166. The World’s Most Effective Public Health Intervention Is Under Attack

Summary

People I (Mostly) Admire

Episode 166: "The World’s Most Effective Public Health Intervention Is Under Attack"

Host: Steve Levitt
Guest: Dr. Seth Berkley (former CEO of Gavi, the Vaccine Alliance)
Release Date: September 13, 2025

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Episode Overview

Steve Levitt has an in-depth conversation with Dr. Seth Berkley, a global leader in public health and vaccines, best known for leading Gavi—the world’s largest vaccination program. They cover the staggering impact of childhood immunizations, the economics and politics of vaccines, challenges in the field (from Ebola to COVID-19 and HIV), and the current backlash against vaccines in the US and globally. The episode also explores the collision between science and human psychology, the mechanics of pandemic preparedness, and the monumental underinvestment in new vaccine R&D.

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Key Discussion Points & Insights

1. Gavi’s Work and Why It Matters

• What is Gavi?
  Dr. Berkley explains Gavi’s mission: vaccinating over 1.1 billion additional children and saving more than 20 million lives globally. Gavi also assists in building health systems and maintaining emergency vaccine stockpiles.
  [02:01]

• Staggering Impact
  Levitt underscores the significance:

  "Over a billion kids immunized that wouldn’t have been otherwise, and 20 million deaths. Absent the vaccinations, about 1 in 50 or 1 in 60 of these kids would have died."
  [02:43 - 03:23]

• Cost and Return on Investment
  Dr. Berkley details how Gavi, through bulk-buying and efficient procurement, reduced vaccine prices for low-income countries to about $24 for the full WHO-recommended suite (11 vaccines per child)—vs. $1,300 in the US.

  "For every dollar invested, you get a $21 return. If you take the broader sense of good health and less morbidity, it goes up to $54 for every dollar."
  [06:25]

2. The Economics and Politics of Vaccine Development

• Profitability Problems
  The vaccine market is less alluring for pharma compared to high-margin drugs. Levitt notes:

  "There’s been a systematic underinvestment in vaccines and R&D over the last 50 or 60 years."
  [06:57]

• Pharma's Role and 'Win-Win'
  Berkley describes convincing companies that global vaccine distribution brings economies of scale and long-term profit, even at lower margins per dose.

  "They’re able to provide it to us at 95% reduction. They’re not losing money… they end up doing good and increasing their overall return."
  [08:24]

• Malaria and Market Failure
  The malaria vaccine took decades due to limited market incentives—if malaria were endemic in rich countries, development would have likely been much faster.

  "For every 200 kids you vaccinate, you are estimated to save one life… an incredibly powerful tool."
  [09:47]

3. Scientific and Logistical Challenges

• Vaccine Development Complexity
  Most vaccine efforts fail; COVID was an outlier in speed because of prior coronavirus research and mRNA tech.

  "The previous record was four years. For COVID it was 327 days—amazing speed."
  "We say actually 7% of vaccines are eventually approved."
  [12:01, 14:23]

• Manufacturing and Cold Chain
  Old vaccines use live or killed organisms and require stable environments; mRNA vaccines need ultra-cold storage—hugely challenging for global distribution.
  [18:05]

• Stockpiling, Ebola, and Preparedness
  It’s cost-effective to maintain stockpiles—even discarding unused doses saves millions of potential lives. Yet, the development sector resists “waste,” slowing emergency response.

  "We're talking about a few million dollars for protection of the entire globe. It's an unbelievably good buy."
  [20:06]

4. Scientific Limits: HIV/AIDS Vaccine

• Why No HIV Vaccine Yet?
  The virus’s ability to mutate rapidly within each host stymies vaccine progress.

  "Within a very short period, you have millions of different viruses inside you… constantly getting around the immune system."
  [21:47]

• Cut Funding, Uncertain Future
  Berkley expresses hope but frustration at recent funding cuts and warns of possible HIV resurgence.

5. Vaccine Hesitancy and Anti-Vaxx Movements

• Is There a Scientific Basis?
  Berkley says side effects exist, but the risks from diseases are vastly greater.

  "Are vaccines safe? Incredibly safe. Do we have a good system in place to look at side effects? Absolutely… but when getting your info anecdotally from non-reliable sources, you don’t necessarily have the right information."
  [24:16]

• The Prevention Paradox
  Levitt shares a personal story: his son died from pneumococcal meningitis months before a vaccine was available.

  "Absent the horrors that come with these diseases, the vaccine works against its own acceptance by effectively getting rid of the horror… it's just a hard problem."
  [26:44]

• Psychology and Causality Confusion
  Vaccines are often blamed for unrelated developmental disorders due to timing (“post hoc ergo propter hoc” problem). Misattribution is human, but persistent.

6. Gavi’s Structure and the Gates Foundation

• Unique Public-Private Model
  Gavi bridges UN/government agencies and pharma, stabilizes demand, and enables manufacturers to scale globally.
  [30:52]

• Bill Gates’ Crucial Role

  "He put $750 million into starting a new [organization]… Now he’s about 15% of support, but he played an incredibly important role."
  [33:33]

7. COVID-19: Gavi’s Response & Lessons

• How Gavi Got Involved
  Early signals from Wuhan and past experiences led Gavi and partners (especially CEPI) to coordinate a global plan for vaccine access—Covax.

  "The best way to control an epidemic is to control it where it’s spreading and vaccinate those at risk."
  [38:23]

• Logistics of Covax

  "We were trying to purchase huge quantities of COVID vaccines that didn’t exist with a pile of money we didn’t have."
  [39:15]

• Risks and Successes
  Gavi’s COVID work could have bankrupted it. Ultimately, Covax delivered over 2 billion doses worldwide, but inequities persisted, especially early on.
  [40:06]

• Future Pandemics

  "People doing modeling suggest we have a 50% chance of a COVID-like pandemic in the next 25 years. That's a serious number."
  [41:24]

8. Underprepared for the Next Pandemic

• Public Health Lags “War Mentality”
  Unlike the military’s constant readiness, public health lacks ongoing rapid-response infrastructure.

  "The military, we’re on constant alert… that mentality has not caught on in public health."
  [44:08]

• Science Undermined by Politics
  Berkley laments science’s loss of authority in public discourse, especially after politicization during COVID:

  "What changed in COVID was the unbelievable partisan behavior… science became a political issue, and that became a tragedy."
  [51:24]

• Trump Era and U.S. Vaccine Science

  "The NIH has canceled support of mRNA vaccine research. One of the scientists I work with described that as the stupidest science decision he’s ever heard."
  [53:40]

• The Real Consequence

  "We are destroying the institutions… If you are a young person, do you really want to go into science knowing you’re not going to get money, not going to have a good career?"
  [56:00]

9. Personal Inspirations and Advice

• Purposeful Careers

  "If you really want to make a difference in the world, you have to go where the problems are."
  [56:40]

10. Key Takeaways

• Vaccines are the single most cost-effective global health intervention.
• Political attacks and funding cuts are undermining future preparedness.
• Human psychology and misinformation create dangerous complacency.
• Major breakthroughs (HIV, pandemic preparedness) depend on the very investments under threat.
• There is an urgent need for ongoing, proactive scientific and logistical readiness for future pandemics.

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Notable Quotes & Memorable Moments

• On Gavi's Impact:
  "Since Gavi was set up, it’s vaccinated over 1.1 billion additional children. It’s credited now with having saved more than 20 million lives." – Seth Berkley [02:01]

• On ROI of Vaccines:
  "For every dollar invested, you get a $21 return. If you take the broader sense… you get a $54 return." – Seth Berkley [06:25]

• On the Science vs. Psychology of Vaccine Hesitancy:
  "The challenge with prevention is giving these innocent little babies a bunch of injections… you have to understand and believe you’re doing something good for your kid. And if you don’t believe that, then that’s a breakdown in communication, not in science." – Seth Berkley [27:19]

• On COVID Vaccine Development:
  "The previous record [for vaccine development] was four years. For COVID it was 327 days—amazing speed." – Seth Berkley [12:01]

• On Systemic Underinvestment:
  "On a dollar-for-dollar basis, our failure to prepare for the next pandemic may be the single worst policy mistake of our time." – Steve Levitt [57:29]

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Important Timestamps

• 02:01 – Seth Berkley explains Gavi’s mission and impact
• 06:25 – The economic return on investment in vaccines
• 14:23 – Only 7% of vaccines attempted become reality
• 20:06 – Cost-effectiveness of stockpiling vs. “wasted” vaccines
• 24:16 – Addressing anti-vax arguments: risk and side effects
• 26:44 – Levitt’s personal story of losing his son pre-vaccine
• 30:52 – How Gavi’s public-private partnership model works
• 33:33 – Bill Gates’ role in founding Gavi
• 38:23 – How Gavi responded to COVID and Covax creation
• 41:24 – Modeling risk of future pandemics
• 51:24 – Politicization of public health during COVID
• 53:40 – NIH’s withdrawal from mRNA research
• 56:40 – Career advice for purpose-driven young people
• 57:29 – Levitt’s conclusion and warning on preparedness

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Episode Tone and Language

The discussion is frank, data-driven, and empathetic—unflinching about failures and political realities, but rooted in the optimism of science and the humanitarian power of public health. Levitt and Berkley maintain a personal, at times emotional, tone, using both hard numbers and human stories to illustrate the stakes.

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For anyone who wants to understand the stakes and mechanics of global vaccination—what works, what’s threatened, and why vaccines’ success creates its own peril—this episode is essential listening.

Transcript

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[Steve Levitt]

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[Steve Levitt]

Vaccines have been making a lot of headlines over the last five years. First because of the remarkable speed with which the COVID vaccine was developed, and more recently because of the Trump administration's hostility to vaccines. I can't think of a better time to have a conversation with today's guest, Seth Berkley, who for more than a decade ran the largest vaccination program in the world.

[Seth Berkley]

These are amazing technologies that have lifted us up from a situation where people are losing a third of their kids routinely to a place where people assume you have one child. That child's gonna live and be healthy.

[Narrator/Producer]

Welcome to people I mostly admire with Steve Levitt.

[Steve Levitt]

My guess is that you've never heard of Gavi G A V I. It's spelled because for an organization with such a massive impact, it keeps a very low profile. So I started my conversation with Seth by asking him to just tell me what Gavi does.

[Seth Berkley]

Since Gavi was set up, it's vaccinated over 1.1 billion additional children. I say additional children because obviously many children get lots of vaccines. It's credited now with having saved more than 20 million lives if you include some of the work done in Covid. But it doesn't just do routine vaccines. It helps build up health systems to be able to deliver these vaccines, and it's responsible for providing vaccines to about 60 of the world's children. It also is holding stockpiles of vaccines that are used to prevent epidemics as well. So lots of different activities working across the world.

[Steve Levitt]

It's easy for people to lose sight of how big these numbers are. Just to reiterate what you said, we're talking about over a billion kids who have been immunized that wouldn't have been otherwise, and 20 million deaths, which is an incredible number. And so absent the vaccinations about 1 in 50 or 1 in 60 of these kids would have died. And it's a stark reminder of how precarious life is in the poorest countries. Even with the interventions by Gavi and others. A child in sub Saharan Africa, if I'm not mistaken, is 10 times more likely than an American child to die before his or her fifth birthday.

[Seth Berkley]

That is correct. And I think we have to go back in history to really understand this. Thomas Hobbes, a philosopher in England, said life is short and brutish, and he certainly was right. The natural death rate is something like 350 out of a thousand kids will die. That's what nature puts in front of us. And it's been the use of science and technology that have changed those numbers. Today in the US that number is over 5.2 per thousand. Very, very low number. But it's still higher than it is in other countries. And of course in some countries in Africa, to your point, the numbers still are much, much higher than that, although not at the level anywhere in the world that they were in a naturally unconstrained environment.

[Steve Levitt]

And just get a few more facts on the table. What's the rough cost per child of delivering the schedule of vaccines?

[Seth Berkley]

Yeah, so the whole purpose of Gavi originally was that there were new and powerful technologies that were being made and made available in wealthy countries at very high cost. And as a result they weren't getting to developing countries. You can argue, given given the poorer state of the health systems, that they're even more important in those countries. The WHO has 11 vaccines that they recommend for all children everywhere in the world. As other vaccines you are recommended if you live in certain areas. But for those 11 vaccines in GAVI, the cost is around $24 for one.

[Steve Levitt]

Child, $24 for 11 vaccines.

[Seth Berkley]

For 11 vaccines?

[Steve Levitt]

You gotta be kidding me.

[Seth Berkley]

But if you use the equivalent vaccines in the. It's $1,300. We were able to, through bulk buying and working with different companies, expanding the manufacturers, we were able to reduce the price by 98%.

[Steve Levitt]

So $24 is so small that I'm having trouble even wrapping my head around is that the cost of the physical material of the vaccines can't include the cost of the delivery of the needles, the healthcare workers.

[Seth Berkley]

That is correct. That's the cost of the vaccines. But some of these countries, they're spending dol on healthcare expenditures for a year. So cost becomes much more important for those countries than it is for places that have much larger budget for health related issues.

[Steve Levitt]

So again, Going to the numbers and trying to do some quick calculations, it's almost absurd, right? At the cost of $24 through the vaccinations and there's a 1 in 50 chance that it saves the child's life. And you multiply those together and, and it's costing something like $1,000 per child life saved, which is in the world of philanthropy or in the world of public health even, it's a kind of return on investment that is just mind boggling compared to many of the things, most of the things that we're doing right, Absolutely.

[Seth Berkley]

And the calculated cost benefit for this is for every dollar invested, you get a $21 return. But if you take the broader sense of what people want in terms of having good health, having a life without morbidity and other conditions, it goes up to for every dollar invested, you get a $54 return. And there's nothing like that in healthcare. This is why vaccines form the base of the healthcare system in virtually all countries in the world.

[Steve Levitt]

The irony of this is that it is the most incredible intervention and, and yet because there is so little money in it for the pharma companies. Right. If you could charge $1300 per kid in the developing nations for vaccines, the pharma companies I suspect would be lining up to do a lot more R and D, a lot more investment in vaccines. That would be incredibly useful in the developing countries. But because there's no money there, I suspect there's been a systematic underinvestment in vaccines and R and D over the last 50 or 60 years. Is that an accurate statement of what's happened in the industry?

[Seth Berkley]

So you're absolutely right. If you're looking for a vaccine just for a disease in the developing world, there aren't the incentives. But the dirty secret here is let's say you're making a vaccine for the United States which they can charge a lot of money for, but the volume of vaccine produced is quite low. Our argument to them at the beginning was, listen, if you provide vaccines for the rest of the world as well, a couple of things are gonna happen. First, you get economy of scale. And so those vaccines, as you're producing more and more of them, the cost of goods sold go down for the vaccine, so you'll be able to make more money in your primary markets. But second, now you've got middle income countries and you've got low income countries, and if you're providing vaccines there, you're making something in those vaccines as well. So your net profit is going up and of course, what you're doing is also preventing those diseases from killing people in a humanitarian sense, but also from spreading from these countries. This is a real win win situation. I mean, look, the Pfizer pneumococcal vaccine, it's quite expensive in the U.S. well, they're able to provide it to us at 95% reduction. They're not losing money in that circumstance. And over time, they're able to reduce the price because they get this economy of scale. Now they increase the price in the US because they can, but they end up doing good. And enormous pride for the workers and shareholders, saving lives, but at the same time increasing their overall return on investment, which is obviously an important thing to do.

[Steve Levitt]

That being said, I still suspect that these companies don't try nearly as hard as they could. Let's take malaria, which I think is a good example, because there finally are vaccines for malaria.

[Seth Berkley]

Absolutely.

[Steve Levitt]

After, I don't know, 50 years of knowing that we would like one. This is a disease that kills. I think it's 600,000 people a year around the globe. If malaria was still endemic in the usa, when do you think we would have gotten the first vaccine? 1990, 1970?

[Seth Berkley]

Well, it's hard to answer that because science is unpredictable, but certainly there would be more money having been invested in it. The reason malaria is so hard, it's not a bacteria or a virus. It's a parasite. It's a complex organism that has ways to try to avoid the immune response. But we've produced a vaccine. It's not the best vaccine. The efficacy rate isn't incredibly high. But because malaria is so common in the hyperendemic regions, for every 200 kids you vaccinate, you are estimated to save one life. So this is an incredibly powerful tool. Started out being expensive to produce, but as that now has moved to other manufacturers, particularly some in the developing world, those prices have dropped dramatically. Another example would be Ebola, a scary disease. There were many different big Ebola outbreaks in poor countries in Africa. There's zero market there. And so the work actually came because if you remember the anthrax attacks that occurred after September 11th. President Bush created a system worried about bioterrorism. And for a while, Ebola was on the bioterrorism list. So then there was some money pumped in and some vaccines were made. They decided it was too hot an agent to use for bioterrorism. So those vaccines just got put aside. And when that terrible outbreak occurred in West Africa, they were dusted off. And our job was to put an incentive in place for companies to be able to take the vaccine all the way to licensure and ultimately set up a stockpile for it. And now we have a stockpile of a half a million doses that are available for anybody in the world and they've been used in outbreak after outbreak. And so you really have to think about how to get incentives in place, things that really have a complete market failure.

[Steve Levitt]

Yeah, the stunning speed with which we managed to deliver Covid vaccines might lead people to believe that it's easy to make these vaccines, but the truth is it's really difficult at so many levels. Could you talk a bit about vaccines and what makes them so challenging to develop and to manufacture and to distribute?

[Seth Berkley]

Yeah, absolutely. So, first of all, vaccines have now a couple of hundred year history and obviously science and technology is getting, getting better and better, but we don't fully understand every aspect of the immune system. And so there is a process always of ultimately empirical testing in humans. So you can design it, you can test it in different animals, but it ultimately has to go into humans. And given that this is something you're going to give to healthy people, you also have to make sure that they're safe and there's no side effects. You need very large trials. So all of that adds to expenses. The previous history for the time it took to get a vaccine, the fastest one was four years before COVID occurred. And so when Covid appeared, all the experts said this is gonna take us maybe super accelerating, 18 months, two years. It was ultimately 327 days, which is just amazing speed. And part of that was the incredible investment that was made. Operation Warp speed was a serious effort, but it also was that previous research had been done on other coronaviruses. There was previously sars, there was mers, those are two other outbreaks that occurred of coronaviruses. So people had started to create vaccines, although they didn't take them all the way. And so when Covid hit, we knew enough about what the right approach would be. And then we also had the advantage of this new technology MRNA which is the fastest way to make vaccines. And so the combination of all of that allowed this to move at lightning speed. The first vaccine, the sequence was put together in a couple of days. It was, I think 42 days for the first vaccine to get made and then it was 63 days ready to be injected. Nothing like that had ever happened in history before. And it really shows the power of science, which by the way is gonna be critical because we're in A moment of poly epidemics and we're gonna see many more. And Covid had a high mortality rate. People forget that there are things that have much, much worse. And that could be the next one.

[Steve Levitt]

You said four years was the fastest pre Covid, but my impression is it's typically more like 10 years.

[Seth Berkley]

That's correct.

[Steve Levitt]

But on top of that, most vaccines fail, right? What percent of vaccines are deemed successful and eventually approved?

[Seth Berkley]

We say actually 7%. So it's a small number. Obviously when you get to the latest stage of trials, if you're gonna invest hundreds of millions of dollars in doing the test, you don't wanna have lots of failures at that point, but they still fail at that point. And they can fail by the way from an efficacy point of also fail from a safety point of view in terms of finding side effects that you don't see in small trials. It really is a expensive and difficult proposition. Of course that is changing now with computing, with AI, which will also speed it up because you can do better predictives. But as a vaccinologist I worked with when I was younger said mice lie, monkeys don't always tell the truth, and therefore you have to ultimately do it in humans to really know whether it's going to work.

[Steve Levitt]

We'll be right back with more of my conversation with Seth Berkley after this short break. People I Mostly Admire is sponsored by NetSuite. What does the future hold for business? Ask nine experts and you'll get ten answers. Bull market. Bear market rates will rise or fall. Can someone please invent a crystal ball? Until then, over 42,000 businesses have future proofed their business with NetSuite by Oracle. The number one Cloud ERP. Bring accounting, financial management, inventory and HR into one fluid platform with one unified business management suite. There's one source of truth giving you the visibility and control you need to make quick decisions. With real time insights and forecasting, you're peering into the future with actionable data. When you're closing the books in days, not weeks, you're spending less time looking backwards and more time on what's next. Whether your company's earning millions or even hundreds of millions, NetSuite helps you respond to immediate challenges and seize your business opportunities. Speaking of opportunity, download the CFO's guide to AI and machine learning at netsuite.com admire. The guide is free to you at netsuite.com admirer netstreet.com admire people I mostly Admire is sponsored by Mint Mobile. From new shoes to new supplies, the back to school season Comes with a lot of expenses. Your wireless bill shouldn't be one of them. Ditch overpriced wireless and switch to Mint Mobile where you can get the coverage and speed you're used to, but for way less money. For a limited time, Mint mobile is offering three months of unlimited premium wireless service for 15 bucks a month. Because this school year, your budget deserves a break. Get this new customer offer and your three month unlimited wireless plan for just 15 bucks a month at mintmobile.com admire that's mintmobile.com admire upfront payment of $45 required, equivalent to $15 a month limited time new customer offer for first three months only. Speeds may slow above 35 gigabytes on unlimited plan. Taxes and fees extra. See Mint Mobile for details.

[Commercial Announcer]

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[Steve Levitt]

Prices and participation may vary. We've been focusing on the science behind creating the vaccine, but most vaccines are alive, right? And so the manufacture and the distribution is no piece of cake either, right?

[Seth Berkley]

That's correct. Put MRNA aside for a moment. Before that, vaccines were living things or they were grown and then killed, or a piece of it was grown and then attached to something to be used. The quality assurance and quality control is extraordinary. It's very different than a drug you Steve, in your garage you could make a drug and as long as it was chemically pure and met the chemical standards, you could say, okay, I got the drug for a vaccine. You can't do that because it's a living thing. So what you have to do is manage the process. That's why there are so many expensive, difficult steps and you can't change anything once you get it right. In other words, if you change a solution you use in it, or a different type of equipment, you have to retest to make sure you end up with the same vaccine. And so it's a very expensive, complicated process. And then usually vaccines have to be kept in cold, so called cold chain, 2 to 8 degrees. Some of them have to be in minus 20, a normal freezer. And then the COVID vaccines, the MRNA vaccines, needed to be in an ultra cold chain, minus 60 to minus 80 degrees, which as you can imagine is hard in many places in the tropics, in the developing world, places without electricity. It raised a whole nother set of complexities that we had to deal with.

[Steve Levitt]

Now, one of the things I didn't even think about until I read your excellent book, Fear Doses is that many vaccines are there to prevent outbreaks. Take Ebola. You talked about Ebola earlier. So most of the time there's no Ebola round. So you can't really run a clinical trial to figure out whether the vaccine works, but you essentially have to have the vaccine on hand and then try to do a clinical trial in the middle of an Ebola outbreak to figure out the efficacy and the safety. And that's just a whole nother level of difficulty that sitting in my living room, I wouldn't be thinking about.

[Seth Berkley]

Yeah, that's absolutely right. At the end, it's all a money game. So let's just go back to Ebola. So you have a couple of candidates you think are potentially promising. You can produce those vaccines. It's not incredibly expensive to do that. It's a few million dollars. It's not nothing. You then put it in a vial. There's gonna be a shelf life for the product. So call it one year, two year. And then if you don't use it in that period, you have to destroy it and remake it again and spend a few million dollars. We're talking about a few million dollars for protection of the entire globe. It's an unbelievably goodbye to go ahead and make that vaccine and have it in vials, ready to go, knowing that you're going to throw it out. But the mindset in the development community was, of course, we can't waste money under any circumstances. And they would keep these vaccines or these prototypic vaccines in bulk storage, not in vials. And so then when an epidemic would occur, they'd say, okay, we have to now fill and finish, which is the term we use. That means putting it in the vial and doing all the testing to make sure it's sterile and everything's perfect, and then get the permits and send it out. We have to think about these agents as a risk for the world, and you want the world prepared for that.

[Steve Levitt]

I also want to talk about the attempts to get a vaccine for HIV aids, which I know is something very close to your own heart. You spent a lot of years personally, the scientific community's been at it for 35 years, and we don't have one. Do you think an HIV AIDS vaccine is coming, or do you think it's somehow just beyond us?

[Seth Berkley]

Well, first of all, I'm an optimist and I believe in the power of science. So the answer is, of course I Think it's coming, but one of the tragedies is there has been an attempt and it's really promising right now. And a lot of that work just got cut for no apparent reason. And we may see a further outbreak of hiv. Now that some of the treatment programs and others have been shut down, we may see more spread of virus, we may also see resistant of virus, and it may be an increasing problem again. And so we still need a vaccine. The problem for hiv, which is different than other agents, is in essence, when you get infected with hiv, you get infected with one or two viruses, just a teeny, teeny amount, but as it reproduces, because it's a retrovirus, it makes mistakes in its reproduction. And so within a very short period of time, you have millions of different viruses inside of you. And so they're all hiv, but they're different strains. And so the body does make an immune response, but because the virus is constantly changing, you're constantly getting around it until it exhausts the immune system. What's interesting is that people produce something called broadly neutralizing antibodies, and those are antibodies that can neutralize a large number of strains. And people said, well, what if we started to try to make these through a vaccination campaign and give not one vaccine three times, but give, let's say, three different vaccines that begin to produce these types of antibodies. So that was the program that was underway. It was a really slow program. Cause as we've already discussed, it takes, you know, five years, 10 years to make a vaccine. Progress is being made, but we'll have to see it when it all shakes out, whether that will continue.

[Steve Levitt]

You and I share the view that vaccines are an amazing scientific accomplishment, one of the greatest medical innovations of all time. But there are a lot of anti vaxxers and even more people who you might call vaccine hesitant. Is there any scientific basis for an anti vaxx stance or do you just think they're getting it 100% wrong?

[Seth Berkley]

Well, as with everything, you don't get it 100% wrong. When you take a disease, let's say measles, it was killing millions and millions of people when it was going unchecked. And the thing about measles, it's the most infectious agent we know of. If somebody was in your doctor's office with measles and left, you can come in hours later and you can get measles from it. So it's just a super infectious agent. Everybody got infected and they have really bad complications that go with infection. The most scary to me is Something called subacute sclerosing panencephalitis. It's just horrible. And an example is Roald Dahl, the children's book writer. It was this pre vaccine sitting with his daughter and she's getting over measles and she says, daddy, my hand feels funny. And hours later she was dead, her brain basically dissolved. I mean, these are really bad things. So one problem is we have vaccines now. Everybody says, oh, measles, no big deal, because we don't see those types of problems much anymore, although we still see them in the developing world. The diseases are much worse than the vaccines. But the reason there is this concern about vaccines is vaccines will have some side effects. People will say, gee, I don't believe there's any risk for these diseases. And my kid, my neighbor, they got a shot and the kid was crying and the kid had a fever. And if they didn't get the vaccine, they would have had the actual disease and they would have been really sick. Are vaccines safe? Incredibly safe. Do we have a good system in place to look at side effects, to look at rare occurrences of problems? Absolutely. But when getting your information anecdotally from non reliable sources, then you don't necessarily have the right information.

[Steve Levitt]

I think anything that is preventative, like vaccines are really struggles against human psychology because there's 20 million deaths that GAVI prevented. They didn't happen, so nobody experienced them. There was none of the pain. And it's really hard for people to use their imagination. I'll tell a horrible story. It relates back to the pneumococcal vaccine, Prevnar. Incredibly, my own son Andrew, my first son, he died from pneumococcal meningitis in October of 1999, completely out of the blue.

[Seth Berkley]

I'm sorry.

[Steve Levitt]

And incredibly, Prevnart was approved by the FDA in February of 2000, just four months after my son died. But the thing is, I had never heard of pneumococcal meningitis. It's not on anybody's radar. And absent the horrors that come with these diseases, the vaccine works against its own acceptance by effectively getting rid of the horror. You know what I mean? It's just a hard problem to deal with because no one can really imagine the counterfactual of what would have happened absent these vaccines. And so we become very complacent in the face of their existence.

[Seth Berkley]

First of all, I'm really sorry. Nobody should have to go through the loss of a child. That should be the goal that we move towards. You know, I knew about pneumococcal meningitis. And experts know about it, and pediatricians know about it, and hospitalists know about it, not everybody else knows about it. The general population, even well educated ones, don't know about it. And the challenge is if you say, well, let's just get rid of all the experts, then it's just a crazy free for all. No parent goes in and says, gee, I want my kid to get a terrible disease, to get side effects, to end up crippled. But who's explaining and how are they understanding the risks that they have? The challenge with prevention is giving these innocent little babies a bunch of injections and they may have some side effects. And you have to understand and believe that you're doing something good for your kid. And if you don't believe that, then that's a breakdown in communication, not in science.

[Steve Levitt]

Yeah. And I think the fact that we give vaccines to young children who are undergoing rapid development, who are often not at the age where they're able to talk and express things either, then the causality of what happens afterwards becomes confusing. Right. Because you don't see symptoms of autism necessarily in a six month old baby, but you do in a two year old child. And in between, that child has gotten a bunch of vaccines. It's easy for parents to say mistakenly, almost for certain, oh, my kid was on track, now he's off track. What happened? Well, I got those vaccines. It's the vaccines that did it. And so I think again, the human psychology crashes headlong into the science. And I think somehow in the modern dialogue and expression, in social media, somehow science has kind of been losing the battle in a way that is to me, very unexpected.

[Seth Berkley]

That's exactly right. And again, the problem is it's not a few people got the vaccine and then they went on to get something. What you're talking about is for, let's say, the measles, mumps and rubella vaccine, basically everybody has gotten that vaccine. So anybody that's gonna get anything is gonna have had that vaccine. And some will get the vaccine the day after they get the symptoms, some will get it the day of the day before. But your point on causality? Because what happens is any parent who has a kid with some bad outcome, they're like, oh my God, did I do something wrong? How could I have prevented this? It's easy to point to something that happens. But of course we know now that some of it's genetic and there's lots of potential that can influence bad outcomes. And given the concerns, vaccines have been studied over and over, large studies. What you need is broad data analysis. And that is a global public good that we have to have and put the money into doing the studies, doing the work to continue to understand what's happening both with vaccines, but also to better understand these diseases.

[Steve Levitt]

I'd like to go back to gavi. We've talked about its accomplishments, but I'd also like to talk about how remarkable it is that the organization exists at all. We're all used to this notion of big government health agencies like WHO and unicef, but GAVI is something different. It's a public, private alliance. I'd just love to hear you talk about how that works.

[Seth Berkley]

Well, it's an interesting history. It used to be that vaccines were made by the public sector. I worked at the Massachusetts State Health Department. They used to make vaccines. And we as Americans particularly, but around the world, decided that getting industry to do this, private sector, industry to do it, was a better way to make these products. And so less and less there's public sector and more and. And more it's made by the private sector. Now, why is that important? If you're gonna make an effort to get these vaccines out globally, if you're gonna influence the market, if you're gonna shape the market, you need to work with the private sector. By the way, 1974 was when the big push for vaccines in the rest of the world occurred. At that point, less than 5% of kids in the entire world received vaccine, a single dose of vaccine, much less all of the ones that were recommended in those days. But as new vaccines appeared, there was a real challenge with getting agencies like the un, The World Health Organization, and others to work with industry because they had a suspicion of industry and industry had a suspicion of them. So by the time Gavi appears in 2000, it's an experiment because there have been failures before. It started really small. And its real role here was to work with industry to try to convince them to make those vaccines and to set up reliable purchase mechanisms. Because the other thing is, if you have a poor country says, yeah, I want to buy some doses this year, and I have the money, but next year I don't have the money, the year after I might have them, it doesn't work. So how do we build a system that allows enough consistency that companies say, I want to invest in this. And so we were able to grow high quality manufacturers in developing countries because we created a marketplace for them. And so it led to the volumes of vaccines we talked about, and also the reduction in cost also with vaccines, it's really important that you don't stock out because you set a program up. Parents get educated. They want their kids to be vaccinated. You can't have them come to the clinic and have no vaccine. So one of the things that we look very hard at is supply security and making sure that there is adequate quantity for the population that wants it. This is really the secret sauce that went into creating this public private partnership.

[Steve Levitt]

We live in a time now where there's a lot of hostility towards the ultra rich. But I have the sense that if it weren't for Bill Gates, both his money and his vision, Gavi wouldn't exist. Is that an accurate statement?

[Seth Berkley]

Certainly. He was a major player. He read a report that I was one of the authors of called the World Development Report. He read it twice, and I think the authors read it twice. Nobody else did. It was by the World bank, and it made the case of cost effectiveness of vaccines. And he said, why do we have these in wealthy countries and not in developing countries? There was some movement, but he put $750 million into starting a new. Nothing like that had ever happened before. I ran the health programs of the Rockefeller foundation in previous life, and we were the biggest foundation in global health, and my budget was about 15 million for the world. So he played an incredibly important role in focusing everybody's attention on moving this forward. Now, of course, at that point, he was the first big investor, and Today he's about 15% of the support of the organization. We were able to build up a global consortium of donors to provide the financing to bring these vaccines to, as I said, the poorest countries in the world.

[Steve Levitt]

So I run a little center at the University of Chicago, and one of our projects focuses on organ donation, and we recently celebrated the hundredth kidney donation that was facilitated by our program. And 100 lives is a lot of lives. And think about Gavi. I mean, you ran GAVI for over a decade, and it just seems almost surreal to think about you shepherding billions of dollars of funds and immunizing a billion kids and rubbing shoulders with world leaders and saving 20 million lives. It's a scale of activity that's almost beyond comprehension to me. Does it make any sense to you having experienced it?

[Seth Berkley]

Well, it certainly was a change from my previous life working on AIDS vaccines. But I think the amazing thing is that I was able to meet with world leaders. I was able to meet with pharmaceutical CEOs, and I would say the receptions almost always were really positive in terms of fundraising. I raised in the time I was there, $33.3 billion. That's a lot of money. But it wasn't unbelievably hard, because what you're talking about is saving children's lives, protecting the world from horrible epidemics and pandemics, and making the world a fairer and safer place. And by the way, vaccines are the most wide distributed health intervention. So about 90% of kids get at least one vaccine in the routine vaccine program. That's different from campaigns for epidemics. And what's critical is that is the infrastructure that is used for other health interventions, but also to look for pandemics, outbreaks, other challenges. And so this becomes the core of trying to create a healthy world.

[Steve Levitt]

So let's talk about COVID While one could see how Gavi might pitch in, one could also make the case that wasn't your mandate. Your funding was around childhood immunizations, and Covid was somebody else's problem. Can you take us back to the early days of COVID and the thought process that you were going through as you had to decide, am I going to change the path of this organization or am I going to stick with.

[Seth Berkley]

What we're good at? Yeah, it was a tough time to think through this. You may remember the original descriptions of what was ultimately known as Covid started out at the end of the year in 2019, going into 2020. And so we were at the World Economic Forum in Davos, and the question was, is this the big one or is this just a dress rehearsal? What we heard is that it was a point outbreak in a market in China with some deaths. But, you know, we also have informal systems that we listen to where people report. And we were beginning to hear some quite disturbing rumors that maybe there was person to person transmission. And given that moment, I thought that we should begin to get prepared. And luckily, in Davos, Richard Hatchett, who runs the organization called cepi, the Coalition for Epidemic Preparedness Innovations, which was set up after Ebola to try to have an organization whose job would be to make novel vaccines for diseases in the developing world of epidemic potential, was also there. And he and I got together and said we should move forward as if this is a big problem. We knew in previous outbreaks, influenza outbreaks, as soon as people realized it was a bad pandemic, high income countries went to the manufacturers and just said, we'll take all the vaccine you have.

[Steve Levitt]

Sure.

[Seth Berkley]

And at the end, there's no vaccine there for the rest of the world. The best way to control an epidemic is to Try to control it where it's spreading and to try to vaccinate those at risk. And so we knew going in that if we could start a more global effort, that would make sense. That was really the intellectual beginning of what became Covax. And so we created a loose formed coalition to move this forward. We built, built up over time, raised money, and ultimately were able to deliver 2 billion doses of vaccine to the poorest countries.

[Steve Levitt]

If I try to boil it down to the nuts and bolts, it seems like what you were trying to do was to purchase huge quantities of COVID vaccines that didn't exist with a pile of money that you didn't have. And that doesn't really sound like a recipe for success.

[Seth Berkley]

That was exactly what we were trying to. We didn't know whether any vaccines would work. We already said that, you know, 7% is the kind of success rate you normally think of. So you could invest a lot of money in a bunch of vaccines, none of which would work. And had we had the money, we probably still wouldn't be able to get in front of the line to get the first doses, let's say, from a manufacturer. That would get national pressure to have it in that country. But what we could do is get in the queue and we also could begin to talk about, about financing technology transfers, which we ultimately did do. That became important because as we expanded the manufacturing of vaccines in reliable places, then we got to larger volumes, which took some of the pressure off, which meant we could get the vaccines out to a broader group of the population.

[Steve Levitt]

It's so easy looking back, because it was such a success to think that all of these choices that you were making made sense. But it seems to me that the choices you were making could have destroyed Gavi really, if this all went awry. Do you think that's overstatement or do you think it was just. You understood there were real risks and it was just the right thing to do and you did it.

[Seth Berkley]

It really is the latter. I mean, certainly it could have destroyed Gavi. We tried to be as transparent as possible. We didn't try to get ahead of our skis. Initially it was China and it was Italy and it was the us. But then you began to see in developing countries, obviously the delta wave in was just devastating. And so people are like, we have to do something. Obviously, I think it was a success, but it wasn't such a success. We had a lot of problems with vaccine nationalism, with export bans, with restrictions, and at the end, the very poorest countries did not get access at the same pace as high incomes did. Now, we never expected it to be exactly the same. The lowest income countries in 2021 only had a few percentage of people vaccinated. We ultimately got the lowest price from every single manufacturer that provided us. And we ended up with the largest portfolio of vaccines in the world. We had 11 different vaccines. I think we did the best we could with what we were dealt, which is why it's so important to learn the lessons from this. Because we need to do better next time. If we have an agent that has a 40% mortality instead of a one and a half percent mortality, the panic will be just that much worse. The people doing modeling suggest that we have a 50% chance of having a Covid like pandemic in the next 25 years. That's a serious number. And as I said, it could be a lot worse.

[Steve Levitt]

I had Moncef Slaoui on the show. He headed up Operation Warp Speed.

[Seth Berkley]

I know Moncef was well and I.

[Steve Levitt]

Asked him the same question about Gamble because he had to pick which companies to put the money behind. And he had an interesting answer to me because it seemed to me like putting all this money behind MRNA vaccines, which hadn't been proven before, seemed really risky. But he seemed at least exposed to think that it was just totally obvious to him that these vaccines were going to work. He had seen them around, he knew that they were ready to go. And that was interesting to me to understand how clear it was that this new technology would already work. Was that your sense also at that time, or did you have more skepticism about whether MRNA would be the answer?

[Seth Berkley]

Is MRNA the best vaccines for Covid? That's a question even today. The issue is no other vaccine can occur that quickly. And it's the speed that really matters. And during a pandemic hours matter. I think Moncef is right. The science of how to make a spike protein and using that for a coronavirus like agent had been worked out. So from an efficacy point of view, I think he's absolutely right. Which you never know though, is what are going to be the safety challenges in a novel technology once you start using it in larger numbers. Which is why Operation Warp Speed funded big trials. I mean, you know, with 30,000 person trials, by the way, he didn't just do one MRNA or two MRNA's, he did a range of other vaccines as well. I think that has to be the way you move forward in these circumstances. But the challenge is educating your politicians and others that some of this stuff just isn't going to work. And it's part of the cost of doing business in an emergency to have that redundancy. The military, it's part of the cost of what they do to have multiple different systems and they may not all work. And we accept that in that circumstance. And yet the evolutionary certainty of this as a way for people to get sick and die is even higher than it is with the military. Risks.

[Steve Levitt]

Yeah, it's a great example because with the military, we're on constant alert, right? We've got airplanes in the air, we got subs all around the world just in case something happened. But that mentality has not caught on in public health. The idea that we would be ready at any moment to go from zero to a hundred somehow has not managed to take hold in public health.

[Seth Berkley]

Frankly, I'd take zero to 20. But that's exactly the point. We're not where we should be.

[Steve Levitt]

You're listening to people I mostly admire. I'm Steve Levitt and after this short break after this outbreak, I'll return with Seth Berkley to talk about finding the source of outbreaks and about the Trump administration's assault on vaccines.

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[Seth Berkley]

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[Steve Levitt]

In Seth Berkley's book Fair Doses, he describes a couple of times early in his career when working as an epidemiologist, he was tasked with trying to understand an outbreak. I'm really intrigued by the kind of detective work that goes into that investigation. So I asked Seth to describe how epidemiologists find the source of a mystery outbreak break.

[Seth Berkley]

I was going to do an academic career. That's what you do when you're at a Harvard teaching hospital. But I was really attracted by the Centers for Disease Control, and I ultimately ended up in the special pathogens branch. And the thing that CDC does is it trains people to be disease detectives for the whole country. And they don't stay at cdc. They work in state health departments, city health departments all around. And a particular outbreak was really interesting. We got a call, and it was these burns on people in the grocery stores. And so you go out to do an investigation, you meet the people, you ask them questions, and you notice that more of them were produce workers and baggers. And so then you're saying, okay, well, maybe it's some exposure to something in produce, which you do traditionally. You should do a study and say, okay, who's handled strawberries and who's handled potatoes and whatever. And turns out that if, if you're working in the produce department, you're handling all that stuff, so you begin to see some differentiation, but it's not very dramatic. And at the end, through a lot of sleuthing, we were able to figure out that it was an exposure to celery. It turns out that they had a super brand of celery that was beautiful and big and healthy looking. And it turns out that it had been bred to do that. But there's a chemical in celery called a faranocoumarin, which in very large quantities can actually be carcinogenic. And it sensitizes the skin to ultraviolet light and can create burns. We figured that out and then we did a little study. And it turns out that it was in grocery stores all over the place. And nobody else had reported this, but when you asked, they were like, oh, yeah, that's weird. We have, you know, guys who had it. The celery ultimately got pulled by the manufacturer, but it turned out they started reselling it under a different brand name, same celery, because it's not a genetically modified organism. It's just bread. It was great celery. So it's a crazy story.

[Steve Levitt]

Before COVID when I thought about epidemiology, I thought about exactly what you're just describing, right? A data driven field that's filled with Sherlock Holmes types who are out there figuring things out. But at least my impression when Covid hit is that what most epidemiologists actually did was something very, very different. They were more like macroeconomists in the sense that they worked on abstract models and they didn't seem very interested or very able when it came to trying to answer the most basic factual questions about the transmission of COVID or even diseases that had been around forever like the flu. It seemed like we knew very little about the flu facts. Even at the end of COVID I'd say, how much do we know about how well did different masks work? Or how infectious were people with no symptoms? Or would ultraviolet light kill the virus? It felt to me like epidemiologists were not really seriously trying to tackle these basic questions. So I want to ask you as the kind of Sherlock Holmes epidemiologist, do you think I got the wrong impression or do you think there's a divide in the future and most of what people do isn't at all what you were doing.

[Seth Berkley]

First of all, it's quite clear you need different disciplines. If you said to me, seth, how do you do a test on which masks work and what the particle sizes are and flow information? You need somebody who really has those skill sets. And an agency like CDC does that. They have people who work on safety in hospitals and ventilation systems and particle size and all of that. What you need to do is bring all that together. But you're absolutely right. At the beginning of the pandemic, you're in this ridiculous situation which is we don't really know anything and you need to do whatever you think is smart. You start out, you wash hands, and eventually you wear a mask and what density does it need to be? And then you say people ought to be six feet apart and say, where's the data for six feet? Well, there is no data, you know, but it's a reasonable distance. So you're doing the best assumptions. Now, what you want is an iterative process where you learn and you figure it out and then you re put out your recommendations. You have to be careful, though. If you're changing the recommendations all the time, then people say, well, you don't know what you're talking about. I'm Gonna ignore everything. That's the challenge that the public health groups have now. What changed in Covid was the unbelievable partisan behavior that ultimately came up. I like to think of public health as nonpartis medicine. It's about science. But all of a sudden this became a political issue and that became a tragedy because that then changed the behavior even more because how honest do we want to be? We're going to be attacked for this. And I think that has been a really, really destructive effect. What you ultimately want is groups that just bring the best science. Then it's a political decision. Do you follow the science? Do you mandate it? Do you not mandate it? Do you just suggest it? But if you don't have the science, then what are you standing on?

[Steve Levitt]

As I watch what's happening in the Trump administration around vaccines, I'm horrified and I'm outraged, but I can't even imagine what it must be like for you. Your life work is being partially undone in such an anti scientific way. I guess it's very disturbing to me.

[Seth Berkley]

That is the horror. When we saw the beginnings of the taking apart of things, it was like, let's take USAID out to the back and put it in a woodshed. The people who do this work are incredibly dedicated and have real knowledge. Is everything good? No. Are reforms needed? Yes. But the way you do it is you don't take a chainsaw to it. What's hard on the vaccine side is, as we discussed earlier, these are amazing technologies that have lifted us up from a situation where, you know, people are losing a third of their kids routinely, to a place where people assume you have one child, that child's gonna live and be healthy. So I don't think anybody would say we wanna get rid of all of that, but now we're gonna be in a situation where we're not gonna be able to continue the science, we're not gonna get new scientists to join, we're not gonna have some of these available. And I think that is a tragedy.

[Steve Levitt]

What I find bizarre Operation Warp Speed was pivotal to the quick development of COVID vaccines during the pandemic. I would suspect it would likely be remembered by history as one of the great accomplishments of the first Trump administration. And yet they take no pride or credit for it. The NIH has canceled support of MRNA vaccine research, if I understand correctly. It just seems strange to me.

[Seth Berkley]

President Trump has been recently saying that he wish he could talk more about it and get more credit for that, because that's really important. And I agree, it's the Great success. And tragically, when he got Covid, it was rumored that he got one of the antibody treatments. The guy who did that got fired later on. Not at the time. The decision about MRNA vaccines, one of the scientists I work with described that as the stupidest science decision he's ever heard in his career. The reason it's stupid is because of the speed issue we talked about. And that speed issue isn't just for pandemics, it's also for cancer. Right now we're beginning to understand how to use immunology to treat cancer. Not just to prevent, but to treat it. These are things that just go like a laser right to the tumors and kill them. And they're amazing. But if you have to make it for each individual patient, you gotta do it super quickly before the cancer kills the patient. So the best technology is probably gonna be MRNA. I think this is an amazing loss for the U.S. you would think having.

[Steve Levitt]

Come out of COVID two big lessons that anyone would take away from it would be, number one, we should try to be better prepared for the next pandemic because speed is everything. And number two, having the capability to quickly develop vaccines is likely to be the most important form of preparation that we can probably take. But as it stands now, we are roughly doing as little as possible to prepare for the next pandemic. It's unbelievable. It's shocking to me. People often criticize the military by saying they're preparing for the last war and not being forward thinking. But on pandemics, we're not even preparing for the last war. That would be a great start to be preparing for the last war.

[Seth Berkley]

I think that's right. And again, we don't know where science will take us. This is why it's silly to do this. I've mentioned cancer, but autoimmune diseases, other things, as we live longer lives. The whole idea is to make America healthy again. You extend life out, you invariably will die. It's likely to be a tumor or cardiovascular disease or something else because you get rid of all the other diseases. And so. So do we really want to tie both hands behind our backs on working on these new diseases? It's not even the funding today, because, all right, funding is down today. Maybe it'll go up tomorrow, maybe private sector will pick up some of it. The real challenge is we're destroying the institutions, we're destroying the academic institutions. If you are a young person, do you really want to go into science knowing that you're not going to get money, you're not going to be able to have a good career. You might as well just go into investment banking and make lots of money.

[Steve Levitt]

So you've seen so much of how the world works over the years. What kind of advice would you give to young people today who want to make a difference in the world?

[Seth Berkley]

I think you want a career with purpose. I'm old enough to have been in a situation where we saw the best graduates of medical schools went to the city hospitals because that's really where you got experience and you could make a difference. We saw the best law school students, students go and work in the public defender's office so they could make a difference. If you really want to make a difference in the world, you got to go where the problems are. You should get paid a good salary to do that. You should have a good career structure. But we really need the use of tomorrow to fix the problems we didn't fix or made worse. And to do that, they're going to need to become experts in their field and really try to, to drive a better world.

[Steve Levitt]

Let me just go on record as saying that on a dollar for dollar basis, our failure to prepare for the next pandemic may be the single worst policy mistake of our time. It's not too late to change course. Let's hope that policymakers come to their senses. Seth Berkley's book Fair An Insider story of the Pandemic and the Global Fight for Vaccine Experiments Equity will be published on October 28th. You can pre order your copy now. Now is the point in the show where I welcome on my producer Morgan and we tackle a listener question.

[Producer Morgan]

Hi, Steve. So we got an email from a listener named Ian and Ian tried something with his family recently. It's a little experiment that you and Sendhil Molinatin talked about back when Sendhil was on the show in 2021. It's an experiment called the $20 auction, also called the All Pay auction. Ian tried to do it with his family in the pub. Do you wanna remind our listeners what the $20 auction is?

[Steve Levitt]

Absolutely. And I also wanna say that I love that Ian listened to an episode and in the spirit of both scientific inquiry and having some fun, he took it to the streets or in this case to the. So the All Pay auction is just like a typical ascending bid auction that we're all familiar with. There's a prize that people are bidding on and people call out their bids until there's a bid that's high enough that nobody else will go any higher. And then the auction ends and the Highest bidder gets the prize. In a typical auction, only the highest bidder has to pay. But in the all pay auction, like the name implies, everyone who has bid has to pay the amount of their auction own highest bid, whether they won the auction or not. So let's say I want to auction off a $20 bill between you and Steven Dubner and say you, Morgan, bid a dollar, and then Dubner bids $2. And then you say, oh, I don't want to go any higher than that. I'm going to stop. Okay? Then the auction's over and Dubner gets the $20. He pays me $2, you pay me $1, and that's the end of the auction. Okay? And if you describe this auction quickly and nonchalantly like I just did, then it sounds like all we did was the usual auction. And you can think about it the same we always do, but in fact, it actually changes everything.

[Producer Morgan]

So when you use this as a teaching tool in class, what usually happens?

[Steve Levitt]

What's. You call out a couple people from the class and you say, okay, who wants to bid one? And then somebody bids one, then the other one bids two. And they just go, 1, 2, 3, 4. And everyone's just going along. Nothing seems to really be happening until you get close to 20, because someone will say, 20, 20. And since they're bidding on a $20 bill, they think they've won it. Well, I bid 20. I didn't make any money. I broke even. The auction's over.

[Producer Morgan]

One person broke even.

[Steve Levitt]

Exactly. The other person is at 19. And they used to get this strange look on their face and they think, wait a second, if I stop now, I'm out $19. But if I bid 21, is the other person really going to bid 22? No, I don't think they're going to bid 22. And so they almost always say 22, 21. And that person who bid 20 always looks a little bit shocked. And then they think, well, wait a second, they bid 21. I could bid 22. I would still lose $2. But that'd be better than losing $20, because if I just stop now, I lose 20. So they bid 22. And what's so amazing about it is there's just no obvious place to stop every single time, as you think on the margin, should I increase my bid or not? You are caught in a trap. And it's so entertaining for everybody except for the two people who are caught in the trap.

[Producer Morgan]

So what's interesting is that Ian had almost the exact opposite experience that you and Sindel have in class. He was sitting in a pub in the UK with his family, his two children and his wife. And he had a 20 pound note in his wallet and he wanted to teach his family a little economics lesson. And so he thought he would do the all pay auction. He explained the rules and he opened the bidding. His son bid one pound, but kind of straight away his daughter and wife got into a side conversation about the fairest way to bid. And he never really could regain control of the conversation. He tried to redirect them by saying, okay, one pound, going once, going twice. But then he was committed to just ending the Oct and he just had to award the 20 pound note to his son. Then he realized he had another 20 pound note in his wallet and he wanted to try again. This time though, his son was really happy with the £19 he had pocketed and his wife refused to play. And so his daughter ended up bidding £1 and she got the £20 note, also netting her £19. So at this point point Ian is out £38. Though his daughter was kind enough to hand him the 20 pound note back. But I'm not really sure anybody actually learned the lesson that he was trying to teach them.

[Steve Levitt]

Yeah, I think you're exactly right. I do think there are three lessons that we can take away from what happened. And the first one is actually a really important one that we don't talk about that much. But people behave differently in different settings. This is an auction that takes advantage of people who are in a consumer mindset, who are thinking like they're at an auction, because it's those rules of thumb that break down when you all have to pay. But within families, people often behave very differently. They have a different set of rules, they act differently, they have different calculations. And one thing I think Ian learned here is that the wrong place to do this is with the family. If he did this at the pub with his co workers, coworkers, I guarantee you with a little bit of skill he could pull off what Sendhil and I get in the classroom. Now the second lesson relates to that little bit of skill. In this setting and almost everything in life, you can never forget that how you implement things matters. And Ian just botched this from beginning to end. Because the key as the auctioneer in this setting is you just gotta get things moving and you gotta get people bidding. And in a very casual way, way, let them be reassured that, look, they have lots of experience with auctions. You see, as we get going, it'll start to make more sense. You don't need to worry about the exact details, and that's what I do in class. And everybody jumps right in and everybody always takes the bait. But the first rule being auctioneer is you can't have a lot of chatter going on in the background when you're trying to auction something off. You got to keep people focused.

[Producer Morgan]

Okay, what's the third lesson?

[Steve Levitt]

Not all failures are actually failures. Sure, it costs Ian 38 pounds, but he's got a great story he got on people I mostly admire, even though it didn't turn out the way he hoped it would scientifically. In the end. There are lots of ways to succeed and Ian definitely, definitely scored with this one.

[Producer Morgan]

Ian, thanks so much for sharing your story with us. That was really fun. Listeners, send us an email if you have a question for Steve Levitt, or if you have a situation that could use an economic solution, or if you have a question for our guest, Seth Burke, Berkeley. We can get that Tim, and possibly answer it in a future listener question segment. Our email is pimaeeconomics.com that's P I M A freakonomics.com. it's an acronym for our show. We read every email that's sent and we look forward to reading yours.

[Steve Levitt]

Next week we've got an encore presentation of my conversation with Charles Duhigg on having great conversations, and in two weeks we got a brand new episode featuring Harvard linguist Steve Pinker. He was the first guest I ever had on the show five years ago, and I've got him back now to talk about what he's been working on and his fights for academic freedom. As always, thanks for listening and we'll see you back soon.

[Narrator/Producer]

People I mostly admire is part of the Freakonomics Radio Network, which also includes Freakon, Economics Radio and the Economics of Everyday Things. All our shows are produced by Stitcher and Renbud Radio. This episode was produced by Morgan Levy and mixed by Jasmine Klinger. We had research assistance from Daniel Moritz Rapson. Our theme music was composed by Luis Guerra. We can be [e-mail] that's P I M [e-mail] they can thanks for listening.

[Seth Berkley]

The time flew and we could have done another two hours.

[Narrator/Producer]

The Freakonomics Radio Network the Hidden side of Everything.

[Producer Morgan]

Stitcher.

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[Steve Levitt]

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