getting something for nothing, right? That's, and, and that always sounds great. Free is, free feels really, really good. Free feels much better than Ten Cents, you know, no matter what you're talking about. And it's very seductive. And so, MMT has had this seductive story of, of, you know, we really don't need to work. We don't, there, there aren't really trade-offs, you know, there's no opportunity to do that. And so, you know, there's no opportunity costs. Everybody can just have more money and it'll be fine. But when inflation, you know, finally reared its head, it seemed like all the MMTers went, went silent.
SPEAKER_00
00:39:51
Because what are they going to say? You know, exactly. Like, are you going to keep saying transitory, transitory, transitory over and over and over again and expect people to just buy it at some point? The one that kills me now is like, oh, inflation's coming down. It's not coming down. It's just not going up as fast.
SPEAKER_01
00:40:09
Yeah, we're still paying 30, 40% more than we were paying three years ago for things.
SPEAKER_00
00:40:16
Yeah. I mean, I got lucky compared to my friends. Like, I live here in Idaho. I'm from California. When I got hurt, I got priced out. Essentially, I was working a, a bar job in San Francisco, making six figures. I decided to go into line work and I took a lower level job so I could get into the industry faster. Essentially, I could have waited and maybe gotten a better job, but I was like, I'm going to get in early, make less money, get through my apprenticeship faster than everybody else and get into it. You know, get into a journeyman position wherever I want earlier. So I moved here to, to Idaho in 2015 and I got in on pre-inflation prices. But like now, all my buddies who were, oh, what are you moving to Idaho for? You're going to live out in the middle of a cow pasture. They're all moving here and they're paying twice as much for houses that aren't as nice as mine. You know? Yeah.
SPEAKER_01
00:41:05
Which part of Idaho you're not, I'm going to be jealous. Oh,
SPEAKER_00
00:41:08
I'm in Nampa.
SPEAKER_00
00:41:09
I'm about 30 miles, 40 miles from Boise. Nice place.
SPEAKER_01
00:41:13
Yeah. Oh, what a place.
SPEAKER_00
00:41:14
Yeah. It's great. I love it here. I was, I was skeptical on moving out of California, but when there, when it was just inevitable that I had to, this place is great. You know, I, I was able to find a house.
SPEAKER_00
00:41:27
My, my, I moved into a house on a cheaper mortgage than I was paying for rent in my place in San Francisco. Yeah. Share with like six people. Yeah.
SPEAKER_01
00:41:39
Yeah. And people are so nice in Idaho. It's incredible. Yeah, it's great. I just love the people there. Every time I go there, somebody does some incredibly nice thing for me just out of the blue. Some, some, you know, some stranger just comes and does something really nice. Yeah. And I was, I was talking to a couple from California one night when I was out there and I, I just had this, this amazingly nice thing done for me and I'm telling them the story and I come to the punchline, which is, you know, even nicer and, and they're just nodding their head. They're not impressed. So yeah, that's what they do. That's how it is here.
SPEAKER_00
00:42:17
Yeah. Yeah.
SPEAKER_00
00:42:17
It's great. I, a couple of weeks ago, I was, this was embarrassing, but I was in a gas station and I don't know how it happened, but I like reached over to close my door and somehow my thumb got stuck in the door. Oh no. And I'm just stuck there and it hurts. Like I'm pushing on the thing, trying to get it open and I'm just stuck. And at this point it's like, all right, what do I do? And I, I like could get to the horn. So I'm like, start honking the horn with my elbow. And then the got the attendant or it might've been a customer comes out and they're like looking out at me. They're like, what the hell? And I'm like, Hey, you know, just like, and finally the guy comes over and he looks down and he goes, Oh my God.
SPEAKER_00
00:43:00
And he opens the door. And I was like, man, if I was in California, I could have been stuck in the car for an hour. Yes. Oh, it was a nightmare, but you know, it's great up here. There's a good thing going on here. I don't know if you're familiar with the greater Idaho movement, but I think we're 11 out of 13 counties in Western Oregon or have all voted to secede to Idaho at this point. The only thing holding it up is Boise. If Boise would, you know, I wish we could just put a dome over Boise and just kind of isolate it from the rest of the state.
SPEAKER_01
00:43:32
Well, doesn't Washington state, aren't they also in the way of that?
SPEAKER_00
00:43:37
Yeah, there a lot. There's, I think, five or six counties in Northern California as well, which that they'll never let that go. But I think that a lot of people are thinking that if, you know, secession in the United States is going to happen, it'll probably happen in Texas. I think it's more likely to start up here, actually, which is, it's a cool thing to be a part of, I think.
SPEAKER_01
00:44:02
Yeah, that's a really interesting movement up there. And I think we really need a lot of that. I mean, why shouldn't we be able to redraw the lines? You know, certainly within the U.S. I mean, West Virginia decided to leave Virginia. Yeah. The world didn't collapse. I know there are probably a lot of places on the border of Texas that would prefer to be there than in Louisiana. Oh,
SPEAKER_00
00:44:32
absolutely.
SPEAKER_01
00:44:33
I don't know if Texas would take us.
SPEAKER_01
00:44:35
But,
SPEAKER_00
00:44:35
you know, you can always try, right? Yeah. All right. So here's something I wanted to talk to you about. I think it's designed that adults don't know anything about economics. So my grandfather, I had a lot of respect for him when I was younger. He drove truck his whole life, like 30, 40 years, he drove truck and he listened to talk radio the whole time he was in the truck. He never listened to music. He doesn't even like music, which is so freaking strange. But anyways, he retired. He put all of his money into the market and he did well for a few years. And 9-11 hit. He lost his ass, had to sell four acres. 2008 hit, lost his ass again. Now, once I got older and kind of learned what he did, I lost all the respect I had for him because he did the bare minimum. You know, he listened to Rush, he listened to Kramer and he just kept it. Kramer burned him twice, burned him on 9-11, burned him in 08 and he's still listening to Kramer.
SPEAKER_00
00:45:42
You know, I try and talk to them and just be like, hey, you know, maybe you should look into this guy or this guy or have you heard of Bitcoin maybe? And it's just like, oh no, just Kramer. Like, what are you talking about? So is this a design? Like I look at Kramer as just this evil, disgusting person who is there to steal your money and just take your home and make you poor. Am I off base on this?
SPEAKER_01
00:46:06
I don't know if it's by design. You know, the default is ignorance, right? Unless you actually work at it, you're going to be ignorant of particularly something like economics because it's not at all obvious. So you can kind of count on most people being ignorant. I don't think you have to.
SPEAKER_00
00:46:36
I was completely ignorant.
SPEAKER_00
00:46:38
I had no desire to learn it. You couldn't have tried to teach it to me. So I get that.
SPEAKER_01
00:46:44
And so I think more likely it's a matter of taking advantage of the natural fact that there's so many ignorant people. You know, my dad used to always quote, whoever that, I guess it was, I forget who it was, who said there's a sucker born every minute and two to take them. And I think that's really quite, that's what I think is going on in that case. You know, there are all these people who want to take advantage of, and the way the system is set up where the Fed is there to bail out the big players that get into trouble, well, there's no downside to them taking the wildest risk imaginable and doing crazy things, you know, giving a mortgage to somebody who can never pay it back. Or, you know, they're going to get bailed out when things go against them, but the little guy's not going to get bailed out. And so they just get crushed every time the cycle turns around.
SPEAKER_00
00:47:46
Yeah. I mean, we have to have moral hazard. You know, we have to pay for our mistakes where these people will never pay for their mistakes. If they make a bad investment, who cares? The Fed will bail us out. You know, we just added, what, another $6 trillion to the deficit in the last two months. That is insane. I don't even know how that is possible. Yes.
SPEAKER_01
00:48:09
You have to have the consequences fall on the actor, right? If I get to do something and the consequences fall on you, well, then I have no incentive to be particularly careful. And that's exactly the problem.
SPEAKER_01
00:48:26
I think it's Thomas Sowell, you know, has something about the dumbest thing you can do is to allow people to make decisions for which they don't bear the consequences.
SPEAKER_00
00:48:38
Yeah. So what do you think about things like Bitcoin? I'm a Bitcoiner. I've got some Bitcoin. I don't have all of my money in Bitcoin. But, you know, it's an interesting position that I've been put in because I kind of feel like if I hadn't gotten hurt, and I just went into line work and bought a new dirt bike, I probably never would have learned anything about any of this stuff. And I might have been poor my whole life. You know, I keep cash in the account, buy stuff on credit cards like my parents did. And in a way, I got lucky where now I'm not going to be poor my entire life, fingers crossed, because I'm doing the right things. What do you think about gold and Bitcoin and the dollar? Where are we going?
SPEAKER_01
00:49:21
Well, you know, none of these, all these things are uncertain. You know, the future is unknowable and uncertain. That's the nature of it. I think from an investment standpoint, you need to diversify. So you need to be to think about different scenarios and say, how would my portfolio perform in these different scenarios? Because it's always different every time. You know, it never repeats exactly any given cycle. But given that, you know, diversification is your friend. I've been very late to the Bitcoin party. It's only in very recent months that I've done the deep dive. And I totally believe that it's a thing now. And I'm starting to invest in Bitcoin.
SPEAKER_00
00:50:14
It's interesting when you get it, you get it. You just see it and you go, oh, wow. Right.
SPEAKER_01
00:50:21
You know, Fidelity has a great white paper that they wrote back in 2020, I think, about Bitcoin.
SPEAKER_01
00:50:28
And they really answered a lot of the doubts that I had at the time. And then there's this guy, Safe. Oh,
SPEAKER_00
00:50:36
yeah. Safe, Adina Moose. Safe, Adina Moose. He wrote a great Bitcoin standard, a great book. He's an Austrian economist. He's the man. Yeah. Yeah. I, one of my buddies is all in on Bitcoin. He just loves fucking Bitcoin. He doesn't know anything about Austrian economics. And I gave him, you know, I gave him a couple books. Check this out. Check this out. Check that out.
SPEAKER_00
00:50:59
And immediately he's like sending me text messages like, all right, so wait a minute. Whoever Satoshi Nakamura is, if it's one person, this person had to be an expert in Austrian economics, an expert in programming, you know, an expert in cryptography. Like, how the hell does one person or even a group of people make something like this? And I thought that was funny. Yeah.
SPEAKER_01
00:51:24
Well, you know, he didn't have to be, he just had to understand a bit about money, I think. Right. Because at its root, Bitcoin is relatively simple. And that is one of its strengths, is the fact that it's simple means that it can be understood. And it can be loaded onto all these different servers all over the world and the network. So I mean, it's the simplicity, I think is quite nice.
SPEAKER_00
00:51:56
And
SPEAKER_01
00:51:57
the,
SPEAKER_00
00:51:58
you
SPEAKER_01
00:52:00
know, the whole decentralized nature that
SPEAKER_00
00:52:02
it
SPEAKER_01
00:52:04
really looks like it's impossible to stop,
SPEAKER_00
00:52:06
you know, it does, right? I rack my brain at night sometimes thinking about how they could screw us. But it'd be tough. Like, the one thing that worries me, and this was actually going to be my last question for you was, I've been accused of being a bit of a catastrophist at times. Like, I think that the big crash is coming sooner, probably sooner rather than later. And it's probably going to be pretty ugly. Like, I think California is well on its way to being Cuba. And, you know, my buddies still own homes there. I'm like, sell your homes.
SPEAKER_00
00:52:40
My sister still lives there. Get out, like, just get out and go. How, what do you think, how worried should people be about the big one coming? Is this going to be sooner rather than later? Or are they going to just be able to keep limping it along like they've been able to do?
SPEAKER_01
00:52:59
You know, it's really hard to say. To, you know, to be completely honest, Austrians have called the last five of the last three recessions,
SPEAKER_00
00:53:13
right?
SPEAKER_01
00:53:13
We're always looking for a downturn. Certainly it's going to happen at some point. Does it look like Argentina or does it look like some other place?
SPEAKER_01
00:53:27
My guess is that it's more an Argentina style, you know, 1970s inflation and then potentially Argentine type inflation. But nobody knows for sure. And I think timing the market has always been sort of a fool's errand. So, you know, again, I think diversification and at some point, yeah, I think it's going to get ugly and things are going to unwind. And I think you have to prepare for that. You know, Bitcoin, gold, cash, real estate, you know, diversified investments. And but then one of the things that Safe says that I really like is, I don't want to claim his thing, everybody says, he says, you know, invest in Bitcoin and then go live your life. Yeah,
SPEAKER_00
00:54:27
because,
SPEAKER_01
00:54:27
you know, if you spend your life preparing for the crash, whether it comes or not, you know, your life has been spent. So try to be prepared enough to be diversified enough and then enjoy the good things in life because there are really so many of them.
SPEAKER_00
00:54:47
I can't think of a better way to get out on that. John, it was a pleasure having you. Merry Christmas. This is this will be out New Year's Eve or not New Year's Eve, Christmas Eve. So Merry Christmas, everybody. Have a good night. Thanks, John. Oh, you got anything? You got anything to plug? What's your website? I think you've already kind of
SPEAKER_01
00:55:07
middle school MBA dot com. That's it. Perfect.
SPEAKER_00
00:55:10
That's all you need. Perfect. Sounds good. Take it easy, everybody. Good night.