Freakonomics Radio - 197. Hacking the World Bank

Episode Date: February 19, 2015

Jim Yong Kim has an unorthodox background for a World Bank president — and his reign thus far is just as unorthodox.

Back in 2012, Jim Yong Kim was minding his own business, carrying out his duties as president of Dartmouth College. He was in his third year there. Then his phone rang, and he learned that the president of the United States wanted to hire him away. Quite literally on a Monday, a Dartmouth graduate from 1983, Tim Geithner, called me and said, Jim, would you consider being president of the World Bank? And, you know, this is the work that I devoted my entire life to, you know, development and fighting poverty.

And so, you know, I called the chair of my board right away and I said, you know, the president's asking me to consider this. I have to do it. And so that was a Monday. I flew down and met with President Obama on a Wednesday. Did you know him previously? I had met him once before, but my first sit-down meeting with him was in the Oval Office to talk about this particular job. And then on that Friday, we were in the

Rose Garden and he was announcing me as the U.S. candidate. When a nation goes from poverty to prosperity, it makes the world stronger and more secure for everybody. That's why the World Bank is so important. And that's why the leader of the World Bank should have a deep understanding of both the role that development plays in the world and the importance of creating conditions where assistance is no longer needed. I believe that nobody is more qualified to carry out that mission than Dr. Jim Kim. I still had to campaign. I had to compete for the job. But it all happened in the course of one week. So it was really quite a whirlwind. Now, most previous World Bank presidents were either former bankers, lawyers, or government officials. You, meanwhile, are a physician, anthropology PhD, college president, spent most of your life in academia, nonprofits.

Not even, I say not even, an academic economist, as though that were a higher credential, which I don't mean to imply. But what does it say about the World Bank or President Obama or you or the shape of the world and especially the shape of development and new ideas in development that a guy like you wound up in a place like this? Well, I remain extremely grateful to President Obama. Let me tell you how that conversation went. He put it right on the table, as he always does. He said, look, Jim, what am I going to tell the people around me who tell me that I should appoint a macroeconomist? What justification can I give them for nominating you? And so I started right off by saying, well, President Obama, have you read your mother's dissertation? And he sat back and looked at me and he said, well, yeah, I have. And I said,

well, you'll remember that your mother argued that the entire world thought that the artisanal industry in Indonesia would be wiped out, especially metal workers, would be wiped out by globalization. But what she showed was that, in fact, that industry thrived. Globalization actually gave a boost to that industry. And I said, you know, that's what I do. I've been doing development on the ground for the last 25 years. And so while I'm not a macroeconomist, I do take a look at things like how incentives work and the reality of development efforts on the ground. And so I will always bring that perspective. And he looked at me and he said, okay, I get that. Later, in a more relaxed moment with President Obama, he said, you know, Jim, I have to say,

that's one of the best ploys I've ever seen. You know, reading the president's mother's thesis is a good strategy. And we had a good laugh about it. Yeah. You know, as you were telling the story, I was thinking, I know this is meant to illustrate the strengths of economic thinking vis-a-vis development. But really, I'm thinking most people out there, when they hear this, are going to take it more as an interview tip, certainly, that whenever possible, if the boss has a mother who wrote some kind of dissertation, you know, prepare. Prepare, and especially if it's relevant, which it very much was.

Well, you kind of lucked out on that, you have to admit, that it was relevant. I have to. It was very relevant. From WNYC, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner. Okay, so here's the best part of the story. It wasn't just that Jim Yong Kim knew that President Obama's mother had written a dissertation that was related to his development work and then went and got it in order to prepare for his meeting with the president. That's not the way it happened. Well, I was so fascinated by President Obama dating back to 2004 that I actually bought her unpublished thesis from the University of Michigan archives and faithfully read the whole thing long before actually I went into that interview with President Obama. But let me say this.

The more you hear from Kim, the less surprised you are by anything he's accomplished. And now he is taking the World Bank in a very different direction, which we'll hear about. But first, let's begin at the beginning. My name is Jim Yong Kim. I'm the president of the World Bank Group. And our organization last year lent and provided grants of about $65 billion. And our mission is to end extreme poverty in the world and to boost what we call shared prosperity, which is a notion that focuses on ensuring that the bottom 40% of any developing country shares in whatever economic growth there is.

So World Bank is fairly impressive. I understand that your childhood dream as an immigrant kid in Iowa, where your father was a dentistry professor, that your dream was to be quarterback for the Minnesota Vikings or Chicago Bears. So I'm sorry that didn't work out. Are you okay with where you wound up? Well, given the way that the Chicago Bears certainly have been doing, I'm very happy with the way it worked out. But, you know, that was in the middle of Iowa, boy, the greatest thing you could ever become is a professional athlete for one of those teams. And so I was fully part of that culture. And I actually played quarterback for my high school football team. And although some people are impressed with that, I then also have to admit that our

high school football team had the longest losing streak in the nation when I was the quarterback. Okay, so that's still a record of some sort. It's a record. It sure is. Jim was also the chair of the Department of Global Health and Social Medicine at Harvard Medical School. He's earned a MacArthur Genius Fellowship, and for the last three years, he has served as the president of Dartmouth College. I should also mention that after emigrating to this country from Korea at age five, Jim went on to become the president of his high school class, the quarterback of the football team, the point guard of the basketball team. I just found out he is a five handicap in golf. I'm a little resentful about that last item, but he does it all. Becoming an MD and then an anthropologist was not Kim's

original plan. Well, let me tell you the story, Stephen. You know, my mother is a philosopher. She's still alive, still working on her writing and very involved in her work on East Asian philosophy. And my father was a dentist. You know, dentists are extremely practical people. And so I had these two influences in my life. And, you know, one day I came home from school. And this was at Brown, one of my first semesters at Brown. And my father picked me up from the airport, which is about 30 miles from our hometown in Iowa. And he said, so, Jim, what do you want to study? And I said, well, I think I'd like to study politics and philosophy.

And I think I'd like to become a politician. And so he slowly pulled the car over to the side of the road, looked back at me, and he said, look, Jim, when you finish your internship and residency, you can do anything you want. So I have had this very practical father who said, look, you know, you're an Asian in this country, no one's going to give you anything. And if you think you're going to make it as a politician, you better think again. You can do that. But first and foremost, get a skill where you actually can help people. Now, let's go back when you were in nonprofits or NGOs or whatever form they were in, where you're trying to bring health care and bring, you know, deliver all different kinds of necessary and often very primary health care to especially

poor places around the world. You were not a fan of the World Bank. You were active, I've read, in the 50 Years is Enough movement that campaigned to shut the bank, as well as the IMF, contending they did more harm than good. That's the report, at least, that I've read. Tell me, A, if that report is true, how true it is, and what led to your evolution in thinking about an institution like the World Bank. Well, it's true, and there's actually good evidence that it was true. I was one of the editors on a book that's entitled Dying for Growth, Global Inequality and the Health of the Poor. And it basically was a critique of the approach that many of the international financial institutions had taken to health. And at the time, what we

were arguing was that an overly narrow focus on growth of GDP was really not the approach that we thought would lead to the kind of results that everyone seemed to want to have. In other words, there were arguments that you should restrict social spending, including on health and education. And so what we were arguing is that we should focus on more than just GDP growth. And we should really try to take a much more nuanced view of what are the factors that are important in lifting people out of poverty. And that's really the direction that the World Bank has gone in a major way in the last 20 years. And so I'm very glad we lost the 50 years is enough argument, because the institution is very different now than it was before. And I think that's what

made it possible for me to lead the institution. The ideas have changed. And partly, and this is what you guys have done so beautifully in both Freakonomics and Superfreakonomics, is you've actually made hypotheses, but then you've looked at the data. So the data now are overwhelming in that investments in health and education, for example fully 25% of the economic growth experience between 2000 and 2011 was due to better health outcomes. So we don't, at this institution, and we have not for a long time, thought about health and education as simply expenditures. We now think of them as fundamental investments in human capital that will lead to growth. And so the institution itself, and this is what's great about the World Bank Group, the institution itself has really looked at the data, really

looked at the evidence carefully, and we've shifted a great deal. Okay, so the World Bank recently released a world development report titled Mind, Society, and Behavior, which I have to admit does not sound right off the bat like a World Bank report from the past, for sure. And it argues for really a new viewpoint or new mindset for attacking poverty. So if you could begin, Dr. Kim, just tell me the background. Were you behind this? Who was behind it? And what was the impetus? Well, it came out of a pretty straightforward discussion that Kaushik Basu, our chief economist, himself originally from India, but a celebrated professor of economics, development economics at Cornell for many years. some of the work that I had become fascinated with when I was at Dartmouth about things like willpower and grit and how they had an impact on success in life and development. And so, you know, he suggested one day that we just take this on. And so that's how it came to pass. It was

a recognition that we really needed a rethink of where we were going with the development strategy. And we also wanted to bring into the discourse of the World Bank Group, these thinkers who've been so influential in academia, but had been much less influential inside the World Bank. Interesting. Yeah. As I read the report, it struck me as basically a kind of a best practices white paper that distills really much of the field, if not the entire field of behavioral economics and highlights the sort of cognitive biases and illusions and the antidotes to those problems that a lot of people have been thinking and talking and writing about for many years, as you've said, primarily within academia, but not exclusively. And one point the report makes is that a lot of these insights are in retrospect pretty obvious, things like framing and anchoring and social norms, which other people call peer pressure. And it struck me that, you know, Adam Smith, who we commonly think of as the father of classical economics, was probably a lot more in tune with that human side of the human being than most economists of the mid and late 20th century. So I'm curious how you think that economics, again, granted, not your field, but you certainly know plenty about it.

How do you think economics got so far away from considering a human being what to be, what a human being really is. And why has it taken so long and so much effort to get back to this new old view? Well, it's a great question. You know, I, as an anthropologist, actually, in grad school, we did read Adam Smith. And most of us were very surprised to hear him writing about moral sentiments and the profound moral voice that really is everywhere in his work and his writing. You know, there is a field of economic anthropology that's been around for a long time. And I remember in one of my first early seminars in anthropology graduate school, we took on the phenomenon of the potlatch. Now, in the Northwest Coast, Northwest Coast Indians would try to out-duel each other in seeing how much of their most valuable possessions they could burn.

That was the potlatch. And of course, you know, from a rational so important to the Northwest Coast Indians that they were willing to do this and that the benefits from actually doing this were greater often than what they would burn. And so we have been trying to make sense of seemingly irrational behavior in anthropology for a very long time. And I think that the assumptions that economists make about rationality have actually led to the rapid development and growth of the field. I mean,

economists have, generally speaking, compared to other social scientists, been much more focused on quantification and sophisticated modeling. And I think you have to have a set of assumptions in order to make a field that's trying to do that grow. And so they started with that. But we have to remember, Daniel Kahneman won his Nobel Prize on looking at different ways of thinking and questioning the assumptions that economists were making in 2002. And so his work predates that by quite a bit. And so we really took his notion that there's these two kinds of thinking, fast thinking, slow thinking, and try to apply it to development work.

And the fundamental messages are that, one, people think automatically, that they think quickly, and they don't think on the basis of ration and reason and looking through the evidence, that people think socially. In other words, other people who have the same thoughts influence them quite a bit. And they work on the basis of mental models that are often unconscious. And so, we looked at those three kinds of thinking and tried to understand if there had been examples of people utilizing that insight to actually get better outcomes. And we found quite a few. Coming up on Freakonomics Radio, we go through some of the most interesting, inspiring case studies in the World Bank's new report.

But if you specifically said it's very important for you to interact with your children this way, the mothers did it, and it had this incredible impact 22 years later. We talk about why it has taken public sector entities so long to get on the behavioral bandwagon. Public sector entities can stay in business for a very long time, no matter how poor their performance is. And we put Dr. Kim through a lightning round of our frequently asked questions. And I just desperately regret not having done more of that From WNYC, this is Freakonomics Radio. Here's your host, Stephen Dubner. We are talking today with Jim Yong Kim, president of the World Bank.

He and Kaushik Basu, the bank's chief economist, commissioned a report that is meant to translate the best behavioral research from academia into real-world solutions to address poverty. The most persuasive to me part of this World Bank report is a table listing examples of highly cost-effective behavioral interventions. So I'd like you to talk about a few of these with me, your favorites, I guess, whether it's addressing adherence to medical regimen, immunization rates, traffic accidents, aspirations and investment. They really run the whole scope of humankind. So underpinning the success of all of these, to some degree, through your view as a World Bank president, is poverty, and that alleviating poverty would help all these things, which most people might not connect necessarily with poverty. So again, this goes back to the brilliance of economists and how they have been focused on measuring and how they've been focused on trying

to get real evidence and real data. So one of my favorites is that in Jamaica, they had an intervention with stunted children. In other words, these are children who had low weight and height for age. And at a certain point, stunting means that your brain literally has not been developing as it should. And it's really hard to get that back. It's hard to make up for that. It's hard to catch up. But so there was a very simple intervention where they had young students go and meet with mothers of stunted children. And they tried all kinds of different interventions, you know, income supplements. But one of the interventions was to just have young people come and stress the importance of having mothers in very poor settings who had other stunted children,

how important it was for them to interact with their children. And this was done once a week for two years. And then 22 years later, they looked at these kids. And so, and they looked at all the different inputs. And the one input that had the biggest difference was that intervention where they went and told mothers to interact with their kids more. And that particular group of stunted children had incomes that were equal to the non-stunted children. And those that did not have that intervention had incomes that are 25% to 30% lower than the non-stunted children. So it's just – it's incredible how these kinds of interventions can have that kind of an impact. Let me just make sure I understand the mechanism here. It's basically stimulating vocabulary and language and thinking. Is that the idea of what's going on that moves things forward?

Right. In other words, these were not mothers who were deliberately neglecting their children, but over years, they developed different practices. You wrap up the kids and put them on your back or whatever, and you don't have that much interaction. But if you specifically said it's very important for you to interact with your children this way, the mothers did it, and it had this incredible impact 22 years later. And so this is a great lesson for us. We have to, in every now culture, be sure that we're actually giving that kind of advice, that if they're stunting, that first of all, you've, of course, tried to improve their nutritional status. But this issue of interacting with children is also really critical. And by changing these mothers' mental model, it had this impact on that affected people's understanding socially of the importance of using less water. This was in Colombia in the late 90s. And they simply published in the newspaper how much water all the different people and companies and groups were using. And

there was a overall decrease in water consumption that persisted. So in other words, knowing that your neighbors are trying to save or knowing that you're not saving and they're going to see it in the newspaper had a huge impact on people's use of water. Similarly, there were, in trying to reduce the number of accidents on the road, in Kenya, they put messages on buses that said, if you see someone driving recklessly, look out the window, scream and yell at them and tell them to stop doing it. And everywhere you are, scream and yell at people who are driving recklessly. It reduced insurance claims by 50%, you know, just to have the social pressure build in that particular way. So we're going to use this in the World Bank Group. We're going to capture all of

these great examples. And we've totally reorganized the bank to do just that. We now have what we call global practices, and their charge is to look all over the world and find out how specific countries have had success utilizing these insights that come from psychology. And so in doing that, we hope that they will then take these examples and then adapt them for the local context. As an anthropologist, of course, you can imagine I'm going to insist that we respect local context, but we feel that we can make tremendous progress if we capture these ideas and bring them to poor countries. But also, we're looking internally because our strong assumption is that automatic thinking,

socially influenced thinking, and mental models affect the way we assess projects. So we actually did a study of our own staff. With the skin cream and the – Yes, the skin cream and the minimum wage and asked them to use the same set of data. Of course, we adapted it to talk about the skin cream. And we had them assess whether skin cream A or B is better for skin rashes. And then using exactly the same data but in a different context, we asked them to assess whether the minimum wage increased or decreased poverty rates. And they did much better in getting the right answer because based on the data, there was clearly a right answer for both of these questions. They did much better with the skin cream than they did with the minimum wage because, of

course, our staff came in with preconceived notions and mental models about the importance of minimum wages. So what we're going to do specifically inside the bank is try to figure out ways where we can get them to do what Daniel Kahneman called slow thinking. Can we get them to be more deliberative, to be more focused on the mechanics of a particular project or a particular intervention, to really consider data first before they jump to a conclusion? Can we keep leaders like me to keep their mouth shut, for example, to not influence socially where a group ends up landing on a particular decision?

The report notes that the private sector has already adopted a lot of these behavioral approaches because, and I'll quote, when failure affects the profit-making bottom line, product designers begin to pay close attention to how humans actually think and decide. So, Dr. Kim, why has it taken nonprofits, including the development sector, certainly so long to buy in? Do you think that it's simply the absence of the market and the needs that exist within the market? Is it the downplaying of ROI within the nonprofit sector? Is it a philosophical point? Well, I think market forces are critical here. And sometimes people say, well, you know,

the private sector does everything better. And I don't know that that's really the case so much is that the private sector entities that did it poorly no longer exist, right? Because they go out of business. And public sector entities can stay in business for a very long time, no matter how poor their performance is. And so this is part of what I've been obsessed with for about the past 20 years. I've been trying to understand in the absence of market forces, how can you improve execution? How can you raise the temperature so that people really focus on improving execution? Because in the public sector, not only do we tolerate poor execution, but often, unfortunately, we celebrate poor execution. Poor execution sometimes for people is a symbol

of the fact that you're public and not private sector. Now, you know, I do not at all think that the private sector does it all correctly, but the folks who do it right. And if you were to go to Ogilvy or any of the big public relations companies and give them this, I mean, I think they would laugh at us in the sense that they have been utilizing these insights very aggressively for a very long time. And in the public sector, there are some really great examples of having used this before. One example comes from an institution that I used to be part of, Harvard School of Public Health. They very consciously try to get the notion of a designated driver into sitcoms in Hollywood. And once they got it into sitcoms, it became part

of the overall mental model that everyone used, and it's now ubiquitous. And it was truly the genius of a group of just brilliant public health professionals who realized that they had to shift the mental model on driving while drunk. You know, cigarette smoking is another one. And so we've done it in bits and pieces. What we're trying to do now is to do it on a much larger scale. I'm curious, as a trained MD, whether you see this kind of research is slower to be taken up in the areas where it's really needed in development, in this case, or faster than in medicine? You know, when you look at innovations in medicine, it's not as if you have a new discovery and then immediately everyone in the United States is implementing it. In fact, the lag time from having a really new discovery of something that's on the market that's doable right now to a point when the vast majority of doctors are using them is 17 years. So I've,

with a bunch of colleagues in here now at the World Bank, we talk a lot about the science of delivery. In other words, let's not just focus on the basic research that tells us about the science of delivery. In other words, let's not just focus on the basic research that tells us about the molecular mechanisms or, you know, for example, in economics, that might be, you know, fundamental theoretical modeling based on mathematical models. And let's not focus just on the things that we can prove in scientific studies actually work. Let's now focus on how you deliver those insights. Let's focus and be as rigorous as we can be about how you take things to scale. You know, one of my good friends in global health used to say to me, Jim, I'm so sick of pilot projectology. When can we get on to the field of scale apology, right?

That's got to be our main focus because if we're going to end extreme poverty by 2030, every model we have of growth suggests to us that with the pessimistic, with sort of the midway or the optimistic model of growth, of've got to be effective and we've got to take effective solutions and scale them and scale them more quickly than we ever have. The World Bank has its fans and its detractors. I have to say, it's hard to imagine that Jim Yong Kim can have too many detractors. He seems to bring so many talents to the job. He's smart, plainly, experienced, compassionate. He's a good executive. Don't forget, he's an MD as well. So I know what you're thinking. That's disturbing. Isn't there anything he's bad at? Well, I am happy to report that he is not a very good singer. I've had the time of my life

And I never felt this way before And I swear it's the truth And I owe it all to you That is from a student talent show at Dartmouth when Kim was president there. But honestly, even the singing wasn't that bad. He also danced and rapped. You know what? Wasn't that bad at any of those either.

So what does the talent show really teach us? It teaches us that Jim Yong Kim has something that very few others in official Washington have, the ability to not take yourself too seriously. And so, even though he is president of the World Bank, we asked him to go through a blitz version of our frequently asked questions. He agreed, of course. Dr. Kim, if you would, tell us in 60 seconds or less what you actually do in a given day. I spend a lot of time going through my briefing books,

which look like real books, and I get one every day. I'm in meetings all the time with all kinds of people, and I try to, one, keep my mouth shut when me saying something could influence a decision we make, and then make a decision when no one else can make a decision. What's the best investment you've ever made? Financial, emotional, education, any kind of investment in getting to where you are today? I think one of them, it's rather simplistic, but late in my life, when I was 24, I started learning languages. I only really spoke English until I was 24. When I was 24, I started learning languages. I only really spoke English until I was 24. When I was 24, I learned to speak Korean because I went back to Korea to do my dissertation research.

And so now I speak Korean, which has been great, especially in all my work with Secretary General Ban Ki-moon of the United Nations. It's been great to be able to have secret conversations in the middle of chaos. Then later, I learned to speak Spanish. So it really was worthwhile for me to do that. And I just desperately regret not having done more of that when I was younger. Who's been the biggest influence on your life and work and why? Well, you know, fundamentally, it's been my mother, who is a Neo-Confucian philosopher. But she's been so influential because at a very young age, I mean, I was reading

the speeches and the writings of Martin Luther King when I was nine years old. So Martin Luther King has certainly been a huge influence. And so people like Martin Luther King, people who've taken an idea fundamentally rooted in moral convictions, and then change the world are the people who inspire me. Tell us one thing you've habitually spent too much on but do not regret. Oh, gosh. It's food. It's eating at restaurants all over the world. In fact, I have a rule when I travel to a developing country.

For every meal, I want native food as opposed to thinking that I need French food or Western food. So I've spent a lot of money at a lot of different restaurants, also with my children. We love to eat. Do you cook as well? Not very well. I used to a lot more, but not much these days. Tell me one thing you own that you should probably throw out but never will. I have a collection of putters, golf putters, that I just can't seem to throw away. You know, it's part of golf. You know, the golf allows for a lot of magical thinking. And so I remember the magical putts I made with some of these putters. And so I've kept them and kept them and kept them, despite efforts of everyone around me to throw them out. The next question was, what do you collect and why?

Just asked and answered, or answered without being asked. What's the one story that your family, maybe it's your kids, maybe it's your parents, always tells about you? Well, my brother likes to tell this story. My brother is a gastroenterologist in Los Angeles, and he always says that if he and I were to come to a wall with three doors, he would quickly and automatically go through the door that was open, but that I would put my head through the wall just in case that was a better way to approach getting to the other side. So,

of course, the story is that I've always chosen the most difficult path, but it served me very well. Interesting. Well, that either leads perfectly into or totally obviates my final question, which is I wanted you to tell me about something that you once quit and why and how it worked out. But if you're willing to put your head through a wall, you may never have quit anything at all. Did you? I did.

I actually quit my infectious disease fellowship. Now, this was in about the 30th consecutive year of being involved in education, you know, from the age of five. So it wasn't as if I gave up prematurely. But I just decided that the credential I would get is to be able to treat people with infectious diseases in hospitals in the United States. And I just realized I'd never do that. And I've continued to work on tuberculosis and HIV and now Ebola. But I did quit that. Dr. Kim, thanks so much. It was a pure pleasure to speak with you. And I learned a lot. And I'm sure everyone listening will as well. And thank you so much for making the time. Well, thank you for having me and thank you for doing this. Hey, podcast listeners, on the next episode of Freakonomics Radio, how for-profit firms have brought behavioral economics into the workplace.

If you want the world of business to understand the value of behavioral science, one of the first things you've got to get across, which sounds trivial, but it is vitally important, is the understanding that small changes can have very large effects. But be warned. I think I ought to be honest about this. You can use this knowledge for evil. How a global advertising giant is finding even more ways to manipulate us, that's next time on Freakonomics Radio.

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