I really like a question Tyler Cowen has been posing to guests on his podcast.
Cowen: If we look at your papers, they’re about topics people have already thought about. The data work is completely state of the art, but I don’t think it would be said you’re doing something other people can’t do, and yet several times a year, you come out with papers of great import that make a big splash, and the results seem to hold up. So what in fact is your competitive advantage?
Chetty: That’s a tough question. Part of what we try to do is exactly as you said: take old questions. I think some of the most important questions in economics and social science have not yet been fully answered, and the recent availability of big data of various types allows us, for the first time, to tackle those classic questions. What our research group tries to do is bring those two things together.
Cowen: But those both sound replicable, right? What’s the non-replicable asset?
Chetty: What hopefully our contribution and scale is, is showing how you can take those large datasets and not get lost in them, and bring out the key lessons that are relevant for thinking about these classic questions.
Cowen: If I’m trying to model the Raj Chetty production function and I described it as such, it’s a multiplicative model, so there is getting the data, but that’s not the key point.
Chetty: That’s not the key point.
Cowen: There’s then some conceptual advance that allows you to see the data can test something that other people hadn’t seen, and then there are numerous stages of execution, and then there’s also recruiting and managing the team. There’s a whole bunch of different steps, and you’re trying to do well at each of them and very few other people can do well at each and every one, and maybe that’s the way to think about your moat. Is that fair to say?
Chetty: That is our strategy. I think the other thing that’s extremely important is, we spend a lot of time on trying to achieve clarity. There are ways to write papers in economics that are more accessible to the public and thereby have greater impact, and there are ways to write papers that are more technically oriented and narrow the set of readers.
Cowen: How do you learn the focus on clarity?
Chetty: That’s just something, I think, coming from a science background from childhood, I really appreciated the clarity, for instance, of scientific experiments where you can say with precision that this is what we think happened when you changed something.
Having that interest from a young age, I want to be able to explain my findings to my parents or my wife, who’s a neuroscientist, and so forth. So that type of focus is something that distinguishes our research group, and trying to think in innovative ways about problems that people have worked on in the past.
For instance, there’s been a lot of work on neighborhood effects for 30 years. Our group by no means is the first to think about neighborhood effects. Where we’ve tried to push forward a little bit is thinking about the mechanisms through which neighborhoods affect kids and showing that, in particular, every year of exposure during childhood seems really critical, something that struck us as being an intuitive hypothesis, but then figuring out how to document that clearly in the data, and that has led the field to be able to now look at neighborhoods in a very different way than people were looking at in the past.
Cowen: There are many smart people in medicine, in surgery, in writing books—for that matter, in writing medical books. What would you say is the Atul Gawande production function? I asked Raj Chetty this. I said “Raj, you get a lot done. What’s the skill you have that other people don’t have?” What would your answer be to that question?
Gawande: I think part of it is that I’m pretty clear about my goal, which is I’m trying to have impact and to try to do stuff that feels cool along the way. My team knows that my mantra is “I want to do cool stuff that lasts, and let’s see if we can do that.” So I think that from early on, I was always iterating against that set of goals, and that I more or less organize my life around it. I don’t watch that much TV. I get enough sleep.
Cowen: But those are your goals, that’s your framework. What’s the talent you have that, say, your competitors don’t?
Gawande: When I get into our hospital settings, whether we’re working in surgery or medicine or childbirth or other areas, invariably, the main thing we have to work to do is identify, what are your priorities? And people in the system, number one, usually can’t say what that is. And then if you observe what their priorities are, it’s actually far away from delivering the best possible care to patients at the lowest possible cost. That actually is a very tiny portion of the healthcare industry that’s trying to deliver that. So in my individual capacity, I think it’s that I’m able to spend a really high percentage of my time on my priority. I think that’s all it is.
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