Stephanie McCullough (00:00:06):

Welcome to Take Back Retirement, the show for women 50 and better, facing a financial future on their own. I’m Stephanie McCullough, and along with my fellow financial planner, Kevin Gaines, we’re going to tackle the myths and mysteries of “Retirement,” so you can make wise decisions toward a sustainable financial future. Through conversations and interviews, you’ll get the information and motivation you need, to move forward with confidence. And we’ll be sure to have some fun along the way. We’re so glad you’re here. Let’s dive in.

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Coming to you semi-live from the beautiful Westlakes Office Park in suburban Philadelphia, this is Stephanie McCullough and Kevin Gaines of Sofia Financial and American Financial Management Group. Say hello, Kevin.

Kevin Gaines (00:00:50):

Hello, Kevin.

Stephanie McCullough (00:00:51):

Today we have a treat, or at least a treat for me. You know when you get to a certain part in life and friends of yours from way back when actually do impressive things and you’re like, “Oh my gosh, that person’s old enough to have done these impressive things.”? I’m like, “Oh yeah, I’m old enough to have done impressive things too, but maybe I just haven’t done as impressive things as my friends.”

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So today we’re having my friend Jon Hilsenrath. Jon is a Senior Writer for the Wall Street Journal, where he has been since 1997. He’s actually been a Pulitzer Prize finalist in 2014 for covering the Federal Reserve, and part of the journal team that were finalists for the Pulitzer in 2009 for covering the financial crisis. He’s contributed to on the ground reporting of the 9/11 coverage, which did win a Pulitzer in 2002, and his colleagues twice voted him one of the nation’s most influential financial journalists.

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He graduated from Duke University, as did I, as you will hear. We’re talking to Jon today because his brand-new book just came out. The book is called Yellen: The Trailblazing Economist who Navigated an Era of Upheaval, about of course Janet Yellen, former Federal Reserve Chair and now our Treasury Secretary, and really one of the most influential economic policymakers of her generation. So we’re going to dive into Jon’s research about Janet Yellen, her life, and what he’s learned along the way. I found it very interesting. Kevin and I both geek out about this stuff, we hope you will enjoy it as well. Let’s dive in.

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Jon Hilsenrath, welcome to Take Back Retirement.

Jon Hilsenrath (00:02:22):

Thank you for having me. It’s great to be here.

Stephanie McCullough (00:02:25):

Congratulations on the book.

Jon Hilsenrath (00:02:27):

Thank you. It’s a little more than a year in the makings, and unlike a lot of people who write books, I’ll say I actually enjoyed it. I had a lot of fun writing this and I’m excited to talk to you about it and talk to your audience about it.

Kevin Gaines (00:02:41):

Right.

Stephanie McCullough (00:02:42):

So tell us how did you come to write a book about Janet Yellen? I mean I know a little bit about your background, but fill us in on what brought you to be an expert.

Jon Hilsenrath (00:02:51):

So I’ve been writing about economics at the Wall Street Journal for 25 years. I’ve literally just gone from one financial crisis to another going back to the late ’90s in Asia when I was living in Hong Kong and then the housing bubble and more recently, COVID. And Janet Yellen is really one of the most consequential policymakers in American history. She’s the first woman to run the Federal Reserve. She’s the first woman to serve as Treasury Secretary. And she was the second woman to serve as the chair of the Council of Economic Advisors back in the Clinton days. And I’ve always found her an important and interesting character.

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What happened in terms of writing this, when she was nominated for the Treasury Secretary, the idea actually popped into my head in the shower. That’s like it’s literally cliche, but this is what happened. It occurred to me that Yellen, I like to say she’s like the Ruth Bader Ginsburg of Economics, the RBG of Economics. And so I thought she was just an important historical figure, but what made this a fun and compelling story to write is really, believe it or not, a love story.

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So Janet Yellen is married to an economist named George Akerlof, and Akerlof won a Nobel Prize in Economics, and it occurred to me the day she was nominated to be Treasury Secretary that between the two of them, between Yellen and Akerlof, they really tell the modern story of economics because the two of them have been involved in literally every major economic debate over the last 50, 60 years, whether it be kind of really abstract theoretical debates about free markets versus government intervention or actual debates that affect everybody’s life tomorrow, such as what do we do with interest rates in the middle of a COVIC crisis? And they had just have a sweet love story, so I was able to retrace economic history by telling their journey through it.

Kevin Gaines (00:05:06):

Wow. As a writer, so you’ve been writing for the Journal for quite a while, how is writing articles different than writing a book?

Jon Hilsenrath (00:05:17):

Well, so this is the main difference. I didn’t have 17 different editors breathing down my neck every day when I was writing the book, which was actually quite liberating. I mean the Journal has a very editor-heavy structure in part because we have a culture and a value system that’s kind of beaten into us in terms of how we go about doing our reporting and doing our writing. We try to have a neutral stance in our writing and we try to look beyond black-and-white stories and get into the gray areas of stories. And it’s just a very editor-intensive paper. So writing the book, I just needed Harper Collins to buy into the idea and then off I went. I didn’t have daily deadlines. So it was a fun experience, I really enjoyed it. Is that where you were going with the question or were you not expecting me-

Kevin Gaines (00:06:16):

Well, I was just hoping you weren’t going to say, “Well the book, it takes a lot longer to write than an article.” I mean I was hoping for something other than the most obvious answer.

Jon Hilsenrath (00:06:27):

So if any of my editors see this, they’ll be like, “Oh, there he goes again, complaining about his editors.”

Kevin Gaines (00:06:33):

Yeah, but how many reporters don’t complain about their editors?

Jon Hilsenrath (00:06:36):

Well, the funny thing is, I have been a reporter and an editor at the Journal, and when I’ve been an editor I always complain about the reporters and how they’re not giving me what we need. And when I’m a reporter, I always complain about the editors about how difficult and demanding they are. So-

Stephanie McCullough (00:06:52):

Sounds like a good balance.

Jon Hilsenrath (00:06:53):

-Grass is always greener. Yeah, exactly.

Kevin Gaines (00:06:54):

So you wrote this book about Yellen, one of the primary reasons was first Chairman of the Federal Reserve, or first female Chairman of the Federal Reserve. Why do we care about the Federal Reserve? And just remember this is only about a 30, 40-minute podcast.

Jon Hilsenrath (00:07:14):

I could actually retell the whole history of the Fed, and actually, I kind of do in the book, but so the Fed has two major roles that it plays in the economy. One is that it’s there to support financial institutions in a crisis when there’s a run on the bank, so to speak. And so that it provides emergency funding to banks when everybody wants to pull their money out all at once in a panic. And we had something like that in 2008. We’ve had something like that during many periods in the past. In the 1800s, we had runs on banks and we had no Fed, and so we had serial financial crises. And then the Fed was created in 1913 after a century of serial financial crises.

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The other really important role that the Fed plays, so there’s like the crisis moments like 2008, and then there’s just kind of day to day, if you pull out a $10 bill, you’ll see the words Federal Reserve Note stripped across the front of it. And what the Fed does is it manages the supply of how much money is out in the financial system, and in managing the supply of money, it manages the price of money, which is the interest rate. So what do we borrow? What do we have to pay for loans for mortgages or automobiles or credit cards? Because the Fed shapes the money supply and for other esoteric reasons it has a major impact on interest rates, which affects the economy and it also has a very big influence on valuations in financial markets. So it is the most important economic institution in the U.S. economy, in almost any economy in the world.

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And we spend a lot of time focusing on it at the Wall Street Journal because we’re the Wall Street Journal, people really care about it. So I’ve gotten to know over the years the different people who’ve run the institution. Janet Yellen, Ben Bernanke, Alan Greenspan, Jay Powell, interesting cast of characters. And the challenge when writing about this stuff is how do you talk about these things in a human way that doesn’t make people want to beat their head against the wall? I mean that’s kind of what I liked about writing the story that I wrote is at the end of the day, these are humans running this place. And I thought it was kind of cool to take people inside that world and show them what they’re like and how they think.

Stephanie McCullough (00:09:53):

Well, I really loved how you tied it to both Janet Yellen’s background and her husband’s background and kind of how they came up both as children but also in the profession. One of the things you’ve talked about is how Janet Yellen has broken so many glass ceilings. Can you give us a sense as to how male-dominated economics really was back when Janet Yellen was studying it and starting out?

Jon Hilsenrath (00:10:16):

Oh, it’s almost shocking. The most kind of mind-boggling example to me is she became an Assistant Professor in the Economics Department at Harvard in the early 1970s. When she showed up there, there was one pool at Harvard, a swimming pool. And this swimming pool was men only, and they swam naked in it. Can you imagine?

Stephanie McCullough (00:10:48):

Ew.

Jon Hilsenrath (00:10:49):

This is in the 1970s. When she was a graduate student at Yale in the late 1960s, Yale did not admit women as undergraduates in the late 1960s. They had faculty meetings at Yale at a private restaurant/bar called Maury’s that was men’s only, so the faculty meetings were in this men’s only restaurant. She was the only woman in her Ph.D. class in late 1960s, and she was only one of two women on Harvard faculty when all the men were off swimming naked in the pool. So just by sheer numbers, it was very male-dominated.

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But there’s also something about the ethos of economics that was also even more so. It’s a very argumentative field. Like Milton Friedman back in the day, Jim Tobin, Paul Samuelson, they just kind of took some perverse pleasure in shooting down other people’s ideas. And so when you went into a seminar room, you kind of expected that you were going to be challenged, and it was often for a lot of women done in a way that wasn’t terribly receptive.

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One of the things that I think made Janet Yellen stand out and armed her in this kind of environment was that in part because of her mother who was a very demanding retired schoolteacher who expected that not only was Janet expected to get her homework done every day for school the next day, but it had to be right. Mom checked her homework to make sure. She didn’t hand in homework with mistakes. So Yellen is almost compulsive about being prepared.

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And so when she went into the seminar rooms and later when she went to work at the Fed, everybody understood that if you got into a debate with Janet Yellen, you were not going to out-prepare her. She was always going to have her homework done.

Stephanie McCullough (00:13:01):

And I love that you quoted in the book that her husband, George Akerlof, says he’d never won a debate with his wife.

Jon Hilsenrath (00:13:08):

That’s right. That was right next to the quote surprisingly that had Donald Trump, former President, who’d let Yellen go as the first Fed Chair, say that he really admired her and he liked her, he just didn’t feel like he could nominate her for a second term because she was a democrat and he was republican.

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Yellen’s relationship with Akerlof is really important Stephanie. By the way, I’m used to calling you Tenny, we’ve known each other for many years. I know you well enough to call you by your childhood name I think. So I’ve thought a lot about how and why Yellen broke through all these glass ceilings, and I kind of came away from writing this story with four rules of thumb for how and why she did it.

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So the first one I mentioned, which was that she really was almost compulsive about getting about her homework done. The other related to her relationship with her husband George, who was also an economist. He won a Nobel Prize in fact. And he was not like a lot of the other economists that they both came up with. So they married in the late 1970s, a time when women were entering the workforce and kind of popular American culture was still getting used to the idea of women working.

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If you think about movies that were being made back then like Kramer vs. Kramer, women were often cast in a negative light. In the case of Kramer vs. Kramer, the woman walked out on the husband to pursue her career. George Akerlof and Janet Yellen decided that their marriage was going to be a full and equal partnership, and by that I mean in their mind and in George’s mind, Yellen had kind of all of the rights and opportunities and benefits of a career that he would have. This was a guy who won a Nobel Prize, he’s a serious economist.

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But also in Akerlof’s mind, he would have all of the rights and benefits and privileges of parenthood that she would have. So when they were teaching at Berkeley, George was often the guy who kind of left to pick up their son Robbie at school in the middle of the day. And he would pick up his boy or take him out on a long hike, and he would meet these puzzled mothers with their children who assumed that he was unemployed because why else would a man not be working in the middle of the day? And so before I think a lot of other Americans moved in this direction, and certainly many have moved in this direction now, Janet Yellen and George Akerlof formed what they saw as a full and equal partnership in the household and also in the workplace.

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And so my second rule of thumb for breaking glass ceilings is choose supportive partners. She had a very supportive partner in George, and when she got job offers in Washington at the Federal Reserve and the White House, his attitude was always, “Yeah sure, let’s go do that. I’ll do that. I’ll leave my job here at Berkeley and then I’ll go do something there, and I got your back.”

Kevin Gaines (00:16:28):

When you said equal and supportive partners, it’s going to go both ways because she followed him over to London, right?

Jon Hilsenrath (00:16:35):

Absolutely. Yeah, when they were first married, he had taken on a new faculty role at the London School of Economics, and it’s a funny story because Janet Yellen is someone who kind of thinks about questions exhaustively and looks at them from every possible angle. The one impulsive thing she decided to do in her life was to marry George Akerlof. They’d only known each other for a few weeks. They were both on temporary assignment at the Fed, and they met at the going away party of a colleague at the Watergate Hotel a couple of years after the break-in. And they hit it off, they found each other to be totally compatible, and she decided to pick up and go with him to London and got herself a job at the London School of Economics, which is where he was going to be.

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A lot of the rest of their career, he ended up actually following her. Of course, she followed him to Stockholm in 2001 when he won his Nobel Prize for research that he had done which challenged a lot of conventional wisdom about how markets work and was kind of groundbreaking research in his day.

Kevin Gaines (00:17:59):

So she follows him to Europe, and he follows her around the U.S.?

Jon Hilsenrath (00:18:05):

Yeah, yeah. And it’s also kind of cute when you would see them driving around in DC. They’re not very tall people, and you could barely see their heads over the headrest. But she was often the one behind the steering wheel because he didn’t like to drive very much. But like when they were in the kitchen, she was more of the cook in the family. But when they were coming up with interesting new theories, he was the one kind of leading the way on that. Very unconventional mind.

Stephanie McCullough (00:18:41):

I love that.

Kevin Gaines (00:18:42):

And they collaborated, like you said, not just in running the household or supporting each others’ careers, but they’ve actually published together as well.

Jon Hilsenrath (00:18:50):

Yeah, and that’s actually another area where Akerlof took somewhat of a lead in where the story of women in economics kind of played a role. So when Yellen showed up at Harvard in the 1970s, she struggled a little bit to get published. Publishing is the thing that you have to do if you want to advance in academic economics. And one of the problems she had was that she had a hard time finding research partners while she was teaching at Harvard who were interested in issues that she was interested in. It wasn’t really until she started working with Akerlof that she started getting published regularly and they started working together on the issue that really mattered most to her and mattered most to him, which was jobs and employment and unemployment. They had both kind of grown up in the shadows of the Great Depression and had come to conclusions really early in life that job loss has devastating effects on families and households that go beyond just a paycheck, that affect the dignity of individuals and have affects on marriages and mental health.

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They became economists because they wanted to solve the problem of unemployment, and she hit her stride in her research when they started working together. He came up with kind of far out ideas, and she was the one who kind of tested and teased out which ideas had some legs in them and which ones needed to be kind of tossed in the trash.

Stephanie McCullough (00:20:33):

So yeah, let’s continue on with your lessons for breaking glass ceilings, right?

Jon Hilsenrath (00:20:37):

So one is do your homework and two is choose supportive partners. The other one you kind of learn by looking through her career as a policymaker, and that is to borrow but modify a phrase of Sheryl Sandberg, “Lean in, but only when it counts.” So Yellen pushed very hard in internal debates at the Fed after the financial crisis of 2007/2008 for the Fed to move aggressively to lower interest rates and pursue other policies to get the economy moving again. And she literally pounded the table at times. She literally followed colleagues into parking lots and pestered them to follow her lead on this.

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So she was a very assertive voice, but she didn’t lean in just for the sake of leaning in, and she didn’t lean in just for the sake of being heard because she was a woman and she wanted to be heard. She leaned in when it mattered, when there was an issue that she thought that she felt strongly about and where she had done the work and believed that she had a point that was important and needed to be heard. In cases behind the scenes, she was a very easygoing, friendly personality. She’d be the first one after a hard day’s work to go out with a colleague and say, “You know what? Let’s go grab a martini and blow off some steam.”

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Getting back to this theme of women in work, she was in the Clinton White House in the late 1990s during a difficult time when the Monica Lewinsky stuff was going on. A lot of women felt that White House was a bit of a boys club, and she would go out with some coworkers and colleagues after a hard day of work literally and just kind of throw down some martinis to blow off steam after having to deal with what felt like a bunker and a bunch of high testosterone sweaty men. But she was relaxed and easygoing when she needed to be, and when it mattered she felt comfortable leaning in on issues that mattered to her, so that would be my third lesson.

Stephanie McCullough (00:23:08):

It seems that both she and George are kind of driven by a moral motivation behind their interest in economics, and you mentioned jobs, right, but is that something that carried through for both of them?

Jon Hilsenrath (00:23:20):

Yeah, yeah. And that’s the fourth lesson, which is to have a higher purpose. And for the two of them, they got into economics for a very specific reason, they both had really strong math skills and quantitative skills. And they wanted to put that to work in the real world, and they felt that by becoming economists, they could tackle the problem of unemployment that they kind of seen as children could devastate so many households.

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And so, they saw themselves … Many years later, they watched a movie called Big Joys and Small Sorrows, it was a Japanese movie about a family of lighthouse keepers whose job was to run lighthouses along the Japanese shore. And it’s a very kind of isolated, lonely job, but these two lighthouse keepers built a whole world around that job of protecting the shoreline. All their friendships, their family life, was kind of built around this job. And Yellen and Akerlof came to see their lives, their family life and their work lives, as kind of like those lighthouse keepers. Everything they did was built around this bigger mission that they had.

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And by the way, you could argue that they didn’t always do a good job. Certainly, with the inflation that the United States is experiencing right now, you can argue that they didn’t do a good job on the lighthouse watch, but they did have a higher purpose to what they did, which apart from whether they did a good job or did a bad job, it gave them a sense of purpose and grounding that have given them a feeling that their lives were meaningful and fulfilling and their marriage was strong because it was all built around this kind of higher ground.

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There were times when they did a great job on the lighthouse watch, and there were times like when there was a terrible storm coming that they didn’t see, and there was danger and damage that resulted from it. And in assessing Janet Yellen’s career certainly, I think you have to acknowledge the storms that the United States has experienced when she was in the lighthouse that hurt a lot of people.

Stephanie McCullough (00:25:49):

Well, a couple of weekends ago the Journal put together an excerpt, right, published an excerpt of the book, and kind of the focus of that was really talking about the difficulties economic policymakers have in knowing what tools to use to fight the current crisis, right? And sometimes as people say in the military, they’re fighting the previous war with the current situation.

Jon Hilsenrath (00:26:12):

Yeah, I think that’s totally right and I think there are lessons that come out of that that’ll apply for individuals in managing their own savings and their finances and their investments. The market landscape and the economic landscape is always changing. I use the analogy in the book about the kaleidoscope that turns. We have to keep our eyes open to how the landscape is changing to understand how to navigate it.

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And what happened after COVID struck in 2020 was, this is a good example of the kaleidoscope turning and how the tools change as the kaleidoscope turns. We had been through a decade of very low inflation after 2008, and we’d been through a decade of high unemployment that was very slow to come down. And policymakers, including Janet Yellen and her successor at the Fed Jay Powell, came to a conclusion during that decade that there was something unusual about the world that we had lived in whether it was related to globalization or the aging of the workforce that had created this very low inflation environment, and that created a slow-growing economy that had led to long periods of high unemployment.

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And the conclusion that they drew was that the policies that they created after the 2008 financial crisis had helped to get the economy going again more than they had hurt. So there was a lot of controversy about the costs and benefits of zero interest rates and this thing called QE, Quantitative Easing. The Fed went out and bought all these treasury bonds. And all the studies suggested that those policies kind of … There were a lot of people who worried during the decade after the crisis it was going to cause inflation, it was going to cause a stock market bubble or a bond bubble, it was going to cause a collapse in the dollar. And those things didn’t happen.

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And so, the conclusion was these policies are safe and they helped more than they hurt. Then COVID struck, and it was a totally different environment, and it really changed a lot of things. It created supply shortages. It became harder for companies to source their chips from overseas, so there were shortages of supplies. And there were shortages of workers, people were sidelined, retired early for whatever reason, so there were shortages of workers.

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And so, the policymakers went to these tools that they developed after the 2008 financial crisis and said, “We’re going to use them again because we don’t want to have another period of really high unemployment, and we think these tools are safe and aren’t going to create inflation.” But in this new environment, it turned out that they weren’t the right tools for the environment because of the supply shortages, and they did create inflation.

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So they were kind of leaned in too heavily on the period that we had just come out of in order to make judgments about the new period that we were going into. And I think the lesson there is not just for policymakers, it’s for anyone trying to manage their portfolio or their retirement savings that you have to try to, this is a challenging thing to do, but kind of take your blinders off and say, “All right,” survey the landscape. What’s going on here? How can I make the most sense of it? This is what Yellen told me when she talked about the lessons that she learned from decades as a policymaker is you got to look at facts on the ground, take off your blinders, and try to make the best judgments you can and then make adjustments as you see the landscape changing. I hope that makes some sense, it’s an important lesson that comes from her experiences.

Kevin Gaines (00:30:02):

All right, I’m just going to cut myself off right here because quite frankly, I could just take this podcast another three hours talking about inflation and the causes now versus why we didn’t have it in 2008, but I will ask this question. So getting back to Janet Yellen leaning in, I’ve read reports where as Treasury Secretary, she was cautioning the rest of the administration against too much fiscal stimulus knowing full well what the Fed was already doing, that it would create or it could create these inflation issues. But what you do in administrations is you tow the company line out in public. Is there any truth to these?

Jon Hilsenrath (00:30:57):

It’s a little murkier than that, and I would actually say probably if you want to give Yellen kind of one serious knock, it would be that she didn’t lean in in this case. So Yellen had reservations about the American Rescue Plan when it was formulated in January 2021, but there was a lot going on then. First of all, she was very new to this administration. She didn’t campaign for Biden, she thought she was retired, so it was actually for the first time in their lives starting to make some money. She’s giving speeches in part to financial institutions, made a decent amount of money giving these speeches to Goldman Sacks and JP Morgan. People can knock her for that too.

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So she was new to the Biden administration. She didn’t know the players inside the administration, didn’t know Biden very well. But they asked her in November of 2020 to join the administration because the economy was in this state of upheaval and they wanted a reassuring presence, and they asked her to do it. She said no the first time they asked her, and then they called back and tried again and she stood in the kitchen with her husband George and their son Robbie and they’re like, “You know what? You have a duty to do this when the President asks you in a time of crisis.” This gets back to the higher moral ground. “You have a duty to do this,” so she decided to do it.

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So then you get into January, and remember what’s going on. The election is being contested by the sitting President. There’s a riot on Capitol Hill as a result of that. There are two runoff elections happening in Georgia that are going to determine the fate of the Senate, which will shape Biden’s agenda. President Trump in December, a few weeks earlier, said that he believed that Congress should send $2,000 checks to every American household to help get them through another round of COVID.

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And so they formulate this plan in January where they just … And the Trump Administration have already thrown a lot of money at this problem through the Paycheck Protection Program, through various relief checks, through rental relief, and the Biden Administration, frankly they and people in Congress are like, “We’re not going to be one-upped. If Trump says $2,000 checks, the least we’re going to do is $2,000 checks.” Yellen is watching all of this and she’s like, “Where’s the economic analysis of whether this is the right amount?”, but that train was already on its way out of the station, and here’s where and why she didn’t lean in.

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Yeah, so she had some reservations. She had some reservations because she’s one of these people who likes to really do her homework. But she had drawn a conclusion and she had advised Biden during the campaign that, “If you’re going to make a mistake in this kind of environment, the mistake you should make is by doing too much and not by doing too little.” She felt that in the previous decade, again recency bias, she was focused on what had happened in the previous decade. She felt that the Fed and the federal government had done too little to address high unemployment in the previous decade, and that if they were going to make another mistake this time it should be doing too much.

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That’s what she told Biden. She said, “If you’re going to make a mistake, do too much and not too little.” So then, they come up with this $2 trillion American Rescue Plan, and she goes to Congress and she says, “The best thing you could do is go big.” So I don’t think it’s fair to say she was acting as the brakes on this and nobody in the administration listened to her. The advice that she gave them was, “Err on the side of doing too much,” and she stuck to that despite the reservations she had in her gut that perhaps they might be going too far.

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And this is where kind of human behavior gets into how policy gets made. It’s not some economic model, it’s not some perfect ideology either. Democrats come into power in 2021, and frankly what’s the right word? I don’t know how you guys handle language on your program, but-

Kevin Gaines (00:35:29):

Go for it.

Jon Hilsenrath (00:35:30):

-They were angry. They were angry. The democrats were angry because they were like, “These republicans, they expand the budget deficit when they’re in power and they cut it when we’re in power.” And so when it came to the American Rescue Plan they were like, “We are going for it. We’re not taking a no for an answer,” and it looks in retrospect like they overdid it in part because they were resentful about the way policy had been conducted in the past.

Stephanie McCullough (00:36:00):

It is interesting right, it kind of gets back to your point in the book that all this policy is made by human beings. And so, an analysis of looking at the actual people could be instructive.

Jon Hilsenrath (00:36:11):

Yeah, human behavior and kind of psychology and sociology. I spend a lot of time in the book looking at the sociology that explains red versus blue America right now. And this is something that grows out of George Akerlof’s theories, and interestingly the theories of Yellen and Akerlof’s son, Robbie Akerlof, they focus a lot on social division. Where does this come from? What is it?

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So I talked about the resentment of democrats when they got in power of 2021, so that’s like a psychological thing. It turns out that animosity between groups is very common in human history, it’s part of human nature. Behavior between in-groups and out-groups, where kind of casting yourself against some out-group, is very common behavior.

(00:37:10):

So one of my favorite relationships in this book is between George Akerlof and his old friend Amartya Sen, another Nobel Prize winner who grew up in India in the 1930s and saw Muslims and Hindus attack and kill each other during the post-colonial period in India. And he spent his life just haunted by how groups could set themselves against each other in post-colonial India. And I think we’re seeing some of that in America today, where you have kind of red America and blue America. People define themselves by what group they’re in, and they also define themselves against the group that they’re not.

(00:38:03):

So you have red America where people feel very strongly about issues like abortion or guns or immigration, and you have blue America where people feel very strongly in different ways about the same issues. And people define themselves in part not just by what they believe in, but they define themselves against those who are in the other group. And we see that over and over again in American politics in ways that look dangerously counterproductive in terms of how the country is being run.

(00:38:38):

The point is what we see with red and blue America, and it’s disturbing I think to a lot of people, is also part of human nature. It is in human nature to attach yourself to a group within the group, and then as part of that group behavior, to cast aside an out-group. And I think we see that on both sides in America today.

(00:39:04):

One of my ways of defining this is just look at the way people drive their cars. You see people driving around in pickup trucks with big American flags on the back or NRA bumper stickers, and it’s like what is that, what are they doing when they do that? Well, that’s like I’m a red, I am a red, and it’s like just look at my car and you will see I’m a red. Well, you know what? Progressives do the same thing. They might be driving around in a car with a bumper sticker with rainbows on it or Roe vs. Wade or-

Kevin Gaines (00:39:41):

Coexist.

Jon Hilsenrath (00:39:42):

-Bumper stickers coexist, and they’re doing the same thing. That’s a signal I’m a blue. And people really, in discrete ways, define themselves by what group they’re in. And I kind of come away from this book with the idea that if you are a patriot in this day and age, there’s so much division. If you want to kind of make America a stronger country, then I think it’s time for people to start looking at our common identity, sources of common identity. Like what do we have in common, as opposed to how do we kind of distinguish ourselves against each other, because when you create these kind of identity economics on both sides, it tends to tear apart the institutions that hold the place together.

Stephanie McCullough (00:40:35):

Yeah, that is true. And the fascinating thing in your book is that Janet Yellen’s still Treasury Secretary, right, she’s still with us, she’s still taking an active role in things. Here’s an important question. Does she know you wrote the book?

Jon Hilsenrath (00:40:50):

Yeah, she knew I was working on it. One of the things we do at the Journal is when we’re writing about somebody, we go to them. We tell them, “We’re writing about you,” and we seek their cooperation and involvement. We never want to surprise people. So I told her at the very beginning that I was working on this, and so they were cooperative. I spent a fair amount of time talking to the whole family.

(00:41:15):

I try to be neutral in my judgments about their politics and behaviors, but I do have to say it was kind of cool to spend a year talking to a Nobel Prize-winning economist in addition to the Treasury Secretary and former Fed Chair. But a Nobel Prize-winning economist about his ideas and theories and where they come, it’s like wow, what an education to have all those conversations with somebody. It was a real privilege to be able to do that reporting.

Kevin Gaines (00:41:50):

As a followup, what was the biggest shock, or what did you not expect to find and you discovered during all this research and interviews about Secretary Yellen?

Jon Hilsenrath (00:42:04):

Well, I would say it was two things. The first one was the family story and the love story. I hoped that there was something there that would make this more than just some wonky book about rational expectations theory. And what I discovered was that that was a really rich vein, and it was a fun conversation to have with people. And I learned a lot I think really about for any adult, especially young adults, how to navigate a world of so many of us just spend a lot of time thinking about work and family, how do you build a balance of work and family that’s fulfilling for everybody, and kind of watching them do it up close was pretty cool. So that was one.

(00:43:00):

And then the other one was this stuff that I’ve been talking about identity. I had written a lot over the last 25 years about the economics and the financial crises and unemployment and inflation and all these things, but I had not given any time to thinking about this whole idea about social identity and how it affects the political world we live in and the economic world that we live in and how it’s kind of shaping the course of the country today. And that was something that Yellen’s husband George Akerlof and their son Robbie had spent a lot of work on, and I learned a lot about that. And so as the book progresses, I get deeper and deeper into that issue.

(00:43:40):

And what it left me kind of seeing more starkly than I’d seen before is that America has this system of market-driven, democratic-run capitalism, right? We have market-driven economy and democratic-driven governance. And I think for any of your listeners who are kind of old enough to know what it was like beginning this millennium, the year 2000, I think America kind of came in to the new millennium 22 years ago with a lot of confidence and hope about the future. It looked like this democratic capitalist system that we built, we had finally figured out not only how to make it work and the economy was growing fast and the stock market was booming, but it looked like the rest of the world was following us. It looked like China had embraced market-driven capitalism and we hoped that we engaged them with free trade policies, they would become more democratic. It looked like Russia had abandoned Soviet communism and was kind of opening itself up to the kind of system that we had, and we were going to lead the world in the end of history they called it.

(00:45:03):

Well, it didn’t work out that way, and I mean a lot of what I do in this book is try to understand why and what happened. And what you see is that the institutions that make a democratic capitalist society work, they never developed in Russia. It became plagued with corruption. And it didn’t develop the way we hoped it would work in China. And what happened in the United States is that we’d been through this period of turmoil in part because of trade with China, and our institutions have taken a hit as a result of that.

(00:45:44):

People’s trust in these institutions, listen I’m a journalist, I get attacked every day for what I do, people see a lot of reporters as kind of part of the elitist cabal that’s screwing the rest of the country. People lost trust in banks. They lost trust in regulators. They lost trust in the Federal Reserve. And the institutions that keep this system of democratic market-driven capitalism together have been damaged by this two decades of turmoil that we’ve been through. And right now, the social division that we’re experiencing, the red versus blue, is amplifying all that.

(00:46:30):

And I came away from this book thinking that this system that we’ve got which is such a privilege for Americans to be able to live in it, it’s not inevitable and it’s not easy. And if we want to make it work, you got to pay attention to building and strengthening the institutions that hold the whole thing together because heaven forbid we go the way that the Russians have gone.

Stephanie McCullough (00:47:00):

On that light note.

Jon Hilsenrath (00:47:01):

Yeah.

Kevin Gaines (00:47:03):

So Jon, in your book you talk about somewhat-well-known person Larry Summers and how Yellen beat him out for Chairman of the Fed. But you also draw a contrast between them when it comes to airports. This particularly resonated with me because let’s just say I follow Secretary Yellen’s school of thought-

Jon Hilsenrath (00:47:30):

Okay. Stephanie, what kind of airport person are you? Are you a Summers person?

Stephanie McCullough (00:47:33):

I’m on the early side.

Jon Hilsenrath (00:47:35):

All right, so you’re both Yellen. All right.

Kevin Gaines (00:47:36):

Oh, I get there as early as I can because I don’t want to leave anything to chance.

Jon Hilsenrath (00:47:38):

Okay, so there’s two kinds of airport people. I’m a Summers airport person. There’s a Summers airport person and a Yellen airport person. The Summers airport person says, “I don’t like sitting around in airports. I’d rather be spending my time in other places doing other things,” so they cut it as short as they can. And Summers had a saying that, “If you’ve never missed a flight, then you’re spending too much of your life in airports.” So he would always get there late and he was the guy kind of running to the gate when the gate is closing with the shirttail untucked and the bags flying everywhere.

(00:48:15):

Yellen is a person who likes to leave three hours in advance. She’s the first person who gets to the gate, and she’ll sit there and read. And her attitude is, “I got a lot of reading to do. I’ve got to do it somewhere, I might as well do it at the gate, and then I’m the first person on the plane and I have the best overhead baggage and I never have to worry about missing my plane.” She has these kinds of obsessive qualities, and while the financial crisis was brewing and getting worse, she was doing all this work. She was also becoming obsessed with the game on her Blackberry phone, Brick Breaker. Did you ever play Brick Breaker?

Stephanie McCullough (00:48:57):

Yeah.

Jon Hilsenrath (00:48:58):

So she would sit at these airports, read all these briefing books, and then when she needed to kind of take a break she would play this … It’s like a Pong, this game called Brick Breaker. She’s a very competitive person. She got through every level of Brick Breaker, through 33 levels of Brick Breaker, sitting in these airports waiting for her planes while Larry Summers was running to the gate to try to catch up. I’m a Summers airplane person, but I’ve learned over time that might not always be the best strategy.

Stephanie McCullough (00:49:30):

I do have one important question though.

Jon Hilsenrath (00:49:32):

Okay.

Stephanie McCullough (00:49:35):

Back when you and I first met each other in the late ’80s, did you fall asleep in Econ 101? Because I did.

Jon Hilsenrath (00:49:42):

Oh, oh, so yeah. Well first of all, so my econ class, I don’t remember if you were in it, but my econ class met at 8:00 in the morning on Tuesdays and Thursdays. That was a very hard time to be in a classroom as an undergraduate in the 1980s. What made it even worse was I was in a fraternity, and our best parties were on Wednesday nights.

Stephanie McCullough (00:50:05):

I have no idea what you’re talking about.

Jon Hilsenrath (00:50:10):

So like, Thursdays, I’m not implicating anybody in making this statement, only myself, but Thursday yeah, I fell asleep. I fell asleep all the time. And in fact, I will admit it right here to your audience, I got a C in economics, and I thought that was end of economics for me because it just wasn’t sinking in.

(00:50:36):

One of my favorite stories in the book is George Akerlof, who won a Nobel Prize, just to make us all feel better, in his first undergraduate economics class, he was asked to go to the board and draw a demand curve. And a demand curve slopes down, so as the price goes up, the quantity you buy goes down. And he had it sloping up. So this guy won a Nobel Prize, and he didn’t even know how to draw a demand curve. And I got a C in my first economics course and just spent the last two years talking to the Treasury Secretary and a Nobel Prize winner in economics. So for anyone out there who’s struggling through economics, there’s hope for you. There’s hope for you if you want to keep pursuing it.

Stephanie McCullough (00:51:20):

It gets more interesting in real life.

Jon Hilsenrath (00:51:22):

Yeah. Now look at you, you’re a financial advisor even after all those econ courses you slept through.

Stephanie McCullough (00:51:25):

Yeah, I got a masters in international economics too after thinking it was the deathly dullest thing in undergrad.

Jon Hilsenrath (00:51:35):

But here’s the thing is they make it deathly dull in a lot of these classes.

Stephanie McCullough (00:51:40):

That’s true.

Kevin Gaines (00:51:39):

Yes.

Stephanie McCullough (00:51:40):

At least back in the ’80s.

Jon Hilsenrath (00:51:43):

I didn’t want to have anything to do with it after I took a course in it. And what I tried to do with the book was just to make it a little bit more approachable by building it around people and characters and stories, and so that’s what I tried to do with the book is just tell stories and explore them through characters and introduce all the ideas along the way.

Stephanie McCullough (00:52:05):

Yeah. Well, I think you did a great job. Thanks so much for being with us. Jon, how can people find you and follow you and find the book?

Jon Hilsenrath (00:52:10):

Well, let me see. Harper Collins has a site with my name and Yellen on it, so I guess if you Google Jon Hilsenrath Yellen Harper Collins, or maybe I could attach the website.

Stephanie McCullough (00:52:20):

We’ll find it and put it in the show notes.

Jon Hilsenrath (00:52:23):

Yeah, yeah. I don’t want to discriminate among booksellers. There’s some popular ones that you’ve heard of that sell it, and some others that are also selling it. I encourage purchases by any means.

Kevin Gaines (00:52:37):

So when does it come out on books on tape?

Jon Hilsenrath (00:52:40):

It’s already on Audible, and it’s on Kindle, and it’s actually doing very well on Audible. We got a narrator who does a really nice job telling the story in a voice that kind of keeps you into it, so I love the Audible version actually.

Kevin Gaines (00:53:00):

All right Tenny, I thought that was a really good …

Stephanie McCullough (00:53:05):

I’ve been Stephanie for a long time in the real world now Kevin. Just because some of my old friends come along.

Kevin Gaines (00:53:15):

Every so often. Anyway in all seriousness, although that would be a change for this podcast, but anyway in all seriousness, it was great to talk with Jon. Yellen, it’s a great book. I mean she’s quite an accomplished woman. Regardless of where you are on the political spectrum, it’s irrefutable that she is accomplished to say the least.

Stephanie McCullough (00:53:37):

Well, and she’s done so many fascinating things, as Jon was pointing out, broken a lot of glass ceilings, but I love the way that he tells the story both weaving the personal histories with the economics and the policy. And yeah, he’s going to get into kind of the different economic schools of thought, but he does it in a way that actually does in my opinion, it’s successful in making it compelling because it is story-based and really makes it more interesting than our undergrad Econ 101 classes at 8:00 a.m. on Tuesday and Thursday mornings.

Kevin Gaines (00:54:10):

For the record, mine was Monday, Wednesday, Friday at also 8:00 a.m., but anyway.

Stephanie McCullough (00:54:19):

I know, what’s up with the 8:00 a.m. lecture courses?

Kevin Gaines (00:54:22):

I don’t know. I really think it was just like a weeder class, that they just want to try to weed the people out that really don’t want to be there. It’s like done, now we got the true believers. I don’t know. Who knows?

Stephanie McCullough (00:54:30):

You never know.

Kevin Gaines (00:54:32):

But I guess it was interesting when he was giving a description of what the Fed’s real role is because we all hear on the 6:00 news, “The Fed did this, the Fed did that,” but as he’s describing how the Fed was there to save the banking system when it needs to be, all I could think of is Donna Reed in It’s a Wonderful Life. Her and Jimmy Stewart just get married and they’re off to go to their honeymoon, and there’s a big run on the bank. And Jimmy Stewart stands up and just through talk try to inspire everybody not to pull their money out of the bank. But at the end of the day, who saves the Bailey Building & Loan? It’s Donna Reed. She just holds up the money that they were going to use on their honeymoon, and just pays out all the depositors that needed to leave. That’s the Fed. You want to understand how the Fed saves the banking system? This Christmas when you’re watching It’s a Wonderful Life, Donna Reed is the Fed.

Stephanie McCullough (00:55:35):

Now you know. All this time, you didn’t know that It’s a Wonderful Life was a lesson in economic history.

(00:55:44):

We hope you enjoyed this, it was a little different talking to an author of a book about a woman in economics and finance. Thanks so much for being with us, we’ll talk to you next time. It’s goodbye from me.

Kevin Gaines (00:55:55):

And it’s goodbye from her.

Stephanie McCullough (00:55:56):

Be sure to subscribe to the show and please share it with your friends. Show notes and more information available at takebackretirement.com. Huge thanks for the original music by the one and only, Raymond Loewy through New Math in New York. See you next time.

Disclaimer (00:56:12):

Investment advice offered through Private Advisor Group, LLC, a registered investment advisor. Private Advisor Group, American Financial Management Group, and Sofia Financial are separate entities. The opinions voiced in this material, are for general information only and are not intended to provide specific advice, or recommendations for any individual security. To determine which investments may be appropriate for you, consult your financial advisor, prior to investing. This information is not intended to be substitute for individualized tax advice. Please consult your tax advisor regarding your specific situation.