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My guest today is billionaire philanthropist John Arnold. You’ve probably never heard of him, but he and his wife, Laura, have quietly given away more money over the last decade than just about anyone else on the planet.

John ARNOLD: Laura and I were in strong agreement that we didn’t want to give a significant part of our money to the kids. And so, then the next question is, what are we going to do with it?

Welcome to People I (Mostly) Admire, with Steve Levitt.

John Arnold was at one point the youngest self-made billionaire in the world. But at the age of 37, he walked away from money-making to focus full-time on giving his fortune away. He’s definitely not flashy, but he’s one of the most thoughtful, insightful people I’ve met. And I say that about him, even though he has rejected every grant proposal I have ever submitted to him for funding. Every single one.

Steve LEVITT: So, before we talk about your second career as a philanthropist, I’d like to touch just a little bit on your first career. Straight out of college, you joined Enron, and by 2001, five years later, by some accounts you were the most successful trader in America. You personally netted Enron $750 million in profits trading natural gas that year. That’s the year, ironically, that Enron declared bankruptcy. You received the highest yearly bonus that Enron ever paid, $8 million, which is tiny really, when you think about it, compared to the $750 million that you generated. Enron collapsed and just to be clear, no one has ever suggested that you did anything wrong. You were far removed from the accounting fraud that brought down the company. But I’m curious, did you have any inkling, any suspicion that something was going awry at the firm?

ARNOLD: So, the firm was growing so quickly when I joined. It was a great place for a young person to work because people ahead of you — people who had been at the company for years, who had more experience and more knowledge — were getting moved off the track to go start either new businesses within Enron, or were getting hired by competitors. And so, as a young person who showed some level of responsibility and ambition, you could escalate the career ladder so much faster than one could at a more mature Wall Street bank. And it was just this incredible place to work. It was named the most innovative company six years in a row from ’96 to 2001, ironically the year it went bankrupt. And it gave me that M.B.A. training that I never did formally. I was learning so much there, both about the industry, about business, just about competition, about markets, and then I learned even more on the way down. It happened so suddenly. It turned out to be okay for the young people, like me, who had lots of career options. It was obviously very detrimental to people who were in their fifties or sixties, who not only had that emotional destruction that happened, but also their retirement savings really got destroyed. But I came out and I had a number of people approach me about funding me, if I wanted to start my own business. And like you said, I had made the company a lot of money. I got paid a lot of money, but on a percentage basis, it was relatively low. And I was looking at the hedge fund model, which typically paid 20 percent of profits to the general partner, which would be me.

LEVITT: Yep, instead of 1 percent.

ARNOLD: Right. And so, as I looked around and do I go work for a bank? Do I go work for another energy company? Or do I start my own fund? The economics of starting my own thing were so great or so tempting as a young person with no responsibilities at home, I could go take that risk.

LEVITT: Yeah, and a good choice, because it turns out that you were a really good trader, and it makes so much more sense to be an owner than an employee. You started your hedge fund and continued to be wildly successful. And a few years later, you had become the youngest self-made billionaire in the United States. You grew up middle-class, right?

ARNOLD: Yeah, I grew up upper-middle class.

LEVITT: You have jobs growing up? Did you have to work?

ARNOLD: I was always entrepreneurial. So, my main job was — I started a baseball card company when I was 14 years old. And this was the late ‘80s. The baseball card industry was really starting to take off and actually has a lot of similarities to commodity trading. Just about information asymmetry, about knowledge of the markets, about geographic arbitrage of what certain cards were worth in certain parts of the country versus other parts of the country. So, for instance, hockey cards were very valuable in New York and in Canada and had very little demand in Texas. And I found that the Texas dealers would buy these because they were allocated from the manufacturers, but they really couldn’t sell them. And so, I would go around and buy up their allocations and found dealers up in the Northeast or in Canada and could sell them there and I make that arbitrage.

LEVITT: Were you making good money?

ARNOLD: I was. It helped pay for a year of school, helped pay for a car. I made a thousand dollars in a day one summer. It was a lot better work to do than to go work in a fast-food industry making four bucks an hour.

LEVITT: So, then you went to trading. I’m just curious, was trading fun for you or was it just a way to make money?

ARNOLD: It was fun. It is a game. And it’s a competition where everybody’s sitting around the proverbial table and you’re trying to outsmart your opponents. One of the great things about it is there’s that scorecard and that scorecard sits there on your computer. How much money have you made or lost? One of the things in retrospect, looking back, is I never understood how much stress and pressure that scorecard on your career, sitting there in real time, puts on somebody. And I think it’s one of the reasons why trading has tended to be a young person’s game. There’s that physical commitment to it. But there’s also that emotional commitment to trading. And people start to age out of that. By 2012, after I’d been running it for 10 years and been in the industry, now, for 17 years, I was just burnt out. I was burnt out emotionally, burnt out physically. It wasn’t a healthy spot and it was time for me to do something else.

LEVITT: When I think about money — and I’ve got more money than I used to have — and what money’s allowed me to do is to unclutter my mind. I used to spend a lot of mental effort trying to get deals to save money. I was cheap. And eventually, I found that the best thing about having some money is that it allowed me to be inattentive to details. Once you get past some threshold where you have more money than you could ever imagine, then anything like I’m even talking about just fades away. It’s just different. How do you react to that kind of appraisal of things?

ARNOLD: There’s this common discussion amongst traders about what’s your number? What number of wealth do you have to reach in order to retire from the job? Because, again, at some point when you get into it, it’s this amazing rush, and you hang out at night with other traders from the industry. You think about it when you’re by yourself at home, when you’re in the shower, you dream about it. And that’s for a stage. And then I think you start to mature as a trader, and you start to get other interests in life and it becomes more of a job. And so, you start thinking about, “Okay, what am I going to do next? I’m not going to do this until I’m 65 years old. So, what’s my number?” And what I’ve always found was that both for me personally, as well as for everybody I’d ever had this discussion with, was that number changes, right? When you reach that number, it bumps up, and it bumps up again. I think part of this is psychological. Part of this is, people just to increase their desires and their wants, their material wants. And so when you have X, you start thinking about, “Oh, this other guy has Y and that must be so much better.” And then if you get to Y then, “Oh, that guy has Z and look what he’s able to do.” And I think that treadmill of always trying to top that other guy or girl and it ends up leading to unhappiness. It ends up leading to being stuck in a job because of the compensation. And not because you love going into work anymore. But it’s about making money. Now, of course, like, for most people work is about making money, but the people I’m talking about and then in this example, it’s people who have enough money to live the rest of their life. But they’re on that treadmill because something psychological is, “I need more. I need more.” And I had gotten to that point where I had so much that it was ridiculous to say, “I need more.” I had this ability to step back and say, “That’s a stupid fight. It’s a stupid way to live my life. I need to be happy and maximize happiness.”

LEVITT: Was it an epiphany or a slow unfolding?

ARNOLD: It was slow. It was hard closing down the firm. In retrospect, I probably did it two years too late. Those last two years were tough. I was waking up on Monday mornings and I wasn’t psyched to go to work. I wasn’t emotionally or mentally connected to it anymore. And when you’re not, in this very, very competitive field of trading, the results aren’t going to be good.

LEVITT: So, the fact that it only took you two years, that’s pretty good. I know in my own life, it often takes me longer than two years to make changes, which are completely obvious that I should have made much earlier.

ARNOLD: I had this conversation with a friend about the power of inertia. That there’s a lot of things in life that might bring you unhappiness, but changing them is really hard just because it’s easy just to continue the next day, the same as today. And that trying to conquer that force of inertia is really hard for people, but it’s so important. It improves your life if you can. But I think most people really struggle with it.

LEVITT: So, while you’re trading, you start giving away money. And the first really big gift of yours that I know about was: in the mid-2000s, you gave $10 million to the KIPP Charter Schools that were located in Houston at the time. Was it hard to give away your money, but was it fun to give away your money?

ARNOLD: Maybe both? I had always had this sense of if you have the ability and you have the resources that you should be trying to improve the lives of others. I think that’s a common thought for people, especially for Americans, where you have this very strong culture of philanthropy. And once you have enough resources to take care of yourself, take care of your family, it is very natural to start thinking about, “How can I take care of others in my community?” And so, I started to have that as well, even back when I was at Enron. My job had limited direct social value. And so, I tried to make it through writing checks. I remember this instance where I was at the supermarket going to check out, and there was a magazine there, and it had the top 200 nonprofits in America. And so, I threw it in the basket, took it home. And when I went home, I turned immediately to the education section. One of the nonprofits in there was based in Houston and it turned out to be KIPP Charter Schools. And so, I went there, took a tour, then wrote them a $25,000 check, and ended up getting on the board. And that started a very long career of philanthropy. So, I’d go to the conferences. I started funding, some of the national nonprofits in this space, having lots of discussions, both with other funders, with practitioners, with superintendents of public-school systems, and just try to figure out what’s going on in the system and how can an outside actor who has the ability really just to write checks — how can we be helpful?

LEVITT: So, you and your wife, Laura, started your foundation, the Laura and John Arnold Foundation in 2010, which is five or six years into this journey of trying to figure out the giving. Now that was the same year that the Giving Pledge emerged. Did you launch the foundation because of the pledge?

ARNOLD: We were already set up and emotionally committed to give away the vast majority of our money. We had had the benefit of seeing very substantial fortunes and how people had handled those both with their philanthropy, as well as, with their kids. And Laura and I were in strong agreement that we didn’t want to give a significant part of our money to the kids. We weren’t sure, in fact, we had very strong doubts that doing so would lead to the goals that we had set for our kids and that it would make them happy and productive in life. And so, then the next question is: What are we going to do with it? Deciding to try to use that in a philanthropic manner is a very natural step. And so that started down this path of, okay, we have very significant resources. We want to give it while we’re living, but that means we need to start giving. And Laura had recently pivoted from her professional career. Her background was as an M&A lawyer. I was in the process of pivoting from mine. And so, we decided, let’s get serious about giving away money. Instead of kind of writing these $25,000, $100,000 checks, let’s start doing this in a serious manner, and start hiring people. As you said in 2010, we had started the Laura and John Arnold Foundation and had started in education, but we kind of quickly expanded as we looked at the amount of resources we had and we looked at our own interests, it was clear that there were other things that we wanted to do and that were tangential, we thought to working in education policy, which we were doing.

LEVITT: So, you and Laura are quiet about what you do, but in 2020, you gave away over $500 million. That was, by my account, sixth most of anyone in the U.S. And relative to others in your wealth bracket, you’re giving away your money so much faster, and certainly relative to other young people. Why do you think that even folks who’ve signed the Giving Pledge to give away the bulk of their wealth — why are they giving it away so slowly?

ARNOLD: Our situation was a bit unique in that I had made very significant sums at a young age. The money was liquid. It wasn’t tied up in a corporate stock. And we just started doing the math of: if we want to give this away during our lifetime, that means we need to start doing it now and not wait into the future because it gets harder and harder every day you’re not giving. People that I talked to — and I’ve talked to a lot of people about philanthropy from some of the largest givers in America down to just normal friends I have in Houston — and their natural comfort level of: what size do I write checks, is do it with a number that doesn’t hurt. That doesn’t have that feeling of this affected my wealth. And I think a lot of people struggle with that, such that they have determined to give one way, but their actions are very, very different. And people need that forcing mechanism to try to draw those two together. There’s been a couple of studies that have taken place in the field of philanthropy about why is there this dichotomy between your desires and your actions on what to do with philanthropy? No. 1 is it’s just hard. It takes time. It’s work. It’s effort. People get risk averse in their giving, which is ironic because oftentimes to amass these great fortunes, you have to be risk loving. But when people start trying to give away money, they get very reluctant. They get very risk averse. What if I make a mistake?

LEVITT: So, by mistake, do you mean you give money to someone, and it doesn’t have any impact? Or do you mean, you give money to someone and later it’s embarrassing because it was unpopular?

ARNOLD: I think it’s both. People want to see their money used in the most effective ways. That’s very natural and is a good thing. And people are concerned about reputational risk that if they become very associated with an issue that later comes out to maybe not have worked, that then they will be guilt by association on that. And I actually think taking risks is one of the real functions of philanthropy in America. The private sector is about 60 percent of the total economy; government’s about 40 percent when you add in all levels; and philanthropy’s only about 2 percent. And when you take out giving to cultural facilities and giving to religious organizations, you’re down to about 1 percent. And so, what’s the role of that 1 percent? It’s looking at where does the private sector and the government fail in trying to address problems? Where does the private sector not have that financial incentive? Where does government not have that political incentive to try to solve these problems? And oftentimes it’s because nobody’s incentivized to take really risky projects. And so, philanthropy and foundations have the benefit of very little accountability. Now, some people see that as a flaw, some people see that as a benefit. And I tend to look at the ladder, these are organizations that have very little public accountability to them. They should be the ones most willing to take higher risk investments, things that the politicians and C.E.O.’s aren’t willing to do. And to do so, it requires the principals, the funders, like Laura and I are, to be deeply involved in it. It’s easier for our organization to take risks because we sign off on everything. Every donation that we make, every grant we make, we’ve signed off on it and say, “We agree it’s worth the risk.” So, when, and as frequently the case, things don’t work out as planned, it’s not the staff’s fault. We took a risk. And a lot of times, those aren’t going to pay off. A lot of times, those aren’t going to be successful grants. But let’s make sure that the risks we take have high upsides, such that whenever we are successful, that there’s real benefit.

LEVITT: So, I’ve had the opportunity to talk to a lot of really rich philanthropists. What I’ve seen is almost the defining characteristic of their philanthropy is they want to be liked. And so, they just don’t want to do anything that anybody would ever be mad about. But the problems that are easy to solve, well, those already got solved. And the only problems that are left are either the ones that are really hard or that are potentially unpopular. And it seems like it would be perfect if there were philanthropists who would step into that breach and say, “Okay, I don’t care if I’m liked or not, I just want to see a good solution reached.”

ARNOLD: Completely agree. And it’s amazing how easily some hospitals, universities, cultural institutions can raise money for a new building. It’s the lowest risk thing there is. No. 1, those organizations they’ve been around, they have a very clear and crisp reputations. They’re not going to embarrass you. You’re confident that they’re going to do good things. And if you’re funding the building you know exactly what that money’s going for. You can go point at that brick that oftentimes will have your name on it, and say, “My money went for that brick.” It is the organizations that are really on the service side that are doing policy work, where it’s much harder to say, what’s your dollar going for?

You’re listening to People I (Mostly) Admire with Steve Levitt and his conversation with John Arnold. When they return after this short break, they discuss whether philanthropy is effective.

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Morgan LEVEY: Hey, Levitt.

LEVITT: Hey, Morgan.

LEVEY: Last week, we talked about organ donations in the second half of our interview with Jane McGonigal. And you have a strong stance that people should get paid for organ donations, which they don’t currently. So, for instance, thousands of people die waiting for a kidney transplant every year. And your argument is that if the government set a really high price — like $250,000 — for kidneys, the supply would be there. People would sign up to donate their kidneys and get paid for it. Now we had a lot of listeners who wrote in saying that you’re not thinking this through. That if you’ve set a really high price, you’re going to get a huge supply and the price is going to drop, and you’re still going to get into the issues of people getting taken advantage of for selling their kidneys for cheaper than they should. So, what’s your response to all of this?

LEVITT: Yeah. So, I think I confused people because we talked about a market for kidneys. But when I said market, I didn’t mean a free market, where there’s supply and demand and price equilibrates. This would be a setting in which there would just be a price floor established by the government. So, the government would say, “Anytime a kidney is transplanted from one individual to another, we will make a $250,000 transfer to the donor.” So, it means that you will have a line of potential donors out the door. I don’t know the right number, but 25 percent of all Americans maybe — 50 percent of all Americans would say, “At $250,000, I’d give you a kidney.” Okay, so, because you set the price so high, you’ve got a tremendous excess supply of potential kidneys. Which is wonderful, right? Because consequently, there’ll always be a kidney available for anyone who needs one. And the quality of the match will be higher than it is right now. Because if you have all of these potential donors, you can sift through those donors to get exactly the right match, which will lead to better outcomes. So, in the end, who wins and who loses? Well, obviously people who need a kidney they’re winners; the people who are lucky enough to be chosen to give up a kidney, they’re winners as well. The government? Well, the government wins too, because it turns out that the government pays all these costs around dialysis and even if the government had to pay $250,000 per donated kidney, it would still save enormous amounts of money compared to the current system of dialysis.

LEVEY: You think?

LEVITT: Yes, absolutely. So, the numbers work out. It would be a bargain. The people who run dialysis centers are the only people who would lose. And what’s interesting. You would think in a world where everyone wins except for the dialysis centers, that this would be a popular policy. And yet it’s not.

Levey: Okay. Walk me through this though. Say the government sets a price they’ll pay you $250,000 for a kidney. Let’s just say a million people sign up for this and that’s way more people than kidneys are needed. So, you have this huge wait list of people wanting to donate a kidney. Now, won’t a market then emerge that’s not regulated by the government? Some kind of black market, because all these people are clearly willing to get paid to donate a kidney and maybe they’ll sell their kidney for a lower price.

LEVITT: There’s no one to sell it to because the people who need a kidney, they’re getting a kidney because the government is saying, “Look, we’ll find you the right donor. And we will pay that donor 250,000 and you will have your new kidney.”

LEVEY: But there’s other countries, there’s people in other countries who still need kidneys.

LEVITT: I think much more likely than there developing a black market at rock-bottom prices for kidneys in other countries is that other governments would look at how incredibly successful this U.S. program would be and they’d set up a program that might not have a price as high as 250,000 cause maybe in their country, $25,000 would have the same effect, as 250,000. It definitely does not follow for me that setting up a well-functioning market for kidneys in the U.S. would lead to a black market in other places.

LEVEY: Okay.

LEVITT: But let’s be realistic. Can I predict the future with certainty? No. I have a vision for how this would work, and I’ve been wrong before. But this is an idea that deserves consideration. And it may not turn out to be the greatest idea, but it’s definitely not the worst idea.

LEVEY: Well, thank you everyone who wrote in. If you have a question for us, our email is That’s We read every email that’s sent, and we look forward to reading yours.

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So, far, we’ve been talking philanthropy, but not actually about whether the giving is having an impact. I’d like to hear from John whether he feels like he’s having the impact he hoped for. And also, I want to get his reaction to my own pet theory as to why philanthropy, the way we do it today, might not be as effective as we’d hope.

LEVITT: So, I have a little center at the University of Chicago that tries to do good. And the scale is tiny compared to what you’re doing. Our entire budget might be $2 million per year, so less than half of a percent of what you’re funding. We’ve been at it almost three years now and we’ve had maybe one-10th of the impact I would have hoped for. And I didn’t really have that high of expectations. It’s hard to make an impact. You’ve given away a lot of money. Have you had the impact you’ve hoped for?

ARNOLD: I’d like to think so. One of the problems we face is we work in policy. And we do that because we think if we’re successful there, that we’ll create solutions that are scalable, they’re sustainable, and they’re structural. The ones that draw us in are ones in which there are ideas about how to improve the system, these large systems in which government interacts with people that really affects people’s quality of life. So, things like healthcare, education, criminal justice system, public finance system. And in working in policy, it’s hard to know they’re counterfactual. Had we not been involved in the work on surprise medical billing, would that law have passed Congress last year? We don’t know. And so, there’s a number of areas in which we’ve worked, in those four larger issue areas, which I think we can point to and say the issue would be at a very different level today, had we not been a participant in it. And that’s really what our goal is, to be a productive voice in these conversations in these debates as policies getting shaped.

LEVITT: So, what do you think your biggest wins have been? What would you point to as, wow, that was awesome.

ARNOLD: Yeah. So, one of them, I just mentioned — surprise medical billing within our healthcare work. Surprise medical billing is what happens whenever the provider that you receive services from has not reached agreement with your insurer. So, whenever you go for that service, you at some point in the future get this surprise medical bill. You think my insurance company should have covered that, but they didn’t. Now the question is, is it reasonable for you to know that in advance and to be able to find a provider that your insurer covers. And sometimes it is, but oftentimes it isn’t. So, one of the things that has happened is that the providers, and when I say providers, it’s sometimes it’s hospitals, sometimes I’m referring to individual doctors or doctor practices, have figured out that the more removed from the patient they are, the higher probability that they can do a surprise medical bill. So, you’ve seen anesthesiologists, for instance. The patient is rarely choosing that anesthesiologist. Often only meets that person the day of the surgery, gets handed a bunch of forms, “Sign here, here, and here.” And one of those forms says, “Your insurance might not cover this.” You’re already at the hospital, your surgeons there ready to go. There’s really no choice but to proceed. And then when you get home a couple of weeks later, you get this big bill because your insurance company says, “We didn’t have an agreement with that anesthesiologist.” And so, the question is, what’s the right process for when that happens? And some states had come up with fixes of varying quality and varying effectiveness. But there was this big drive for defining the problem, explaining how it’s affecting people, working with experts to devise an alternative solution that’s fair for the insurance company, it’s fair for the provider, and it gets the patient out of this because the patient doesn’t want to be taking the anesthesiologist to court on these bills. It’s just a horrible use of everybody’s time. And so, there was federal legislation passed last year that created a significant fix to this issue.

LEVITT: So, roughly how much would your foundation have spent in trying to fix this problem?

ARNOLD: We’ve spent tens of millions of dollars, and we were probably the only philanthropic organization that was involved in it, or at least involved to materially. And so that’s the type of issue that we get really excited about. It’s one that has a policy fixed to it. It’s one that both sides of the political spectrum can look at and say, “There’s a problem here, and we need a better solution.” And it’s one that the experts have ideas about how to fix it. And there is a viable pathway to a legislative solution to it.

LEVITT: I know you started out with education as your focus, but you didn’t give me an education example.

ARNOLD: K-12 education is the hardest area we’ve worked in, and it is this enormous ship that you’re trying to turn very, very slowly. And part of it is that the results for a K-12 education depend on one teacher at a time in the classroom and one school at a time. And so, what we’ve seen is that we need to have a policy that says the incentives and rules of the system that encourage better results and have accountability. It’s not a natural monopoly in terms of the service provider that you see today. You have religious schools, private schools, district schools, public charter schools that all compete with each other. Although those without significant financial resources have much less choice. And in certain cities that don’t have a strong public charter sector, they have very little choice. And so, it ends up being, you have one choice, or it goes back to that monopoly. And it’s a government-run monopoly that’s not good at accountability, and it’s not good at innovation, not good at quality control. And while, technically, the state education agency has some accountability of the system of the districts, in reality, they’re just very reluctant to use that because it becomes political quickly. And so what we’ve been working on for 10 plus years is just creating more competition and accountability in the system. And that’s through having a vibrant and significant public-charter sector. Give the parents and kids choice as to where they want to go to school. Let them make that decision about what’s the best place for them. And the enrollment patterns will tell you very quickly, who’s doing a good job and who isn’t.

LEVITT: I’m sure you’ve had far more disappointments than you’ve had wins. What are your biggest busts?

ARNOLD: We’ve had a number. One of the ideas we’ve had is how do we make it easier for other funders to find effective charities? And so, it’s things like, it makes little sense for the director of a program to spend, very significant time just telling the same story over and over to philanthropists and doing it one at a time. So, are there ways to kind of collect philanthropists together and have them hear that story one time rather than each one separately? Are there ways to create a curated list of effective nonprofits. And are there ways to encourage faster giving such that it’s not just giving through your will, but it’s funding programs while you’re living and funding their operating budget year after year, rather than just writing a one-time check. We’ve really struggled and have kind of put some significant money in over the years into this and had to call that quits and give up on it. We’re one of the bigger proponents of carbon taxes, viewing that as the way to intersect the efficiency of decarbonizing in the lowest cost possible with this need to raise public funds. And so, if you want to tax anything, taxing something with high externalities is the thing that economists get very excited about. And I have an economics training. And so, I get very excited about that. And whether that externality is something that causes pollution or something that causes obesity, like sugar? And so, we’ve worked in this area of sugar taxes, as well. These have been two concepts that we’ve supported and tried to encourage municipalities to pass and have largely failed at those.

LEVITT: So, people who listen to this podcast have heard me rail in favor of carbon taxes endlessly. Don’t you think from a societal perspective, if you could just get even a small national carbon tax, wouldn’t the benefit of that just be immense? And have you tried and failed?

ARNOLD: We’ve tried. We’ve tried, and many that we fund have tried. The politics are so far from that today. I don’t think it has support either on the left or the right. And so, we’re interested in issues — you have to get at least the left or the right, and then get a couple from the other party to come along with it. And I don’t think there’s a majority support either on the left or right. I think the regressive nature of them is something that’s hard to overcome. We’ve been living in this era when the federal government hasn’t had to make trade-offs, they could just proverbially print more money rather than doing anything that people didn’t like. And so carbon taxes have kind of fallen aside as the perceived lack of need for higher tax revenue has been the mantra in D.C. now for probably close to 10 years. And so you see the right cutting taxes, the left just increasing spending without wanting to do a commensurate tax increase. And so when you start talking about a new tax on something, you kind of lose on both sides.

LEVITT: You talked a lot about competition in schools, have you thought about creating competition within the Arnold Foundation? In some sense, when you hire an expert to run a program, you’re giving them a monopoly on what you do. A different kind of structure would create competition within say your education activities, and philanthropy, where you’d have your experts kind of competing for attention or funds based on the impact they’re having or how compelling the arguments are. Have you ever considered a different kind of structure?

ARNOLD: No, but it’s an interesting concept. I don’t know whether it would work because, my hesitancy is that outcomes for giving is very hard to measure. And so, trying to figure out how you would have a competition based upon some type of feedback loop is hard to imagine. Now, we do internally have many different teams that are competing for capital. And part of that is the capacity of an issue area to absorb capital. Part of it is, what stage of maturity is that area within our portfolio. Some of it is, is our team finding good ideas? Or do those good ideas even exist out there to be found? The same way that any business C.E.O. is allocating capital across the various divisions within the company, based upon the perceived R.O.I. that each investment offers, I think we have an implicit version of that. So, different groups compete for capital, but we don’t have three different groups on the same topic competing for capital, but it’s got a very interesting idea about, should we, and if we should, is there a manner in which to do it? I don’t know. What do you think?

LEVITT: I think it is possible. What’s tricky is that organizations are also built on a culture of cooperation and it’s sometimes challenging to have cooperation and competition coexist especially when people who come to the Arnold Foundation come because they’re passionate about a topic. And I suspect that the advocates you bring in would despise bringing in the market inside the firm. That’s my hunch. Let me ask you about something that has long puzzled me. So, Bill Gates stopped running Microsoft to spend his time largely on philanthropic activities through the Gates Foundation. And I’m sure he would say that the activities at the Gates Foundation — fighting malaria, tuberculosis, improving education — those activities are far more important than what’s happening at Microsoft. And the problems that the Gates Foundation tackles are harder than the ones that Microsoft, suggesting you really need talented people to solve them. You would think because the problems are so hard that the foundation is trying to tackle, you’d want to have the top talent doing it. And yet, the compensation of Microsoft C.E.O. is almost $50 million a year. And the compensation of the head of the Gates Foundation is a little over a million dollars a year. Now it’s still a lot of money, but do you think it’s sensible? Not just in this specific case, but broadly across virtually every position that for private firms pay far more than non-profits for the same talent?

ARNOLD: Hmm. I think there is a component of who wants to do the work. There’s more supply of people who want to work at a foundation, want to work in the nonprofit space, than there are jobs. And when we see this whenever we put out any type of job opening. The quality of candidates that we get, sometimes I’m astounded by. And even in our legal department. We just get phenomenal resumes that come in. And there are people who have gotten frustrated with some of the for-profit career tracks and want to do something that has a dual purpose that pays a nice wage, but also has that benefit of being directly involved in work that helps others. If both systems, the for-profit labor system, as well as the not-for-profit labor system are trying to optimize their expenditures, I found that we don’t have to pay 100 cents on the dollar to hire somebody from the for-profit side.

LEVITT: So, that’s spoken like a true economist. So, at a basic level, that makes sense. But I think it doesn’t address the fundamental problem of talent allocation. So, the pool of people who are interested in doing good at a big reduction in their pay, is not trivial, but it’s also not everybody. It doesn’t strike me as inevitable that we wouldn’t try to get the most talented people in society focused on the most important societal problems. It still strikes me that it’s a strange model that especially, you’re an economist at heart, and that you wouldn’t say, “Hey, I should structure this the same way I structured my trading firm. I should give people strong incentives.” Now, maybe you’re saying, “I don’t have good feedback. So, I can’t give people strong incentives because I don’t have good feedback on success.” But in principle you should want to. My sense is that you’ve built a different culture, probably a culture where I would suspect people don’t work nearly as hard as they did at the trading firms, not as long of hours. Is that true? Would you say that it’s a different lifestyle associated working at the Arnold Foundation? And if that’s true, why is that efficient?

ARNOLD: Hmm. For some jobs, I think that’s true. For other jobs, where they came from previously, and that’s assumed that it’s not from a not-for-profit, they’re working oftentimes equally or harder here than they were. But are people putting in the 80, 100 hour weeks here? No, that’s certainly not true. Some people in Wall Street are working the equivalent of two jobs and they get paid the equivalent of two jobs for doing that. And so, there are some times a lifestyle choice that people are making about going to work in a certain sector. So, there’s that feedback loop problem — how do we know somebody is doing great investing? And I came from the investing world. And so, I look at our grantmaking as investing. We’re investing in ideas. We’re investing in people the same way that a private equity firm or venture capital firm is investing in ideas and investing in people. There is a greater tie, direct tie and feedback loop in the financial investing space. And I think broadly the closer that link is, the more direct tie between the employee and their let’s say contribution to the firm, the higher the ceiling is on their compensation. So, the trader is, I think, the one with the most direct tie between how much did you make the firm and the employee? Something like a teacher has a very indirect association between, how much did you contribute versus, for that one person. And so, they’re valued very differently in the capitalist world. In that, there’s a lot of people who, if they view your financial contribution to that firm with high confidence, they’re much more willing to pay you very high salaries. And going back to that teacher example, there’s not a direct financial implication for hiring a certain teacher. There are softer outcome measures. And because that’s soft and because it’s more indirect, the ceiling on their pay is much lower.

LEVITT: So, teachers and teachers’ unions, in that light, should be working hard to have a stronger link between the inputs than teachers are putting in and the outputs of their students. Because in that world, the good ones would be compensated. Now, of course, that’s the exact opposite, I think of what most teachers’ unions are trying to do.

ARNOLD: Whenever you create a program to pay the top performers more, in doing so you have to create some type of accountability system, some type of measurement system. And if you can measure the top, you can also measure the bottom. As soon as you put that system in, there will quickly be pressure to do something about the lower performers. And I think because the teacher’s union represents all teachers, they don’t want to encourage a system of bifurcation between the high performers and low performers, knowing that that will lead to pressure of more involuntary termination.

LEVITT: So, looking forward 40 years, you and I will both be old men. Is the world we live in then better or worse than today’s world, do you think?

ARNOLD: I was thinking about this recently and there was a little thread that went through Twitter a few weeks ago. It went something like this. “Would you trade your life today to be one of the richest people in the world 50 years ago? 100 years ago? 150 years ago?” That the quality of life was so different back then and that arguably somebody middle-class today lives a higher quality of life than the richest person in the world from 150 years ago.

LEVITT: Right. Live a lot longer, not infirm. You have the internet, you get to play Angry Birds. So, all sorts of fun things. Yeah.

ARNOLD: All these things. And so, starting to think, “Well, obviously one would just think about the gains and quality of life gains that are going to occur over the next 50 years, over the next hundred years.” But that brings risks too, from climate, from war, from A.I., from any number of aspects, that’s very hard to quantify. And so, I’ll answer with a big, I don’t know. Could we be living in the golden age of the human error right today? I think it’s possible. Will our kids be living in a world that’s better, that provides a better life for the average person in one generation? I don’t know. In two generations? I don’t know. It could be much better. It could also conceivably be worse.

LEVITT: I’m surprised you’re not more optimistic. I would’ve thought from the fact that you spent most of your waking hours trying to make the world a better place, that it would be really hard to do that if you didn’t think that 40 years from now, the world would be a better place.

ARNOLD: One of my learnings from doing this full time for 10 plus years is that success is hard. You run into a lot of inertia, you run into a lot of special interests, run into politics, I look at a number of things that the world is letting fester. One of them is just America’s financial situation. We’re now culminating with high inflation today. And what happens if our fiscal system — that is Congress — or a monetary system — that’s the Fed — what if they’re unable or unwilling to address these problems? The thing that keeps me optimistic is technology. That technology has done so much to improve quality of life and to solve problems over the past a hundred years. And the question is, are there any unintended or unforeseen consequences of those technology tools that we’re building? And I don’t know.

The thing that keeps John Arnold optimistic is technology. Well, there are actually two things that keep me optimistic. The first is technology. I agree 100 percent with John’s perspective on that one. And the second thing that keeps me optimistic? It’s the fact that people like John Arnold, talented, thoughtful people who could be doing anything they wanted to, that they choose to spend their days trying to make the world a better place. That keeps me optimistic. Thanks for listening and we’ll see you next week.

People I (Mostly) Admire is part of the Freakonomics Radio Network, which also includes Freakonomics Radio, No Stupid Questions, Freakonomics M.D., and Off Leash. All our shows are produced by Stitcher and Renbud Radio. Morgan Levey is our producer and Jasmin Klinger is our engineer. We had help from Alina Kulman. Our staff also includes Neal Carruth, Gabriel Roth, Greg Rippin, Rebecca Lee Douglas, Zack Lapinski, Julie Kanfer, Eleanor Osborne, Ryan Kelley, Emma Tyrrell, Lyric Bowditch, Jacob Clemente, and Stephen Dubner. Our theme music was composed by Luis Guerra. To listen ad-free, subscribe to Stitcher Premium. We can be reached at, that’s Thanks for listening.

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LEVITT: Instagram knows me better than I know myself. They know what I want better than I do.

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  • John Arnold, philanthropist and former hedge fund manager.



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