Avik Roy on Solving National Problems with Bipartisan Solutions
In this episode, Spencer and Carli chat with Avik Roy, president of the Foundation for Research on Equal Opportunity (FREOPP), about innovative market-driven solutions for economic challenges in Tennessee. Avik discusses the potential of Bitcoin and other strategies to empower low- and middle-income Americans.
About Avik Roy
Avik Roy is the president of the Foundation for Research on Equal Opportunity (FREOPP), where he advocates for market-driven policies that create economic opportunities for all Americans. With a diverse background that spans medicine, finance, and public policy, Avik is recognized for his ability to distill complex economic concepts into actionable insights. He has written extensively on critical topics, including his notable article, "Bitcoin and the U.S. Fiscal Reckoning," where he examines how cryptocurrency could serve as a hedge against inflation.
At FREOPP, Avik focuses on innovative strategies in healthcare reform, emphasizing solutions like Medicare Advantage for All to improve access and affordability. He also addresses pressing issues such as housing policy, working to find sustainable paths that support low- and middle-income Americans. Through his efforts, Avik aims to empower individuals and strengthen communities, particularly in regions like Tennessee, where economic challenges are pronounced. His work emphasizes the importance of decentralized finance and other market-driven approaches. For more insights and resources, visit FREOPP’s website.
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Spencer Patton 0:35
Today's guest is Avik Roy, a Yale trained physician who now serves as the president of free op, an organization dedicated to advancing policy solutions for low income Americans. Free OP is the foundation for research on equal opportunity. Avik, welcome to signature required.
Avik Roy 1:02
Thanks. Spencer.
Spencer Patton 1:04
You and I have just met not too long ago, but through a mutual friend. So Michael Hendricks, who will get a shout out here, is the policy advisor for governor, Bill Lee. So I met Michael a couple years ago now, and was asking him, how in the world do you, Michael, stay educated on all the things that you have to brief the governor of Tennessee on right? Because there's moments where I can imagine the governor bursts out of his office and points at Michael and says, you know, teach me about health care or teach me about economic policy. And he's got to be ready. And so I was just having the chance to talk with him about how he stays so smart on a lot of things, for important decisions, and getting to know you was one of the things that he said, You gotta know Avik. You gotta know these organizations. You need to go to these events. So I have really enjoyed the chance to read some of the work that you've done, and clearly you have the ear of some very influential people for the policy ideas that you have. Well, thanks
Avik Roy 2:02
First of all for the kind words. And you know, it's certainly been an interesting journey, not one that I drew up on the whiteboard when I was 17 years old and was planning out my career, but it's been extraordinary to be able to play a role in some of the important debates we've had as a country. And yeah, yeah. It's been. It's been, it's been very interesting. So free op stands for, as you said, the Foundation for Research on equal opportunity, and we are a nonprofit, nonpartisan organization that does research on how to improve the economy in ways that expand opportunity for Americans on the bottom half, the latter using the tools of individual liberty, free enterprise, technological innovation and pluralism. I graduated from med school around 2000 and then spent a dozen years on Wall Street as a biotech and healthcare investor. And how I fell into all this is what we now call Obamacare gets, gets kind of enacted in the law around 2010 and in the lead up to that, I started writing a lot about health care policy, because I'm like, Hey, there's this big health care reform that's happening. And people who are left of center saying it's going to work great, and people who are conservative were saying it's it's big government, it's an expansion of welfare. It's not going to work. But they were mainly talking about in terms of the fact that it was going to increase government spending. And my reaction was, if you're an average person who's struggling with your health care bills and you just want a solution to that problem, you have two parties, one party saying, I'm going to try to solve your problem. And another part of the saying, I don't think it's a big problem, and I think what the other people are doing to solve your problem are bad, right? That's what the Republicans were saying, basically, and that's not a really attractive alternative. And I thought, well, actually, you know, I thought of myself as a Republican, and I'm like, there's actually a way to solve these problems using competition and innovation, and Republicans aren't talking about that. And why is that? And why is that? And I have a lot of opinions about this, because I invest in healthcare companies. So let me just start a blog. This is what we did in 2010 as you start blogs. And the reason I decided to start free up was because there were several things, several arrows, or several gaps or opportunities that I saw, needs that I saw in the public policy market. One was what I described about health care, but about every policy area that a lot of times, conservatives were very good at describing what they were against, but not very good at what they were for on issues like health care, like the high cost of housing, like the high cost of higher education, people will say I'm against Bernie Sanders free college plan, but they have no solution for how to make higher education less expensive, same with health care, same with these other things. There are ideas out there that aren't a compromise between Republicans and Democrats, a split the difference kind of politics, but more a if you are a progressive and you want everyone to have health insurance, you can champion these ideas if you're a conservative. COVID, who wants fiscally sustainable healthcare, and a private sector based model, you can champion these ideas too. So it's a positive sum idea, set of ideas, where people can get together and then you can solve these problems, because you need 60 votes in the Senate.
Spencer Patton 5:15
You need both parties. So just you know, the through line of what you're trying to advocate for is don't spend all of your time saying why we can't do something, why we shouldn't do something. But what I've particularly liked about your work and what free op puts out there is that there's always an articulation of, here's what will work, here's what we can do. Rather than just staying in your ivory tower to say, this doesn't work, this doesn't work, this doesn't work. And that's something that I really appreciate about your work.
Carli Patton 5:49
It goes to show the power of debate. Spence and I joke all the time when I met Spence, he was a total debate nerd, traveling like some of our first ever trips we took together were two debate tournaments. You were coaching, right? And we wouldn't see each other over the summer when we were in college, because he was teaching at camps. But we've talked a lot about the power of debate, and what it does for youth, whether they be in middle school, high school or at the collegiate level, is this ability to parse out arguments on both sides and learn enough about the alternate view to be able to debate for it, even if it's not your own conviction, because then you have empathy for both sides. And so we believe entrepreneurship can save the world, and I honestly believe true debate training can save the world. But I want to ask you a little bit, because one of the threads I love about what you're saying is it's all about the Heart of Education. I believe my husband has the heart of an educator, and how we've built our businesses, teaching and training people. And I love what you're doing is getting beyond the tweet, getting beyond the 140 characters, and helping people understand the nuance of what is actually going on around them. And so as you're working in free op. Do you? I know there's an appetite amongst certain levels of people for this content, but I'm thinking about the people you're most trying to serve, the people that are having a hard time making their mortgage payment, the people that are spending hours a day in the pickup line. Are they reading your content? Are they getting the education of what you're putting out?
Avik Roy 7:20
So some of it is ordinary people in the public who read our stuff. But our stuff is pretty dense. You know, we just put out, for example, a big paper on homelessness that's like 9000 words and very detailed about how we should re imagine the way we think about homelessness, and the average person is not going to read those 9000 words.
Carli Patton 7:37
You don't want to reduce it to a tweet, because it is so nuanced, it's tricky.
Avik Roy 7:43
That's true, but there are now tools, I'll tell you. There's a there was something I was playing with the other day, a Google AI tool, where it basically will generate a nine minute podcast with a male and female host, kind of bantering with each other, digesting any amount of text that you give it.
Carli Patton 8:03
So they’re after our jobs, they're already redundant. It's crazy.
Avik Roy 8:07
So I basically tested it out on this homelessness paper. I'm like, okay, I'd like to see Google summarize this 9000 word pretty heavy paper on a very heavy topic. You know, it's about homelessness and about mental illness and about foster children, all the real challenges with that, that set of problems. And, I mean, I'll send it to you this podcast that, that that Google generated in about a minute. I mean, it's remarkable. There are a couple things wrong, like some of the acronyms were mispronounced, and this and that, but it did an amazing job of summarizing this 9000 word paper, wow, in nine minutes in a breezy, accessible form. And I bring that up to say that it may be possible through technology, in the future and in the present, really, to take a lot of the work we do and make it more accessible to more people using some of this technology. Write the articles that you feel are necessary, that you feel like are not being written, and try to identify the challenges or the problems, the solutions that that you don't see other people writing about. And that's where I've been able to have an impact, and where our team has had an impact. And what we found as an organization is that when you start to build these solutions, it really is amazing, like we have a team that works on higher ed reform, and they've built a searchable database where you can look at any degree program in the US, college, med school, grad school, vocational school, certificates, and how much it costs to pay for that degree, and what your earnings are at age 2535 and 45 after you graduate. And so what's the ROI of investing your money in that degree? And it turns out that a lot of the ROI for a lot of these degrees is negative, and now parents and kids can search that database say, Okay, if I major in Psychology at Iowa State, what's the ROI of that degree versus majoring in nursing? Or computer science. And what's cool about it too is not just that it's a research resource for parents. What's cool about is that we have, you know, under the last four years, we've had this policy of we're going to basically write off all the student loan debt as a way of trying to solve this problem of people struggling with their student loans. And that's only going to make the problem worse, because colleges and universities are going to look at that and say, Well, I'm just at that and say, Well, I'm just going to raise my prices even more, because I know that there's going to be a bailout of the students, and so I can just charge whatever I want and just treat the taxpayer like an ATM, which is a terribly it's like, it's going to make the problem worse, not better. But imagine a world in which Congress and regulators can say, Okay, why should we subsidize student loans for degrees that leave people worse off economically than they were before. Why can't we actually say no, we're actually going to concentrate our resources on subsidized student loans, or low interest student loans for the degrees that actually have a positive return, and if you if your degree has a negative return, that's on you University X to reduce the price of that degree, or invest in the outcomes of your kids, or do both, and you can hold them more accountable. So it's an example of nobody had tried to do that before.
Carli Patton 11:11
I'm curious for my fellow Tennesseans how they should take your work, how they can access it and use it. I see it really applicable to my friends looking to get their daughters and sons into college, looking for the right degree and where to go, but when we think about our gas, when we think about our groceries, when people are thinking about moving to Tennessee, trying to find a house that they can afford, where should they be? How should they be using your data sets to serve them in their everyday life?
Avik Roy 11:36
What I'd love to ask you a follow up, which is, when you have those conversations with your your fellow Tennesseans, what do they say? What? What tell me about those conversations?
Carli Patton 11:46
People are really struggling to put gas in their car. People are really struggling to put groceries in their car. And these are people with good jobs, and just because you have a good job, let's say they are have six figure jobs, right? The percentage that they're spending on that is cutting into their life. What whether they can afford for their kid to play the sport that they've always played, whether they can get the gear that their kid needs to can they take their kids on spring break, if their kid wants to go to camp? These are decisions that I hear people making that they're have to really prayerfully consider, and it's hard, and it also goes back to families and marriages, and these are hard conversations that nobody wants to have. And because the economy has been so different for so long, they haven't had to have them, and now all of a sudden, they are, and I think people are hungry for any data, any resource that they can have that will help them make an educated decision while they figure out their future.
Avik Roy 12:43
Yeah, that's that's super helpful and resonates with me a lot. What I'd say is that there's, there's several different levels of answers to your question. The first is more, let's call it a high level answer, which is, when people are struggling at the gas pump or the grocery store or paying their rent or making their car payments. The default answer from a lot of politicians has been, well, let's subsidize it more. You know, you're struggling with your car payments, let's give everybody $5,000 to afford a car payment, your subsidy. You're struggling with the cost of childcare. Let's expand the subsidy for child care so you can afford it more. And the problem with that kind of knee jerk answer that you get a lot of times from politicians is it fails to ask the question of, why is child care so expensive in the first place? Why is higher education getting more expensive every year? Why are the prices at the pump higher for gas. And so I think for your for the people that you, you talk to, that's the first question they should always be asking, is, why has this become more expensive than it used to be? And that's where free app comes in. I would say there's two, two broad categories of reasons why things are getting more expensive. The first is the combination of regulations and subsidies. So take childcare as a great example. You know, we heavily subsidized childcare, but there are only so many companies or agencies or people that do childcare, and so you have a fixed supply of childcare workers who can actually care for your kids, and a lot of people who've got the money to pay for child care. What does that do? Supply and demand. The price goes up. Then on top of that, child care is heavily regulated, because everyone's worried, oh gosh, I don't want somebody who's not certified or credentialed taking care of my kid. But that can have unintended consequences. So like, for example, in the District of Columbia, you have to have a college degree to work in childcare. But a lot of the people who need childcare don't have college degrees. They're not looking for someone with a college degree to care for their kids. They're just looking for someone who's compassionate and will be responsible and diligent. And you exclude the two thirds of Americans who don't have a college degree if you if you have that regulation. So you constrict the supply, you artificially juice the. Demand, and that leads to higher prices and scarcity. That's one set of things that we do in a lot of different parts of the economy. The second thing we do, which is a more general macro problem, is we flooded the economy with new money. So one thing a lot of people don't think about, and Spencer and I were talking about this at breakfast before we recorded this podcast. Is that what the amount of US dollars in circulation changes over time. We think of the dollar as just, oh, something costs $1 $1 is like a pound or an inch. It's like a unit of measurement, but it's not exactly like a pound or an inch. In the sense of a pound or an inch stays the same. You know, something that that was an inch long 100 years ago is an inch long today. But $1 100 years ago is not the same as $1 today. It doesn't buy the same set of things. It doesn't have the same value, and a lot of that is controlled by the number of dollars in circulation. Just to use a thought experiment, imagine if you snapped your fingers and tomorrow there were twice as many US dollars in circulation as there were today. That wouldn't make everyone twice as rich. It would mean that each of your dollars was worth half of what it was before.
Spencer Patton 16:15
That's such an important concept to get because that that is a fundamental like, Okay, if I could just double the money, then I'm in good shape. But it does create that immediate knee jerk reaction that we well know as inflation.
Avik Roy 16:28
That's exactly right. So that is the big macro reason for inflation is that the policy of the US government, particularly the Federal Reserve, has been to dramatically increase the number of US dollars in circulations during crises like COVID, like the financial crisis, to the point where now they're four times as many US dollars in circulation today than there were in 2001 at the dawn of 911 and that is the reason why houses are more expensive, and a lot in the stock market is so much more valuable. In certain ways, a lot of things have become more expensive and more valuable, because when the Federal Reserve creates those new dollars, they give them to banks, JP, Morgan, Wells, Fargo, Bank of America, and then those banks invest them in the stock market or the real estate market, or ideally, lend them out to businesses and customers, which is why the Fed does it, because they think it's going to stimulate The economy. But the end result is people at the top of the financial food chain get the money first. They spend it, they benefit from it, and by the time it trickles down to the people at the bottom of the ladder, all they see is higher costs at the grocery store, higher costs at the gas pump.
Carli Patton 17:35
I think people can really relate and tear thought of, you know, an inch is an inch, right? And a pound is a pound to take it to a parenting into a lifestyle. There's always been a formula for success. You go to school and you work hard, perhaps you get married and mom, you know, or dad helps with the kids, and somebody goes and works, you figure it out, right? But there's a formula. And now there are so many Americans, Tennesseans, that are trying to follow the formula, and it inches in an inch and a pound doesn't feel like a pound, and $1 is not $1 and it's leading to marital discord. It's leading to this inequity and work life balance and equity and who does what in the household, because more hours, more work, less time as a family. And I think people are just really struggling.
Avik Roy 18:25
You know, something I'll mention to amplify your point is, you know, a lot of us, we don't talk about it every day, but you know, a conversation that Americans often have, especially those who are traditionally minded in their in their values, will say, you know, people used to work hard and save for tomorrow, and more and more people are just living for today and not thinking about the future. And that may just seem like something that's about the modern world and about our technology and our phones and things like that, but it's not just about that the the view of mainstream economics, and particularly the people who make these decisions about how much money there is in the economy and how to run our debts and deficits and things like that. The argument they make is that for the economy to grow, we need to manipulate you to spend more of your money today and not save it for the future, because more consumption today will lead to more economic growth, more GDP growth, but all you've done is actually moved forward the consumption of the future. Because if you spend money today, instead of saving it, this money you save you would have spent it eventually, probably on something nicer, because it would have interest dollar amount. Yeah, exactly, larger dollar amount. But by spending it today, you're actually less well off than you would have been. So we're trading a little bit less economic growth today for what would have been more economic growth in the future, and we are actively by saying your dollar is going to be worth less 10 years from now. We're actually telling consumers, and this is what economists actually think we're telling consumers, yeah, we want you to feel that way. We want you to feel that your dollar will be worth less 10 years from now, so that you spend more today than you will 10 years ago. They don't frame it like that. They don't put the sentence together the way I just did. But if you actually read through what they say, that's what they say, they say, well, we can't have, you know, a more conservative, traditional approach to the way money works, in terms of not growing the money supply and all these other things. Because if we do that, people will believe that they're better off saving than spending, and if they're if saving rather than spending, then the economy will shrink. And that's how they think about and that's that's the wrong way to think about. The right way to think about is actually, we want people to say, we want people to be future oriented, but we've made it harder to do that really deliberately through policy over the last 80 years.
Spencer Patton 20:48
The staff that I want to call out, because it's really compelling, it makes a lot of sense, is the money supply from 2001 to today is four times larger. And I I just think of it like, so I'm a Diet Coke drinker, which is probably really bad. Everybody says it's bad, but I remember in high school, we would go to the vending machine and a can of Coke was 25 cents, and I know if it was any higher than that, I felt like I was getting ripped off, like, I distinctly remember you could get it there, and now it's a minimum of $1 and it could be $2.50 and you think of all of the stuff in our life and how much it's changed since just 2001 and what a massive shock that is to our economy. I mean, four times the money supply over that time, it feels hopeless to say, Okay, well, now that we're here and there is four times the money supply, what do we do? How do you turn back that clock? Because it seems like I'm suffering here. And what we also know is our government is likely to continue to print money. It's the only way that the economy functions right now is that we're printing money. So in speaking to how you try to either turn back the clock or survive with the direction that it's going, how do you counsel people?
Avik Roy 22:12
We have an article on our website called Seven problems with the way we think about income inequality. And one of the points we make in that article is that the way economists and politicians often talk about income inequality is, oh, this person's salary is $100,000 and this person's salary is $40,000 and that's unequal. But what that's not taking into account is, from a from a business person standpoint, that is your top line, right? Your your gross income, your salary, maybe $100,000 or $40,000 but where it really matters is what's left after you've paid your taxes and your rent and your grocery bills and your gas bills, your disposable income is what matters. And if you compare the cost of living in a place like California to a place like Tennessee, it's not just the fact that Tennessee doesn't have an income tax that matters for people here. It matters that the cost of living is so much lower that even if you're making the same amount of money, let's say you're making $40,000 in California versus $40,000 in Tennessee. It's more livable in Tennessee to live on that than it is in California. It's unlivable in California, right? And a lot of our work is to point that out, that actually, if you really want to address the challenges that ordinary people are increasingly facing, living paycheck to paycheck, the most important thing to do is to ask that question, why are these things becoming more expensive in the first place? And what can we do to change that? And certain things, you know, Tennessee can't change the way the Federal Reserve acts, but you can in Tennessee change some of these other things at the state and local level that drive up the price of housing and other things.
Spencer Patton 23:49
I think that's really speaks to a heart posture that I have in that one of my thesis that I have is that the states that produce energy will command the future economy of the United States. And you see all different types of policies at state levels that some that are totally against energy production, some that want to be for energy production, but can't get there for a variety of different reasons. But the demand on energy is growing at an unprecedented rate. It's aI data centers, it's manufacturing, it's all sorts of stuff that's intensive in its consumption, and I really appreciate it's Spoken like a doctor and to say, let's not address just the symptom. The symptom is that everything is more expensive in the same way, the symptom is that you are bleeding on the top of your flesh. Now that may be a reason because you are cut, but it could mean that there is something much worse going on. And addressing that underlying root issue is important. So as you think about the most. Those influential policy areas of change. Maybe healthcare is the largest spender and is perhaps what you're most kind of able to speak to as your original heart language. But what would you say free op has a lot of things to target. What is the primary focus to say, Spencer, this is where we should start in trying to address the symptoms of why people are feeling so much pain.
Avik Roy 25:32
Yeah. I mean, if I had to, if you put a gun in my head and pick one thing, I'd say cost of living overall. Right within cost of living. What are the biggest things that are getting worse over time. Healthcare is certainly the worst. We're at a point now where more money comes out of your paycheck to pay for healthcare, whether it's health insurance or the taxes to pay for other people's health insurance, or however you want to calculate it your own, out of pocket expenses than what you send to the IRS, what you pay purely for hospital care every year out of your paycheck is more than what you send to the IRS and taxes for the average household, which is insane, right? We're now at a point where you can cut taxes. A lot of politicians like to talk, I'm gonna I'm gonna rob if you elect me, I'm gonna cut your taxes. And that's great. People love lower taxes, but we're at a point now where for the average household, they're not actually paying a lot of taxes. There's no state income tax in Tennessee, their federal tax rate is actually relatively low, especially when you factor in all the deductions. But what's really eating into their paycheck every year, and is the biggest threat to their living standards, is the fact that the cost of health insurance is going up six 8% a year, and people don't see it, because most people aren't buying their health insurance directly, the way you buy auto insurance or homeowners insurance. But what's happening is your employer is buying that insurance for you, and that's why you haven't gotten a raise. And we're at a point now where actually, if you look at the last 20 years, the average household's income has not gone up at all, adjusted for inflation and the rising cost of health care. So that is a big problem. There are other problems, as I mentioned, higher education, housing, energy, all these things are are problems. That's why I say cost of living overall is so important. And going back Carli to something you asked me before, is like, how do you actually get people to care about your work and how do you get traction? Cost of living is something that all politicians care about because voters care about it, right? It's not that. It's not inherently an ideological issue, right? People want to be able to afford their daily lives, whether Democrats or Republicans or Independents. And if you as a nonprofit or as a policy maker or a policy entrepreneur are trying to work on those issues, you're going to get a hearing your people are going to hear you out.
Spencer Patton 27:36
And that's where we found we can build bridges over true to your tradition of writing. And this is what everybody's asking you to do is keep writing. You are doing that. So why experts fail? Tell us about what you're writing.
Avik Roy 27:49
Now I'm working on a book. I'm trying to find the time to work on a book, and that's part of why I'm trying to reorient my professional structure. And the title of the book is why expert at why experts fail, and I wanted to write a book for a long time. It's just every time I my kids and my wife go to Barnes and Noble, I'm like, I want to Why is everybody else written a book and not me? I need to write a book. I really just, it's one of those bucket list things. I've always wanted to write one, but I've always struggled to find a great idea for a book where I feel like I have something to say that hasn't already been written. And then we had the experience during COVID where we were arguably the leading Think Tank making the argument that schools could stay open safely and that a lot of the economy could stay open safely, even though we believe that COVID was dangerous and an important pandemic to try to address in terms of the virus and the disease. And in that environment, in that COVID environment, there were a lot of people who were saying, Well, you've got to listen to the experts. And if you aren't an epidemiologist, you basically have no right to have an opinion about any of this stuff, which was totally wrong on a bunch of levels. First, the science, yes, the science over I mean, the problem number one is epidemiologists aren't thinking about what's the social cost of closing schools and the economic cost of closing businesses. The second piece is that the epidemiologists are not Nostradamus. They get things wrong, and they're it's a judgment how much risk, what the cost benefit is of these different steps that you might take as a policymaker, and they were often wrong. They were wrong about school closures. They were wrong about the need for aggressive, total lockdown to the economy. But I didn't want to write a book that's just, hey, here's why the experts failed in COVID. I feel like, you know that's just, that's a topic that's, I don't want to say, beaten to death, but it's been covered a lot, yeah, but and you could write a book about the next pandemic. But who knows exactly how the next pandemic will go, but I thought over the course of my time in public policy, and even beyond that, that's been a that that point about you have no right to an opinion unless you're an expert, has been a dominant strain in our politics. It's true in energy policy as well. For example, you were touching on that earlier. It's true in a lot of areas, and a lot of times the experts are wrong. And there are a lot of people writing books and columns about why this means Americans are stupid. You're not respecting the fact that I have a PhD and I went to Harvard and all this kind of stuff. And I want to write a book which both explains to experts why people mistrust them, and go through all the ways in which experts fail and create mistrust because their decisions are often catastrophically wrong in terms of public policy, but also to help ordinary Americans to the questions where you were asking earlier, help ordinary Americans navigate expert opinion? Because you know, a lot of times you know you're going through life, you have to trust experts. You have to trust that the plane works when you get on it. You have to trust the weather forecast, even though we all know they can be wrong. You have to trust that when a pandemic happens, that there's somebody out there giving you guidance as to how you should, you should navigate your life. And so how do we as ordinary people take this flood of information that we're getting every day and navigate it so that we can set have a sense of here's someone I should trust as an expert versus someone I shouldn't trust who's just flashing their diploma around but doesn't actually have good judgment. So that's the book I'm hoping to write, looking going through some case studies of how expertise has failed over the last several decades, if not century, and how in a world of where there's more and more data every day, more and more information overwhelming us, how do we navigate it and make sure that we're able to use expertise well and that we get better experts who are more humble about where they can be wrong.
Spencer Patton 31:43
I think it's really well articulated there, and I appreciate that it also has an element of saying, let's teach experts why and how they can do a better job of communicating, because it is important to listen to people that have gone through and have experience that we don't have. But I'll also tell you, you know, I've had it with just the you don't get an opinion because you don't have a PhD, you're not a doctor. I'm not an epidemiologist. I mean, that that was those were fighting words just a couple years ago, sure, and it has done tremendous damage to our willingness to listen at all to what the experts have to say. And that's not a good place either, right? Exactly. There's a middle ground there, exactly, right? That will be fun. We'll definitely write that. I will echo what the West Wing said. Keep writing. Thank you, and we'll be excited to see that we share one other passion in common. We share a lot of things.
Carli Patton 32:39
I can't believe that you have waited this long to get to this topic.
Spencer Patton 32:43
So we care about some bitcoin and some cryptocurrency I have spent Since 2013 pretty interested in this space and to see it come mainstream, to where both of our presidential candidates have platform positions that they have articulated about Bitcoin is really amazing. So talk to us about your Bitcoin story and just some of the things you're working on right now as it relates to cryptocurrency.
Avik Roy 33:12
Yeah, I'm like you. You know, I had some friends who were really into this stuff, who I had a good friend in my when I lived in Boston, who predicted the financial crisis and was short Bear Stearns and Lehman Brothers gone to the financial crisis, and he kept telling me that Bear Stearns and Lehman were gonna collapse. I'm like, Yeah, whatever. You know, the governmental bailed him out. I mean, I can't imagine and he had, he nailed it. He was basically, he wasn't in The Big Short, but you could imagine him in The Big Short because he was basically making those exact arguments and analyzes. And so I was kind of ignoring his kind of Cassandra catastrophism for a while, but then after that, I'm like, Okay, I better listen to this guy, yeah, and, and he, he was the one who first turned me on to the Bitcoin white paper, which was published in 2008 and, and how, you know, there was a need for an alternative solution to this problem that we're talking about with the dollar keep getting less getting less valuable over time, because there's always this temptation for the government to say, you know, we're going to keep running deficits, we're going to keep piling on debt, and the only way we can address that problem is making the debt less valuable by making the dollar less valuable. That's a temptation that the government has in any country and the US is following that path. And you know, that was the dime of the financial crisis. And you know, so around 2013 2014 I finally there was a big crash in Bitcoin, because a Japanese exchange called Mount Gox blew up, and the price of Bitcoin went from $1,200 to $300 and I had, I've been like, not paying enough attention to it, because I'm like, I don't have the time to figure out how to own Bitcoin and mine it and code all this stuff. I'm very busy with my Wall Street careers. I have no time. But then finally, there's been this blow up, and I'm like, Okay, I've gotta, I've gotta take the time to learn it now, because this is my window to figure it out. And started accumulating a position and. And and I, I decided I was gonna just basically have a percentage of my portfolio. I decided 10% that was going to be in Bitcoin, because I'm like, It's uncorrelated with the rest of the portfolio. It's gonna be very different, and it's maybe a place to hide with if there's another financial crisis. That was my thought process at the time. And then, of course, it grew and grew, and I had to pay more attention to it, because it was a became a bigger part of my portfolio. And then I really started to go down the rabbit hole of realizing that a lot of my work in fiscal policy and the big problems with our deficit and debt. You know, one of our big projects at free app is we're producing a documentary on how the federal debt is going to influence ordinary people through inflation and higher interest rates and other problems. And Bitcoin was very much a part of that, of that journey, and that Bitcoin is designed for exactly that, to solve that problem. It's something that isn't controlled by anyone, let alone a government. And so the number of Bitcoin in circulation will always be 21 million. It won't quadruple in quantity like the US dollar. That's the way it's built into the software. And so long as it's legal to buy bitcoin and exchange US dollars for Bitcoin, you can have that in your portfolio, or as you're part of your savings to protect yourself from the dollar getting less valuable over time, and in the free app context, a big part of why that's important is because we've talked before about inflation and how to protect yourself from inflation, and it's hard, because, you know, if you don't have a lot of net worth and you're living paycheck to paycheck, how do you protect yourself from inflation? And one of our arguments is that to the degree you can save money. Bitcoin has created, recreated that incentive to save Yes, it goes up and down. It's somewhat volatile, little less volatile now than it used to be. But in any four year period, if you've owned Bitcoin and you've held it for longer than four years, you've made money, far more money than you would have had if you just kept it in the in your checking account. And so if you're able to squirrel away anything and save it, and it's remarkable what that does to your optimism about the future, even in a world where it's getting harder to afford things, your Bitcoin helps you afford those things over time. And that's the good side of it. I think the thing I worry about, and I have an article coming out short soon, called, then they fight you, which is about this, this problem of I've written two big articles on Bitcoin that the first, that's those came out three years ago, called Bitcoin in the US fiscal reckoning, which talks about what I just described. Yeah, thank you. Must read, and it's about this point, about explain to Washington why Bitcoin is not a passing fad while it's why it's going to be here for a very long time and it's going to be increasingly important in the economic conversation, but also explaining to Bitcoiners why the government can make their lives very hard. Yeah, it's like people, a lot of people in the Bitcoin world say, Hey, this is totally independent of government. Government can't do anything to me. That's not true at all. Yeah, absolutely. So. So that article, which it really kind of helps people. A lot of people tell me it's the article they send to their uncle who's skeptical about Bitcoin to help them understand why Bitcoin is important. So that's something people can read. And this new article that's coming out very soon, sometime in this in the fall of 24 I hope, or late 24 is on, what happens if my doomerism is right about the federal debt and that 20 years from now, we really do have a fiscal crisis that's going to lead to skyrocketing inflation and interest rates, and people do, en masse, flee to Bitcoin and other alternatives to US dollar. What does the US government try to do, then to crack down? Do we basically turn into a Latin American country where we say to people, you're not allowed to get your dollars out of the country and or change them into other currencies, capital controls. Are we going to massively tax people into oblivion in order to try to solve this problem? For both there's, that's, that's what you have to say as a default scenario. Or are we going to say, you know, we've got problems in our economy. Let's fix those. Let's fix the budget deficit. Let's address those long term problems. And so part of why I wrote this second article, and it comes from that, that old aphorism that's attributed to Gandhi, where he says, or he allegedly says, First they ignore you, then they laugh at you, then they fight you, then you win. And so I'm making this point of like the then they fight you. Part is coming. It hasn't come yet right now. It's still they laugh at you, maybe. But when we get to that point where it really is a battle between the government and and people wanting to be unfortunately, more skeptical US dollar, how do we? How do we ensure that the US comes out and Americans come out better off in the end, there's a lot of danger points, a lot of risk, a lot of potential for inequality, because people who are early in Bitcoin are going to be super rich in that scenario, and people who were who were skeptical of it or not. Can we? Can we actually create a. Millions to Bitcoin so that it's more protected against that outcome, but also give the government the incentive to actually solve the problems of the deficit and debt and actually restructure our big entitlements and other things so that we protect lower and middle income Americans, but still make sure that we are reducing the deficit and debt and getting it under control. And so that's the big thing we got to solve for our kids and the next generation. Because this is not a problem of like, you know, 50 years from now or 80 years from now. This is a problem of today. The inflation we're experiencing today is driven by a lot of this stuff, and we are. We only have about 10 to 20 years before there is a major economic crisis due to the federal debt, and a lot of the work we do now at free OP is to try to say, how can we how can we have the plan in place so that when the crisis comes, politicians have the right ideas in place to actually address that and get us out the other side?
Spencer Patton 40:55
I think that brings it full circle, that to say that there's a reason why you have the ear of governor Lee and Michael Hendricks and others that are looking for your advice on policy. Just to spend an hour with you, it is obvious you are really smart, and to be in a lot of rooms with a lot of people that are asking your opinion is an important moment, and I can appreciate that you are a good steward of that opportunity. You clearly work hard. You've put together a good team, and from someone that consumes a lot of your research, I really have enjoyed seeing what you do, and most particularly, that you all advocate for something because it is the coward's way out to just say no, no, no, no, no, no, but to leave it at that. And so for you to come forward and say, We're gonna say no to that, but here are viable pathways, and it's a little something for both sides of the aisle. And so I really am glad that Carla and I are supporters of free op. And for those that are hearing about you for the first time, it's definitely worth googling you, starting with that Bitcoin paper, give us a title again, one more time from three years ago, Bitcoin in the US fiscal reckoning.
Avik Roy 42:03
It's really worth it.
Carli Patton 42:06
You're gonna save some holiday tables. You know that are fighting about Bitcoin. They can get the real data so it's really accessible.
Spencer Patton 42:13
And I appreciate you took the time to do that. Thank you for being here today and really enjoyed this conversation.
Avik Roy 42:20
Really appreciate all the kind words and grateful for your support, and look forward to learning more from you. Over the years, I've really come to admire your life story and all the things that you both have done with your lives. It's really amazing.
Spencer Patton 42:32
Thank you. Vic does a great job of starting off to show his credibility. He is incredibly smart, and to hear the word Think Tank is immediately alienating, right of just like, okay, these are some academics and an ivory tower, and I haven't learned just until the last couple years even what a think tank is, and all it is is just an institution that puts together an environment for 10 to 100 really smart, nerdy people to get together and work on papers and books and topics that they release something Which, if they do their job right is accessible to the broader public, and I think that's where a lot of people that are competitors to free op or ovic, they really miss it in that they produce something that is so arcane that it might as well have been written in hieroglyphics, and it just gets thrown away as soon as soon as it's produced, because nobody reads it.
Carli Patton 43:43
Sure well. And I think, too, there's a practical element. Is that, if you look at what people are going through right now, yeah, working longer than the hours trying to keep up with their families, trying to have their basic needs met, the idea of sitting and reading a think tank paper is probably not top of mind. So I really appreciated his approach, and when I asked that question, his thoughtfulness to say, we are trying. We hear you and we are trying. And I really, I didn't expect that, and I was pleasantly surprised.
Spencer Patton 44:11
Yeah, it's like, it's enough to get the attention of the West Wing, right? It is scholarly enough and influential enough to appeal to that market, but he's also humble enough to say, Hey, I put one of our pieces into Google AI and had him produce a nine minute podcast for it. Because, you know, there's a lot of academics that would put their nose up in the air and say, I'm not reducing my paper to what Google AI is going to mock up in a podcast. I mean, it's like they're going to do it with a monocle and keep that voice. That's like, my, that might be my new podcast voice. I can that's a sustainable voice. I can talk like that.
Carli Patton 44:47
We’ll be replaced by AI so much faster if you continue to use that voice. No, that was really good. I learned a lot, and I'm hopeful that our audience listening will look up some of his. Research, and maybe, if it is super dense, put it in AI, use a tool available, because I do think knowledge is power, and the more we know, the better we can we do, and the more educated we are about what's happening to us at the local level and what we can do about it.
Spencer Patton 45:17
Yeah, look up his stuff on Bitcoin too. That really was a topic that I have a heart for, but it's hard to communicate what Bitcoin is and why you should trust it with any level of savings, because it has been volatile and even questions around its legality and things that you don't know what you're getting into his paper does a great job of being able to articulate that you.
