What Happens When Misinformation Wins? | Rory Stewart - PT 2

Summary

Impact Theory Podcast Summary

Episode: What Happens When Misinformation Wins? | Rory Stewart (Part 2)

Date: October 2, 2024
Host: Tom Bilyeu
Guest: Rory Stewart, former UK politician, diplomat, and writer

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Episode Overview

This episode focuses on the acute challenges societies face regarding misinformation and social media. Tom Bilyeu and Rory Stewart explore how digital platforms, political systems, and economic cycles interact and impact liberal democracies in today's world. They discuss the dangers of unchecked algorithmic amplification, the limits of free speech, and practical solutions for equitable progress, concluding with a discussion on decentralization and Rory's advocacy for direct giving in international development.

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Key Discussion Points & Insights

1. Social Media, Algorithms, and the Spread of Misinformation

• Tom Bilyeu questions the accountability of social media companies and whether there should be more robust controls on the information shared on these platforms ([01:00]).
• Rory Stewart raises concerns about tech giants prioritizing profit over ethics, influenced by their business models that center on grabbing attention at any cost.
  • “These algorithms are not sharing information on the basis of what they believe is true. They’re sharing information on the basis of what gets attention, which they can then sell…” ([02:54])
• Stewart points out that initial idealism (e.g., Google’s “Do no evil”) has faded, replaced by relentless pursuit of profit.
• Social media’s built-in incentives favor viral misinformation, and even efforts like X’s (formerly Twitter) Community Notes often arrive too late to counteract the damage.
  • “Often the community notes come when the damage is done… 45 million people viewing a post… before any community notes get on” (Rory Stewart, [04:05]).

2. Real-World Consequences of Viral Misinformation

• Stewart recounts a recent example: false claims about a Syrian immigrant led to riots and violence against Muslim communities in Britain ([06:39]).
  • “Lies spread on social media quite literally led to asylum seekers trapped in a burning hotel with hundreds of people outside trying to set light to it…” ([07:40])
• He warns that when the government loses control of the narrative due to such misinformation, chaos and violence can ensue, overwhelming the state’s ability to respond coherently.

3. The Limits of Free Speech and Democracy’s Vulnerability

• Bilyeu reflects on whether the general populace can reliably discern truth in an era oversaturated with information and whether limiting speech is “for the good of the people” ([08:16]).
  • “So, for instance, can the populace think for itself? ...you have trade offs before you and you are simply choosing the lesser of the bad trade offs.” (Tom Bilyeu, [08:16])
• Stewart rebuts by emphasizing the need for a rules-based society; democracy thrives in pluralism but still requires boundaries, especially when speech incites real-world harm ([09:28]).
  • “People can choose within that stadium... They cannot, in my view, choose to burn down hotels with human beings in them.” ([10:14])

4. Checks, Balances, and the Fragility of Liberal Democracy

• Bilyeu expresses fear that government overreach (especially in times of crisis like COVID) could morph into authoritarianism when speech or debate is suppressed ([12:27]).
  • “When authoritarian rule comes in to say, misinformation, disinformation, malinformation, those are all completely off limits, you get a totalitarian state.” (Tom Bilyeu, [14:37])
• Stewart distinguishes systemic groupthink and optimism bias from true authoritarianism, arguing for institutional checks (independent judiciary, free universities, free press, electoral cycles) to maintain balance ([17:41]).
  • “The answer is the structures of liberal democracy, not that we’re going to stop authoritarianism by unleashing the power of social media.” ([18:22])
  • Warns deregulated social media could actually undermine democracies by empowering demagogues.

5. Populism, Economic Inequality, and the "Dry Tinder" of Discontent

• Bilyeu notes that populism takes hold only when “the tinder is dry” — when people are already frustrated ([19:23]).
• Stewart is pessmistic; argues that “all societies are full of tinder,” as feelings of injustice, envy, and dissatisfaction are omnipresent because of inequality ([19:51]).
  • “Our experience as humans is one of perpetual dissatisfaction... society cannot produce a situation where everybody... is going to feel that their lives are great.” ([20:20])

6. Improving Democratic Resilience and Political Debate

• Stewart prescribes three key remedies ([22:19]):
  • Better political leadership and policies: “Non-populist politicians” need to be credible and effective in improving quality of life.
  • More skillful communication: Politicians should be relatable, even humorous, to bridge the current disconnect.
  • Clarity of moral purpose: Defend the moral value of pluralism, equality, and democracy.
  • “If the center is to regain a bit of momentum, it needs to develop a sense of humor. But finally, we need a sense of moral purpose.” ([23:01])
• Calls for more regulation of social media platforms to minimize harm, suggesting self-policing is insufficient.

7. Economic Cycles, Empire, and Historical Perspective

• Discussion shifts to cycles of debt and the rise/fall of empires (citing Ray Dalio’s work) ([23:49]).
• Stewart notes the “collapse of empire” does not preclude people being materially better off than previous generations ([26:06]):
  • “Now we live in a world in which we no longer get to send white guys off to rule large chunks of India, but the average person... is far better off materially than they were in the 1930s, 1940s.” ([26:21])
• The challenge is not inevitable collapse but managing painful transitions and mitigating suffering during periods of change ([27:37]).

8. Decentralization in Governance and Aid

• Stewart advocates decentralization as a way to restore democratic faith ([28:16]):
  • Proximity breeds engagement; local knowledge yields better solutions.
  • Innovation and competition among regions/states refine policy.
  • “Our societies are basically too big, our governments are too far away, and... a lot of our problems come from that.” ([29:10])

9. Direct Giving in International Development

• Stewart details his experience moving from top-down aid to championing GiveDirectly’s model, providing direct cash transfers ([30:00]-[32:39]):
  • Direct cash to the poor (e.g., $900 in rural Africa) provides transformative results at a tiny fraction of traditional aid costs.
  • Cash empowers local agency, respects individual needs, and creates cascading economic benefits.
  • “Cash falls like kind of water on a mountain landscape… It adjusts flexibly to different people’s lives.” ([31:25])
  • Dignity is restored by trusting local people to know and address their own needs.

10. Addressing Critiques and the Evidence for Direct Giving

• Bilyeu probes: Is direct giving just a short-term fix? ([33:10])
• Stewart responds with evidence:
  • Cash transfers are one-time investments for the extremely poor, not ongoing basic income.
  • Long-term studies show that beneficiaries sustain better outcomes (savings, productivity, health, and well-being) even a decade later ([39:25]).
    • “For each dollar going into these villages, there’s $2.50 of benefit for the surrounding area.” ([40:06])
  • The poorest often lack only capital—not knowledge or opportunity.

11. Contrasting Aid Philosophies: Direct Cash vs Targeted Health Initiatives

• Bilyeu asks how direct giving compares with Bill Gates’ approach ([42:29]).
• Stewart:
  • Gates focuses on eradicating disease (vaccines, health).
  • Direct cash empowers choice; people pick what matters most to them.
  • Stewart critiques the Gates model: “What you’re often doing is letting people live longer lives in extreme grinding poverty. You’re not giving them the opportunity to improve their lives. They’re just living longer.” ([43:19])

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Notable Quotes & Memorable Moments

• On Tech Companies’ Shift in Priorities
  “It feels to me as though the only thing they care about now is profit.”
  — Rory Stewart ([01:57])
• On Algorithmic Amplification
  "These algorithms are not sharing information on the basis of what they believe is true. They're sharing information on the basis of what gets attention..."
  — Rory Stewart ([02:54])
• On the Limits of Free Speech
  "People can choose... to leave the European Union... They cannot... choose to burn down hotels with human beings in them."
  — Rory Stewart ([10:14])
• On Social Media and Democracy
  "...the power of social media is much more likely to lead to the collapse of liberal democracies and the development of authoritarian states."
  — Rory Stewart ([18:22])
• On Perpetual Human Dissatisfaction
  “Our experience as humans is one of perpetual dissatisfaction.”
  — Rory Stewart ([19:51])
• On Political Remedies
  "If the center is to regain a bit of momentum, it needs to develop a sense of humor. But finally, we need a sense of moral purpose."
  — Rory Stewart ([23:01])
• On Decentralization
  “…the closer you put government to people... the more faith and trust they redevelop in the democratic system."
  — Rory Stewart ([29:00])
• On Direct Giving
  "It gives dignity. It's saying that the poorest people in the world know more than you or I do about their village..."
  — Rory Stewart ([32:09])

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Timestamps for Key Segments

• Social media & misinformation – the challenge of accountability: [01:00] to [06:36]
• Falsehood, riots, and the real-world impact: [06:36] to [08:16]
• Free speech vs. responsible boundaries in democracy: [08:16] to [12:27]
• Checks, balances, and institutional resilience: [15:07] to [19:23]
• Populism, economic grievance, and discontent: [19:23] to [22:04]
• Remedies for political revival (leadership, humor, moral purpose): [22:19] to [23:49]
• Decentralization as good governance: [28:16] to [30:00]
• Direct giving in action + evidence: [30:00] to [41:45]
• Direct cash vs. targeted disease eradication: [42:29] to [43:40]

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Resources Mentioned

• GiveDirectly.org – Research and results on cash transfer effectiveness
• Rory Stewart’s Book: How Not to Be a Politician (US release)
• Studies on social media algorithms, populism, and groupthink (mentioned, not linked)

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Final Takeaway

Rory Stewart and Tom Bilyeu present a nuanced exploration of today's information and political crises. Stewart’s practical approach blends urgent regulatory reform for social media with democratic renewal and innovative international aid, reminding listeners that material progress and stable societies depend on rational rules, local agency, and ethical purpose. The episode closes with optimism about giving cash directly to the world’s poorest as a highly effective, dignified method for sustainable change.

Transcript

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[Tom Bilyeu]

I'm Tom Bilyeu and this is Impact Theory. Let's dive right back in to Part two with Rory Stewart. Talk to me about social media. So practically speaking, there is a collision. As an American, this certainly seems true. As an outsider looking at the uk, it seems even more true. As a, an outsider looking at Canada, it's downright terrifying. What do you think should be done with social media? Should people, barring a direct incitement to violence, should there be controls? Should the platforms be held accountable to what people publish on their platforms? What's your take on that?

[Rory Stewart]

I don't know. I mean, it's, it's a very, very difficult world to get into this. A part of the problem is there is so much money involved, literally some of the very, very wealthiest companies in the world are on one side of this debate and their entire business model is predicated on these algorithms and on this particular way. What's striking is that, and I'm being a bit provocative here towards you and many of your listeners, but what's striking is some of these companies, my sense is, you know, Google began quite idealistic. There was all this do no evil stuff going on, right? And back in 2014, it still seemed plausible to me that these companies believed they had an ethical purpose. It feels to me as though the only thing they care about now is profit. And they have developed these unbelievable marketplaces, advertising models, algorithms that allow them often to take 80 cents in the dollar from an entire industry. Now, to what extent can they then be trusted really to think clearly about these things? I just had a, I just had a long Conversation with a guy called Nick Clegg, who's very senior at Facebook. And I like Nick very much. But can I really believe when he's earning as much money as he is, that he's going to be clear and honest with himself? I don't think he's necessarily lying to me. He may be lying to himself about the negative impacts of what's going on. So I don't know how you get through this, but one thing I know for sure, these algorithms are not sharing information on the basis of what they believe is true. They're sharing information on the basis of what gets attention, which they can then sell to a company that wants your attention in order for you to buy their products.

[Tom Bilyeu]

What do you think about X? Sorry, go ahead.

[Rory Stewart]

Yeah, gonna go with that.

[Tom Bilyeu]

I was just going to ask, what do you think about X's community notes?

[Rory Stewart]

I step in the right direction, fine, if anybody pays any attention to them. But often the community notes come when the damage is done. I mean, Elon Musk had got 45 million people viewing a post claiming that Keir Starmer was trying to extradite people to a small island in the South Atlantic before any community notes get on. I mean, why did Donald Trump just produce in this debate this strange story about immigrants eating cats? Because he operates in a strange bubble full of other people who believe this. Why do they believe this? Well, they believe it because it's incredibly easy now to share this kind of information. And when he said it, I guess millions of people listening will have been like, damn right. Because they somehow have seen this stuff and he's seen this stuff. But these algorithms are not acting responsibly. I mean, they're not attempting in any way. I mean, Elon Musk is a very interesting example of this. You would have thought that as the owner of this company, he would bother sometimes to check what he puts out. The fact that he can't be bothered to spend a little bit of time checking whether the article he's sharing is true or not. Checking whether or not the historian he's endorsing has said that Adolf Hitler was in favor of peace and Winston Churchill was the worst war criminal of the war. I mean, what's going on? It's this, I think, that's bringing it to a head that previously, if you were a regulator in Europe or Canada dealing with these companies, you could convince yourself that they were well intentioned and that when they got things wrong, it was by mistake. So the model was predicated on the idea that you would go to Facebook or go to Twitter and say, I'm sorry, you've posted something dangerous or untrue and rely on them to take it down. But we're now dealing with a situation where it feels as though, I'm afraid with Elon Musk, that he's not well intentioned in that way, that he's testing it, he's pushing the boundary as hard as he possibly can, and that you're not going to have a very productive conversation with him saying, I'm sorry, what she just said was completely untrue, unbelievably dangerous, causing huge chaos on the streets. Could you please take it down? The likelihood is he'll say, no, this is my free speech. I'm allowed to share lies if I want. And that changes the whole equation.

[Tom Bilyeu]

In what way?

[Rory Stewart]

Well, because if 44 million people suddenly hear that, for example, I mean, how did these riots start in Britain? The riots started in Britain because a post on social media claimed that a Syrian immigrant who's named got off a boat in the last 12 months and killed three young girls with a knife. This was completely untrue. The girls were killed by a Christian who'd been born in the United Kingdom. Immediately, people are burning down mosques and they're burning down mosques because they believe it was done by a Muslim. And then being spread very rapidly around social media is details on other mosques and other community centers and other asylum seekers. And quite quickly the government begins to lose control of the narrative. Then if other people are tweeting out, the government is trying to crush you and they're going to take you off to the South Atlantic and put you on an island in the middle of nowhere. More and more people come out on the streets fighting against what they believe is this kind of crazy, repressive government that's going to deport them from the country. So, I mean, that was a very obvious example to us a few weeks ago, where lies spread on social media quite literally led to asylum seekers trapped in a burning hotel with hundreds of people outside trying to set light to it, on the belief that these people were somehow responsible for stabbing young women who they hadn't stabbed.

[Tom Bilyeu]

So your own countryman Orwell was very aware that there was always going to be a battle for the truth and that humans could be manipulated pretty easily with fear being one of the greatest weapons. That is where I start to get worried, because social media forces us to confront some really stark, base assumptions. So, for instance, can the populace think for itself? If you don't think that the average person at large can parse through the information that's coming at them, then it's like we have to shut this down for the good of the people. If you believe that someone somewhere, when you put that kind of control on, is going to have to decide what is true and that they are likely to become corrupted by power. If nothing else, you run into a situation where you have trade offs before you and you are simply choosing the lesser of the bad trade offs. Does it not seem that way to you?

[Rory Stewart]

I think where we probably disagree is I think you are imagining a little bit like your mob against authoritarian rule. You're imagining two extremes and you've lost sight of the reality. I mean, the reality is that each of us, including you and me, are fallible humans. We often will end up believing things that aren't true. And you and I will be quite proud of our ability to parse information and judge. But we'll be aware that we've got it wrong. We've been wrong about friends, we've been wrong about world events. We're susceptible to certain kinds of authority. Our memories are very weird and flawed. I mean, we are strange creatures. And so I don't think one wants to. I mean, I'm very sensitive to this as somebody who was an elected politician. I mean, obviously as an elected politician, it would be a complete career suicide to suggest that the public could ever be wrong about anything because your opponent would immediately say, you know, you're contemptuous the public. You don't believe in democracy. My view is that generally the judgment of the public's pretty good. It's generally why I like living in a democracy. I think people are pretty sensible. Do I think that the decision to vote for Brexit was the correct decision? No, I think it's been very damaging for the United Kingdom. But the majority of people voted for it. How do I then deal with that? I deal with that by saying to myself, well, we live in a society where there's lots of different access to information, lots of different levels of education, lots of different data out there. And it's a pluralistic society. And people have the right to choose to leave the European Union if they want to, even if I disagree with them. But that's about defining a terrain of rules. It's defining a stadium within whose bounds you play. People can choose within that stadium to leave the European Union. They can choose to put taxes up or taxes down. They cannot, in my view, choose to burn down hotels with human beings in them. And we have, I mean, our whole system is about drawing boundaries and lines. And the risk of where the real techno optimists and apostles of social media are going is that they're forgetting how many rules there are already in our societies, how our whole society depends on rules, and they're asking for exemption for the rules for one particular form. Forgetting that our entire lives, liberty and happiness depend upon systems that constrain in innumerable ways what we can do.

[Tom Bilyeu]

Okay, so I think we actually agree on all of the pieces, but we disagree maybe on the conclusion. So we're fallible. So my whole, my whole worldview is predicated on my agreement with the following statement. So it's interesting that I think there is some area though, where we end up drawing something different. So we're fallible a hundred percent. That, that is why I am so terrified of the government. Because a, an authoritarian government is a government that says we know best. And I'm saying, no, no, no, you're just fallible. People who believe things that aren't true, who have memories that are just wildly manipulated by themselves, by others. It's the way that our minds work is utterly fascinating. So all of those things that make us a slightly scary creature. I agree with all of that. And I come back to. And I suppose the question that I asked about community notes is because that to me feels like the only real solution. So I get it. There are going to be times where 45 million people, 100 million people, 200, whatever, they see a lie, a blatant lie, and that will do just unimaginable damage before it's corrected. But, and I have not been able to articulate to you in this, that I look at the two extremes so that I can find the third way. I'm just trying to see what the realities of the compromise are. Not because I'm saying, oh, you just go to one or the other other. I'm saying if you understand what the trade offs are going to be, hopefully you can find a better way. But when I look at, oh, okay, millions, hundreds of millions of people will see a lie and that lie could have tremendous consequences. So what do I do about that? Do I step on that from the top down or do I let the people battle that out in the arena of ideas? I think I was pretty agnostic until Covid happened. And all of a sudden I saw people that had very credible voices in terms of epidemiology being told to shut up because what they were saying didn't match the narrative. And if you believe in the scientific pro process, as I Do you break that process? And so you are breaking the ability to make progress when you tell people that certain things are beyond the pale and cannot be discussed? There are certainly things beyond the pale that you can't do. But in terms of like, hey, here's my hypothesis on what is happening here. Again, I'm not saying that you should be able to advocate for violence or anything like that. I'm just saying we. When authoritarian rule comes in to say, misinformation, disinformation, malinformation, those are all completely off limits, you get a totalitarian state.

[Rory Stewart]

So, I mean, I've. I, you know, I agree and sympathize a lot of what you're saying. I mean, my version of your experience during COVID was my experience in Afghanistan and Iraq. So I served in those places, and I saw very, very clearly people pursuing completely crazy policies that made no sense at all. And I saw politicians and generals and an enormous amount of the public getting behind projects which were just simply crazy, wasting lives, wasting money. And so it's very easy on the basis of that to think the establishment, the elite's got no idea what it's doing and we need to blow up the whole system. The question is, what is the alternative? And I don't think that what we're describing with COVID or Iraq and Afghanistan, or indeed what I saw as somebody working in international development, where I saw so many ludicrous, stupid, wasteful projects, I don't think those things are examples of authoritarian rule. It can feel like it, because if you disagree with the conventional wisdom, it can feel pretty authoritarian. But it's much more like what happens if you're in a company where the board has got the wrong end of the stick. These are much more. The problems we face in our societies are much more about optimism, bias, groupthink, risk aversion. So if I think about what's happening with COVID in the United Kingdom, it's not exactly that we're living in a dictatorship. It's more that a bunch of slightly complacent politicians and scientists, for reasons which are often to do with their psychology rather than the evidence, end up going down a particular path. And that's always true.

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[Rory Stewart]

You know, it's now clear that the economic policy of the 1970s was largely ludicrous and the economic policy of 1980s was pretty ludicrous. And that a lot of the things we've done and believe in are pretty ludicrous. I happen to believe that there's a form of this groupthink and optimism bias happening with social media, that in 20 years time, people are going to look at it and they're going to look at it in the way that they look at Philip Morris cigarettes or Purdue Pharma. They're going to literally say, what were these people thinking? How did they think this was normal and okay? But this isn't authoritarianism. This is groupthink. It's optimism bias. It's financial interests. And the way to deal with it is not through. The radical opening of every narrative. The way to deal with it is through checks and balances. The way to deal with it is through an independent judiciary, through independent universities, through electoral cycles where people can get rid of their government every four years, through breaks between executives and legislatures. I'm much more confident that the answer is the structures of liberal democracy, not the kind of that we're going to stop authoritarianism by unleashing the power of social media. I think the power of social media is much more likely to lead to the collapse of liberal democracies and the development of authoritarian states. It's much more likely to embolden populism, much more likely to embolden people who are able to exploit attention and advertising models to take power and then challenge the Constitution.

[Tom Bilyeu]

Very interesting. If I'm right, that that only happens when the tinder is dry, meaning the economics are bad. There's an underlying sense of frustration. Yes, I can see that. But I think that's just. You're supercharging the. The voices to your point. But if the voices have nothing to rally in the populace's soul, I don't think it will take hold. When things are growing and people feel good, you just don't end up going down that path.

[Rory Stewart]

But my answer to that is I'm more gloomy than you are. I think it's very rare in societies for things to be growing and for people to be feeling good. Our experience as humans is one of perpetual dissatisfaction. I mean, what are we meaning when we're saying things are going well? If you're somebody on a low income in The United States. You now live in a world in which even if your income was going up by 10% a year, you're still getting by on 40, $50,000 a year. And you can see on television people living lives where they don't have to worry about their mortgage, they don't have to worry about facing their grocery bills. You're stuck in Flint, Michigan, and you can see the Kardashians having a good time in California. We cannot, as societies, produce a situation where everybody or even the majority of people are going to feel that their lives are great. People are always going to be incredibly conscious of the injustice of the world, the unfairness of life. Most people will always feel that. And therefore we need to design systems which are realistic about that, which find ways of explaining that in the United Kingdom, that we can't pay for our health service without paying much more tax, that we can't expect to clean up our rivers without investing far more in our water system, that we're not going to be able to have an economy that grows as fast as China, that we're not going to be able to run our hospitals without having immigrants. And the tinder will always be there. All societies are full of tinder. I mean, there may be rare exceptions. It's possible that in the United states between about 1955 and 1975, you had a rare period of 20 years where the tinder was a little wetter and where people were not as enraged. But the general condition of most of our societies doesn't matter. Whether you're in China or Indonesia or Britain or the United States is a lot of very angry people, understandably, because life is extremely unfair.

[Tom Bilyeu]

That is certainly a sobering perspective. So if we are living in a state of perpetual dissatisfaction, the tinder is already there, always there. Social media gives voices that create this rise in populism. What do we actually do?

[Rory Stewart]

Well, I think on we have to up the quality of the non populist politicians. They need to have policies which are credible and serious. They need to be able to improve people's lives. I mean, they're never going to be able to deliver everything that people crave. But we certainly should be able to deliver better healthcare to people in the United States. We should be able to deliver better infrastructure. We should be able to deliver decent economic growth. Not Chinese style economic growth, but we should be able to deliver 2 or 3% economic growth and we should be able to have more equal tax systems. These things are not beyond us. Secondly, I think we need much better communication. I Think one of the problems is that the Hillary Clintons of this world came across as humorless and stiff and out of touch. And if the center is to regain a bit of momentum, it needs to develop a sense of humor. But finally, we need a sense of moral purpose. We need to explain why the populist critique is not just intellectually incoherent, but morally wrong. Why pluralism matters, why democracy matters, why equality matters, why these things are precious ethically. So that's on the side of the politicians. But then I think there is probably also room for more regulation of social media as part of the story.

[Tom Bilyeu]

All right, I see. I mean, this is a very classic view, but I see all of history, all of human existence as a feedback loop, and quite frankly, a positive feedback loop, so that the output of the system itself causes the system to move faster. And when I look at the economy, I don't know if you. How much you know about Ray Dalio, but looking at his study of empires rising and empires falling, and it's all essentially a cycle of debt, there seems an inevitable ability. I know you and I slightly disagree about. Although I will say in your answer, it sounded to me like a lot of things that you're saying that we need to do better politicians, better economy, more humor. These are all things that, that put a little moisture on the tinder. And I think that's right. I think that's the right answer. But it does get at, I think my stance, which is, okay, the tinder is always going to be there, but it, it does differ in degree of dryness. And so there are times where it's more likely to spark than others. So, um, I think the debt cycle drives a lot of this and that. We are now, obviously the UK is an empire that has. I mean, I would say it has collapsed. Certainly it's. It is not what it was when the sun never set on the British Empire and the American Empire feels like, to use Ray Dalio's language, we are mid to late stage five and stage six is total collapse. In this moment, do you perceive any inevitability? Because that is certainly how it feels from my perspective.

[Rory Stewart]

It depends. Depends what? I mean, I think you're right that debt is a big problem. And we don't talk enough about debt and we don't talk enough about the way that money works, and we don't talk about what happens when debt is canceled or forgiven and what that can mean for countries too. But. It also depends when you talk about the collapse of empires, what you mean and what you're worried about. So the United Kingdom no longer rules an empire. Right. It's a small island in the Mediterranean. Sorry, small island in the Atlantic. I don't know why I put it.

[Tom Bilyeu]

I was like, wow, you guys upgraded to the Mediterranean. Nice.

[Rory Stewart]

We've upgraded. It must be the weather here. It's climate change making us seem more Mediterranean. But the average person in Britain is much better off than their grandparents were. So at the period where Britain ruled a quarter of the world, life expectancy was in its early 60s. Average incomes were down at five or six thousand pounds a year. People didn't have indoor lavatories and indoor toilets. They didn't have electricity. Many people. And now we live in a world in which we no longer get to send white guys off to rule large chunks of India, but the average person in the United Kingdom is far better off materially than they were in the 1930s, 1940s. So what are we talking about when we're talking about the collapse of the American empire? Right. Perfectly plausible that within 20, 30 years time, nobody in the Congo is going to be interested what the United States has to say about the world. Perfectly plausible that nobody in Japan or South Korea is going to rely on the United States to save them. But that doesn't mean that the next generation or the generation after might not live lives which are longer, happier, more fulfilled, and richer than those of us that are alive today.

[Tom Bilyeu]

Yeah, the only thing that I lose sleep over is that the transition moment is almost always devastating. So the long arc of history, it won't matter. It'll bend towards justice. Things will get better for everybody. But that will be cold comfort to the people that have to live through it. But setting that aside, because there's some other things that I want to talk to you about. Decentralization being one of them. This is something you've put forward as a way to improve politics, to get out of some of the quagmire. And then your recent work on direct giving. I think these two ideas are really powerful.

[Rory Stewart]

Well, let me talk about them. And they're related in a way. So decentralization is about understanding that often local people know more, care more, can do more than distant officials, that you're much more likely to come up with a good solution for your neighborhood than somebody in Washington. And that there's another great benefit for decentralization, getting power down to a local level, which is that you can end up with a lot more innovation. You can learn from each other, rather than having a single centralized structure different States do different things and they learn from each other, compete with each other. I also think that at a time when we've lost faith in democracy, the closer you put government to people, allowing them to vote in their local area and get engaged in shaping their local area, the more faith and trust they redevelop in the democratic system. I think our societies are basically too big, our governments are too far away, and that a lot of our problems come from that. The same would be true with industrial strategies. I think that an industrial strategy for California is much better developed in California than in Washington, and probably much better developed in Northern California than in California as a whole, et cetera. On direct giving, I mean, this is something which is even more radical. But I used to run a $20 billion a year international development program. We're literally giving 20,000 million dollars a year to people in the developing world. It's one of the largest development programs in the world. And we achieved so little. And one of the reasons we achieved so little is that we were obsessed with the idea that we knew best. We were coming into an African village and we were going to teach them something. We had this great phrase, give someone a fish, they eat for a day, teach them to fish, they eat for a lifetime. And we developed these mad teaching people to fish programs, which ended up consuming 95% of the budgets and ending up with almost no good results on the ground. I then had the privilege a few years ago of visiting this nonprofit called GiveDirectly, which was giving cash. That's all it was doing, turning up in a village. It was surveying people, and then it was transferring to their phones. Cheap feature phone, about $900 in cash. You go back a few weeks later, the entire community is transformed. People have new roofs, their kids are in school, they're eating better. There's electricity, there's water supply, there's latrines. The whole place has been completely transformed and transformed for, I would say, about 5% of the cost that it would take you to do it through a traditional program, Whereas you could do 20 times as many villages as you could do through a traditional program. And why? Well, because it turns out that cash falls like kind of water on a mountain landscape. It fills every crevice and cranny. And it adjusts flexibly to different people's lives. It adjusts the fact that you may have a different business idea to me, or your neighbor may be focused on healthcare and someone else focused on education, or you may need to fix your roof. I've already fixed My roof. I want to buy a cow. You want to get a bicycle for your business, and the cash allows you to do that. Whereas the traditional program comes in and says, the one thing that matters in this village is water, or the one thing that matters in this village is education, or the one thing that matters in this village is a road, or the one thing that matters is roofs. The one thing that matters is sanitation. It's nonsense. Every house is different, every need is different. And if you give cash, something very interesting happens. People begin adjusting to each other. You and your neighbors buy a bunch of bicycles so you can take your products to market. I open a store fixing bicycles. You buy a cow. I open a store selling veterinary medicine for cows. Or I set up a yogurt business processing the milk from those cows. There's amazing multiplier effects that come out of cash. And above all, I think just to finish on that, it gives dignity. It's saying that the poorest people in the world know more than you or I do about their village in Malawi. The idea that you or I have any idea what their lives are like, what their needs are, what their priorities are, it's just madness. We can begin to understand what they're worried about day to day. And it would cost us an incredible amount of money trying to work it out, most of which would be wasted.

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[Tom Bilyeu]

It is an utterly fascinating idea. So as I try to wrap my head around what this is, at its essence. So it's. It's going to sound weird, but it's basically a decentralized, centralized bank that is creating money out of thin air from their perspective, right? So it just shows up in their bank account. So we're creating money, we're distributing it. Now, given that that must always happen to jumpstart an economy, whether you're digging gold out of the ground or you're harvesting seashells or salt or whatever, you have to create a thing that is the money that people want and therefore they will do a thing. It allows people to Specialize. I mean this just is how economies are born. But the economy must become at some point self sustaining or you get what we're having here in America, which is why I think we're in so much trouble, which is just printing money. But setting that aside, how does this, how does direct giving, if you look at it like that, jump starting an economy, how does it become self sustaining?

[Rory Stewart]

Well, one thing is that what we're increasingly doing is giving one time payments. This is not a ubi so people are not receiving this money every month. It's a one time capital investment that is going into getting their business off the ground or fixing that roof. And, and it's understanding, as you say, that often what's holding people back is capital, not knowledge. The people in this village have a very good idea what goods they can sell in the market town. The problem is they're 20 miles away from the market town and they don't have a bicycle to get to it. Or they just don't have a plastic bottle into which to put the yogurt that they're milking out of the cow. I mean there's very simple things that they're often lacking. So it's recognizing that's what's holding. Or you're running a little shop in town, you don't have any money to buy any biscuits. These are pretty straightforward things. Or you can't buy in bulk. A lot of the issues is that one of the reasons the extreme poor in Africa end up in a very bad position is that they can't buy a packet of 12 bits of toilet paper. They have to buy it in tiny, more expensive quantities because they don't have the money to do any kind of bulk buying. There's no economies of scale for them. Once that's going, then of course it isn't about cash. Once the motor of the economy for the extreme poor is going, it's then much more about the economy as a whole. It's about is there a decent government, where's the tax rate, where's the infrastructure, are the roads, are the schools, are the clinics, what's your tariff and trading position? And so the cash is not about kickstarting the whole economy, it's about allowing the extreme poor and even within a country as poor as Rwanda, we're talking about a third of the population, not the majority of the population, allowing them to access the infrastructure and the economy that's out there.

[Tom Bilyeu]

Interesting. You said this is not about jump starting the whole economy. I'm very surprised you say that. Meaning there's already an economy there or.

[Rory Stewart]

Yeah. So let's take Rwanda. Rwanda's got a gross domestic product of about $10 billion a year. And the extreme poor are living on about $2 a day. And there's probably about, say 2 million of them in that country. What you're talking about is giving the money to the people who are literally struggling to work out how they're going to eat for the next two days and allowing them to access services which often already exist. There's often already a hospital or a clinic, but if you are on the edge of starvation, you just can't get to that hospital or clinic. There may be a school, but you just can't afford to send your kids to that school. Because the basic money that you might even need to buy a textbook or the decision that your child's not going to be hoeing vegetables but go off to school is too much for you to make. Again, Rwanda, it's got an insurance sector, it's got call centers, it's got software developers, it's got people employed as teachers and doctors. There's lots of stuff happening in the economy. The problem is these remote villages, and that's where the $900 suddenly transforms somebody's opportunities and ability to better themselves.

[Tom Bilyeu]

Okay, so what is it? Just not to pick on Rwanda. But since you brought him up, why doesn't Rwanda do this themselves? Is there corruption in the system? Is there something broken? Like, why didn't this problem resolve itself?

[Rory Stewart]

Well, fundamentally, because the country hasn't got enough money. I mean, Even with a GDP of $10 billion, it's got a population of about 10 million people. They're living on, the average person is living on about $1,000 a year. And the tax revenue that you can generate from that is not sufficient to be able to deliver $900 to a family in extreme poverty, you would need to bring in the money from the World bank or the IMF or some other donor. And it's not a loan you're giving people, they're not paying you back. It's a one time cash grant. So without the taxation revenue, without the ability to borrow, you simply don't have the money to give these people.

[Tom Bilyeu]

Okay, so is this just trying to find an analogy to help people wrap their heads around this? And I'm asking this in the spirit of the following. I don't think the average taxpayer cares. So they're like, why am I going to pay for this? Like, if the Rwandan government isn't able to do this, for their own people, why am I doing this? And so then it becomes a humanitarian thing. And I think people will get. Some people obviously will get behind, like, okay, cool, I'm willing to do this. But they're going to need to really understand how this at some point becomes self sustaining. So if the Rwandan government is already not collecting enough taxes to be able to do this with their own populace, and this isn't jumpstarting the whole economy, but attaching them to the economy, does that, like, make this all work, or are we going to have a brief generation where things are nice and then it just falls by the wayside?

[Rory Stewart]

No, I mean, one of the reasons why we're quite confident about this is that some very, very rigorous randomized control trials have been run where you compare the groups that receive the cash with the groups that don't receive the cash over 3, 6, 9, 12 years. And we're seeing, even 12 years into these programs, the sustained impact of a few hundred dollars given twelve years earlier in terms of people's savings, their investments, and above all, their incomes. And you're seeing those people becoming taxpayers, and you're seeing those people contributing in a productive fashion to the economy. So the evidence is very, very striking. In a study in Kenya, for each dollar going into these villages, there's $2.50 of benefit for the surrounding area. This is partly because people are starting from a very low base. I think you were getting at this a few minutes ago. Capital in this context goes much, much further than it would in somewhere like the United States. Partly because things are much cheaper, partly because what is a dollar for us will end up being worth about $100 for the people that are receiving it. But also that there is so much untapped potential, so much untapped labor, so much untapped resource, quite literally. In Zambia there is. I was with a farmer in Zambia and he said, I've just got a house for my son. And I said, well, what does that mean? He, he said, well, come with me. And literally he just walked into the bush, chopped down some trees and stuck up a mud thing. And now his son was cultivating what was wasteland and still in an enormous amount of Africa, there's incredible land there which hasn't even begun to be cultivated. So the small amount of money that you bring in, which allows somebody to get that hoe, buy a few seeds, get a little bit of fertilizer, pesticide, plant a few trees, produces impact in a way that it never could if you were giving the money to Somewhere, I don't know, in Kansas, where it's much more difficult for somebody in extreme poverty to put their money to work.

[Tom Bilyeu]

If you guys have 12 years worth of data on this, where can people learn about that?

[Rory Stewart]

So if you go to GiveDirectly.org there are fantastic and I think very honest. And one of the reasons I support this organization, I'm not paid by this organization, but I support this organization is because they're wonderfully honest and they've got a lot of research. They talk very openly about things that go wrong. They talk about when they're surprised by less impact. They talk about when they're disappointed. But they also talk beautifully about the things that have worked and how much they've learned. And they show, right the way down to the detail, these academic papers. There'd be more than 350 studies now. And these are rigorous, modeled on the way in which you do a medical trial, in the way that you compare the control group and the treatment group.

[Tom Bilyeu]

How does this compare to what Bill Gates is doing?

[Rory Stewart]

He is doing something very different. Bill Gates is concerned with health. And what he really wants to do in many contexts is eliminate diseases. So he would like to eradicate polio. He'd like to end malaria, for example. He'd like to vaccinate people. And that really is what he cares about. If I'm looking at somebody in a village house and you give them cash, they get to choose what their priority is. Am I going to fix my roof? Am I going to start a business? Am I going to put my kids in school? Am I going to vaccinate myself? That's not the Bill Gates view. Bill Gates view is this person should vaccinate themselves. The money is going into vaccination. And my problem with that, and I'm not succeeding in convincing Bill Gates of this, and this will just irritate him if he listens to your show, Is that what you're often doing is letting people live longer lives in extreme grinding poverty. You're not giving them the opportunity to improve their lives. They're just living longer. Now, there's something to be said for living longer, but I'm not sure that the weight that he puts on living longer, as opposed to living a shorter life in better material conditions, is correct.

[Tom Bilyeu]

Rory, talking to you has been utterly fascinating. Man. I cannot thank you enough for your time. Where can people follow along with you?

[Rory Stewart]

Well, thank you. So a couple of things do go to the GiveDirectly website because I'm passionately proud of them. I tweeted Rory Stewart UK and I've just written a book on politics which is out in the US called How not to Be a Politician.

[Tom Bilyeu]

I love it. Awesome. Thank you again so much for joining me today everybody. If you have not already, be sure to subscribe. And until next time, my friends, be legendary. Take care.

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