Freakonomics Radio - 443. A Sneak Peek at Biden’s Top Economist

Episode Date: December 10, 2020

The incoming president argues that the economy and the environment are deeply connected. This is reflected in his choice for National Economic Council director — Brian Deese, a climate-policy wonk and veteran of the no-drama-Obama era. But don’t mistake Deese’s lack of drama for a lack of intensity.

This past summer, a few months into the pandemic, we started working on an episode about plastic. Exciting, right? But we were struck by how plastic was an interesting moment. On the one hand, it was being held up as an example of everything wrong with our disposable economy, all those plastic straws and containers and shopping bags that are briefly used and then tossed away to the detriment of our environment. On the other hand, during a pandemic, plastic could be a lifesaver, a layer of protection

for our bodies, our food, our shared surfaces. So yeah, an interesting moment. But the episode didn't pan out and we killed it. Just so you know, this happens all the time. For every episode we publish, there are three or four ideas that just don't make it to the finish line for any number of reasons. Lack of data, lack of clarity, lack of something interesting to contribute to the public conversation. Anyway, this idea about plastic was filed away along with the interviews we had recorded

for it. But last week, one of those interviews suddenly got a lot more interesting, even if plastic didn't. One of the people we interviewed is named Brian Deese. He worked at BlackRock, the world's largest money manager, which had recently announced a huge push to integrate sustainability into their investment philosophy. Before that, Deese worked in the Obama administration for all eight years, ultimately serving as a senior advisor to the president on climate, conservation, and energy policy. One of his first duties in the Obama administration during the financial crisis was working on the auto industry rescue. A New York Times headline called him the 31-year-old in charge of dismantling GM. For what it's worth, GM wasn't actually dismantled. Just last week on our show, we spoke with its CEO, Mary Barra. In any case, young Brian Deese

kept rising. He would go on to hold the deputy director job at both the Office of Management and Budget and the National Economic Council, or NEC. The NEC is where most of the president's economic policy is conceived, debated, and coordinated across federal agencies. It is involved in everything from regulatory and tax policy to healthcare and employment. Depending on who the president is and how much they like to follow economic advice, the NEC can be very influential, especially the director of the NEC who carries the additional title of assistant to the president for economic policy. And guess who Joe Biden has just announced as his director of the NEC. Yep, Brian Deese, all 42 years old of him.

During the video announcement, Biden made clear his priorities for the job and why Deese was chosen. He'll be one of the youngest NEC directors in history, but he'll be the first who is a true expert on climate policy. If we're going to tackle the climate challenge, we need to make sure that solutions are woven into every output of our policymaking. When I saw news of the Deese appointment, I went wanted to examine the worldview of someone who is about to become assistant to the president for economic policy, especially for a president who has elevated climate policy and, maybe more important, equated climate policy with economic policy. So we thought you might like to hear this interview too. Inevitably, it does not cover many of the economic issues Deese will face immediately at the NEC,

like the continuing economic damage caused by the pandemic. But I do think it gives a pretty good look at how Brian Deese thinks and operates. His appointment, which doesn't require Senate approval, by the way, has so far not garnered much pushback. The most vocal critique has been from progressives, including a climate group called Sunrise Movement, which protested his appointment outside BlackRock headquarters in New York. They have said the Biden administration shouldn't include anyone from BlackRock until the

company upgrades its sustainability standards. For what it's worth include anyone from BlackRock until the company upgrades its sustainability standards. For what it's worth, another young BlackRock employee, Wally Adeyemo, was just named to the number two job at Treasury under Janet Yellen. So BlackRock is starting to look like this administration's Goldman Sachs. We reached out to some former White House economists, Democrats and Republicans, for their take on Brian Deese. Kevin Hassett is a former top economist in the Trump administration. Here's what he told us. Brian is a fantastic choice. The White House is a place with its own rules and its own rhythms and neither make much sense in the abstract.

Having a person running the economic team with his deep well of experience will help them hit the ground running. And this is from Jason Furman, a Democrat with whom Deese worked in the White House. Brian Deese is one of the most remarkable people I have ever seen in economic policy. It is notable that someone with his knowledge and passion on climate change will be coordinating economic policy for President Biden. Deese grew up in the suburbs of Boston. His mother is a policy analyst for a clean energy think tank. His father is a political science professor at Boston College with a focus on climate politics.

So, apple, tree, not falling very far from, yada yada. Brian Deese went to Middlebury College and studied political science. So apple, tree, not falling very far from, yada, yada. Brian Deese went to Middlebury College and studied political science. He also got a law degree from Yale. He still lives in the Boston suburbs with his wife and two young kids, at least until he heads to the White House in a few weeks. Our conversation with Brian Deese, incoming director of the National Economic Council, begins right after this. From Stitcher and Dubner Productions, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner. Our interview with Brian Deese took place in early June.

Because of the COVID crisis, he was recording at home, so you may hear the occasional siren and some birds chirping outside his window. First, would you just say your name and what you do? Sure. My name is Brian Bees, and I am the Global Head of Sustainable Investing for BlackRock. Can you give us a very quick description of the firm and then a description of your post, please. Sure. BlackRock is the world's largest asset manager with about $7 trillion in assets under management, a global firm that manages money for clients from pension funds to large institutions to end investors all around the world. And at BlackRock, I manage our sustainable investing efforts, which spans both how we invest on behalf of clients and the products and the strategies that we bring forward that have a sustainability component, as well as how we use data and analytics to improve our understanding of sustainability factors in the investment process. Let me quickly interrupt to give some context to BlackRock's $7-plus trillion under management. How much leverage does $7 trillion get you?

As of 2017, BlackRock held at least a 5% stake in more than 97% of the companies in the S&P 500. It's estimated that BlackRock has its hands on roughly 8% of the total value of global stock markets. And it wants more, from China especially. The Wall Street Journal recently reported that BlackRock CEO Larry Fink was one of a select group of American business executives, mostly from Wall Street, who two years ago met with Beijing's chief trade negotiator

in the hopes of averting an open trade war. China wanted support from the U.S. investment community. In exchange, they would open up the Chinese market for business. The trade negotiator got the support he was looking for. And this past August, BlackRock became, as the journal put it, the first foreign firm to win preliminary approval to start a wholly owned mutual fund business in China. So even more money should soon be flowing into BlackRock. But remember, it's not their money. Unlike other financial institutions, BlackRock's fully in a fiduciary model, meaning all of that money is clients' capital that we manage on their behalf. So we don't have our own balance sheet capital that we invest. And for someone who isn't familiar with sustainable

investing, or maybe on the other end of the spectrum, someone who's skeptical of the label of sustainable investing, tell me what it really is. So we operate with a simple definition of sustainable investing, which is taking the best of a traditional investing process and incorporating perspectives on how the environment or how societal and government factors will affect the performance of a company or an asset in an effort to try to produce a better long-term outcome. And for the skeptic, what we're trying to do is not create some sort of other separate approach, but instead improve the way that we invest and improve the core processes because we have a perspective that incorporating these additional considerations actually will make us better investors across time.

At the beginning of 2020, Larry Fink sent his annual letter to the CEOs of the thousands of firms BlackRock invests in. It was titled, A Fundamental Reshaping of Finance. Climate change, Fink wrote, has become a defining factor in companies' long-term prospects. He noted that the public was growing alarmed by the risks of climate change, but that markets to date have been slower to reflect that risk. Fink declared that BlackRock was going to start holding companies and their board directors accountable if they didn't align their business models with the goals of the Paris Climate Agreement, even though the U.S. at this moment is no longer a participant in that agreement.

Fink wrote that in the preceding year, BlackRock had already voted against or withheld votes from 4,800 directors at 2,700 different companies whose sustainability practices BlackRock did not consider kosher. In other words, the climate issue is now an economic issue. And if you don't adjust to this new reality, we'll adjust for you. Other big financial firms, including Goldman Sachs, had made similar declarations. But again, $7 trillion gets you a lot of headlines and leverage, even with something like an index fund, which is a portfolio built to track an entire basket of stocks or bonds. How much leverage? Yeah, so it's a great question. In virtually all cases, BlackRock doesn't construct the index. We partner with an index provider, a company like Standard & Poor's or MSCI. We have the ability to express our views

about sustainability in a couple of ways. One is by encouraging index providers to create sustainable versions of their indices and then offer investment strategies that track those. The second thing that we can do is there's a part of our business where we create portfolios. And one of the commitments we made earlier this year was to move in the direction of making the default offering in those portfolios, the sustainable version, because one of the things that you know well, and that is a clear lesson from financial economics, is that the default offering is really important, because humans go with the default. So I've heard you say in an interview that, I'll just quote you briefly to yourself, that these risks... Uh-oh.

What's wrong? No, no, I'm just saying it's always dangerous to get quoted back at somebody. So you said these risks, meaning climate risks, are more pronounced than financial markets currently understand. But, you know, according to most economic and investment theory that I'm aware of, at least, the markets are always more efficient than any one person or firm. So what makes you say that BlackRock essentially knows better than the markets here? Persuade me that this position is not some form of virtue signaling and is actually an investment strategy that is market beating. So there's actually a long line of financial academic literature that identifies

the places where there actually is a structural mismatch in the sort of efficient markets hypothesis. And one of those areas is in long and slow moving changes that are predictable, but not necessarily predicted by the markets. Demographics is probably the best example where the aging of society is actually quite predictable, but actually those changes don't get priced into markets until you reach milestones. And climate change really is a good example of that type of slow-moving phenomenon. Our admonition is that climate risk is investment risk, that markets have not figured out how to effectively incorporate this, in part because most financial models are predicated on this idea of climactic stability. And so our models have gotten quite used to that. Our view is not that we have

uniquely cracked the code, but instead to signal that our models as well as others don't fully capture this. So, Brian, your background is in politics and policy of the Democratic and progressive flavor, the Obama administration all eight years and the Center for American Progress. So how did a guy like you end up working at the world's largest asset manager, albeit in a sustainability role, but still, how'd that happen? Well, a lot of the work that I did in government was focused on economic policy. That's my core area of expertise. And in the second half of the Obama administration, I spent a lot of time on the issue of climate change. And we were trying to get our own government, as well as governments of the world, to put in place policy frameworks that would encourage more private capital to move toward lower carbon solutions, be those in the production of energy or in the way that we operate our vehicles or our homes and businesses. And a lot of that was

really designed to encourage private investors to shift the way that they invested and understand these risks more generally. So when I came out of that experience, I thought I really want to put my money where my mouth was and figure out how private investing can actually help to accelerate these processes globally. And I figured that BlackRock had an appetite to do more in sustainable investing. And when we get this right, the way that BlackRock orients itself often ends up affecting change throughout the investing ecosystem. So that was something that was attractive to me. So according to everything I've read, everybody I've ever talked to about President Obama,

he cared deeply about these issues, energy, sustainability, climate, etc., etc. We have a sort of longstanding debate within the show about how much leverage the president actually has in moving the needle on issues like this that are big, complex, multiplayer issues. Considering how much he did care, how successful long-term would you say those policy and political efforts were looking at it now from, you know, three plus years back? I would say that on an issue that's complicated and multifaceted as climate change, it requires real discipline and focus and patience to use all of those tools that a president has to actually create serious and durable change. And so if I think about our efforts internationally,

President Obama started his first year in office trying to think about our efforts internationally, President Obama started his first year in office trying to think about how to forge a new international consensus on climate change. And it took almost a decade of work to actually get us there. If I look back, that's an area where maybe counterintuitively, I think that that will be one of President Obama's most lasting legacies, because notwithstanding the change of orientation in the United States toward the Paris Climate Agreement, what we saw was that work that took place over many years, complicated, requiring patience, has actually fundamentally changed the international consensus. And the largest emitting countries of the world, absent the United States,

have actually doubled down on their commitment to that basic framework. So that's a place where you see the benefit of staying at it and being patient and working in incremental steps to try to really change the way consensus is built. There are other areas where the impact is less durable because you've got a regulation that can be rolled back by a subsequent administration. Rolling back regulations is something that now happens routinely in Washington when a new president comes in. It certainly happened with Trump, who rolled back dozens of environmental regulations. This was doable because Obama often created those regulations through executive order rather than the legislative process. And the executive orders of one president can often be easily undone by the next one.

We looked into this issue at some length in a 2016 episode, which we put out before Trump was elected, by the way. The episode was called, Has the U.S. Presidency Become a Dictatorship? Because the last several presidents have increasingly relied on executive orders when they don't have the legislative leverage to make a more durable change. So Obama created environmental and other regulations that Trump rolled back with his own executive orders and which Joe Biden, as of next month, will almost certainly unroll back, although with some changes to be sure. For instance, climate policy experts expect Biden to not just restore, but to expand Obama-era regulations on greenhouse gas emissions. Biden has also said that the U.S. will re-enter the Paris Climate Agreement, from which Trump withdrew the U.S.

Expect Brian Deese to be heavily involved in all this environmental re-entry and unrolling back. We asked Larry Summers, a former NEC director himself, as well as a former Treasury secretary, about the appointment of Brian Deese. He said, Brian Deese will be a great NEC head. He cares deeply about policy, is skilled at process, and shrewd about politics, just what the job requires. We'll be back in a minute

with more of our conversation with Brian Deese. Don't forget to check out the two new shows in the Freakonomics Radio Network, No Stupid Questions with Angela Duckworth and me, and People I Mostly Admire with Steve Levin. You can get them wherever you listen to podcasts. We will be right back. For years, small pockets of the investment industry have been promoting what they call ESG funds. That stands for environmental, social, and governance. When BlackRock CEO Larry Fink sent out his annual letter in early 2020,

he made the argument that ESG thinking was no longer just a matter of taste or conscience. It had become a straight-up economic issue, driven in large part by changing public awareness. In the near future, he wrote, and sooner than most anticipate, there will be a significant reallocation of capital. Of course, when the head of the world's largest investment fund says there will be a significant reallocation of capital into companies with better ESG credentials, well, there will be. So I asked Brian Deese, Joe Biden's pick to run the National Economic Council and who at the time was the global head of sustainable investing at BlackRock, how much reallocation had already happened as a result of Larry Fink's declaration. Well, industry-wide, you've seen dramatic growth in the assets in sustainable strategies, but off a very low base. So we've got about $1.2 trillion in assets globally in dedicated

sustainable strategies. In the first quarter of 2020, during a pandemic and historic market sell-off, you saw a 40% increase in that base globally. So the basic story is very significant growth, but we're still in early days because as a share of total assets in the investable universe, it's still very, very small. Again, the traditional skeptical view would be that you have to trade off return in order to access some degree of sustainability. In the first quarter of this year, 94% of index funds that have a sustainable variant beat their traditional market cap benchmark. In terms of the returns in that first quarter, you and your co-authors, I know in a report, point to factors like

customer relations and board effectiveness, which are part of the ESG umbrella for sure, but those seem like the general components that everyone wants for better managed companies. How can you persuade us that sustainability per se is driving those better returns and not some confounding factor that may travel along with firms that say they're interested in sustainability? The first thing we wanted to test against is, well, this is really an energy story, right? There's often a sense in which sustainable strategies may be structurally less invested in oil and gas companies or traditional energy. That is true in some

cases, but even when you isolate and test this holding sectors neutral, you still see that the tilt toward more sustainable companies is generating some excess return. So then you break down and say, well, what's actually driving that? So the ability to measure, for example, companies that have better employee engagement and better relationships with their customers does actually seem to position companies differentially during this period. And you can say, well, that's intuitive. A company that has a more engaged workforce, a more attached workforce is going to be better able to navigate a historic crisis like this, where you have to shift paradigms very quickly. But in a lot of traditional financial analysis, you're not weighting creative ways at actually measuring

employee attachment. And so that's really what sustainable investing is all about, is identifying things that you think, yes, are intuitively going to contribute to the financial performance of a company, but because they haven't traditionally been thought of as quote-unquote financial metrics, they've been given less priority in financial analysis. Brian Deese is, of course, talking BlackRock's book here, and you can't blame him for that. BlackRock was his employer during the interregnum between Presidents Obama and Biden. But now, heading back to the White House as the most prominent voice on economic policy, it will be interesting to see how Deese and Biden, of course,

try to balance the relationship between the large and powerful investment industry, the companies they invest in, and government itself. The Republicans generally accuse the Democrats of being anti-business. Will the presence of someone like Brian Deese as head of the NEC change that? True, he is a sustainability guy, but he's also a financial services guy. He might get more flack from the left. Here's one thread worth pulling on.

Last week, more than 40 big U.S. corporations, including automakers and energy firms, sent a letter to Congress and the Biden transition team. The letter was titled In Support of Ambitious, Durable, Bipartisan Climate Solutions. The letter didn't have much substance. You could easily see it as nothing more than hand-waving, as in, hey, we are the biggest companies in America and we are really on board for some big-time change. Still, here were these big corporations telling Washington that climate issues are business issues, and they have to be addressed. But the progressive wing of the Democratic Party, best exemplified by Bernie Sanders and Alexandria Ocasio-Cortez, they generally argue that

corporations aren't to be trusted, much less brought into the fold, when it comes to energy and sustainability. They portray many corporations as evil and capitalism itself as an exercise in pollution and exploitation. This progressive position is usually shrugged off by moderate Democrats as naivete or paid advocacy. But it's easy to envision a lot of chaos in the continuing relationship between progressive and moderate Democrats, to say nothing of Republicans. Fans of Brian Deese, like former Council of Economic Advisers Chair Jason Furman, point out that Deese handles chaos well. I can remember when Brian would sit at his desk in the hallway of the NEC, Furman told us, churning out memos on how to save the auto industry, seemingly heedless of the chaos of people coming and going around him. We also asked Austin Goolsbee, another former Obama economist, about Brian Deese.

He said, Anyone that has worked with him knows that Brian is a rare talent. He combines full chops on policy detail with a high EQ and the full respect of the political folks. And, perhaps most important, Goolsbee said, He has repeatedly shown that he's a guy that can get the job done behind the scenes without a lot of drama. Still, the NEC job requires a lot of high-stakes decisions and, inevitably, some drama, too.

So the last I saw, and please correct me if I'm wrong, but it looks like BlackRock still owns about $10 billion in ExxonMobil stock. You are a big holder in Berkshire Hathaway, Warren Buffett's holding company, which has a lot of oil stocks and airline stocks. So how is that part of the picture? And again, persuade me that the sustainability pitch isn't more virtue signaling than actual, I guess, divestment? So the first thing to say is that principally, when you look at those holdings, those are driven predominantly by the index part of BlackRock's business, where we don't have discretion to sell in and out of a particular security.

And so the ability to change that over time is associated with our ability to offer sustainable variants and then encourage clients to consider those, including by the use of defaults. But the second thing to say is that there is a misconception that sustainable investing is equated with divestment. And certainly thinking about excluding certain types of companies or certain types of risks is one way of approaching the issue. But the flip side is if you believe that these sustainability elements actually are drivers of return, then there's an opportunity element as well as a risk element. And so the way that we think about this is actually trying to identify differential performance on sustainability and think about skewing actually trying to identify differential performance on sustainability and

think about skewing between companies within a particular industry. So think about an oil and gas. Theoretically, ExxonMobil offers something along some dimensions of sustainability that some other oil company might not. Is that the implication? Well, I'd flip it on its head, which is to say, a sustainable strategy doesn't need to exit the oil and gas industry altogether, but instead needs to be increasingly good at measuring within oil and gas companies, which of those companies are better preparing for the low carbon transition, getting ahead of trends and identifying ways in which they are going to innovate and benefit from the new opportunities of the future. So let's look at the flip side rather than how and where to divest. Let's talk about how and where to invest. So obviously, we hear about solar and wind power, we hear about battery,

we hear about recycling, etc, etc. Tell us something we probably don't know about sustainability practices, where there's a strong positive momentum? Sure. Two examples. The first is the issue of cybersecurity, which isn't naturally or the first place where somebody goes when they think about sustainability. But actually, the ability to protect your company from cyber-related attacks is largely a function of your employee management issues, because most cyber attacks are a function of human error, lack of good training and lack of employee attachment and commitment to staying on that training. And so measuring whether a company is actually doing well at that requires you understanding how to look at policies and procedures and employee engagement

in a way that gives you a perspective on that. In the world we find ourselves in today, that becomes increasingly important because we now are experimenting with an environment where companies have to massively disperse their workforces and operate on office networks remotely. And the risk of operating from home offices in terms of cyber attacks is exponentially greater. And we're seeing, unsurprisingly, in the first half of 2020, the amount of phishing attacks against these dispersed office networks has increased almost 100%. So if you have a perspective on which companies are better prepared for that, you can get ahead of a risk like that.

The second idea is the question of managing your natural resource footprint. There's been a lot of talk about carbon footprinting and how carbon intensive is your business model. One of the things that we found is that if you actually look at how much carbon a company emits, but also how much water a company uses per unit of output or unit of sales, and in particular, you look at the rate of change of that, meaning is a company getting better at being less carbon intensive per unit of sales, less water intensive per unit of sales, less water intensive per unit of sales, that that actually gives you a really interesting measure into a company's operational performance. Not only because of the traditional rationale, meaning that company may be less susceptible to

a carbon tax in the future or less susceptible to environmental regulations in the future, but actually because companies that are really good at managing that type of cost element actually are really good, well-managed companies. And it's a helpful and uncorrelated measure of operational performance that actually helps to broaden out your view of, is this a well-run company beyond the traditional metrics that she used. So in terms of carbon intensity and carbon use generally, if there's one item that's caught on in public opinion as well as policymaking, at least municipal and state-level policymaking, it's the plastic shopping bag and the view that it's really terrible and should be eliminated. Does the lowly plastic shopping bag even enter into your

larger view on all these different investment and sustainable thoughts? Well, it certainly enters into my calculus because I'm somebody who generally uses recyclable shopping bags, but in the COVID environment, plastic bags have made a comeback. But look, it's a good example, right? The typical plastic bag gets used for 12 minutes. That's the lifetime of its usage. You know, most of our consumption model is built on a use and throw out or use and throw out with some small share, you know to really change the economics of these inputs. We've gotten better and better at doing cheaper and cheaper packaging. So those economics need to change, including with very significant government policy. Let me ask you from the consumer end, though, and just human behavior being kind of strange, as we all know, thinking about the plastic shopping bag, also thinking about the plastic straw ban that has gone into effect in some places, it does make me wonder if it will fall victim to what's called moral licensing,

the idea that if I as an individual do some pro-social step, in this case, ah, I did something good for the environment or for sustainability generally, that then I kind of have one in the plus column and I can spend it elsewhere. And I'm curious whether you see this fixation on end use of things like plastic bags and plastic straws being small gains that allow people to not focus on the bigger systemic changes that are necessary. Fascinating question. I guess I'd say two things. One is, I do think that those end-use opportunities are ripe for thinking about how to operate nudges rather than regulations to really get the full benefit of the impact. Meaning, if you force people to consider the alternative, will you get 95 or 98% of the impact without it

becoming a requirement that people may feel as if it's forced upon them and is less durable. And in fact, what we know about nudges is that they can operate to significantly change behavior without there even being a full awareness on behalf of the end consumer that they've made it, which cuts a little bit against the moral licensing argument. But the second is, I think that there is a more fundamental change in how consumers, and particularly younger consumers, are thinking about these issues. That it's less of a trade-off and more that small action and demand for big societal change are increasingly correlated. And on the saving side and the

investing side, it's striking that we are right on the front edge of the largest wealth transfer in human history from the baby boom generation to the next generation. And there is an argument that, yes, well, young people are progressive about these issues until they make a lot of money, and then they will become conservative as well. But there's actually good economic literature that younger generations are affected quite significantly by scarring elements of what happens in their formative years. And so this is the generation that has grown up with the great financial crisis, now COVID, with a sense of insecurity and a sense that individual actions need to get connected to

larger societal change. One larger societal change is a growing appetite in some quarters to remake the economy from a linear one to a circular one. Rather than thinking about a linear economy where you produce, you use, and you throw out, instead think about an approach where from the design of the good or the service to the use of it to then the redeployment, you're thinking about how to create circularity. And that circularity can generate two positive outputs. One is reduction of waste and you save cost, whether that's an input cost like water in the production process of a piece of clothing, or it's in packaging. And it could also position brands and position products to lean into the front edge of consumer preferences. Last year, BlackRock launched an investment fund called the Circular Economy Fund. It buys shares

in companies noted for minimizing waste and addressing the full lifecycle of their inputs and outputs. So the Circular Economy Fund is designed to look for those companies and those business models that are really within their industry or within their sector getting that particularly right, that are using the idea of circularity to actually position themselves to be at a competitive advantage. So I see that your Circular Economy Fund has as one of its components Coca-Cola, the Coca-Cola company, which I guess is because I know they're said to be very good water stewards around the world. So maybe that's why they're there. But on the other hand, you know,

soda consumption and sugar generally is considered one of the biggest health risks in society linked to, you know, all sorts of bad outcomes, diabetes, heart disease, cancer, so on. Is that really, you know, a better circular economy investment than, you know, give me the ExxonMobil? Yeah, so look, in this context and in others, a lot of our approach is to look at within industries, try to identify relative leaders and those leaders that we think are pursuing either business model changes or operational changes that we think will change ways of doing business. Understanding that, you know, there are entire industries where you can argue there are negative externalities to their operations or the output that they provide. Do you look into and consult toward the longevity of products

themselves, of physical products especially, because planned obsolescence is considered an enemy of a circular economy. White goods, household appliances now last an average of something like seven years, whereas it's thought that typically they could last four or five times longer, but their obsolescence is essentially planned or at least allowed. Is that an element of your thinking? And do you talk about that with firms and investors? It's one important theme that we think about and we engage with companies on. At the same time, we're also looking at those business models that are actually thinking about how to leapfrog the planned obsolescence altogether and provide product opportunities or services in ways that actually can overcome and reduce the actual footprint of the product or service itself. So the answer to that is yes, with a view toward are there more disruptive business models that could overcome some of those challenges altogether.

The biggest disruption, of course, to every part of the economy has been the COVID-19 pandemic. It's disrupted production and consumption, employment and travel, pretty much everything you can name. It has also left just about every budget, from federal to state to municipal, in a deep hole. The U.S. government has already dispersed a few trillion dollars of rescue money, some call it stimulus, and there will likely soon be more. I do think one of the big questions for the world is going to be, does the stimulus activity coming out of this crisis actually succeed of lockstep increase in consumption patterns, emissions patterns, usage patterns. But that's a question mark and one that we'll have to pay close attention to over the coming year. Brian Deese will be paying even closer attention than he could have imagined when we spoke back in June, not only to consumption and emission patterns, but to unemployment

and health care, to rent relief and the college debt problem, to Chinese trade and Saudi Arabian oil and a few thousand other items that will cross his desk as director of the National Economic Council. As you heard, Deese is a precise and judicious thinker and speaker. I wouldn't expect too many bombshells coming out of the NEC office. As one White House veteran told us, we'll probably hear a lot less about econ team infighting than there was in the last crisis. One last early reaction to Deese's appointment before we go. The economist Glenn Hubbard, who has served in Republican administrations, including as chair of the Council of Economic Advisors under George W. Bush, told us,

President-elect Biden's selection of Brian Deese to head the National Economic Council puts a high value on experience and expertise. Deese will be a knowledgeable coordinator of economic policy, and I expect strong matching idea contributions from Treasury Secretary-designate Janet Yellen and CEA Chair-designate Cecilia Rouse. Coming up next time on Freakonomics Radio. There is one theme that is drowning out just about every other topic that's being discussed, and that's the topic of burnout among health care providers. Even before COVID, burnout among doctors and nurses was a big problem.

We'll hear from some physician researchers who have diagnosed the problem and found a solution. And I was blown away. I couldn't believe it. The upsides of compassion. That's next week. Until then, take care of yourself and, if you can, someone else, too. Freakonomics Radio is produced by Stitcher and Dubner Productions. This episode was produced by Daphne Chen. Our staff also includes Allison Craiglow, Mark McCluskey, Greg Rippin, Zach Lipinski,

Mary DeDuke, and Matt Hickey. Our intern is Emma Terrell, and we had help this week from James Foster. Our theme song is Mr. Fortune by the Hitchhikers. All the other music was composed by Luis Guerra. You can get Freakonomics Radio on any podcast app. If you want the entire back catalog, use the Stitcher app or go to Freakonomics.com. Freakonomics Radio can also be heard on many NPR stations around the country. As always, thanks for listening. Yeah, I love those birds. I don't mind the birds. And I can see the bird now sitting on the electrical wire outside my window. I mean, what are we going to do? Do you mind killing all the birds within earshot?