The Rational Reminder Podcast

Prof. Robert Frank: Success, Luck, and Luxury (EP.230)

Dec 8, 2022

01:21:16

Creator website

Episode guests

Robert Frank

Highlights

AI Chapters

Episode notes

Great career advice

02:15

The Importance of Individual Action in the Fight Against Climate Change

01:24

If everyone stands up, then it's no better off for anyone.

01:20

The Negative Effects of Smoking on Others

01:24

Introduction

2min

Professor Frank: Is There a Consumption Tax?

2min

The Rational Reminder Podcast - Is There a Difference Between With and Without Regret?

3min

Are You a Behavioral Economist?

4min

Is It Cold Out in Toronto?

2min

The House in the Middle

6min

How Does the Consumption of Positional Goods Affect Mental Well-Being?

5min

The Relationship Between Luxuries and Happiness

2min

How Does the Spending of the Super Rich Affect Consumers?

2min

10.

Are You Driving 2,000 Pound Cars?

4min

11.

The Relationship Between Consumption, Arms Race and Inequality

2min

12.

How Well Do Differences in Human Capital Explain Incomes?

3min

13.

The Role of Luck in the 100 Meter Competition

3min

14.

How Did You Meet Her Luck in That Paper With the Runners?

2min

15.

The Role of Luck in Tax Rates

3min

16.

Would You Rather Have the Porsche on the Nice Road of the Ferrari?

4min

17.

The Winner Take All Markets

4min

18.

How to Find Individual Success in a Winner Take All Environment

4min

19.

Are You Engaged in a Task Like That?

2min

20.

Financial Independence for Tire Early

5min

21.

Idiotism and Success in an Economy

5min

22.

Conspicuous Consumption Is a Net Negative for Society

6min

23.

Is There a Sales Tax?

7min

The world is a highly competitive place, and becoming successful requires hard work, dedication, and luck. This is the view of today’s guest, Professor Robert Frank, who helps us unravel the nuance of conspicuous consumption trends and the role of luck in gaining financial success. Professor Frank is the emeritus Henrietta Johnson Louis Professor of Management at Cornell University and holds an MA in statistics and a Ph.D. in Economics from UC Berkeley. He is also a prolific author, having written 12 books, financial textbooks, and many peer-reviewed articles in journals such as the American Economic Review, Econometrica, and Journal of Political Economy. He is passionate about how policy can help drive positive consumer behaviour, reduce inequality, and increase individual happiness. His work has also focused on the role of luck in achieving financial success which he covers in his book Success and Luck. In this episode, we unpack how individuals can improve societal collective action, the role of policy in driving those changes, and how luck interplays with success. We discuss economic and financial relativism, the dangers of conspicuous consumption, how expenditure cascades occur, and what influences consumption trends in society. We also dive into the topic of luck, whether wealthy people are happier, what behavioural changes are needed to create a better society, and more.

Key Points From This Episode:

Professor Frank describes the difference between departures from rational choice with regret and without regret. (0:04:34)
Whether he classifies his work as behavioural economics. (0:07:38)
An explanation of economic and financial relativism. (0:10:50)
The role of economic and financial relativism in consumption trends. (0:12:44)
Find out what constitutes a positional good. (0:16:56)
How the consumption of positional goods affects psychological well-being. (0:19:32)
Why people choose to engage in consumption arms races. (0:21:52)
The relationship between the consumption of luxury goods and happiness. (0:24:45)
What people can do to recognize and avoid negative consumption behaviours. (0:26:31)
How the spending of the super-rich impacts the spending habits of the typical consumer. (0:27:38)
Ways in which social media influencers have affected consumption. (0:30:32)
We learn about the link between consumption and inequality. (0:32:40)
How well differences in human capital explain differences in income. (0:35:04)
Professor Frank explains how likely it is that the most skilled person gets the best outcome in a competitive market. (0:38:13)
Professor Frank shares how they measure luck. (0:41:20)
The influence luck has on achieving a successful outcome. (0:42:09)
Find out if luck influences consumption trends and inequality. (0:44:03)
A thought experiment concerning the wealthy and higher taxes. (0:46:56)
We discuss whether winner-take-all markets are a good thing for society. (0:50:22)
How people should behave differently to help drive positive change. (0:53:06)
Advice for people to stay motivated and work hard. (0:57:19)
What Professor Frank thinks about working a job you hate for more money. (0:58:59)
He provides insight for people who work jobs they hate. (0:59:59)
His approach on the subject of luck and meritocracy with young kids. (1:00:47)
We discuss the idolization of financially successful people. (1:03:36)
How successful individuals should behave differently in an economy where luck plays such an important role. (1:05:38)
The response of successful people to Success and Luck. (1:08:15)
Steps people can take to positively affect those around them. (1:09:29)
Discover what Professor Frank’s position is on policy. (1:14:20)
We hear how Professor Frank defines success in his life. (1:18:33)