Is This Really a Thing?

This past summer marked a significant change for college athletes as the NCAA voted to allow them the opportunity to benefit from their name, image and likeness. While it’s certainly a significant change in the NCAA’s approach and rulemaking, what will it mean for most student athletes, especially those outside the big conferences and revenue-generating sports like football and basketball?   Featured Guests Terry Mohajir – Vice President & Director of Athletics at UCF Brittney Anderson-Duzan – Associate AD for Compliance at UCF Scott Bukstein – Undergraduate Program Director & Associate Instructor of Sport Business Management at UCF   Episode Highlights 01:08 – What is NIL? 04:27 – What’s going on nationally? 06:26 – What’s the total value of the market? 09:08 – Is it going to impact recruiting? 14:54 – Are there guidelines for sports agents? 18:52 – Is NIL the endgame or are more changes coming? 27:05 – Dean Jarley’s final thoughts   Episode Transcription Paul Jarley: This would not have happened a year ago. Valerie Moses with Addition Financial (00:02): Good morning. It is so great to see you all here today. We are so proud of our partnership with Dillon Gabriel and with UCF Athletics and with the College of Business, we’re a proud partner. You can see us at the student gate at any football game, so please come visit us. We are incredibly honored to sponsor this morning’s event and to get to hear from Dillon and from [Steven 00:00:24] as well, all about the NIL partnerships. This is such a huge brand new front here, I would say, in the world of sports business and something that we all really need to be paying attention to. So it is very exciting to see these partnerships really come alive, and we are so grateful for our partnerships here today. Paul Jarley (00:44): Will this newfound right to publicity change college athletics forever? Paul Jarley (00:48): This year was all about separating hype from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? On to our show. Paul Jarley (01:08): Name, image and likeness is a legal concept that allows any person, including student athletes, the right to publicity, the ability to capitalize on anything that identifies them, including the ability to engage in third-party sponsorships and endorsements. Some people think this will change college athletics as we know it, others aren’t so sure. They think the marketplace will adjust, and that the benefits will accrue to a very few. To help sort through this, I’ve assembled three guests. Terry Mohajir is UCF’s athletic director, Brittney Duzan is the associate AD for compliance, and Scott Bukstein is an associate instructor in our DeVos Sports Business Management Program. Listen in. Paul Jarley (01:51): As I understand NIL, this is being dealt with on a state-by-state basis. So what does Florida allow student athletes to do now that they couldn’t do before? Brittney, I’m going to throw that to you. Brittney Anderson-Duzan (02:06): Sure. So, like most states, the state of Florida is one of the few that actually has a legislated piece for name, image and likeness. So essentially what they now have is the right to utilize their name, image and likeness for commercial purposes, so whether that be for money or not for money, that they weren’t allowed to do previously by NDA legislation. So basically, they have the right to publicity now. Paul Jarley (02:32): They can print their faces on t-shirts. Can they get appearance fees? I’m trying to understand exactly what we’re- Brittney Anderson-Duzan (02:39): Yeah. They can get appearance fees. It [inaudible 00:02:43] us now with what students on campus can do. So think outside of just those big endorsement deals, our student athletes can now do philanthropy work and actually use their platform as a student athlete for that. Paul Jarley (02:53):For their own foundation, you mean. Brittney Anderson-Duzan (02:55): Yep, they can create a foundation. Previously, they couldn’t go out on their own and utilize their name, image and likeness for a business. So if my student athletes want to go to the entrepreneurship office here on campus and want to start a business and use their name, Brittney Duzan’s makeup brand, they weren’t allowed to do that previously. They can do private lessons and actually use their name, image and likeness for that. Like you said, speaking engagements, autograph sessions, and then the stuff you’re seeing in the media, like these endorsement deals, and- Paul Jarley (03:24): They could provide private lessons to like high school athletes. Paul Jarley: Terry. Terry Mohajir (03:28): The only thing that we can’t do is we can’t create the deal for them. So we cannot be involved in the deal, they have to create it themselves. People can ask us, “Hey, I want to talk to so-and-so.” We can put them in contact, but that’s it. Paul Jarley (03:43): Okay. You can do that. Brittney Anderson-Duzan (03:44):Yep. Paul Jarley (03:44): Okay. Brittney Anderson-Duzan (03:46): Yep. And what was odd was before, like with the private lessons, they’ve been allowed to do that forever with the NCAA, but the NCAA used to say, if I was the star tennis player, I couldn’t say me, Brittney Duzan, the number one for our tennis program, is giving private lessons. I would literally have to say, “Would you like to do lessons with me?” And couldn’t give my credentials because that would be using your name, image and likeness, which makes no sense because when you’re giving lessons, you’re going to want to give your credentials. Terry Mohajir (04:11): You just couldn’t have a formal camp with your … you could [crosstalk 00:04:15] private. You couldn’t advertise it. Paul Jarley (04:17): Okay. But now you could do a formal camp, Terry, is that true? Terry Mohajir (04:19): Mm-hmm (affirmative). Paul Jarley (04:20): You could, okay. Terry Mohajir (04:21): You could have the Dillon Gabriel quarterback camp. In the past, he could do private lessons, but not- Paul Jarley (04:27): Yeah, yeah. Hey Scott, are there any good sources of data on NIL activities at the national level? Do we know what they’re doing? Scott Bukstein (04:34): The data within the space influencer is one of the primary NIL marketplaces. From July 1st through October 31st, the first four months in which NIL activities have been allowed, social media content has represented 59% of all transactions within the NIL space on that one platform. If we look at another primary marketplace, Paul, Opendorse, posting social digital content represents right around 28% of total NIL compensation on the Opendorse deals marketplace. So right now, social media where college athletes are essentially functioning as brand ambassadors, they’re making posts, endorsing a company, right now that’s the primary activity area and also the primary revenue area. Now there’s a bunch of other NIL activation and monetization areas. For example, some student athletes are making personal appearances at places like restaurants, car dealerships, community events. Some student athletes are signing autographs. This could be on physical, or now on digital, trading cards, digital collectibles, NFTs. Scott Bukstein (05:41): Some college athletes, they’re playing video games with fans through platforms such as YOKE Gaming. Student athletes will get paid to spend 20 to 30 minutes playing in a specific video game with fans. College athletes can generate revenue by providing shout-outs to fans on platforms like Cameo, or they can engage in sending text messages to fans on platforms like Subtext. Some college athletes have been selling apparel, other branded items, through platforms like [inaudible 00:06:09] and The Players Trunk. So here’s a neat possibility that we’re seeing emerge for group licensing collaborations within the space with university athletic programs, so that college athletes, they’re able to sell merchandise and memorabilia that have trademark protective university athletics program logos and colors. Paul Jarley (06:26): So Scott, do you have any sense of what the total value of this market is? Like, even for just the influencer stuff, do you have a number? Scott Bukstein (06:33): It’s difficult to capture. The main reason is, and we’ve seen this within the past couple weeks, not all of these deals are being disclosed. It’s reporting that’s been made voluntarily by some athletic programs and then by these marketplaces. So for example, Opendorse, which is one of the primary marketplaces, for the first four months of [inaudible 00:06:53] activities from July through October, if we look at total compensation for division one, 82.9% of all NIL related compensation through the Opendorse deals marketplace involve college athletes on men’s college sports teams, and the average compensation per deal was $686. Paul Jarley (07:15): Those numbers aren’t eye popping to me. Particularly on a per-athlete basis, right, I mean, they’re pretty small potatoes. Scott Bukstein (07:22): Yes. Paul Jarley (07:23): I would assume that the best opportunities here are probably for superstars in either football or basketball in the revenue sports. Fair enough? Scott Bukstein (07:34): Okay. For sure. Paul Jarley (07:36): All right. So you went to kind of what’s my next question, I assume the star quarterback is in a pretty good position to maybe take advantage of this, but do you have any sense what percentage of your student athletes are probably involved in something related to this? I mean, are you even allowed to know? Terry Mohajir (07:51): Well, yeah, she knows. Brittney Anderson-Duzan (07:53): Yeah. I was going to let Terry take it because he does have a good grasp on it, but yes. So the state law does require student athletes to disclose their NIL activities. They don’t give a timeline for disclosure, but our student athletes do a pretty good job about disclosing what they’re doing. You’d be surprised, it’s a wide breadth of student athletes from the starting quarterback to bench warmers. We have some students who have a really big following on like TikTok, or really good on Instagram, and that’s where you’re seeing a lot of things happening right now. So I wouldn’t say it’s a huge percentage of our student athletes that are utilizing it, but it’s not just the star quarterback. Terry Mohajir (08:31): Yeah, I would tell you Paul, that our female athletes probably have the most upside, especially the ones that have a very robust social media following. And they play better, I think, as far as for advertisers. And so I think if you start looking around the country, you might see bigger numbers with maybe a star quarterback, or a star basketball player, but you’ll probably see more of your student athletes that are females. Paul Jarley (09:08): Terry, do you think this is going to impact recruiting at all and how colleges recruit? Terry Mohajir (09:13): Absolutely. Paul Jarley (09:15): Give me a sense of what you think’s going to happen there. I mean, we’ve talked before, right? Yeah. I thought you’d be going out and hiring social media experts and some brand experts to help the students develop this, and quite frankly, what you don’t want is UCF’s student athlete filling the blank on the headline for something that happened NIL-related that you had no control over. I mean, that’s what would freak me out. Terry Mohajir (09:44): Yeah. I think the biggest concern I have is predatorial people that are promising the world and the sky, and they’re not able to deliver. The other thing is, what I’m finding out is you have people that want to help and want to use certain student athletes’ name, image and likeness, and then they have handlers that get involved that try to get way over market price. That’s a little bit of a challenge too. So I think this is going to correct itself eventually. From my understanding, going back to your question about recruiting, I think it’s really a strong recruiting tool as far as when someone says, “Hey, I’m going to go to this school because there’s a lot more NIL opportunities.” I think when you are in a metropolitan area, like we are in a top 20 DMA, as opposed to a traditional college town, that maybe the only thing in that college town is the school that doesn’t have a lot of industry, it’s a little bit more challenging. Terry Mohajir (10:50): And I also think, just to be very candid, which I’m a very candid person, is there’s also a lot more opportunities to not use the rule why it’s intended for. It’s more to pay players. Paul Jarley (11:05): Right, right. So boosters are going to oversell… Terry Mohajir (11:09): [crosstalk 00:11:09] … there’s really no market value. If you are in a small SEC town and I’m using that, she loves that when I use … and your- Paul Jarley (11:18): Let’s pick on Tuscaloosa, can we do that? Terry Mohajir (11:22): Let’s call it Rich Point State, whatever, Rich Point State. And you’re a small little town, and you have boosters that are paying for name, image and likeness that live in two states over. Paul Jarley (11:37): Yeah. Terry Mohajir (11:38): You know that they’re industries in two states over. And also can work against you. If you have a star quarterback, well, I’ll just use an example, star quarterback at, if you have a [inaudible 00:11:50] company that spends money on name, image and likeness, and you pay a star quarterback at one school, and you’re not doing another school, it may hurt you on your advertising. So I use the car dealers, if you are promoting a quarterback at one school and you have a very competitive collegiate region, and you say, “Look, he’s sponsoring that quarterback,” why would I buy from him? That’s not my school. So I think you have to be very careful from an advertiser as well, because people are generally very parochial in how they spend their money, and they want to support people that they support their interest, if that makes sense. Brittney Anderson-Duzan (12:30): And I feel like with recruiting too, just being part of the recruiting process sometimes- Paul Jarley (12:35): Yeah, Brittney. Brittney Anderson-Duzan (12:35): … is, you’re seeing a shift of the questions they’re asking or like, how are you going to market me as a school? So you’re looking at the school’s marketability, you’re looking at the town’s marketability. And then it’s also, I think, going to tie a little bit into, all right, well, we already have these student athletes or these kids that want to play their freshman year. I think they’re going to say, well, it’s going to be a more candid conversation because the starters are the ones potentially getting better deals. So you’re kind of seeing those conversations start in some of these sports with, all right, well how are you going to market me, which that conversation wasn’t happening a year ago. Terry Mohajir (13:10):[crosstalk 00:13:10] … you could also see some of the student athletes that might have more of a realistic chance to play at the next level that really don’t want to mess with it either. Brittney Anderson-Duzan (13:21): Yep. Terry Mohajir (13:21): They just say, “I don’t want to mess with, I want to focus on my trade. I want to play in NFL, NBA, whatever it is, and I don’t really need any distractions.” And you can also see certain student athletes being distracted from it as well. So I think it’ll correct itself, just like all the stuff, and I really love the rule. Having been a former student athlete coach, I love the rule, the opportunity, because it’s intended to help the women’s soccer player write a children’s book, or help a young man have a passing camp or a shooting camp or something like that, and just like regular students. But it’s not intended for college X to get booster Y to pay a player $50,000 for no market value. And I hope this is being recorded because you can take that to the bank. Paul Jarley (14:10): Yeah, no- Terry Mohajir (14:11): [crosstalk] … because that’s not the intention of why we are doing this. Paul Jarley (14:15): Sure, of course, Terry. Terry Mohajir (14:16): [crosstalk 00:14:16] … people out. Paul Jarley (14:18): So what flashed through my mind, I have to admit, when Brittney was talking, is the frightening scenario of NIL being available when Johnny Manziel was playing at Texas A&M, but we won’t actually put that in the podcast. Terry Mohajir (14:31): No, that’s okay. That comes up often. Paul Jarley (14:35): I mean, he’s sort of the poster child, right, in a way. Terry Mohajir (14:37): No, because he was signing autographs for money, which actually, I don’t have a problem with that. If someone wants to pay him money for that, that’s fine. Now- Paul Jarley (14:46): Remember Terry, A&M had it on their website. Terry Mohajir (14:49): I know. Paul Jarley (14:50): … and they’re selling it on their own website, but I’m also worried about agents here. Terry Mohajir (14:54): Yeah. Paul Jarley (14:54): I’m worried about agents approaching student athletes and saying, “Well, we’ll handle this, your image and likeness stuff for you now,” and this is a way for them to get in the back door. So are there guardrails on that? Terry Mohajir (15:08): Well, that’s what my concern is. I was talking about the handlers. Paul Jarley (15:11): Yeah. Terry Mohajir (15:11): … and now there’s legit agents that have some legitimate opportunities to help a young person get to the next level in their professional sport. But then you have handlers that may not have the experience. You have uncles, aunts, cousins, brothers, that want to get involved that really don’t have the expertise. So we do have a couple forums that allows them to go on and get the professional help that they need. There’s a couple companies out there. One that actually was started by UCF grads is one company is called Icon Source. And it’s basically, after you register through the compliance portal, you can go on there and they can negotiate all your contracts, they handle all your name, image, likeness. It’s a resting place for your name, image and likeness that advertisers can go on there, it’s very clean. We also have services on campus that our student athletes can take advantage of, the legal services on campus that they can use, and I think they have. Brittney, I think you’ve … Brittney Anderson-Duzan (16:24): Yeah, we funnel a lot of student athletes over, which has been helpful, because we can’t help them obviously work through contracts, but to Terry’s point, the most we can do right now is educate them on what to use and what to do. Because you are seeing some shifts where you’ve got agents who’ve worked in that professional realm who are saying, “Well, we’ll come do NIL with you,” and so just educating them on, well that’s not what their normal course of dealings is. They’re not used to dealing with those kind of contracts, so are you sure you want to work with that agent? So making sure before they sign anything that they’re going over to legal services and doing that. And what Terry’s talking about is third-party market places … Paul Jarley (16:59): Yeah. Brittney Anderson-Duzan (17:00): … and there’s a ton out there, and Terry did a great job of vetting some of them. But giving our student athletes the opportunity to say, look, you don’t need an agent to go out and find deals. Here’s a platform you can go on, where you can meet people that want you to do an endorsement deal with them, or want you to do a social media post with them, and you can work with them and the contract’s done there and vetted, instead of you going out and hiring someone that you don’t know. And then all agents have to register through our office, so they have to be licensed with the state of Florida. If they’re a professional, if they work with like the NFL, they have to be NFLPA certified. If they are an attorney, they actually have to be in good standing with the bar. So we do that kind of vetting and give our student athletes a bit of information before they go out and do things, just to kind of help as much as we can. Paul Jarley (17:47): Scott has a bit of a different take on NIL and agents. Scott Bukstein (17:52): From an agent perspective, I actually think that name, image, likeness is going to be helpful for student athletes. Currently, we have an amalgamation of state laws that have been completely ineffective at regulating agents, the NCAA has tried to regulate agents. So now from a student athlete perspective, you have some time to learn more about various agencies instead of picking the agency that agrees to charge the lowest percentage for commission on your rookie deal, instead of picking the agency that your basketball or your softball coach recommends. And all of a sudden NIL provides college athletes with an opportunity to learn more about these agencies, be more informed. But, most certainly, you’re going to have situations where an agent might offer to represent a college athlete for NIL marketing purposes. That agent would advance a large sum of money against which the player’s future marketing earnings would be credited, because historically, and this is unfortunate, but in reality, some agents have provided marketing guarantees as part of a broader effort to sign players for contract negotiation purposes. Paul Jarley (18:52): So is NIL going to be the end of this, or do you think more legislation is coming to allow more kinds of activities? Look into your crystal ball. What do you think? Terry Mohajir (19:04): Go ahead Brittney, I’ll give you my honest opinion. Brittney Anderson-Duzan (19:09): I mean, honestly, I think any opinion I’d give right now would be stupid because 10 years ago I would never have said that name, image and likeness would be- Paul Jarley (19:17): I mean, that’s fair. Yeah. Brittney Anderson-Duzan (19:19): So, do I think things will change? Yes, I think it’ll just continue to evolve as we move along, but I’m going to hold what I think’s going to happen. I’ll let Terry answer. Terry Mohajir (19:32): So here’s my thought, and I’ve been doing this for long time now, been in AD for almost a decade, and I’ve seen it evolve and everybody was freaked out when we went to cost of attendance, we were allowed to pay up to the cost of attendance. I was very much in favor of it and it didn’t change the world all that much. It’s just became a budget issue for schools that wanted to pay it. However, in this day and age, what we have allowed to happen as a practitioner and people in my industry, we have allowed the media to hijack the narrative of who our student athletes are. I’m very passionate about. We tend to let people think that they’re employees, and so that’s the big topic right now on Capitol Hill, is that our student athletes employees, they’re not employees. Terry Mohajir (20:30): When you talk to our student athletes today and ask them if they want to be employees, they do not want to be employees. They do not want to pay taxes. They do not want to be fired. They don’t want all kinds of stuff. They don’t want to have to get workman’s comp. They don’t want to have to get taxed on their housing, their apparel, and all that stuff. So now if they become employees, they get taxed on all that, their food, their shoes that we give them, the medical care, the pharmacy opportunities they have. Terry Mohajir (20:56): So that’s the biggest challenge. We are in a kind of a crossroads right now. I think the NCAA needs to talk to more practitioners about changing the narrative. And I’m very concerned that we have not done enough to really speak to the fact that it’s about education and a degree and career services, period. That’s what it is. Sport, intercollegiate athletics is a conduit to an education and a degree in a career, period. If you happen to play in the 1% that happens to play professional sports, wonderful. The 1%. But we think there’s a lot of value. There’s not a lot of value in some of our sports. There’s more cost, so they don’t make money. They don’t generate revenue. Right now, the only sport that pays the bills on this campus is football. Paul Jarley (21:54): Yeah. That’s true on most campuses, Terry, right? Terry Mohajir (21:57): Most campuses, I’ve worked at a school where basketball paid a lot of bills, universities. And so it was an elite basketball program. But I think that’s the key, I am concerned of this talk about employees versus non-employees, because when you get Capitol Hill involved and you get people that are trying to have political favor because they think it’s a very trendy thing to do, they’re not talking to the practitioners, including the students. Paul Jarley (22:33): So it’s 10 years from now, will NIL have changed college sports in a fundamental way, or is it just going to be a benefit for a few star athletes? Scott, what’s your take? Scott Bukstein (22:44): A pure financial perspective, I do think in our rights, they’re going to continue to assist many college athletes with professional career prospects and for sports such as football and basketball. In the long run, I think college athletes that benefit might end up being the ones who need the money the least. So what do I think we’re going to see within NIL? So we have this 10 year big picture vision. Within the next year to two, we’re definitely going to see more structure. I think we’ll see more formal classes within colleges of business, similar to a new credit hour, I think it’s a two credit hour class at BYU that is a Shark Tank-type component. We’ll see more workshops led by compliance staff. I also think we’ll see more strategy. So it’s just like esports and sports betting, where companies at first just rush into this space, I think companies now they’re just jumping into the NIL space without any [inaudible 00:23:32] strategy, or end goals, defined objectives. I also think we’ll see some type of consolidation within this space and emergence of several key leaders. Paul Jarley (23:42): Terry, what do you think? Terry Mohajir (23:44): I think it’ll be a benefit for a lot of athletes, because it gives athletes an opportunity to really do what it’s intended. You’re going to hear horror stories. We’re already starting to hear about the starting quarterback at these elite programs that came in as starters, now they’re not starting, so they’re getting their advertising dollars taken away from. Terry Mohajir (24:09): … because they’re not playing anymore. So I think you’re going to start seeing advertisers be a little more cautious about putting their investments into 18-year-old. Paul Jarley (24:17): That’s interesting. Terry Mohajir (24:18): So I think that’s going to be happen, but I do think it’s what it’s intended to be. I talked to Chip LaMarca, he’s the one that sponsored the bill in the state, and I had a really good candid conversation with him. It is intended, for young people, to generate some extra money, to start a clothing company like Dillon Gabriel did, to write a children’s book, to be an equity actor. Our student athletes are in great shape to go be actors, or be able to take photos for advertising, like for a fitness magazine, or all that kind of, I think that’s going to be what’s going to evolve, and I think that’s great. I think it’s fantastic to- Paul Jarley (24:59): What do you think Brittney? Brittney Anderson-Duzan (25:01): I agree completely. I think the media is focusing on the recruiting aspect and the big stars and these giant deals, but the things that they’re not focusing on, which I think we’ll start to, are, I have some student athletes that I’m not going to out right now because they’re going to have things coming out, but they’re doing philanthropy work and are doing these things that, two and three years ago they could do to an extent, but now they can have total ownership of it. And they’re going to be able to take that, they’re not going to be going to the NFL or the Major Leagues. And they’re going to be able to show that on their resume when they go apply for a job. Brittney Anderson-Duzan (25:34): This is something that I did while I was in college, and I think that’s going to continue. I think it’s going to grow, because the more that we get into NIL, and the more we understand where our student athletes land, because we have no data to look at, right? Like I don’t know how many student athletes want to start their own clothing company, how many student athletes want to be a social media influencer. So I think the next few years, as you see us kind of to get some historical data, we can start helping our student athletes, and I just think you’re going to see those areas grow as much as you’re going to see the endorsement side grow. Paul Jarley (26:01): Well, and I mean, athletes are in a unique situation here to use their likenesses, but let’s not forget, I have a lot of students on campus in the College of Business who start foundations and businesses while they’re in college, and frankly we encourage that as much as possible, right? So I think [crosstalk 00:26:23] … it’s easy to forget they’re student athletes, right? Terry Mohajir (26:26): Yeah. And I’ve always hesitated. I say student athletes, but I’m very cautious about saying student athletes. I just say our students most time. The population that Brittney and I serve, they’re students, they happen to be very talented in one area. They just are. I mean, I’m recruiting students, not to be athletes, I’m recruiting to your college. And other colleges. That’s what we do, we’re recruiting them to other colleges so they can get an education and degree and get a career, period. That’s it. We have lost our way in that narrative, we have lost our way as practitioners. Paul Jarley (27:05): It’s my podcast, so I get to go last. A lot of my students want to be social media celebrities and to monetize their brand in some way. It’s incredibly hard to do. Sports give student athletes a little bit of a leg-up in trying to establish celebrity status, but it’s still really hard. Being a good student athlete doesn’t guarantee that people are going to find you interesting and worthy of their attention off the field. NIL is in its infancy. New things always draw attention, but the early return suggest it’s not going to be a big moneymaker for many student athletes. As this becomes more apparent, NIL’s ability to fundamentally change the college athletics landscape will fade. That said, there are some potential risks for students, athletes or not, in marketing their name, image and likeness. The potential for shenanigans by agents is especially troubling. And a course on this, offered by our marketing department, could be, well, a very good thing. Paul Jarley (28:12): So what’s your take? Check us out online and share your thoughts at business.ucf.edu/podcast. You can also find extended interviews with our guests and notes from the show. Paul Jarley (28:24): Special thanks to my new producer, Lesley Crews, and the whole team at the Office of Outreach & Engagement here at the UCF College of Business, and thank you for listening. Until next time, charge on. Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.

If you’re wondering what an NFT, aka Non-Fungible Token, is, well, you’re not alone. CryptoPunks and CyberCats are selling for six and seven figures and even Christie’s is getting in on the digital art action. So we’ve got questions…what are these digital items, why are people investing a fortune in them (and should you?), and what does that mean for the financial sector and the art world?   Featured Guests Buvaneshwaran “Eshwar” Venugopal, Ph.D. – Assistant Professor of Finance at UCF Carla Poindexter, M.F.A. – UCF Professor of Art Lory Kehoe – Director, Digital Assets & Blockchain, BNY Mellon Episode Highlights 0:26 – Introduction 2:04 – What the heck is an NFT? 04:01 – What do I actually own? 05:58 – What’s actually in the blockchain? 11:33 – Why did the bank become interested in an NFT? 15:10 – When the world gets back to normal, will this all go away? 21:40 – What keeps you up the most at night about NFTs? 24:45 – 10 years from now are NFTs going to be around and what are they mainly going to be used for? 28:15 – Dean Jarley’s final thoughts   Episode Transcription Paul Jarley: Eshwar, I’m going to start with you. What the heck is an NFT? Eshwar Venugopal: I think the world is trying to figure it out. Paul Jarley: This here was all about separating hype from fundamental change. I’m Paul Jarley, dean of the college of business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show. (singing). On March 11th, CryptoPunk 3,100, a piece of digital art, sold for $7.6 million with an NFT. That broke the record set the day before by CryptoPunk 7804, which had sold for $7.5 million. Then on March 21st, Beeple’s the First 5,000 days sold for $69.3 million. Needless to say, people took notice. I took notice. Well, honestly, Josh told me to take notice. I was hesitant. This all seemed pretty esoteric. Techno geeks with stupid money doing techno geeky things, I thought.But then Forbes did an article. I noticed Christie’s auction house was involved. And so I started to send some emails and make some phone calls. My resident blockchain guy had an interest in this. The dean of arts and humanities, Jeff Moore, put me in contact with an artist interested in NFTs. The kicker was Jeff Stokes. Jeff is a member of my dean’s advisory board, with BNY Mellon, who put me in contact with their digital asset guy. If Alexander Hamilton’s bank was interested in NFTs, I figured I should be too. So to shed some light on this new phenomenon, we have with us today, Eshwar Venugopal, who is an assistant professor here in the finance department at UCF, Carla Poindexter, who is the professor of art at UCF, and Lory Kehoe, who is the director of digital assets and blockchain at BYN Mellon. Listen in. Paul Jarley: Eshwar, I’m going to start with you. What the heck is an NFT? Eshwar Venugopal: An NFT is basically a certificate of ownership of a digital group. Basically giving artists an ability to offer limited additions of their artwork. I’m going to use artists as an example over here, since we have Carla over here. But I have a problem with that, but I’ll come to it later on. But the idea is that you have a certificate of ownership and it is a limited edition product and it is more of a digital collection rather than a physical good. That’s how it has been envisioned. But things have been changing rapidly. These days, if you take some of the latest NFTs that are being minted, there is a physical aspect of it. One guy actually sold his house on NFT. So, things are a little bit blurry now, but if you take a look at it from a property perspective, it is just an ownership as a consumption good. That’s it. Paul Jarley: Yeah. Let me be old school for a minute so I can understand this a little better. I can purchase an original Monet. I would go to someone who would be an expert in Monets who would say, “Yes, Monet really painted this.” And I would spend a kazillion dollars and I would put that Monet on my wall. But other people could reproduce that Monet. So when I buy the original Monet, I also didn’t really buy the intellectual property or the licensing of that Monet. All I bought was the original Monet. Carla, do you agree? That’s how this world used to work? Carla Poindexter: Definitely. But you can also purchase the copyright. Paul Jarley: But that would be separate though, right? That would be a separate buy. Carla Poindexter: Definitely. Right. The Monet is probably, it depends on the piece, but sometimes it’s an open source image. Paul Jarley: Okay, yeah. Carla Poindexter: And sometimes it is not. Paul Jarley: Okay. Carla Poindexter: So, that is the difference. Paul Jarley: I want to stay in the world I think I know, and then we’ll move to most of the world that I think we’re going to be in. The other analogy for me is, I’m a big baseball card collector. Eshwar Venugopal: Oh, yeah. Paul Jarley: And I’ve seen that a few… Akil Badoo, who’s this rookie for the Detroit Tigers, is actually issued a lot and in NFT. So I have a little bit of knowledge in the collectible area, only enough to be dangerous here. But the first thing I want to understand is what I actually own. I own a certificate of authenticity. Eshwar Venugopal: Right. Let me actually give you an example with the baseball cards. So the other thing about NFT started with something called CryptoKitties. I’m not sure you know CryptoKitties. Paul Jarley: Okay. Eshwar Venugopal: So it’s basically similar to baseball cards. Paul Jarley: Yeah. Eshwar Venugopal: But a digital version with cats’ pictures on them. That’s how the entire thing started off. And essentially what you’re owning over there is the rights of ownership, or you can even think about it from a copyright perspective, through that particular kitty. The same way you have an authenticated baseball card, here you have a digital authenticated certificate of ownership. And it basically says that nobody else can claim ownership of this particular image, right? And the image is basically a set of lines and quotes, that’s it. You can claim in the public markets saying that, “I am the one who owns this baseball card or a CryptoKitty card,” and it can be easily verified and it can be verified digitally. If you have the baseball card, you have to call in, say, I don’t know what they’re called, but you probably have to call an authenticator. Paul Jarley: Yeah. Eshwar Venugopal: And somebody has to come in and verify the certificate of ownership and all of that. This just makes that process a bit easier and quick. Paul Jarley: Let’s talk about what’s actually in the blockchain. If Carla had produced a work of art, for our listeners, Carla is a painter by trade, and she did a digital painting and she put it out for bid for an NFT. If somebody were to purchase that NFT, her artwork isn’t actually in the blockchain, correct? Eshwar Venugopal: That’s correct. Paul Jarley: Okay. Is it a link to the site? Is it a web address? What’s in the blockchain? Eshwar Venugopal: So let me give you an example. I tried making an NFT last week. I took a picture of a monkey in Houston, I just uploaded it to Rarible and linked it to my Ethereum wallet and I tried minting. So when I minted, what happens is that Rarible has a unique code for my artwork or in this case, a picture of a monkey. And this particular picture gets uploaded into Rarible’s database, and there’s a link to it, and there’s a unique identifier. I can upload the full quality image or I can upload a lower quality image. It doesn’t matter, right? There’s a unique ID in Rarible for that particular thing. And that is the ID that gets embedded into the blockchain. It is not the actual image that is being uploaded into the blockchain rather a reference. And this reference is your identification for that particular image. So essentially no image is being uploaded into the blockchain, it becomes all the elements of the blockchain … Paul Jarley: I’m placing a couple of bets here, I think. First I’m betting that the company has actually verified that you are the real creator of this, that you just didn’t pick something off of web. Eshwar Venugopal: Right. Paul Jarley: Right? And decide to throw that in. So what is the verification process like? Eshwar Venugopal: That is where things get a bit mucky and I’m not clear on how Rarible does this. Rarible basically says that, or at least… All platforms definitely will verify whether this person has the raw art or if it’s a 3D art, they ask for the source file. If the source is there – it is this particular person, that’s something to verify the ownership. However, that’s not a foolproof way of doing things. I’m assuming that these platforms go ahead on the web and do an image comparison with whatever is existing out there and see if those links back to you. That’s one way of verifying. I’m not exactly sure how each platform was doing it. Paul Jarley: Okay. Then secondly, I have to assume that that company and its website and address is going to continue in operation. Eshwar Venugopal: Yes. That’s the hope actually. But if Dot Com and even the recent ICO woman busted any evidence, it may not be true in the long run. It may be true for the next five years, but who knows what’s going to happen in the next 10 years? Paul Jarley: I’m on the fees issue…. Carla Poindexter: Yeah. The fee is supposed to be very high. Eshwar Venugopal: Yeah. So the fees really depend on how much pressure is there on the blockchain at this point of time. Given that the last couple of weeks has been crazy and everybody’s buying a lot of Bitcoins and Ethereum, the pressure was high and therefore the fees are normally higher. On average, the fees have been in the range of $30, just to say that this image belongs to this person, so getting an entry into blockchain. And that particular part is $30, but if you want to actually list your items for sale, then you have to move to something that is an auction website. I used OpenSea and over there, the fee was again, roughly around $40 or something. So just right off the bat, before I even sell it, it’s $80. And on top of it, there’s a 2.5% commission for Rarible and they take it over. The good thing about this is that, I get a royalty every time this image is being sold and resold, right? The first time I get 100%. But every time it has been resolved, right? If I’m a popular artist, probably Carla has more experience on this, if a piece is getting resolved, I probably get, I set it as 10%, but many people… You have the option to set it as a 20 or even 100%. That likely keeps growing. That this is not the case in today’s scenario. Yes, Spotify and other mediums allow artists to get royalty, but it does not set up in this way that you get lifelong royalties. And I think it’s not to lose…. 10% is a huge number, in today’s standards. Carla Poindexter: That’s the beauty of it I think. Because when an artist sells an artwork, they receive whatever. But when that gets resold and resold the artist receives nothing. Eshway Venugopal: Yeah. Especially the physical ones, their structure. Yeah. Carla Poindexter: Right. And I think that’s why this has been invented. And I think that’s what is so exciting about it. Paul Jarley: That’s very helpful, Carla. So the incentive from the artist is to be able to capture more of the future revenue stream in the resale market of the item. Carla Poindexter: Definitely. Paul Jarley: Is that right, Eshwar? Eshwar Venugopal: Yeah. That’s correct. Paul Jarley: Carla is that right? Carla Poindexter: Definitely. That’s the beauty of the whole thing. Paul Jarley: Okay. Carla Poindexter: Because, imagine as a young person selling a piece of art for $1,000, and then later in your life, when you have established a reputation- Paul Jarley: Right. Carla Poindexter: … same piece gets sold for $20,000. The original artist never sees anything. Paul Jarley: So Lory, why did the bank become interested in an NFT? Lory Kehoe: We got involved and our interest, and why we’re interested in NFTs, is simple in many ways, it’s because our clients have started asking us about NFTs. And some of our clients in the wealth management side started purchasing NFTs, and they’ve got in touch with the bank to understand how we can custody them. And also, we’re getting early stage questions in relation to… Over time as these entities increase in value or some of them already valuable, and to Carla’s points just there, could they be used as items of collateral over time? So I think what we’re seeing is, NFTs has a potential. Are they a potential store of value as well as being something that, I guess, consumers may make, collect and engage with? For me on the NFT front, and this, I think, plays neatly into what Carla was talking about there, the way I think about NFTs is down to three things. So A-M-C. A, is accessibility. NFTs provide access to something which was… Especially pieces of art or very expensive pieces of art or luxury cars, as the case may be. And provides access to things like that that were unavailable for most of society, right? I wish I could afford a Rembrandt, but I can’t, but I may be able to afford a Non-Fungible Token or a token representing a small part. So that accessibility piece is that term that gets used a lot. The second area is, M, and that stands for marketplace. It creates a marketplace where people can buy and sell these tokens or whatever you want to call these or NFTs. And then the final piece is community is C. And I think the community piece is actually the really interesting part of this. So growing up here in Ireland, I used to have football or soccer cards, in US, you have baseball cards and things like that. Paul Jarley: [crosstalk 00:13:43] Baseball cards right there. You joined us late. Yeah. Lory Kehoe: Exactly, right? And that was cool and I could trade those with my friends, but I was limited in terms of the folks I could exchange those with. And now, due to internet, obviously I could do that anywhere. But I think what Non-Fungible Tokens have brought about is, and which is really interesting, is that, it is the convergence and merging of the fan experiences in terms of physical and digital. And I think the Kings of Leon have done that incredibly well and I think they’re going to be… Actually, we’re only at the start of that happening so, the Kings Leon issued a bunch of NFTs- Paul Jarley: Now we are into music. Yeah. Okay. Lory Kehoe: Exactly. So they issued, as part of their latest album, a bunch of NFTs. And if you bought a bunch of them, built into the NFT, because it’s programmable, right? It’s a programmable piece of technology that you own. And this is really where the magic is, they built in this Willy Wonka and The Chocolate Factory Golden Ticket. Paul Jarley: Golden ticket. Lory Kehoe: Exactly. But what it did is that, the golden ticket gave you access, or will get you access, when we’re back doing all this great stuff, to a front row seat or to meet the band backstage. So what we’re seeing is this blending of fan engagement at a physical level, but also at a digital level. And I think we’re going to see a whole host of more of those initiatives, which are going to be unlocked through things like NFTs. Paul Jarley: If I were to make the naysayers argument, it would be this, and this is where I started when I first discovered NFTs, there is stupid liquidity in the market right now. There’s a bunch of money running around, it’s got to attach itself to something and now it’s attaching itself to a digital asset because there ain’t enough things for it to attach to. And then, when the world gets back to normal, this will all go away. Lory Kehoe: Geez. What can I say there? I think there’s a number of points. I think the world going back to normal, I don’t know what that world is going to look like, right? I think the genie’s out of the bottle post COVID. So, I think COVID has accelerated digital agendas for companies and for individuals all around the world. And I think people are interested in communities now more so than ever. We want to be part of something where we felt that we weren’t in the past. I’ll give you an example, if I go to New York and I go visit a museum or something like that, it’s interesting, I’ll go back home and I might tell my mom, “I was there and I saw this painting.” But actually, I now have a mechanism where I’m able to bring her into what that story looks like. I’m able to purchase an NFT or a token. I’m able to pass it onto her. She’s now part of that story. She understands what that piece of art is, the history associated to it. And there is that community associated with it. She may want to purchase more tokens as the case may be, she may want to pass it on to somebody else. So for me, I think there’s value in that level of ownership. I don’t think it’s pure speculation. I think there is, it comes back to that community play. And I think we’re, we’re at the beginning. Paul Jarley: Do you think the consumption side is more important than the investment side? Because part of what you’re talking about is consumer… What you’re talking about there is really varied in consumption. You’re purchasing the experience to consume that experience, which is different than, I think this asset is going to appreciate in value and I’m going to be able to sell it at a multiple some years in the future. Lory Kehoe: And I think it’s both. Paul Jarley: Yeah. Lory Kehoe: I’m a regular Joe, if I see a potential for an asset to appreciate in value, and I can afford that asset. Well, I might go down that path and make that investment as the case may be, as part of a balanced portfolio, naturally. But, if there’s an opportunity to purchase something instead of buying, a MoMA pen, for example, right? I’m able to do something a bit more interesting. I’m able to pass that on. I’m also able to bring that person, the recipient of my gift, into the world of NFT. So they’re not only getting that NFT and the story about the painting, but I’m also bringing them into how this whole world works, which I think is also another angle. So it’s an interesting one. I was talking to somebody yesterday about this and they were saying… They asked me, would I be interested in potentially purchasing a token or an NFT, which represents part of a forest where I’m actively contributing to the de-carbonization of an area. My gut response was, tell me more, tell me more, I’m interested. So I think the consumption side and the investment side, I don’t think they’re mutually exclusive actually. I actually think they could converge and that’s probably where you’ve got an even better story. Carla Poindexter: I love what you’re saying, Lory, because that’s the whole thing about art. There’s the community and the activity of investing in an artist. And then there’s the other side, that more people tend to think about when they’re not interested in art, and that is the investment side. And I think the community side has to come first and then it becomes authentic. You were talking about reputable companies getting into this and looking into it. I love it when someone says, “Think about an NFT supporting an artist.” Someone purchases that token, purchases that artwork, and that allows the artist’s reputation to grow. And it’s not so much about the thinking that, Oh, someday I’ll get to pass this along and make money. Of course, that’s part of it, but entering into it, the point of the consumer, I think, is a good way to talk. Love it. Paul Jarley: What do you think, Eshwar? I want you to react to my comment about stupid liquidity. Eshwar Venugopal: Okay. Yes. There’s a lot of stupid liquidity over here. So, just let me take a step back and see where the NFT thing came from. So I mentioned CryptoKitties a while ago, right? The company that started this CryptoKitty build, the first thing that they wanted to do was do NFTs for real estate and they decided not to do it because of the regulatory pushback that they got. To both Carla and Lory’s point, community actually comes first in these things. This started off as a toy, as Chris Dixon would say it, and it has garnered a large enough community now that regulators have started taking notice of it. And as you mentioned, there was a lot of liquidity over there. And I wouldn’t buy the argument that things are going to go back to normal, or at least what it was before after the COVID pandemic just because people won’t have enough time playing with this thing. Because there’s already enough interest that this is now a self-following process. More and more people are getting into it. And it’s not going to be just with the art market. That’s what I said earlier. Paul Jarley: Yeah. Eshwar Venugopal: I have a problem with NFT being more hyped with the art market, rather IBM and IBV they have been in talks about putting patents, the entire patent system onto the NFT platform or as NFTs. And therefore trying to evaluate how much each patent is worth by buying and selling, there’s an active secondary market for that. And also even Academia, if you think about it. Academia can use the form of an NFT. If you think about it, we pay fees to the journals, to get our work published, and the journals ask universities to pay subscription fees and the authors themselves, in many cases, won’t have the copyrights to these things. Rather, if you put it on a NFT, you actually give credit to these authors, you can monetize it if the patent becomes a successful or an industry source uses your model. Paul Jarley: What keeps you up the most at night about NFTs? Lory. Lory Kehoe: Look, I thought some of the points that were made earlier there were great around… I think it’s difficult to purchase, right? I think the friction associated with them, that will get solved, right? That’s just technology in an early stage and a new wave of technology. That gets solved and gets solved quite fast. And I think it already is beginning to, right? And that’s number one. Number two, I think on the energy intensive nature associated with them. I think that is a consideration. But I also see that getting solved as we move away from the complex consensus mechanisms in terms of proof of work, to proof of stake, to other new ones that’ll emerge. So, although I don’t have a solution right now, I do think that that will get solved. So that’s number two. And number three, I do think also as well, sometimes it could be, Eshwar was talking about this, it can be very expensive to actually purchase the token. Not the token price, but the actual process in terms of paying the gas fee or the associated fees to purchase it. So I think that’s another area that will get solved. As those three things move forward and get solved, that provides more people with an easier route in. And then also what happens, is that, you’ll have a bigger stock of NFTs to purchase. Not just art, not just luxury cars, but a range of things. And what keeps me up at night is probably, me sitting on the edge of my bed, being excited as to what’s to come, rather than fretting as to what will come each bar. Paul Jarley: Eshwar, what about you? Eshwar Venugopal: Well, Lory actually has covered one of the many things that keeps me up. Well, the first is, the overall impact that has. But the more important thing is the interaction of this digital economy with the existing one, how it is going to play out. Because it’s a matter of sustainability and stability over a period of time for… Because, yes, you have a new digital asset in place, but how is it going to impact the value of dollar over a period of time. It’s going to affect the larger economy, right? Paul Jarley: Yeah, it is. Eshwar Venugopal: Adoption is exponentially, especially, as I think Lory mentioned earlier, the COVID pandemic has just accelerated the way people adopt to digital assets. Paul Jarley: Yeah. Eshwar Venugopal: So the government has to step in and if they step in, and let’s say all of a sudden, they put a moratorium on Bitcoin or even the NFTs and they think that something is not right over here. What would happen to the existing money inside the system? Paul Jarley: Right. Eshwar Venugopal: To your point about stupid liquidity, a lot of people have put their money into the NFT system and Ethereum and all the other things over here. So what is going to happen over there? The interactions and the fall out, or the shake up before things settle down is, what both excites me as a researcher, but also keeps me up as an average citizen because I have a lot of money in NFTs as well. What will I do … Paul Jarley: Can they be hacked? Can NFT systems- Eshwar Venugopal: Yes. Yes. Paul Jarley: 10 years from are NFT’s going to be around and what are they mainly going to be used for? What do you think Eshwar? Eshwar Venugopal: I really wish they transform into something a little bit more reasonable. I wish they are not focused on just artwork and there’s a better way to mint these NFTs. My problem with NFTs is that it’s expensive, number one, and it is highly carbon intensive. Paul Jarley: Yeah. Eshwar Venugopal: So we cannot sustain a world where we are burning carbon so much just for the sake of digital art, even though I have high praise for art. So I hope that things change and we find a better technological way to implement these things and have artwork. But there are much, much bigger applications or use cases there for NFT. One of them is the patent system, the other one could be academic publishing, knowledge sharing. I’m hoping that the system would change from what it was. It’s a tie now I want to want it to become an actual thing. Paul Jarley: Carla, what do you think. Do you think artists are going to be dabbling in this 10 years from now? Carla Poindexter: I think so. I think it’s complicated now. I think the safety factor, the understanding of that clearing house that we talked about earlier on before Lory got in. Where does one go to even create that contract and create that token? How does that entity, the Christie’s or the intermediary, how does that all work? And I think once it becomes easier for people to understand, it’s a little bit like cryptocurrency right now, what are we going to really purchase a fraction of Bitcoin? Or, what was it, Doge? Paul Jarley: Dogecoin. Carla Poindexter: The Elon Musk you know. Paul Jarley: Oh, right. Carla Poindexter: Oh my gosh, it broke in half overnight. So I don’t know, I think we need to understand more about blockchain technology that the every… The artists are not, like you said earlier, most of us tend to… We need a step by step process here and we have to feel that these things are safe because the art market has never been a safe place for artists. Paul Jarley: Lory. Lory Kehoe: In 10 years, it will be the NFTs for many different things. Certainly not just art, I think music is one area. I also think in 10 years on, what you’ll see is that, these pieces, these NFTs will be used as financial instruments. I think what tends to happen at a retail level is that as more people adopt pieces of technology… And we saw this in Bitcoin, it happened at a retail level, and then eventually it reached a certain scale and then institutions really started getting interested in it, and then the regulators have to get interested in it because of the impact to the overall financial system. With NFTs, if it reaches a certain scale, it will then be, okay, is there an opportunity here, at an institutional level, to help, for BNY Mellon, for our clients, we’ll provide services around NFTs. What other purposes can those NFTs serve? If we’re custodying them, it goes back to that collateral point. So I don’t think that’s going to be today or tomorrow, but I think that’s something that will happen over time. I think we’re at the start of the journey, if anything, we’re maybe coming towards the beginning or the end of the beginning, but we’re no means at the beginning of the end when it comes to NFTs. Paul Jarley: It’s my podcast, so I get to go last. New technology is seductive. It gets you thinking about endless possibilities. Techno geeks creating and spending millions on digital art is a bit like fashion designers creating originals for the Paris runway. The designers and models get a lot of publicity, but your spouse ain’t wearing that on date night. It’s not practical. When moving from theoretical possibility to practical solution, I like to ask two questions: first, which problem does this solve? And if it does solve the problem, is this solution economically efficient? The Fisher Pen company allegedly spent a million dollars developing a pen that could write in space, but astronauts used pencils. Carla and Eshwar helped me to understand what problem NFT solve for the creator. It allows them to capture some of the appreciation in value of their creation in the resale market. But as Carla noted, creators need to understand and trust that the private guarantor of this contract will still be around and able to enforce this agreement at the time of resale. And since fees are high and tokenization is environmentally irresponsible, it seems a good option only for a small number of relatively well-known creators, not the masses. Lory is a classic early adopter. He gave us three motives for potential buyers. Most fundamentally, NFTs have created a market by solving the ownership problem, you don’t want to purchase the digital equivalent of the Brooklyn Bridge from some scammer. Access and community are tougher sells for me. People want to be part of communities and will pay for access and exclusive events. But NFT seem a gimmicky solution to a problem with simpler known solutions like VIP tickets. This leaves access via fractionalization. Fractionalized tokens may make it easier than putting together a syndicate to purchase an expensive asset. But I’m not sure at what price point a fractional NFT is worth the cost of mining it. And there are a host of legal issues here that will need to be resolved. In the end, I favor an explanation for the rise of NFTs, offered by Anil Dash, one of its creators, in a recent article in The Atlantic. NFTs for high priced art represent one of the few places people holding a lot of cryptocurrency can cash in their investment. They can’t buy expensive yachts, they can’t buy Teslas, depending on the day, but they can buy high priced techno art from artists. This will allow famous artists to get richer and retain some of the rights at resale, but the masses of artists and investors, well, they’re likely to be left behind. Eshwar called NFT a toy, I would add, a toy for the rich, at least for the foreseeable future. Paul Jarley: So, what’s your take. Check us out online and share your thoughts at business.ucf.edu/podcast. You can also find extended interviews with our guests and notes from the show. Paul Jarley: Special thanks to my interim producer, EriKa Hodges, who can’t get rid of this gig fast enough, Kenny Butcher, who helped us make this podcast possible, and the whole team at the office of outreach and engagement here at the UCF College of Business. And thank you for listening until next time, charge on. Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.

After one of the deepest recessions in history, the U.S. economy still has roughly 10 million fewer jobs than before the COVID-19 pandemic began. While some say the economy is improving faster than expected and has seen significant growth in recent months, it could be some time before the U.S. returns to pre-pandemic highs. What will drive the economy back into recovery? And can it happen before 2022? Sean Snaith, Director of UCF's Institute for Economic Forecasting, explains his timeline and predictions for complete economic recovery. Featured Guests Sean Snaith - Director, UCF Institute for Economic Forecasting Episode Highlights 0:45 - Sean Snaith introduction 1:31 - Just how bad did it get in 2020? 4:54 - How Sean Snaith describes the economy today 7:01 - The U.S. government's response 9:46 - Will new stimulus packages be effective? 11:41 - How did Florida fare compared to the U.S. economy? 16:06 - The future of the U.S. and Florida economies 18:18 - Economic recommendations for the Biden Administration 22:48 - New taxes? 25:21 - Are the "Roaring '20s" going to be a thing? 26:54 - Paul Jarley's final thoughts

As employees continue to work from home, leases are running out and corporate office space is in jeopardy. Managers around the world have to decide if it's more efficient to keep their offices open, downsize, or go entirely remote. Seven months into this pandemic, the question remains... is working from home really going to stick? How is the commercial real estate industry handling the move to remote work spaces? Can professionals truly replicate the "sense of space" that comes with collaborating in person... from home? And five years from now, what will the typical workday look like? Featured Guests Steve Garrity - Vice President, Highwoods Properties Nick Poole - Managing Director, JLL Yvonne Baker - Regional Managing Partner, Franklin Street Bill Moss - Director, Dr. P. Phillips Institute for Research and Education in Real Estate at UCF Episode Highlights 2:34 - The state of commercial real estate pre-COVID 4:25 - The rise of the open offices 9:19 - How the pandemic is changing office space 12:07 - The importance of "a sense of space" in collaborative work 13:44 - How working from home affects company culture 18:30 - Will companies downsize their offices? Eliminate them entirely? 23:04 - Permanent fixes for temporary problems 25:27 - Will everyone be back in the office in two years? 28:01 - Dean Jarley's final thoughts

Two researchers at UCF are developing a cough drop that can reduce the spread of COVID-19 by making saliva heavier and stickier - it makes sneeze and cough particles fall rather than float. But is there really a market for such a product? Paul Jarley talks with researchers Michael Kinzel and Kareem Ahmed to find out the science behind the lozenge, how soon it could hit store shelves and the similarities to products you already have around the house. Featured Guests Kareem Ahmed - Assistant Professor, College of Engineering & Computer Science, Department of Mechanical and Aerospace Engineering Michael Kinzel - Assistant Professor, College of Engineering & Computer Science, Department of Mechanical and Aerospace Engineering Cameron Ford - Director, UCF Center for Entrepreneurial Leadership Michael Pape - Dr. Phillips Entrepreneur in Residence; Lecturer, Management Episode Highlights 0:49 - The origin of the COVID-19 cough drop idea 2:58 - How mechanical engineers got into cough drops 5:18 - How can the COVID cough drop make it to stores? 7:58 - Legal hurdles for the COVID cough drop 11:53 - Who is the target audience for this? 16:27 - How long will it take to get to market? 25:42 - ...Ketchup? 28:48 - What are the learning lessons for students? 33:07 - Final thoughts from Paul Jarley, Cameron Ford and Michael Pape

A media darling of sorts, UCF economist Sean Snaith’s presentations across Central Florida tend to be an 80/20 mix of economic forecasting and comedy sketches. But the Director of the UCF Institute for Economic Forecasting means business – his forecasts have been named one of the nation’s most accurate. This episode takes a “behind-the-scenes” look at Snaith’s forecasting methods while exploring his thoughts on the state of the Florida economy in 2020.   Featured Guests Sean Snaith – Director, UCF Institute for Economic Forecasting Erika Hodges – Director, Communications & Marketing, UCF College of Business Jessica Dourney – Assistant Director, Outreach & Engagement, UCF College of Business Episode Highlights 1:48 – Paul Jarley introduces Sean Snaith 2:37 – What the Florida economy is going through 3:28 – Commentary from the “Mean Girls” 4:14 – Florida’s housing market 07:04 – Sean Snaith: “King of the Nerds” 11:09 – Growth by industry in Florida 15:06 – Job and population growth in the state 17:01 – Questions from the audience 21:30 – Paul Jarley’s final thoughts   Episode Transcription Paul Jarley: Sean Snaith is central Florida’s favorite economic forecaster. Sean has been named one of the nation’s most accurate forecasters by Bloomberg News and as appeared on pretty much every media outlet from the Wall Street Journal to the BBC. But he has some very strange hobbies. Sean Snaith: If you’ve heard me speak over the years, you know I have an affinity for SkyMall. Paul Jarley: You remember SkyMall, It’s the defunct inflight shopping catalog that survives on the internet. Well, Sean, he might just be their biggest fan. Sean Snaith: The Dean called it a fetish, I think, last year, which, that sounds a little dirty. Paul Jarley: He’s also a bit of a diva who dreams of becoming a viral internet sensation? Sean Snaith: So, everybody can’t be a social influencer though. I mean, I think that’s where they all want to be. I do too. Quite frankly, I’ve got 1300 on Twitter. I don’t know what I can offer to them, but. Paul Jarley: And he hates being handled, especially by the college’s so called mean girls. Sean Snaith: There’s a group of, largely women, in the college of business and there’ll be shaking you down for money here at the end of the event, but I like to refer to them collectively as the mean girls and they sort of followed me since middle school and they make fun of my clothing and my glasses and things like that. Speaker 3: I don’t know if you’ve seen his PowerPoint slides, but we think they date back to the mid 1980s. Paul Jarley: Is Sean Snaith really worth all this trouble? Are those forecasts right? Or do those mean girls have a point? Speaker 4: That is so fetch. Speaker 5: Gretchen, stop trying to make fetch happen. It’s not going to happen. Paul Jarley: This issue is all about separating hype from fundamental change. I’m Paul Jarley, Dean of the College of Business here at UCF, I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? Onto our show. Paul Jarley: This podcast is a condensed version of a talk Sean gave at our recent Dean Speaker Series, where he provided his economic forecast for both the US and Florida economies. Since Sean had already weighed in on the US economy as part of our podcast on whether the 2020 recession is really a thing, we focused today’s show on his predictions for the Florida economy. We’re calling this the mean girl edition because I’ve given the team the opportunity to take you behind the scenes and play some of Sean’s comments into context. Listen in. Sean Snaith: No, no wohoos. Nope. Well thank you for coming out. I see a lot of familiar faces, all members of the greater Orlando masochist club apparently. But welcome back and happy new year. I appreciate you getting up early to listen to my nonsense here for a little while. But we just released our Florida Metro forecast and I sort of recounted my youth, growing up, literally, physically, I was always kind of tall and in order to get tall you have to grow. Sometimes that occurred in big spurts and it caused me a great pain in my knees. Right? Like I would get these lumps and it just hurt because of the growth plates or whatever. I’m not a real doctor, but the condition is called Osgood Schlatter disease. So I think what Florida is going through right now is an economic version of Osgood Schlatter, growing pains. Our two achy knees are the housing market and our transportation infrastructure and they’re not unrelated. Paul Jarley: We begin our mean girl commentary with Jess and Erika. They work with Sean on a regular basis and they’ve got some stories to tell about our favorite economist. Jessica Dourney: His wardrobe is either, I woke up, I’m going to speak at a presentation dressed to the nines with a suit and tie, or it’s Birkenstocks on with socks, cargo shorts and an old tee shirt from North Dakota where he’s from. Or where he lived. Erika Hodges: He likes a good crowd. To his credit he definitely, he draws a pretty good crowd on his own. But yeah, he is aware of how many people are in the room, and he asks about that often. Jessica Dourney: Well, he’s also been called the silver fox before. Paul Jarley: Jess and Erika are two of the original college of business mean girls. Back to the presentation. Sean Snaith: So the housing market, things are going great in the sense that prices continue to rise at a pace more than twice overall inflation. You can see sales here above where they were at the height of the housing bubble. Median prices continue to rise. They’re higher than they were at the height of the housing bubble. So this is a pretty, pretty solid housing market. Sales continue to rise year over year. Prices, you can see, statewide up almost 4% year over year. Again, is this another housing bubble? I get this question and we’ve probably addressed it the past three years and I’m going to give you the same answer. No, it’s not a housing bubble this time around. I mean I know Florida, man you can’t put it past them to do it to themself again. Sean Snaith: But a 3.6 months of inventory, and I don’t know if my colleagues in the real estate school would agree with me, but I think six to nine months depends when you talk to, of inventory, is a balanced housing market. So anything less than that, six months of inventory is what the realtors in the room would call a sellers market, to what the economics professors would call a shortage. In markets where there’s a shortage, what happens to price? Yeah, that’s right. You didn’t know there was a quiz there was. The bigger the shorters, the faster prices rise. So if you look around the state at different metropolitan areas, Tampa’s a good example, their inventories under three months, and they have some of the fastest price appreciation in the state. So there is a real shortage in the housing market. Sean Snaith: The other thing that’s absent this time around that was there in 2004/05/06 that really fed the beast, if you will, is easy money. You cannot just walk in and get a mortgage the way you could in 2005 without a job, without assets, without anything. So in absence of that easy finance and in light of the fact that we do have a real shortage, the price appreciation that we’re observing to me is not something that’s alarming. It’s just a sign of an absence of supply. Sean Snaith: Here in Orlando, it’s even worse. 2.6 months of inventory. Population growth remains very strong. Economic growth, job growth, all very strong in Orlando. It is one of the fastest growing job markets in the country, certainly in the fastest in the state of Florida. That continues to put upward pressure on prices. This low inventory. We have an influx of population. We saw from Puerto Rico, the wake of fiscal economic crisis compounded by Hurricane Maria, and now they had an earthquake. Geez, I don’t know how Puerto Rico got God mad, but some something’s not right. But I wouldn’t be surprised to see another influx, in the wake of this latest natural disaster. Paul Jarley: Jess and Erika, there’s some of Sean’s toughest critics, but it’s all in good fun and they try not to hurt his overly sensitive feelings. Jessica Dourney: When we had the AUBER conference, we went to Medieval Times and he was actually knighted and was known as the homecoming King of the Nerds. So the nickname has stuck, King of the Nerds! Paul Jarley: Most economists, by the way, well they don’t really have feelings, but Sean, back to the presentation. Sean Snaith: All this population into the area, it continues to put pressure on the housing market. So affordable housing is one of the major challenges that we face right now. It’s not unrelated to transportation. How did we get so far behind the curve? Well, builders in 2013/2014, and again in 2015/2016, sort of plateaued when it came to housing starts, and you could see that in the bars. There’s this kind of a flattening out for a year or so and then they picked up again. But during that entire time period, the demand for housing continued to grow robustly. From 2012 on, Florida was outpacing the national economy in terms of GDP growth, in terms of job growth, population growth. Of course in the state we’re back close to that a thousand new Floridians a day, and that all feeds demand for housing and those are the underpinnings of it. But supply just didn’t keep up. Sean Snaith: So now we’re behind the curve, still playing catch up. Ultimately it’s when that supply gets to the market that’ll help alleviate, and dampen some of that price appreciation. Statewide, as I said, population growth is solid. I mean if you had a coin on one side it was population growth, the flip side of that coin would be economic growth. More people in a region means more economic activity it’s just by default. Sean Snaith: This river of a thousand Floridians a day has three tributaries, right? You’ve got domestic migration to the state, whether it’s retirees moving down to the villages or Margaritaville or whatever, jimmy Buffett’s new retirement. That kind of makes me sad in a way, that Jimmy Buffett’s in the retirement village business, right? I don’t know. And migrants coming to the state for job opportunities, right? So we’ve got that domestic migration, we talked about migration from outside the US, whether it’s from Puerto Rico or for international locations. Florida continues to be a magnet for South and Central American migrants. Then lastly, birth rates exceed the death rate in Florida now. So we’re making Floridians faster than we’re losing them. So all that feeds into continued economic growth, really, for the foreseeable future. Paul Jarley: You might be wondering how Sean has time to process all that economic data. Well. He’s got an army of students working for him. Speaker 8: Hi, I’m a non-identified student researcher under Dr. Snaith at the Institute for Economic Forecasting. Paul Jarley: Only one was willing to go on the microphone. Speaker 8: Researching under Dr. Snaith has been a great experience. It’s quite sophisticated, really. The most important thing I’ve learned from Dr. Snaith is when in doubt, use the magic eight ball. Paul Jarley: Magic eight ball or not. Sean’s economic forecasts seem to be pretty accurate. More on that later. Sean Snaith: Unemployment in the state is even lower than it is nationally. You know the last time we got unemployment rates this low in Florida was at the height of the housing bubble, right? This unsustainable sort of crazy phenomenon that was going on, drove unemployment down to 3.3%, now there’s not really anything crazy and unsustainable. We just have a strong economy pretty much across the board and it is a driven the strength in the state’s labor market. State GDP continues to grow faster than what is the case for the United States and we’re forecasting that that will continue here in Florida. Payroll employment, solid growth. Florida’s not quite growing twice as fast in terms of jobs as the national economy, but it’s close to double the national rate of job growth. Sean Snaith: So again, this is a really pan sector in the economy. This is not an unsustainable bubble as was the case of 2005 and six, this is just a really strong economy that we have. I’ll quickly go through some of the sectors here. The construction sector, that’s one of our fastest growing sectors, it’ll continue to be going forward. All you have to do is look out the windows to see evidence of it here in central Florida billions of dollars of infrastructure projects, billions of dollars of private investment projects I mean, it’s hard to find a major road anywhere in this area that doesn’t have some construction going on right now. So couple that with the housing market, and the construction sector remains quite strong. Professional business services. This is the fastest growing sector right now in Florida’s economy. Most of you probably fall into this particular sector, architects, accountants, white collar jobs, high skilled, high paid jobs, and they’re growing rapidly. Sean Snaith: Leisure, hospitality. I mean tourism is just, it’s been pretty remarkable. It was the first sector to start to grow again after the great recession ended back in 2010. People during the financial crisis, the great recession, “Hey dad got laid off and his 401k fell 50%, what are you going to do now? I’m going to go to Disney World.” No you’re not, those trips get postponed in those situations. That kind of leisure spending is a low hanging fruit when households are tightening their belt. Sean Snaith: But once the economy stabilized in 2010 and things started to turn around, the recession ended, the tourism picked back up and hiring in that sector took off. It’s remained robust really ever since. This is in the face of a lot of headwinds, right? We’ve had hurricanes, we’ve had Zika, we’ve had red tide. We’ve had all kinds of things that, that should have taken a little wind out of tourism sales. But that has not been the case, and this will continue to be a cornerstone to the state, and certainly our region’s economy. Sean Snaith: Financial activities. We’re finally seeing in forecasting some job growth in this sector. I was on for a long time, the Dodd-Frank soapbox, kind of rant and raving about that. Now it’s just mostly the kids that are on my lawn that bothers me. But what we’re seeing and this administration is addressing the regulatory environment in a way that hasn’t been done for a really long time. So the first year of the administration we saw 22 deregulatory acts for every one regulatory. Year two that ratio was 13 to one, year three it looks like it’s about 20 to one, including addressing some of the issues with, with Dodd-Frank. Sean Snaith: I mean a regulation that large and that complex always, always brings with an unintended consequences. So the impact, for example, on small community banks have this increase in compliance costs. I just don’t think was part of the thinking back when this law was put together. I mean, I think it was put together, I don’t want to point fingers, play politics with it. It was put together in a time of fear and uncertainty and we had gone through this horrible crisis that nobody wanted to see repeat. So at the time when you’re doing something out of fear and all that emotion, anything that contributed to this crisis, “We’re going to come up with a new Bureau and a new rule and a new regulation and we’re going to stop it.” Sean Snaith: Next thing you’ve got a 2,600 page law, that still isn’t fully implemented by the way, signed into law in 2010. But now that’s being addressed, the financial sector, I think, is going to start to see some growth. Over the past 10 years, I believe, there’s only been three new banks in the entire State of Florida. That’s a problem in a market economy. You need new entrants into every sector to drive competition, to drive innovation. But I think regulation kind of choked some of that off. Sean Snaith: So looking forward, over the next three years here, average job growth, you could see professional business services, construction, hospitality, health services, I think will continue to grow. I mean, we’ve got an aging population. As I said, you need a doctor for every body part when you get older. So the demand for health services is going to continue to grow in Florida. Paying for it, we still haven’t figured that out yet, but I thought the Affordable Care Act was a solution. But now we’re saying that’s not it. So I don’t know what the answer is exactly. But the demand is going to drive job growth in that sector going forward. Sean Snaith: Looking across the 12 metros that we currently forecast, you could see that Orlando has very solid population growth. Lakeland is booming. I don’t know if you’ve been to Lakeland lately. I know, I know. It’s not all just Lego buildings. There’s actual big cranes and real buildings going up because Lakeland in position between Orlando and Tampa and they’re really going to benefit from the growth in those two Metro areas, and currently are. Job growth, you could see, well above what the state is producing we’re forecasting for Orlando. I mean this is a really good economy. Sean Snaith: I don’t want to jinx it, but I mean it’s hard to find a flaw. I mean other than our achy knees of transportation and housing, the rest of the checkup, the bill of health is pretty, pretty good. I wish I could get the same from my physician. So looking here at our Florida County Metro area you could see growth even faster than what we’re forecasting for the state, much stronger and really across sectors. I think this is likely to continue. I think there’s enough momentum here in central Florida barring some sort of black swan event to carry us for several more years of pretty solid growth. With that I’ll happily take some questions or go back and sit in my office. Yes. Speaker 9: So you listed leisure and hospitality as a growing sector. I don’t know if you read Orlando Says No, but they had a nice little segment series called Laborland, which kind of went into affordable housing and many who work at the parks and leisure can’t afford to stay in homes. You saw Universal Orlando pledge $100 million affordable housing, at the same time receiving some money from the county to build roads, which is probably not related to each other at all. But the question becomes, is affordable housing a significant block to the growth that you’re talking? Because if I can’t afford to live where I’m going to work, then I can’t work properly. Sean Snaith: Right. I mean, I think it’s a bump in the road. I don’t think it’s necessarily a road block, but it is something that that needs to be addressed. Now Disney has announced a move into the $15 minimum wage, I think Universal’s done the same. I don’t necessarily believe they’re doing that out of the goodness of their theme park hearts. I think this is a strategic move to make sure they have the workforce in place to satisfy an increasingly larger customer demand. Sean Snaith: But the transportation, I mean we have to, first of all, you need affordable housing. Typically to get affordable housing. Right? If you look around the country at major metros as they’ve grown, where do you live in DC if you want affordable housing? Georgetown? No, you go out to West Virginia. Well how do you get from West Virginia to your job at the Veterans Affairs Department? You take a train, you take the metro, you take something. So we’re piecing it together, right? We’ve got SunRail, we’ve got Brightline. I think public transportation in central Florida really needs to be addressed, and have a source of dedicated funding so we can get those people who might have to come in from Lakeland to Universal or Disney. Sean Snaith: If you look at surveys of consumer expenditures for the lowest 50% of US households, the two largest components of spending are housing and transportation. So those two things can really, I think, improve the plight of folks in Laborland, as that story called it. Yes. Speaker 10: Could you talk a little bit about the upcoming election? Sean Snaith: Oh boy. Speaker 10: Or is that next meeting? Sean Snaith: I don’t know. What’s college is political science in? Maybe we should get those suckers. Yeah, I’ll talk about it. Sure. My speaking career here, it’s been about 20 years now, I started doing this- Sean Snaith: I’m going to go out with a bang. You might want to videotape this and you could tweet it, and I’ll be fired before lunch. Speaker 10: You know I’m not the only one that wanted to ask. Sean Snaith: Yeah, of course. But no. So I mean, in my speaking career you never really know your audience. I mean, I kind of know some of you, but I mean you don’t, so you stay away from politics, you stay away from sex, you stay away from religion. Right? Some people are Democrats, there’s all kinds of perversions in the world. See actually, it depends where I’m speaking. I change the party, right? So when I’m in Kansas I say Democrats, when I’m in California, I say Republicans, it gets the same laugh. Sean Snaith: No. My feeling on this, I think incumbency is a big benefit. I think that the economy is particularly strong and unless something really goes off the rails, I would be surprised if the president was not reelected. But who knows? I mean, I sure surely didn’t predict he was going to get elected the first time around. So we’ll see. I mean I think politics has really changed dramatically. It used to be right, it’s the economy stupid. That was it. I’m not so sure. But if it’s the economy then I think he’s in a pretty good place. Speaker 11: Well, thank you Sean. Sean Snaith: Yeah. Appreciate it. Paul Jarley: The mean girls have a point. Sean is high maintenance, but in my world, like many others, notoriety has its privileges. Sean has been named one of the nation’s most accurate forecasters by Bloomberg News, and has appeared on pretty much every media outlet from the Wall Street Journal to the BBC. Who cares if it’s because of a magic eight ball? Whatever method he’s using, it appears to be… “fetch.” Paul Jarley: Sean’s ego doesn’t need inflating, but let’s hope he’s right about the Florida economy in 2020. If so, the roaring ’20s will be off to a good start, and my May graduates, well they’ll have plenty of job offers. What do you think? Check us out online and share your thoughts at business.ucf.edu/podcast. You can also find extended interviews with our guests and notes from the show. Special thanks to my producer, Josh Miranda, and the whole team at the Office of Outreach and Engagement here at the UCF College of Business, and thank you for listening. Until next time, charge on. Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.

A lot of people don’t really like change. But can they be coached or managed through the change process to understand and truly appreciate its benefits in the workplace? Guest host Thad Seymour, Interim President of UCF, introduces a panel of staff members from Addition Financial to discuss their recent re-brand initiative and what they learned from undergoing a massive, company-wide change.   Featured Guests Thad Seymour, Ph.D. – Interim President, University of Central Florida Jordan George – Head of Leadership & Talent Development, Addition Financial Christina Lehman – Marketing Manager, Addition Financial Kerby Pickens – Manager of Leadership & Talent Development, Addition Financial Episode Highlights 0:39 – Introduction from UCF Interim President Thad Seymour, Ph.D. 2:26 – The difficulty of change within an organization 8:22 – How to implement change 16:27 – What makes people resistant to change? 19:34 – “How Stella Saved the Farm” 29:20 – Common mistakes to avoid as a leader 40:27 – Addition Financial’s experience with change 46:36 – Thad Seymour’s final thoughts   Episode Transcription Jordan George: We’re really excited to dive into this topic around changed management. Something that I know that you have overseen a lot in your time at UCF and certainly we’re experiencing a lot internally right now with the name change from CFE to Addition Financial. Getting ready for an acquisition in the next couple of months here. So as we think about change and how disruptive it can be, why is effective change management so difficult? Paul Jarley: Well, the short answer is people don’t like change. It’s uncomfortable for them. But if you drill down into it, I think it comes down to a few things. If your change is very fundamental, a lot of people came to the organization, they were attracted to it maybe because of a specific mission or set of values or culture that you have. And if they see that change is threatening those things, they can have a very emotional reaction to that. People care deeply about those things. And they feel like they fit in an organization. And if they think that change threatens their fit with the organization, that can be a pretty traumatic experience for them. Paul Jarley: Secondly, organizations develop compensation systems and other kinds of reward systems that are in place to encourage the kinds of behaviors and outcomes that they want. And people know whether they’re winning or losing under those systems. Or perhaps they’ve come to be comfortable with wherever they are kind of in the hierarchy of that system. And if those initially proposed change is going to threaten that they get pretty nervous about that. That’s their livelihood, at one level, and that can be very disconcerting. Another real problem here is generally in a change process, the costs of the change are borne first by people. They’re really well known and they’re at a minimum irritating and maximum kind of threatening to their security. The benefits are all about the future. And those are kind of fuzzy and they’re kind of unknown. Paul Jarley: So unless you have a change that’s being motivated by something that’s really compelling and urgent and threatens the entire organization, and it’s just going to force a change, people tend to focus on the cost side of the change, rather than the benefit side of the change. If you’re a leader in the organization, the hardest thing I think it is for a leader to do is to get people to see a future they have yet to experience. That’s really, really difficult for people. And if they don’t see that future experience as something that’s going to benefit them personally, they’re going to resist it. Jordan George: I like what you said about, we receive the cost of the change before we receive the benefits of the change up front. There’s that initial reaction of seeing what this is taking away or how this is going to make my life more difficult, or how I’m going to have to adjust, even if ultimately the outcome down the road is really going to be a positive one. I remember we went through that a couple of years ago, we went through our core system conversion and everybody who was here then just let out of collective sigh. But it was a really stressful time for a lot of people who had been here for a while, because you’re basically taking the core system that everybody operates on day in and day out, and changing it up. So your day to day is changing, even though the new system was radically better. There were a lot of people who were just really hesitant to let them go. Paul Jarley: Absolutely. I think that happens a great deal. And no leader comes into it to announce a change initiative and says, “We’re going to work less now.” Jordan George: I’ve yet to hear Kevin Miller say that. Paul Jarley: That’s just not how that works. Jordan George: Yeah, right. So Christina, you came in at a time when Dean Jarley was talking about how the culture shift changes and how people as they come into the organization may be attracted to one thing, then that’s changing. And that seems a little threatening. But you’ve come into the organization at a time when we were already changing. You came in right at the height of our brand redesign. So what was that like for you? Christina Lehman: I did. I just started six months ago. So I started here as CFE but entrenched in the middle of this rebrand. I’m not only learning about CFE and me, but then I’m also in the process of who’s Addition Financial and what does that mean for us as an organization because I’m learning two organizations at the same time. But there’s so many people, so many team members in our organization that have been here for so many years. So I can’t even imagine how that change must have been for them. And I think something that makes it easier is just trust. And Kevin Miller is really big on communication, and communicating, and speaking about the change, and he’s wrote so many emails and so many week and x about this, and I think that really helps the growth and understanding of why we did it. Paul Jarley: Well, that’s that’s absolutely true. The first part of any change process is to explain to people why you’re doing it. And honestly, you have to explain that to them until you’re sick of hearing yourself explain that to them. And then you should explain it to them some more. Christina Lehman: Yes. Paul Jarley: That’s just about how that is. The why is really important. And the deeper the kind of change that you’re going to make, the more compelling the why needs to be right. It’s one thing to say we’re going to change how we’re doing certain things. And people might be uncomfortable like that, like with your IT system. At least they knew that the old system might have been terrible, but they understood the rules of engagement with the old system. And now you’re changing the rules of engagement, that’s going to cause some friction. But that’s a very different thing than coming in and to people, “We’re not going to be something different than we were before.” Kerby Pickens: And so, Dean Jarley, change can be seen as something disruptive or something scary. So how do we implement successful change? Paul Jarley: Well, it’s a long process to be quite honest about it. And it’s one that’s fraught with a lot of difficulty, but explaining that need for change is kind of the first step. What’s the compelling reason for the change? And sometimes that coincides with a leadership change. Frankly, that happens a lot. And it can happen for two different kinds of reasons. Sometimes the board will identify a need and understand that they needed a different leader from the kind of leader that they had before in order to implement that kind of change. And it’s not uncommon in that situation for that leader to come from the outside. Sometimes they come from the inside. But it’s almost certainly the case that the new person is the opposite to the last person. I was the opposite of my predecessor and I’ve known Kevin and Joel a little bit. Yeah, not the same guy. We can all agree. They’re just not the same person. I know I interact with both of them very differently. Right. Paul Jarley: If you come from the inside, you said something really important a minute or so ago. People kind of know who you are and there tends to be more of a trust factor associated with that. When you’re a leader and you come in from the outside nobody trusts you. Christina Lehman: Yep. Jordan George: Christina goes, “Yep.” Paul Jarley: Well, that was my situation. So one of the things in that situation that you have to do is you have to borrow somebody else’s trust. And the way that you do that, once you’ve got your idea for change and why it’s important, and you can articulate what that is, you have to get your top leadership team kind of aligned on. So you need to hash out any concerns that you have before you’re going to take that public. If you’re coming in from the outside, you should do an assessment of who on your leadership team people do trust. Because you know what, as soon as you say something, they’re going to go right to that person. Jordan George: Yeah, that’s a great point. Paul Jarley: And a lot of times they’ll run to that person because they want to test whether or not they can say something to me as the leader in that situation. So if that person isn’t on board, that’s a real problem. But even more generally, inconsistency is a killer. For those of you who are parents, how many times does a kid try to split mom and dad? Jordan George: Yep. Kerby Pickens: Yep. Paul Jarley: You’re going to have that exact same dynamic here. That doesn’t mean everybody’s going to agree on every detail. That’s not going to happen. And you want to be really careful here because people have a tendency to tell the leader what they think the leader wants to hear and that’s a really bad situation to be in. So you kind of have to have that sweet spot where everybody understands what the goals are, and the need for change, but can be kind of flexible on how you get there. So how do you build a culture, whether it’s within a team within an organization, where people tell the leader the truth, instead of what the leader wants to hear. Paul Jarley: I know you mentioned trust and trust is a big component of that. Obviously, before you get to that trust, it’s going to be really difficult for people to come up and be honest with you. But as you move through that process as a new leader coming in, and maybe Christina, you’ve experienced some of this and you want to weigh in on it, or Kerby. How do we, within our teams move beyond people telling us what we want to hear or what they think we want to hear, to really being honest with us and giving us the feedback that we need in order to make the team and the organization better? You want to reward honesty, not punish it. That’s kind of the short answer to that. Paul Jarley: You can also sometimes identify by talking to your people who sort of more prone to do that anyway. If you can find out who they are putting them in public forums, or if they’re willing to do that and let others see how you react to that. That’s not a bad thing. Jordan George: All right. That’s the opposite side of the coming in and borrow someone else’s trust, and then find your most vocal person and let them be the mouthpiece for the rest of the team that may be too afraid to say. Kerby Pickens: But I just had an interesting point come through the chat. It’s someone asked, “But when does that sort of truth telling become where maybe you are detracting from a team or you’re starting to turn into maybe not being a team player.” And I did that in sort of air quotes. I think maybe that’s a fine line. Paul Jarley: Well, that will depend on your leader a bit, but I guess I would characterize it this way. Every organization should have things that are not negotiable. If you do not sign on to those things, you just shouldn’t be here. And those tend to be the values of the organization. Generally speaking, sometimes there’s some key behaviors associated with those values too, but we can argue all day about how to get there. That’s an entirely different matter. And that’s the line I’ve always kind of used when I’m managing up and I’ve been managing down. Kerby Pickens: I think that’s a really important point because we’ve kind of mentioned leaders in the scenario, but we’re not talking about maybe leaders of people, but everyone, you are a leader of yourself, of your daily work. And so, managing up is the term where you maybe see a need and using your influence in a way that is maybe outside of what you have jurisdiction over. Jordan George: Yeah, absolutely. Paul Jarley: Well, because every organization has key influencers in them. There’s two kinds of authority, there’s formal authority, and then there’s informal authority. And during any change process, it would be a huge mistake not to understand where the sources of informal authority are, and making sure that you’re in touch with those processes. That’s really, really key. Jordan George: That was one of those things that I learned the hard way very early on in my career, was the value of those informal influencers. So if you’re listening to this today, and you’re saying well, I’m not a manager, I’m not a formal leader in the organization, I don’t really think this change management stuff really has a lot to do with me. Really evaluate the role that you have culturally on your team or within your branch within your department. A lot of you that have been here for quite a while, we’ve got more than a third of our organization that have been here 10 years or more, several people that have been here 25, 30, 35 years, think about the role that you play in swaying the opinion of those around you. And if your immediate reaction is to be critical to something others are looking to you to see what you’re going to do. You may be not indirectly influencing them on that. And likewise, if you’re really passionate and supportive of something, the same is going to be true there. Paul Jarley: So a really good example of that are administrative assistants because administrative assistants know everyone, everyone interacts with them. They have really diverse network. And so yes, they can have a lot of influence on what people think. Jordan George: Oh, yeah, no one gets to Kevin without going through Jeniffer. We know that- Paul Jarley: Her name is Tina in my organization. Christina Lehman: So what might make people resistant to this change, or any change? Paul Jarley: Well, I think there are a few things that come to mind. And these are very closely related I think. Change generates uncertainty. People hate uncertainty. They really, really hate it. And that uncertainty can come in a few different ways, really. They may be uncertain about the role as the role evolves, and they’re not really sure what to do. They may feel that they’re ill equipped for the tasks ahead and usually in that situation, a combination of training and clear instructions from supervisors is really, really kind of key. Sometimes people have nagging concerns about whether the plan will work or not. If they don’t see quick results, for example, they might start to doubt the plan. So it’s really, really important in any change process for the leader to have a few very simple measures that everybody agrees, will show what you’re winning or losing. They don’t have to be perfect measures because no measure is ever perfect. Paul Jarley: And again, this is more of an emotional response than it is an intellectual one. So if you can find just two or three measures, I wouldn’t say more than three, that everybody agrees is an indication of whether you’re winning or losing and you can use that data to show people where you are in that process. That’s really important. I think milestones can be really important to the extent that the leader can say things like, “We’re going to engage in this process. And when we get to A, then we’re going to do B. And when we get done with B, we’re going to do C, I’ll give you an example. Paul Jarley: When I first came to UCF, I fired a department chair and I shut down their PhD program. Those are two of the most disruptive things you can do to a group of people. I brought them all together, and I said, “We are going to engage in an external search for a chair, we are going to get that done in seven months. When we have that new chair, that new chair is going to sit down with all of you and create a new plan to make your PhD program more effective than it is now. We’re going to go out and hire two more senior faculty over that next year. And then we’re going to reopen your PhD program.” We did every one of those things on schedule and on time. Jordan George: Just laying out a clear framework for them to know what the expectation was moving forward. And I think what you did there too, was you gave them a little bit of a sense of when normalcy would return, maybe not in the same way, because obviously, there were some things you needed to change, but you let them know clearly when they were going to get back to that world that they were so used to. Paul Jarley: So another one. Sometimes the change process requires you to bring in people who are really different than the people that you have. So one of my favorite books of all time is called How Stella Saved the Firm. And How Stella Saved the Firm is a book written by two Harvard faculty members as a children’s book. And it takes you through the innovation and change process. And so, the farm is run by animals, short story. The farm is run by animals and the long time owner of the farm is sick. And his daughter becomes the head of the farm. And she recognizes pretty early that the farm in financial trouble. And it has being run by a project manager who has been there a very long time and has sort of set in his ways. Paul Jarley: And so ultimately she asked for suggestions from the employees. Stella is a donkey and Stella had been on vacation in South America, and she met alpacas. And she knew a little something about the luxury fair market. So the daughter brings in alpacas, well, nobody likes the alpacas. They’re kind of smelly. They stand in the fields by themselves, no one will eat with them. Long story short, the alpacas saved the farm. By integrating people who are really different too at a very different thought process can be really fun. Kerby Pickens: When I think talking to people resistant to change with our brand change and Christina you kind of deal with this externally, our members who are saying, “CFU is was just fine.” Christina Lehman: Yes, I help run our social media and about a week after our change, there was a lot of resistance. And I think going back to your story about Stella Saves the Farm, is the comfort zone. And the comfort zone is such a dangerous place. It’s a comfortable place, and it’s a nurturing place. But it’s a dangerous place because if you’re in your comfort zone, you’re not taking any risk, calculated risks. So that’s a scary place to be and that’s when change doesn’t happen. So in your example, they were in their little comfort zone, they’ve been doing the same thing for 20 years, and then this person comes in and wants to disrupt it. And it’s very hard to get out of that comfort zone. Jordan George: But once you get out of the comfort zone, that’s when the growth occurs, that’s when you’re stretched and pushed and challenged a little bit. Christina Lehman: Well, the comfort zone leads to mediocrity. Jordan George: Yeah, exactly. Christina Lehman: It’s essentially what it does. Jordan George: Its complacency. It’s just, “I’m very comfortable in my cocoon here. I think I’ll stay a while.” But it’s a fine line between… I had a professor that described it as there’s really three phases, in the comfort zone, there’s discomfort, and then there’s alarm and you don’t want people in alarm. Or at least not for very long Paul Jarley: Yeah, that’s right. Jordan George: So discomfort is a good place to be because that that causes you to stretch some muscles that might have been under-used in the past and help you grow and change and evolve. But once you get into alarm, that’s when people start to panic, they start to worry about things like, “Will I continue to have a job? Will I be as good as I was in the past? Will somebody else come in and surpass me or replace me?” That’s not a place that we want to have people operate within at least not for a long time. Paul Jarley: I agree with that. The term I like, I borrowed it from somebody, is positive restlessness. That’s [crosstalk 00:21:50]. Jordan George: Oh, I love that. Yeah, that’s a good one. I love that. Christina Lehman: I feel like, going back to our members, they felt just like Kerby was saying, “But I like the old CFE,” or they thought, “Oh, they got bought out. This Addition Financial, what’s that? I don’t know who that is.” We actually had to come out and say, “Same great credit union. We’re the same people, same values. We’re just a different name and we’ve done it three other times.” And exactly what you were saying about explain and explain again and explain again, every time I talked to a member online or on Facebook or Will can attest to this. You explain it to them, they’re like, “Oh, you’re not abandoning teachers. Oh, you’re not.” All these things that they speculated in their head we had to explain it again and again, but the explanation calm their fears and brought them to the other side. Kerby Pickens: I think that’s important like letting people vent and giving them that opportunity. Jordan George: Putting people on your couch is one of the things that I spend a lot of my time doing. We’re all counselors in some capacity. Paul Jarley: Exactly. Jordan George: Have seat tell me how you are feeling right now. Paul Jarley: That’s so true. Jordan George: Yeah. Well, I agree, and I had heard similar stories from the folks in the branches in the contact center, there are just some people who are never going to be happy with change, even positive change, no matter how many times you explain it to them. But I think that’s a very, very, very small minority of people. And we saw that with this change, like you were saying, Christina, once we were able to explain it to them, and they understood the why, and they understood that we weren’t taking away anything, this is only going to make things better for them. It’s only going to improve the number of people that we can serve, how we can serve them, the types of products and services that we can provide. Jordan George: It was a much easier thing, but I know someone out there will be able to echo this in their own experience with their family. My own mother was upset that we changed our name. And I remember I was out to dinner with her a couple of weeks before, and I said, “Yeah, we’re getting ready for this brand branch. It’s really exciting. We’ve got a lot going on right now.” And she was like, “Yeah, I don’t really like it.” And I said, “Well, what don’t you like about it?” She goes, “Oh, no, I just really liked CFE,” I said, “Do you know what it even stands for?” She had no idea. But she knew that she liked it. And I heard that, bringing this back to UCF, with the Arena. I know there were some kids who go, “Addition Financial Arena? I don’t like that.” Paul Jarley: “We’re going to win fewer games now.” Jordan George: Yeah. [crosstalk 00:24:34] name the stadium. Paul Jarley: Yeah. Jordan George: But I was thinking to myself, I understand not everyone’s going to like the name. But was it really better or was CFE Arena really any better? At least you know what this stands for, we can be proud of that. But it is it’s an adjustment period. And particularly around the name, we talked about how you think about all the big organizations today that people know as household names. And you look and you analyze their names. Walmart, Apple, Google, Starbucks. What do those mean? What do those names… If someone just Starbucks, that’s really the one that’s… It’s what you make of it, I think. And so going back to your point, it’s how we communicate these things. It’s the influencers, it’s the buy in, it’s understanding that the changes are what we make of them and if we go in with that negative mindset of well, this is only going to hurt me, only seen those immediate costs, and not recognizing the potential long term benefit, I think we’re doing ourselves and our members a disservice. Paul Jarley: I think one place we really missed in our change process going forward, looking back on it, and I still don’t have this completely worked out. Excuse me. Making sure you’re incorporating something into your orientation program for new employees is really important because they’re going to get set into the middle of this and you might think that they come kind of baggage free. And in one way that’s true. But they’re going to immediately be inserted into a conversation that you haven’t prepared them for. And you might want to think through how you do that. Christina Lehman: That’s a good point. Jordan George: We saw a lot of that, especially during the name changes, people were coming in because we were really hiring then- Paul Jarley: “I thought I applied to CFE?” Jordan George: Yeah, right. Right. We were hiring… Kerby Pickens: People were throwing away their credit cards and they were like, “I don’t know who [crosstalk 00:26:44] handle it.” Jordan George: Yeah, “I have no idea.” Kerby Pickens: “I’ve been hacked.” Jordan George: Yeah, “I never applied for this card.” Yeah, it was interesting, because we did have some hiring managers that had preempted the discussion with the folks that they brought on board and said, “Hey, we’re going to be changing our name. This is coming, just FYI.” And we had others that didn’t. And that was very clear in orientation when we would start talking about Addition Financial, and you’d see two or three confused looks, sideways glances, “Am I in the wrong…” It’s like going to the wrong class on the first day of school. “Am I in the right room right now? Am I in the right place?” And that was before we changed any of our signage or anything. So it was interesting. That’s a great point. Jordan George: I think when you look at all the different educational channels that as organizations we have to reach people and the different ways that we can do that, the different times in their employee lifecycle that we can do that, that new hire orientation is a really critical piece, because that’s really setting the foundation for their expectations moving forward. Paul Jarley: Well, I think too, because the leadership team and the communications team generally, you’re living and breathing this change process every day. So it’s like the most relevant thing in your life. But for a lot of your people in the field, frankly, that isn’t true. And it only becomes salient when they run up against something that’s changed that they don’t like. And then suddenly the light bulb goes on and they think, “Well, why are we doing this?” And as hard as that can be, that’s when you need to have the answer for them. The fact that you told them before, it doesn’t really matter. Kerby Pickens: So are there any common mistakes that we should look to avoid as leaders or even just as someone trying to influence change? Paul Jarley: I think so. I actually think the biggest failure that most organizations have is they don’t recognize from the outset, that not everything is going to go well. There’s a famous quote, attributed to a number of different generals, [inaudible 00:28:51] is one of them, who was fond of saying, “The battle plan never survives contact with the enemy.” Now Mike Tyson said everybody’s got a plan until you get punched in the mouth. Yes, that’s true. Jordan George: Yes. Paul Jarley: So you want to go into it, kind of understanding that not everything is going to go well. And I think if you fail, that’s sort of three risks in one for you. So I honestly think it’s your biggest risk. If you go into it, particularly if the leader goes into it, thinking that they’re a genius, and have an ironclad plan, that’s just going to work well, honest assessments of progress will not occur. They will not. Because the leader is essentially telling you, they don’t really want honest assessments of progress. Things are perfectly fine from the way he sees it. Secondly, it’s going to lead to a lack of resilience among people. As soon as things get hard, they’re going to want to quit. Paul Jarley: This is related to the third thing, you’re going to miss opportunities to learn and pivot. And some amount of pivoting always has to occur. So you want to think about those sorts of things up front. Now, you’re never going to be able to come up with a document that says, “Here’s all of the ways things can go off the rails.” Christina Lehman: That’d be great, you don’t have that? Paul Jarley: Well, back to my introduction. I have 8,500 students. If there are cracks there, they are like water, they’re going to find those cracks, wherever they are. And so, it isn’t that you’re going to be able to do all of that up front, but you will reduce the scope of the number of times you’re surprised. And you can start to think through at least what your options are because the place you’re most likely to make the worst decision is when you think you’re in that crisis situation, because of something you didn’t anticipate. That’s a really bad spot to be. In those spots, generally people don’t see all of the alternatives that they have in front of them, and rarely pick the best ones. Paul Jarley: So if you have a good system in place, I think a lot of times people think communication is about the leader standing up and explaining the why over and over again, and that’s important. But the other side of communication, is making sure that the person up front is actually listening to what people are telling them as part of that process, And not dismissing them, but understanding that those are real issues that somehow you got to get out in front of. Christina Lehman: I found that really great quote that I think would fit well there. It says, “I’m not going to tell you it’s easy. But I’m going to tell you it’s worth it. So join me.” And the leader needs to lead by example. And I think if they’re transparent, and they say, “This isn’t going to be easy, but together, we’re better together. Trust me, trust my team. Let’s do this.” And I think the culture here, which is so wonderful, that I didn’t experience in the past, is that we all fail forward. It’s okay, we’re going to make mistakes. Let’s learn from those mistakes and then let’s move forward. So we don’t have those critical [inaudible 00:32:41] that we’re not prepared for. We can always come back reflect and let’s keep going. That’s also scary. I don’t like making mistakes. Fear almost, is crippling to me. Jordan George: It’s paralyzing for some people. Christina Lehman: Like, feeling is crippling to me. So that’s a huge thing to have that trust in an organization. It’s like, “Okay, I’m going to tell a member this.” So I hope that what I’m saying someone’s going to back me up, because I’m putting my faith in what they told me. Jordan George: Yeah. Paul Jarley: Well, and that’s my understanding, your culture is really important. Christina Lehman: Mm-hmm (affirmative). Paul Jarley: There are written rules and regulations, but the culture is about how the organization and the people in it really respond. Christina Lehman: Yes. Paul Jarley: And what’s really important to them and what’s not really important to them. I remember being at a round table one day where someone said, “Culture eats strategies’ lunch.” That’s true. The second mistake that most people make is they don’t understand how the change is going to interact with the culture that they have, not the culture that they want. That’s a different thing. Any experienced leader worries the most about their culture. It’s the single most important thing. Jordan George: Yeah, absolutely. Kerby Pickens: And I think though, talking about how our cultural interacts with some of our strategies or things that we have coming down the pipeline, our enterprise board is a great tool for that, that forecasting, that planning of looking at, “Oh, goodness, here’s a big system change coming up within the next quarter. How have I prepared my people? Have I been communicating along the way, so it’s not two weeks before we go live and all of a sudden, Hey, everybody, the system we all know and love while we’re switching in a week. So get ready.” But really, as a leader, looking at that enterprise board and seeing how do these projects, how do these things that are happening interact with my area, and are going to impact my people’s day to day and planning for that. And setting people up for success ahead of time, instead of waiting for maybe that one email to say, “Okay, it’s in two weeks. Starts in a week.” Jordan George: I think that’s part of any large organization. There’s so many things going on that it’s easy to get pigeonholed into just thinking about what your next day or week is going to look like and not understanding the broader perspective. And the enterprise board has a great way that we try to overcome that through communication. I know that our team and several other teams have done the same thing have adopted a version of that, where we do a weekly stand up meeting, 15, 20 minutes every Monday morning, which is just a quick update on all of our projects. So not something long and drawn out and protracted because I know it’s difficult to get entire teams together and you don’t want to sit down at the table, lets go around the table for two hours talking about updates, but just a quick 15, 20 minutes so that everyone knows what’s going on and his understanding of the other priorities. Christina Lehman: Well, you know what that provides? Is accountability. Jordan George: Well, you know what, Christina? It’s like you read my mind because I saw the last bullet on the slide up here and I wanted to talk to the Dean about that, that lack of accountability. Because I think we see that sometimes within the organization, that is a huge killer to productivity, to trust, to the positive culture that I think leaders are trying to build. How do you overcome that lack of accountability at an individual or team level? Paul Jarley: Well, ultimately it comes down to people being willing to make difficult choices when they have to make them. Jordan George: Yep, I agree. Paul Jarley: Those are never fun. Jordan George: Nope. Paul Jarley: Never ever, ever [crosstalk 00:36:38]. Jordan George: Yeah, speaking from experience. Paul Jarley: Although sometimes I will tell you this, though. I have been in situations, too more often than not, that you have a person who’s underperforming or perhaps doesn’t fit. They know that. Jordan George: Well, I think we’re doing a disservice not just to ourselves, but to the team, to the organization, and to that individual to allow them to continue to struggle in an environment that’s not right for them. Paul Jarley: Well, yeah, there’s a few steps there too. The first one is fair notice and I think it’s the most important one. I don’t ever want to be in a situation where someone can come to me who were terminated. And they say to me, “I did not know I was having a problem.” Jordan George: Absolutely. Yeah. Paul Jarley: And frankly, there have been some situations where that was true. So, regular, honest performance evaluations, followed up by things like needs for changes in behavior or training or those sorts of things, if it’s going to get to termination, you want that to be the last step in a process where you’re at least convinced that you’ve done what you’ve could to make that person successful. But also I think you’ll find any change process, particularly the more fundamental it is, some people will opt out, you should expect some turnover. That’s going to happen in a process like this. And honestly, that’s not a bad thing. I mean, you want to understand why that turnover is occurring. But if the turnover is this is an organization that’s changed, and I’m no longer committed to the goals or values of that organization, yes, then you should move on. Jordan George: Yeah, I always say we spend too much time at work to be miserable. Paul Jarley: Oh, absolutely. Jordan George: So if we as individuals are not feeling fulfilled and valued and aligned with where the organization is going, then don’t stay there. Paul Jarley: Incredibly miserable place to be. Jordan George: Yeah, right. And that’s not the kind of place that you want to go. I mean, I know that not everyone’s going to look forward to Monday mornings, and I’m realistic about that, but at the same time, you shouldn’t be dreading it either. You shouldn’t be just, “Urgh, I can’t do it. I can’t get out of bed today, I can’t go in it.” We need to be more honest about those types of things because that’s a that’s a difficult conversation to have is helping people recognize when this is no longer the right fit, which is after taking all the other steps that you talked about. Having a deeper understanding, having discussions to understand what’s going on, making sure that the communication is clear so that people can make an informed decision about what’s right for them and for their family and further their stage in life. Paul Jarley: Treating everybody like they’re an adult sometimes goes a long way. Jordan George: Yeah, imagine that. I wanted to touch on one of the things that you had up here that I really liked. So that second to last bullet point. And I’ll admit, I think this is an area I won’t say for the organization but that certainly I wish I had done a better job with right after the brand change, which was, and Christina, and Kerby, and Valerie, everyone else in the room that was here knows what a tremendous undertaking that was. Even just replacing the signage, there were like 6000 signs or so. John Thomas told me at one point. Updating all the materials, just every time there was a policy, a procedure, a job aid, a reference, a training course. And that’s just one piece of it, but everyone within the organization really was stretched especially the months immediately leading up to that brand change and immediately following because of the member reaction Jordan George: One thing that I wish I had done differently was take a little bit more time to celebrate what a tremendous win that was for us and for the organization instead of so quickly moving on to, “All right, that’s done on to the next thing.” That’s kind of the pace that we move at, but it’s so important to recognize those things. Paul Jarley: So I have a chief excitement officer. That’s part of her role. Those of you who are laughing know who she is. But no, I think it’s a mistake not to do that. Again, it doesn’t need to be a parade. No, I’m not suggesting that. But, a little appreciation goes a long way. I think we overlooked at some times, particularly, I think early in the change process, highlighting the early adopters and holding them up as role models for the kind of people that you want to have in your organization, can really help out. But I do want to go to the one you skipped over. Jordan George: Yeah. Paul Jarley: Okay. And that’s the failure to align reward structures with your new [inaudible 00:41:50]. Jordan George: Sure. Paul Jarley: So, the most famous article in human resource management was written by a general and it was called Rewarding A While Hoping for B. And he asked two simple questions. How did soldiers get to go home from World War Two? Anybody know? Well, the answer was when we won the war. How did soldiers get to go home from Vietnam? When they had accumulated enough points to rotate back to the States. Which of those two wars did we win? His point being in Vietnam, we were hoping for victory, but we were awarded survival. Jordan George: Yeah. Paul Jarley: That’s what we got. And that’s a very dramatic example obviously. Jordan George: Yeah, I know. I like that. It’s good. Paul Jarley: But all organizations do this all the time. So if you’re going to go through a change process, it’s really important that you review your reward structures and I’m just not talking about compensation. There are all kinds of reward structure. And to ask the question, are these still the things that we want to reward? Are there new things we want to reward and how are we going to do that? Because your reward structures are the most powerful thing that you have, people respond to incentives. So you should think really carefully about what your incentives are because you’re going to get them. Jordan George: I think a really good point is not just thinking about that as compensation. We so often do, we think of it as some sort of bonus or sales commission or something like that. It’s not just about the compensation. It can be how we reward people with time off or the flexibility. Christina Lehman: Or not even that, like what’s wrong with… One of my favorite things I receive are handwritten letters. I just want to feel seen. I want to feel that somebody saw that I did something that bettered the organization. And because I wasn’t feeling that way, I came here. So good people you want to stay in your organization will leave if they do not feel valued, or they see other people being rewarded for their bad behavior. Jordan George: Oh, that’s the worst. Paul Jarley: Different people want different things sometimes. Before I came to Orlando, I was in Las Vegas. I’ve been staying at UNLV for five years. My assistant at you and UNLV had a list of seven names on them, of which she could not schedule an appointment with more than two of them on the same day with me. And these were all high achievers. They were not problem employees at all. But their need for recognition and affirmation could be emotionally exhausting. Literally, I couldn’t do more than two. What was so striking about that is for most faculty, they’re the opposite. The last thing they want to do is see the Dean. So if I want to make their day a good day, I just don’t talk to them. Jordan George: Just stay away. Paul Jarley: But for these seven people, they wanted me to know in excruciating detail, what it was they were doing, and they wanted affirmation from me, even though at times I would have to tell them an hour and 35 minutes in, “I really love you and what you’re doing, but I’m not going to remember any of these details. And when somebody calls me and asks me about them, I’ll call you. Honestly, that’s what I’ll do.” But no, I think that’s really important, is understanding people work for different reasons. They really do. I mean, everybody got to eat, I’m quite sure. But yeah, understanding people and kind of how they work and what they really respond to, yeah, that’s an important part. Jordan George: Well, and you can have a job at a lot of places. Paul Jarley: Yes. Jordan George: You talked about, everyone’s got to eat, well you can choose where you get your paycheck to put food on your table. Paul Jarley: Absolutely. Jordan George: There’s lots of options, we have to do more than just provide a paycheck for people. And I think understanding as a leader, what your team values as individuals is really critical, even as fellow team members understanding how your peer is on the team, like to be rewarded and recognized because again, it could just be something as simple as saying, “Hey, thanks. I really appreciate what you did today,” or a handwritten note. I know so many people when you walk around this building, and I know it happens out in the branches as well have little trinkets and things that they’ve collected over the years that they’ve received from people, received from members, that from a monetary sense have no value. Jordan George: But from a pride and respect and kind of as a reflection of the things that they’ve done and accomplished and how they have helped somebody else, have a measurable value that they keep out in displayed that somebody has given them just because it’s a reminder that they made a difference, to Christina’s point, that they were seeing that they were valued and that they were appreciated for what they did. So even understanding that not just from the leader’s perspective, but as an individual on a team, and how you might be able to do some of that for those around you. Paul Jarley: It’s impossible to have a shared set of goals and objectives if people don’t know and understand each other. Jordan George: Yeah, I love it. Awesome. Well thank you Dean Jarley so much for being here. Thank you Christina, Valerie, and of course as always, Kerby it’s great to have you here. Kerby Pickens: Thank you, Jordan. Paul Jarley: And thanks to Addition for being such a great partner. Jordan George: Thank you. Thank you.   Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.

Presidential candidates on both sides of the aisle point to a host of different factors for the state of the U.S. economy. With an economic recession on the way, renowned economist Glenn Hubbard joins UCF Business faculty John Solow, Sami Alpanda and Paul Jarley to discuss the hot topic of income inequality and when we can expect the current expansion to hit a wall. Is a recession really on our doorstep?   Featured Guests Glenn Hubbard ’79 – Economist; Chairman of the Board, MetLife Inc. John Solow – Kenneth White and James Xander Professor in Economics, UCF College of Business Sami Alpanda – Associate Professor, Economics, UCF College of Business Episode Highlights 1:02 – Guest introductions 3:02 – Rising income inequality 7:24 -Technical disruption in the workplace 15:54 – Politcal response to a changing economy 21:00 – Trade wars 25:35 – Rising healthcare and pharmaceutical costs 29:46 – President Trump, politicians on the economy 33:41 – Questions from the audience 40:48 – Paul Jarley’s final thoughts   Episode Transcription Paul Jarley: The economy is a thing. The national election is a thing. But, the stuff politicians talk about on the way to Election Day? Well, those aren’t always things. We’ve assembled a panel of experts. Listen up, people. Paul Jarley: This year was all about separating hype from fundamental change. I’m Paul Jarley, dean of the College of Business here at UCF. I’ve got lots of questions. To get answers, I’m talking to people with interesting insights into the future of business. Have you ever wondered, is this really a thing? On to our show. Paul Jarley: This podcast comes from an event where we were celebrating Glen Hubbard, and his gift to endow a professorship in economics. Listen in. Paul Jarley: I didn’t want to resist the huge opportunity I had today to get together a panel to talk a little bit about the relationship between the economy and the political election that’s coming up. So we’re going to talk a little bit about whether a number of things are sort of a thing, or not in as non-political a way as we can here. Paul Jarley: I have three panelists with me today to help me understand some things. Most of you know Glenn Hubbard. What you may not know is Glenn Hubbard is a graduate of our economics department at UCF. He studied here. He is currently the chairman of the board of MetLife and is the former dean of the Columbia Business School. He is still a professor there, and I like to joke with Glenn, after you’re a dean, the comment that you always make is you get to go back to be part of the problem, right, and then, the part of solution, and he’s enjoying that a great deal. Glenn Hubbard: Totally. Totally. Paul Jarley: Right now. Paul Jarley: Next to Glenn is John Solow. John is new to the college this year. He spent many years at Iowa. In fact, John and I were assistant professors together many, many years ago. And, he sits in the White, Xander endowed Professorship in Economics that Glenn and Glenn’s wife, Constance, has funded. Glenn Hubbard: [inaudible 00:02:01]. Paul Jarley: And, it’s not named after them. It’s named after the two faculty members, who were most influential to Glenn while he was here becoming an economist. That’s really awesome, and we’re really glad to have John with us today. Paul Jarley: My last guest is Sami Alpanda. Sami is an associate professor in the Department of Economics and spent four years? Sami Alpanda: [inaudible 00:02:22] there? Yes. Paul Jarley: Four years at the central Bank of Canada. So I thought he would also bring kind of a really interesting perspective to what we’re going to talk about today. Paul Jarley: And at the end we’ll give you a little time to ask questions. I hope I ask some things that are on your mind, but if not, we’ll give you a little bit of an opportunity to do that. Paul Jarley: I’ve been watching the news, like all of you, and some of the debates and the things that are being brought up. So I’m going to do a little bit of a lightning round with the panel, where I’m going to bring up a particular issue that the politicians have been talking about. And I’m not so interested here in getting a political take on the issue. That’s not what I’m about. Instead, what I’d like that panel to talk about a little bit is, how important is this issue to the economy in the short-term, and the long-term. Paul Jarley: Let’s start out with rising income inequality, particularly at the top. Is it a concern from an economy standpoint? Is it not a concern? What do you think? Glenn Hubbard: To me, the concern in inequality is the bottom, not the top. So I’m extremely worried about the earnings prospects of millions of Americans, who don’t seem to be participating in an economy dominated increasingly by technological change, and globalization. I’m less worried about how many billionaires there are. The only reason that one would be worried about how many billionaires there are is, if you think there somehow monopolizing the political process. You told me there was one billionaire on the stage the other night at the Democratic Party debate, I don’t think he’s the most influential. So I’m more worried about the poor than I am the rich. Paul Jarley: John? John Solow: I think it’s a long-term problem. I agree with Glenn that I’m more concerned about, so what economists call absolute poverty, is the ability of the poor people to have a standard of living that they can … They can support a family, and they can enjoy, rather than the disparity. If everyone were richer so poor people could afford the necessities of life, that would be a good thing, even if there were rich people, people who are richer than that. John Solow: I am concerned about the ability of the very wealthy and the very organized to influence policy. The impact of money on the political process, I think that is causing problems. I think, we’ve just seen a lot of it, and you can argue on both sides of the political spectrum, but there seems to be an awful lot of what we just think of as corruption, wealthy people using the political system to increase their incomes, not to do what’s best for the country as a whole. John Solow: Yes, there’s only one billionaire, that we’re aware of, running during the debates, and there’s obviously a billionaire already running on the other side, but that’s not where I think the problem is. It’s not so much that they hold the offices, but that they pull the strings behind the scenes. Paul Jarley: Sami? Sami Alpanda: I do agree that, in principle, there shouldn’t be a worry that we have more billionaires, or anything like that, but as long as the pie is growing at an enough pace, and that, that pie is being evenly, or at all levels, that growth is being shared. But currently, that’s not the situation. So at the very top, at least in the last 30, 35 years, there has been an increase in the income share of the top 1%, from about 10% to 20% of total income. Sami Alpanda: Now, most of this reflects capital income, especially entrepreneurial income, dividend income, but … And for the top 0.1%, actually, I think the income share of the 0.1% has increased from about 4% to 9%. So this type of economic gains are not being shared, especially in the middle-income categories, and that … In the long run, this is going to be worrisome because it will have political implications. It’s already started to have political implications. Paul Jarley: Sure. Sami Alpanda: And that is a worry. Paul Jarley: Go ahead. Glenn Hubbard: I think these things are all really important. I think your question’s probably one of the biggest long-run questions for our country. I don’t think we live in a world where the system is depriving people of gains from productivity, whoever those people are. I think, we have a lot of Americans, who do not have a marginal product that would lead to the wages that John is describing. Glenn Hubbard: If we want to fix that, and I think it’s critical that we do, we have to use social insurance programs more aggressively than we’re doing today, and we have to decide on our nation’s priorities, is that what we want to do? We’re running a government that’s, principally, about old-age entitlements, things like that, and should we be investing more in working Americans. I think, we should. I think, it’s a huge question. Glenn Hubbard: Who pays for that is a separate question. It could be the rich. It could be somebody else. But prioritizing those programs, I think, is critical. Paul Jarley: Because here’s what I worry about. I graduate 2,000 students a year from the College of Business, and I’m trying to prepare them for a future where data says to me, there going to have maybe two, or three careers. And we’ve seen, and I think, we’ll continue to see a lot of technological disruption of a lot of those careers, and perhaps, a lot of structural unemployment. Biggest risk, you think? Glenn Hubbard: I think, it’s a very big risk, and I think that there are two familiar ways to deal with it, and our country has done both in the past. One would be a sort of battering ram approach on opportunity, and I think there about Lincoln era policy. People associated the president with the Civil War, obviously, but remember the Transcontinental Railroad, the Homestead Act, the land-grant colleges, Lincoln had a almost maniacal focus on opportunity. The other in American softening of capitalism has been more Rooseveltian. It’s social insurance programs that keep everybody in the boat. Glenn Hubbard: We know how to do this, and we need to. The structural unemployment is real, but our labor market policies were designed in an era where you lost your job for a temporary period of time, then you came back to the same job, like a layoff, or a strike. That is not the world we live in. Paul Jarley: Because when they perfect those autonomous trucks driving, I’m going to drive [crosstalk 00:08:48] a job, so that … Glenn Hubbard: Well, yeah. When the president said he was worried about Mexican truck drivers, I said, I was worried about no truck drivers. I think, that’s really the issue. Paul Jarley: Yeah. John, what do you think? John Solow: The question of automation in technology has been with us for a long time. About 55 years ago, President Johnson had a commission on automation and the economy. I still have a copy of that report. My father was one of the members of the commission. It was headed by Howard Bowman, who was the president of Indiana University at one point, and the people wanted included Edwin Land of Polaroid, and Thomas Watson of IBM. So these were serious people. John Solow: This issue’s been around for a long time, and yet, we still have very, very low unemployment rates. I’m more concerned about, and I think Glenn probably is, too, about the wages. I think, what we’re talking about is the wages of the people, whose jobs are replaced by technology. John Solow: Technology is complimentary to people like us. This is a tool that we get to use that makes us much more productive, but there are people for whom it is a substitute, and those people, who are losing their jobs, and yeah, I think its r- … We always talk about how education is the way to solve this problem. Exactly as Glenn said, there are people who don’t have much productivity, and we need to figure out ways to solve that. It’s not just, “Well, I need money so I can survive,” but what skills can we develop in you, where you can do something to help us. John Solow: I’m not trying to blame the poor, but I do think that part of the game is finding ways to make less-skilled people more productive. I just came from the Midwest, where rural America is struggling very badly. The world has just changed dramatically. These little towns that used to support an agricultural community, and everyone knew everyone, and kids could ride their bikes after school on the streets, and idyllic ’50s, that is just going away. The world is changing, and we have to figure out some way, either for those people to, not so much the people, who live there now, but their kids, and their grandkids to do something different. They can’t look back to the way, and say, “I want it to be the way it was in 1955.” That’s just not going to happen. Paul Jarley: Sami? Sami Alpanda: Well, the unemployment rate is at a all-time low, 3.5%, so jobs are being created, but where are they being created? They are being created at the very high end, so high-income jobs are on the rise. So there’s a lot of job growth there, and there’s, also, a lot of job growth in the bottom end, but a lot of middle-income jobs are being hollowed out, essentially, most through a technological change, to some degree by trade, and off-shore. Sami Alpanda: So this is an ongoing problem. This problem is, probably, not going to go away. If anything, it’s probably going to become more severe, so machine learning and artificial intelligence is with us. I’m not sure if self-driving trucks are around the corner. I think, we’ve been a little bit too optimistic about that, probably. Paul Jarley: Marketing’s ahead of the reality there? Sami Alpanda: I think that’s, probably, the case. We probably will need to wait another two, three decades, perhaps, for that to happen, and it’s not clear whether it’s going to happen as we envisage that it would happen. Sami Alpanda: But, nevertheless, you see this type of automation even in the high-skill jobs now. A lot of finance jobs are being automated, and even healthcare jobs, so basically, machines diagnose, or making diagnoses, or reading X-rays on their own, and doing a better job from humans at that. Sami Alpanda: I think, this is with us, and I agree with the panel that we’ll need to find remedies at some point, in terms of redistribution of some sort of the gains from all this type of technological advancements. Paul Jarley: Is there a country in the world, currently, that we can use as an example there? Americans like to think that they’re exceptional, and different, and need different solutions, but is anybody doing that right? Or ahead of that game? Glenn Hubbard: Well, Germany has for years had apprenticeship programs and training programs. To many Americans, they all look unusual because they are tracking children from quite a young age and to jobs, something we would, or wouldn’t want to do socially, but I think the U.S. could learn a lot from its own past, too. We used to have very strong vocational education in the country. We have outstanding institutions in community colleges that are doing a lot of the training that’s needed by local business, but are woefully underfunded. There’s just lots of things we could be learning from. John Solow: So long as it’s a matter of choice, I don’t have a problem with that, all right. I remember being a schoolboy in England at the age of 10 for one year, and they have this exam called the eleven-plus, and if you do well on it, you get to go to the high school that leads you to college, and if you don’t, you get on the high school that leads you to baking. And I was petrified, as a 10-year-old, that if I screw up this exam, that’s my life. John Solow: Of course, I was an American. I didn’t even have to take it. My mother had explained to me that, “Oh, it’s not for you,” but my classmates had this sense that at some age we’re going to track you, and part of what makes America a great place is this notion that you can be whatever you want to be, if you’re capable of doing it. You’ve got to do it. You can’t just say, “I’d love to be the starting shortstop for the Boston Red Sox, but I can’t hit as well as Xander Bogaerts. Or even a bad shortstop. John Solow: But I think, we would like … I think, it is important that people have opportunities. But what I do worry about, well, it’s sounding the same, which is the middle is hollowing out. David Autor at MIT has done a bunch of work on this, and where the jobs seem to be being lost are in the middle, not the low end. We have lots of low-end, low-paying jobs, and we have good high-paying jobs, but the middle is hollowing out. And I think that, that’s very tough. But it used to be that you could move up the ladder, and now the leap goes from burger flipper to coder, or junior Wall Street executive, and that’s a huge leap. Paul Jarley: Sami? Sami Alpanda: The worry is that, as these trends are happening to the middle class, there is a lot more pressure to, perhaps, limit immigration because the immigrants- Paul Jarley: That’s my next point. Sami Alpanda: The immigrants [crosstalk 00:16:07]- Paul Jarley: But you’re not required to talk about it. Yeah, immigration is next. Sami Alpanda: Or it’s about trade, so we should, essentially, close down our borders to trade, or not allow off-shoring. So that’s sort of the worry. So, if you want to get … I mean, there aren’t calls yet to sort of destroy the robots, but maybe, that might be the next thing, if actually robots take over. Paul Jarley: That didn’t work out for the Luddites, too well. Sami Alpanda: [crosstalk 00:16:33]. Exactly. Paul Jarley: Yeah. Sami Alpanda: So I mean, obviously, all these things are a net positive for the economy. We don’t, actually, want to get rid of either automation, or immigration, or trade, but if we still want to keep them and make this politically feasible, then we would need to find the solution as to how we keep the middle class, or the former middle class happy. Sami Alpanda: We have to, perhaps, ensure them in some way, or it could be income, for example, in terms of healthcare, or educating … promising to educate their kids for the better jobs in the future. That’s not something we do, necessarily, a very good job, especially in poorer neighborhoods. I mean, rich neighborhoods have pretty good schools, but not necessarily poor neighborhoods. Sami Alpanda: So we have to find, ultimately, a solution to that. Paul Jarley: So what about immigration? How big of an impact is it on the economy in your estimation? Is this something we should be worrying about from a macroeconomic standpoint, whether we’ve limited, or- Sami Alpanda: So I s- Paul Jarley: … let it be open? Sami Alpanda: Well- Paul Jarley: I mean, from a … Go ahead. Yeah. We’ll come back this way. Sami Alpanda: I think, the literature is pretty clear on this that immigration has been a net positive, both high-skilled immigration, especially high-skilled immigration, but also, low-skilled immigration, too. I mean, it has pushed production possibilities, and also, productivity. Sami Alpanda: Now, a lot of the low-end jobs, actually, have been filled by foreign-born workers in the U.S., and ultimately, that has increased the welfare of native-born people, but there has been some wage impact. So there is some in the picture that looks at the wage of high school dropouts in particular, and there has been some negative wage impact in that particular part of the labor market. Sami Alpanda: But again, this is to say, immigration of both kinds have been a net positive for the economy. Paul Jarley: John? John Solow: This is not a literature that I follow, so I’m going to defer to the person, who knows something about the literature, but everything that I’ve heard, read or heard, says pretty much the same thing. I mean, remember, we’re now down to, even the legal immigration, a limit of 18,000 people in a country of 300 million, right? This seems like … This is as close to zero as you can get. I find … I don’t think that this is an economic problem, but I think it’s a social problem. It points to a darker side of our society. Glenn Hubbard: I completely agree with that. We have two immigration stories, and they’ve already been well told. One is about a high-skilled, one low-skilled. High-skilled, half of the students I have at Columbia in the business school are not Americans, and I would love it, if they all wanted to work in my country, and could. Not because I’m a nice guy, but because I’m fundamentally selfish. They’ll add to our productivity, and frankly, we should want all foreign-born grad students, maybe, maybe not lawyers, but everybody out here- Paul Jarley: Well, I agree with you. Glenn Hubbard: … who hadn’t … Apologies if there’s … We should work these people. Glenn Hubbard: So low-end, there is an issue. There will be legitimate disagreement. The studies are, actually, mixed about the effects on the wages of native-born Americans, but if we care about this, we have to treat it as a social issue. I think, that’s absolutely right. Glenn Hubbard: Our country isn’t going to have as bright a future, if we restrict immigration. We know that, and everything points that way, but we can’t just blithely say that as economists. We have to address the concerns of people, who feel left behind. They’re being told by some forces to point the finger at immigrants and the other, but instead, we need to help them. And if we don’t do that, the immigration discussion will get worse, and worse, and worse. Glenn Hubbard: I recommend to everybody a book one of my teachers at another institution wrote, Ben Friedman, called The Moral Consequences of Economic Growth. Societies that are growing, and well distribute their gains are more placid societies, where you see racism, bigotry, anti-Semitism. That usually comes about in struggling, slow-growth societies. We don’t want to be that. Paul Jarley: Lack of hope is a bad thing. Glenn Hubbard: It is. Paul Jarley: Really bad thing. Paul Jarley: You touched on this a little bit, Glenn, but the next one on the list, of course is trade wars. Talk about that a little bit and the impact it’s having. Glenn Hubbard: Well, it’s interesting because I, actually, would start off by giving the president a little bit of credit. China has been a bad actor in the global trading system for a long time. As one of the people, who tried to push President Bush toward WTO accession for China, I always thought, and I think other people thought that China would ineluctably reform because it would see it in its own interests. That is wrong. China’s still massively subsidizing credit, [inaudible 00:21:37], so the real question about whether China should be in the WTO, as it’s currently structured. Glenn Hubbard: Having said that, everything we’re doing in the trade wars is, from an economic perspective, bizarrely wrong. Why wouldn’t you unite your friends against the common enemy, rather than picking fights with everybody at the same time. If there’s any hope for WTO action in China, it would have to be multilateral. So right diagnosis, but the treatment seems odd. Paul Jarley: John? John Solow: I think, Adam Smith is rolling in his grave at a very fast [inaudible 00:22:15]. So I absolutely agree. Yeah. China has misbehaved in a lot of ways, but I do think that the focus … We were not going to get to political, I hope, but I don’t think our president understands trade. I think, he’s focused on two things. He’s focused on bilateral trade balances. So what we sell to China, and what China sells to us. John Solow: And we’ll just leave the rest of it aside and focus on that, those numbers. And that’s a pretty meaningless number in a very interconnected multi-country economy. If we buy things from China, and China spends that … This a loose example, but if we buy things from China, and they spend that money on things from Brazil, and then Brazil spends that money on things from us, we gain. Everyone has specialized what they do best, but our bilateral trade relationship with China looks like we send them millions of dollars, and their stealing our wealth. And this is just a meaningless thing. John Solow: The other thing is that the determinants of trade are not result of deals between presidents. They’re the result of economic forces. We import a lot because we don’t save very much, and we’re a good place to invest, and so people, rather than buying things, they invest in American companies, and American assets, and stocks, and bonds, and things like that. So I don’t think he understands it very well. That’s not to excuse China for being bad about intellectual property, for being bad about selling substandard products, and cheating on dog food that poisons dogs, and fluorine that poisons people, and things like that. But I don’t think that getting into trade wars all over the world, with our allies as well as the Chinese, makes the world a better place. John Solow: If you ask … And people have done this. If you poll economists, the one thing … Look at all these jokes about economists not agreeing with each other. Right? Paul Jarley: This is one. John Solow: But one of the Roosevelts said something … I think it was a Roosevelt, who said that, “I want a one-armed economist,” so he wouldn’t say, “on the one hand, and on the other.” It’s an old, old joke. The one thing we all agree on is that trade is a good thing, that free trade … 99% of th- … I think, the 1% that doesn’t is somebody named Navarro. John Solow: We’re not going at this very well. This is, again, in the Midwest, this is … In Iowa, where I used to live, this is hurting the agricultural economy badly. Yeah. So we give them money to prop them up, but that’s not really the solution. We cause the problem, and then we throw taxpayer revenue at them to help mitigate the problems. It’s not a good thing to be doing. Paul Jarley: Some of you want to beat that dead horse just a little more. Go ahead. Sami Alpanda: I, probably, agree with everything that has been said. Paul Jarley: How about rising healthcare and pharmaceutical costs? Concerned about that as a headwind on the economy? Glenn Hubbard: Definitely. And it’s related to some of the other discussion we had, too. If you look at pay and compensation, which are two different things, pay is your wages, compensation’s your total package, a lot of what is happening to a middle, lower wage workers is higher healthcare costs are taking a lot of that. So a lot of the labor market discussion we had, it’s actually linked … It’s actually part of the healthcare discussion. Glenn Hubbard: We, also, know that we’re paying way too much, that if we look at outcomes in the United States versus outcomes in our peers, and then compare that with the spending as a shared GDP, we’re paying too much. The causes are many. There’s no silver bullet. They have to do with the huge importance of third party pay. When economists use the words like insurance, we mean something specific. We mean catastrophes. What’s called insurance in the United States is tax-subsidized prepaid healthcare. It’s not surprising that, that would lead to over-consumption, public programs that have poor incentives. There’s a lot that we could do there. Glenn Hubbard: And you are starting to see action on drug costs, too, where we’ve seen patents pushed too far. We’ve seen other areas, and I think the, both the right and the left, from different mechanisms and different perspectives, are trying to come at that. So this is an issue I expect to be a big one. Paul Jarley: John? John Solow: I agree. I think that all the polls suggest that healthcare is the single most important thing on voters’ minds, of the five things that were on our list. What voters are really s- … What’s impacting people in their daily lives is healthc- … They’re not thinking about automation, and … I mean, they may at some level, but what really matters to people is healthcare. And I agree with everything that Glenn said about that. Sami Alpanda: John, I completely agree, too. Healthcare is a very, very important part of the welfare of people, and obviously, high costs are of a major concern, and that should be a politician’s priority, I guess, to try to fix that in some way. Sami Alpanda: I would add though, I think we should rethink the fact that we have a system of employers … So we expect, essentially, employers to give healthcare. I mean, we don’t expect them to give, I don’t know, to pay for our rent, or pay for our cars, or anything like that, but we do expect them to pay for our healthcare. I think, we probably have to move away from that system. That system, probably, has been a negative, in terms of labor market mobility, too. I mean, you have to think about what’s going to happen to your healthcare, if you decide to change jobs, or geographic locations. Sami Alpanda: And then, maybe, start from that point, whether you go on the one hand to single-pay, or whether you go to a much, much more private-based, but perhaps, with some insurance about catastrophic healthcare expenses, for example, is going to be a political concern. But I think, we have to, probably, move away from this employer-based healthcare. Glenn Hubbard: It’s interesting. On that point, the system we have was an artifact of wartime wage and price controls. So what the dead hand of policy that most Americans don’t even understand what it was, it was so long ago, has really shaped the healthcare system in odd ways. Glenn Hubbard: It’s striking that the political discussion is just completely unrelated to what we’re talking about. So one side would say, “Medicare for all,” a $30 trillion spending expansion over 10 years. The other side says, “That’s socialist. We want nothing.” Where are all the ideas, the actual economic ideas. There somewhere in between all of that. There’s no reason we couldn’t have universal catastrophic health insurance. There’s no reason we couldn’t help low-income people through the funds that we currently put in Medicaid. Glenn Hubbard: There’s solutions here. They’re just not being talked about. Paul Jarley: Last question. So with respect to the economy, what aren’t politicians talking about that they should be talking about? Glenn Hubbard: To me, the biggest is an undercurrent in several of your questions that the anxiety, the economic anxiety that many Americans feel, that their futures are in peril, particularly for low and middle-skilled people, no politician is talking about this. We’re hearing a discussion on one side about universal basic income, or throwing money at it. On the other side, we’re hearing nothing. This is unsettling, as this problem’s not going away, and it’s going to get bigger. That would be my suggestion. Paul Jarley: John? John Solow: I agree with Glenn. I might put it a little bit differently, but I think, you mentioned earlier on sort of American exceptionalism, and I think this is a problem. I think, we think that we deserve to be the wealthiest people on earth because we are the wealthiest people. We’re America, darn it, and we just deserve it. You earn it. It’s not written in stone anywhere that we’re going to be the most successful country on earth. Other countries want to succeed, as well, and they put effort into it. John Solow: I’m going to plug something that … It sounds self-serving, and of course it is, but China has said at different times they want to build 20 MITs by the year 2050. Our state governments are cutting education budgets. That doesn’t sound like a very smart policy. Well, we just deserve it. You got to work for it. We’re not entitled to it. We have to earn it. John Solow: That’s something that worries me, that our … A hundred years ago, I sometimes put this up for students, a hundred years ago the country that was the world super power, whose currency was the world standard, that was the most innovative and creative on the planet, and the list goes on, and on, in 1900, that was England. The hundred years later, 120 years later, you wouldn’t put England in that category. It’s a nice place to live. Don’t get me wrong, but it’s not the world leader. John Solow: Things change, and we can’t expect just to coast on our laurels, and say, “Well, but we’re the greatest country that the world has ever seen.” You got to earn that every day. Paul Jarley: Sami? Sami Alpanda: Perhaps income mobility across generations could be more a bigger type of conversation. I think, one of the biggest worries that middle-income people now have is not only that they are falling behind, but they’re seeing, also, their children falling behind, so I think we have to preserve and sustain equal opportunity at least. Sami Alpanda: We don’t, necessarily, we don’t want equality of outcomes. We’re all capitalists, I think, here, but we do want to preserve human capital formation at the highest possible level, and also, make sure that every strata of the community actually have resources to get a good education, especially the Pre-K to 12 level. I mean, there’s a lot of emphasis at the college level, but I mean, for some of these kids, it’s actually too late by the time they get there. Sami Alpanda: There’s a lot of effort. I’m not trying undermine the effort, but we are ranked, I believe, like 25th out of 35 OECD countries, I think, in terms of math scores, science scores, reading, and that’s a shame in the richest country in the world. So we have to do something about that. Paul Jarley: Take a walk through any college of engineering and see where the bulk of the students are from. That’s all you really have to do. Yeah. Paul Jarley: So I know Tiffany wants to give time to mingle, but I promise I’m going to take two questions from the audience. Paul Jarley: Carrie? Paul Jarley: The mic failed to pick up a question from Carrie, but it was about the deficit and monetary policy. Glenn Hubbard: Thank you. No one talks about that. Right? Audience: Yes. Glenn Hubbard: Then no one talks about the deficit. You had two really big questions. I’m not sure we have a new monetary policy. I think, the Fed had gone a little too far in its rate increases. I think the president hectoring them doesn’t help matters, at all. I think, the Fed is in a fine-tuning mode. I’m more worried, the subject may be for another time, that the Fed is not clear enough with the public about where True North lies for its balance sheet, or its policy. I think, the communication’s just very poor. So I would give the Fed pretty poor marks at the moment. Glenn Hubbard: On the deficit, we’re running a trillion dollar budget deficit in, essentially, a good time. We’re at, or above our potential growth rate. That strikes me as odd. More to the point, we have massive accrued liabilities in our entitlement programs, so we really are on a fiscally unsustainable path. Politicians say, “Well, look at the 10-year interest rate. It’s under 2%, so what’s the problem.” There will be a problem one day. Glenn Hubbard: Unfortunately, our political system can’t really cope with this outside of a crisis. The major fiscal adjustments we’ve had have been in manufactured, or real crises, so I think of the Greenspan Commission in the early 80s. We’re about to have another manufactured crisis because the Medicare trust funds are going to run out of money. Glenn Hubbard: So I think, it’s a huge problem, and no one is talking about it. And that’s bipartisan. No one on either side is talking about it. John Solow: Yeah, I’ll add to that a little. So when I was in graduate school, oh, so long ago, we read a book called The Social Security Crisis by … And that was what? 50, 42 years ago? This has been coming for a long time, and we all know, there is no magic bullet. The answers are either you cut benefits, you increase taxes, or some combination of the two, and the longer we wait, the worse it’s going to be when things really get tough. If you had made choices, modest choices earlier, then people have time to adjust their behavior. They have 30 years to save a little bit more because you know that you can’t count on quite as much in the way of Social Security, and so forth. But we don’t want to do it. John Solow: I think, the answer to a lot of this is just politics. Neither side … I think, both sides know what the right answers are. They may differ about the balance a little bit, but nobody wants to let the other side win by solving the problem, so we just don’t do anything, and we have this sort of paralysis. John Solow: I think, the same thing is true about the budget deficit. You either raise taxes, or cut spending, but neither side wants to let the other side win, so we go on, and on, and on. Sami Alpanda: If another country was running these types of deficits, we would, probably, think that this is definitely on a unsustainable path, and there’s going to be an imminent crisis, and the currency will depreciate by so-and-so percent. Now, we’ve seen this many, many times in Argentina, Turkey, other emerging market economies. Sami Alpanda: Our luck, or benefit is that we, actually, own the reserve currency in the world. So the U.S. dollar is the reserve currency of the world. We run deficits, we finance them by issuing treasuries, and the world gobbles it up, and at very, very low rates. They are, basically, renting us free cash. Paul Jarley: [crosstalk 00:37:36] we could pay our debt in our own currency. Correct? That we print. Yeah. Sami Alpanda: So as long as that continues, there doesn’t seem to be a problem, but there will … I mean, if you do continue this for- … You cannot continue this forever and ever. And given, as Glenn mentioned, that we have this unsustainable debt path, and obviously at some point, there has to be some correction to it. I guess, the markets do believe that we will, eventually, wake up to the point where politicians will, “Well, we’ll fix this.” So there are adults in the room, but if that doesn’t occur, then I think, we are probably going to crash hard. And we might even lose the reserve currency status, which would be sort of the big tail event that we probably don’t expect it will happen, but it’s possible that it could. Paul Jarley: Okay. Last question. Merrell. Merrell: So I’m a CPA and I’m, also, a lawyer. Glenn Hubbard: Sorry. Merrell: I deal- Merrell: So I deal with taxes all the time, but I also deal with the elderly, and my estimates for my clients is that they don’t recognize that they’re going to get old. They think they’re going to be healthy forever. They’ve saved nothing, and they don’t think that things are going to cost a lot. Merrell: And so, when you take that and look at the budget of so much in entitlements, and then you look at, well, how many people are, actually, paying for taxes, yeah, we got to cut spending, or we have to raise taxes, but I don’t know on whom. Because we can’t cut the benefits for the old people, and we can’t really squeeze that much more out of the 50% that are paying taxes because it’s, generally, the middle-class because low-income, in like what I see, low-end aren’t paying taxes, and the high-end have all the wisdom of the lawyers that bring it down. So it’s the middle-class that’s getting hit more and more, and may end up keeping their elderly in their home with ruining their lives, and their economics paying for it. And I don’t know how to fix it. Glenn Hubbard: I, actually, think Social Security is fixable. It just requires political courage. And there are a couple of fixes that would go a long way. One would be to take up retirement ages because the ability of most Americans that we already discussed, the service sector’s the dominant thing, not manufacturing, or heavily physical work, so that’s part one. Glenn Hubbard: Part two would be something more akin to what economists would call progressive indexation of benefits. So currently, everybody gets their benefit growth at the same growth of real wages. That could be slower for more affluent people, or an even more sensible system might be to raise the minimum benefit, but then flatten it, so that it’s much less generous for middle and upper income seniors. Glenn Hubbard: We’re going to have to make these choices because when you say we can’t old people’s benefits, the law is that we will. So in 2034, the secretary of the treasury, whoever he, or she happens to be then, is going to have to start cutting Social Security benefits, unless we do something, and that may sound like it’s a long way away, and I suppose it is, but it strikes me as one we ought to think about. Paul Jarley: Well, thank you all for the panel, and thank you all for your attention. Paul Jarley: We’ve covered a lot of ground, so what’s the thing, and what isn’t. Or in these cases may be, what’s a good thing, and what’s a bad thing. From a purely macroeconomic standpoint, growing income inequality at the top isn’t really a thing. It’s the bottom that’s the real issue. Paul Jarley: People not having a productive skillset that allows them to share in the fruits of our economy is a bad thing. Technological disruption and changing economic forces are hollowing out the middle. Trade wars and immigration limits aren’t going to solve this problem and are net drags on the economy. They are decidedly not good things. Paul Jarley: Don’t get me wrong. Losing your job hurts, and the playing field needs to be fair. China has been a bad actor, but the solution involves investment in human capital that will help people compete, not putting up barriers to trade, or mobility. Paul Jarley: Rising healthcare costs are most certainly a thing. Our employer-provided healthcare system is a historical artifact of a bygone era, hurts labor market mobility, and has shaped the healthcare system in odd ways. It is especially a thing for lower-income groups where it is taking up a larger and larger share of their total compensation, and from an international perspective, the results of our system, well, it just hasn’t been very great. Politicians need to talk more about creative solutions here. Paul Jarley: More generally, the economic anxiety of the electorate is real. People are concerned about their long-run future. We need to invest in our people to bridge the income and equality gap and improve the future of our children, especially for those at the bottom of the income distribution. Paul Jarley: And while interest rates are low and financing the debt is not an issue now, those IOUs will come due. We are mortgaging our future, while limiting our ability to use fiscal and monetary policy to help us cope with the recession when it comes, and it will come. That is most certainly going to be a thing. What do you think? Paul Jarley: Check us out online and share your thoughts at business.ucf.edu/podcast. You can also find extended interviews with our guests and notes from this show. Special thanks to my producer, Josh Miranda, and the whole team at the Office of Outreach & Engagement here at the UCF College of Business. Paul Jarley: And thank you for listening. Until next time, charge on.   Listen to all episodes of “Is This Really a Thing?” at business.ucf.edu/podcast.