The DeLorean Saga: Fraud, Drug Deals and Marty McFly's Car

18:05Tim Harford:Oh, too kind. So an economy of scale simply means that the more you're producing of a thing, the cheaper it gets to produce each extra unit. So you might contrast, say, a sports car with a sports massage. So if you're in the sports massage business and you give someone a sports massage... For our American listeners, that's a massage. Go on, Tim. Honestly. Please leave a massage. It takes an hour, right? It takes an hour of your time. And you want to do another sports massage? Anyway, whatever. It takes another hour. And if you want to do another one, it takes another hour. You're not really gaining anything by having more massage appointments.

18:45Tim Harford:None of this is getting any cheaper or more efficient. But if you think about a car, you've got to design the car, you've got to test the car, you've got to tool up the factories. And it costs an absolutely enormous amount of money and time and effort to produce the first car. And then the second one is way cheaper. And the third one is cheaper. So there's a real advantage to just trying to produce as many of these cars as you possibly can. Not just because, hey, everybody wants to sell more, but for any given price, the amount of cars you're selling could mean that you're making a loss on each car or you're making a massive profit on each car.

19:24John DeLorean:And this makes it very hard for new competitors to come into an industry where there's these economies of scale, because I could say like, oh, I've got a great idea for a car, but all I need is millions and millions of dollars to build the factory, hire the workers, get the land, design the car before you even sell one.

19:40Tim Harford:And that first car needs to be very expensive. You've got to borrow a lot of money. You've got to persuade a lot of people that this is a good idea. Who are you going to persuade? Who's going to come up with that money?

19:51John DeLorean:So in fact, this is a big part of the reason it's so hard to start a car company as opposed to, you know, a massage therapy business. And in fact, for decades before DeLorean tries to start his company, people have tried and failed in America to start new car companies. It has been like 50 years since there was a successful new car company, which, by the way, was also started by a former GM executive named Walter Chrysler. So DeLorean, of course, knows all this. He knows about Chrysler. He knows about all these failures. And he thinks that a sports car might actually help him solve this economy of scale problem because people will pay a lot of money for a beautiful sports car with doors that open up instead of out.

20:35John DeLorean:So if you can charge a lot for that car, you don't have to sell as many to get over the economy of scale hurdle. This is exactly the same trick used by Elon Musk when he first started Tesla. Like the first car was a sports car. It cost$100 ,000. But he also signed people up in advance to get the money to help make those first cars. And then, of course, later on, he developed cheaper cars and weirder looking cars. Once he got to scale, right? You use the sports car as the first car that gets you to scale, and then you can sell the cheaper car for the masses.

21:08Tim Harford:Did Elon Musk start Tesla, by the way? I feel we're going to get letters about this.

21:12John DeLorean:He did not. Robert, did you say that he did? I think I said that. I'm going to write you the listener letter right now. Dear sir.

21:18Tim Harford:Elon Musk joined Tesla and helped make it successful. Thank you. Okay. But the sports car strategy makes sense. Musk used it, and DeLorean is going to go for it. Yes, this is his plan.

21:30John DeLorean:But still, you got to raise all that money. You still have to raise a crazy amount of money. So in 1975, he starts the DeLorean Motor Company and he starts raising money. He's very glamorous, right? He's good looking and he's kind of a star and he's of the moment. And so he's raising money from Johnny Carson and Sammy Davis Jr., which I love these as like 1970s cool investors. I'm in, John. I can't tell if that's Sammy Davis Jr. or Johnny Carson. And I don't want to know. And so some money is coming in and he's sharpening his vision of the car. He works with this famous Italian designer who comes up with this low boxy design that is like a great design.

22:12John DeLorean:If you think about the time, you know, cars are kind of moving in the direction that the DeLorean is going. It is kind of ahead of its time. And DeLorean also decides to use this process where the frame of the car is built basically with this special kind of plastic. And then there's stainless steel on the outside, kind of like the Model T, any color you want, as long as it's black. The DeLorean is any color you want, as long as it is stainless steel, which also looks cool. Did he work with Lotus as well? He did. He did work with Lotus as a British citizen. Perhaps this means more to you than to me, but tell me about Lotus.

22:44Tim Harford:It means so much to me because the car that James Bond turns into a submarine, this sleek white sports car, he's escaping for the helicopter and he He drives off the pier into the lake and then the car just sprouts fins and it turns into a submarine. And when I was a boy, I had the toy of that car, the die cast car. You press a button and the submarine fins come out. And yeah, that's all I know about Lotus. But yeah, I just wanted to say that.

23:13John DeLorean:And this is probably a similar era, right? I mean, did that car look kind of like a DeLorean, Tim? Did it have that kind of boxy vibe also?

23:21Tim Harford:Yeah. I mean, it was super sharp at the front. had a very, very sharp point at the front. That's for cutting through the water. Exactly.

23:29John DeLorean:They didn't have laws then to keep kids safe. So this is the vision for the car. Lotus has worked on it. It's Italian designer. Stainless steel, of course, the doors. Now is when you need the real capital, not the Johnny Carson, Sammy Davis Jr. kind of capital, but big, big capital. And by capital, you mean money. Lots of money. Thank you. Yes, money. What I mean is money. And we live in this world today where somebody like DeLorean would have people, you know, running down his door to give him money. We live in a much more financialized world now. There wasn't a startup ecosystem like we know it.

24:07John DeLorean:There wasn't private equity like we know it. There wasn't venture capital like we know it. All these things were getting started, as we've talked about on the show and, Tim, as you've written about and talked about. But it just was not like it is today. And also, every new American car company for the past 50 years had been a failure.

24:22Tim Harford:So you need somebody with money and no judgment. That's what you need. Yes.

24:26John DeLorean:A government. You need a government. And governments, especially at this time, but actually still, governments really love car companies.

24:38Tim Harford:Yeah. They love them because jobs making cars, they are manufacturing jobs. They are perceived as high status jobs for ordinary citizens. You know, it's not for the elite. It's not for people with fancy degrees. It's for regular guys. And they usually are guys without a load of education who can get some skills training and they can get a good job. And it's a steady job. And what's more, there's going to be a whole network of suppliers which are all going to be relying on this car factory. And so you're not just building a car, you're giving citizens great jobs and you're revitalizing an entire region.

25:19Tim Harford:That's the attraction. That's what governments are hoping for. And the nice thing about having someone build a factory on your territory is it's hard for them to take it back. Once they've built it, it has to stay there. Yeah. And, you know, we've been mocking governments. I've been mocking governments, but China has done this and has been very successful. But it's not cars like the DeLorean. It's the new cutting edge. It's electric vehicles. And some of the best electric vehicles in the world are coming out of China. And that story about the supply chains, that counts as well. So this is also a story about China having an EV grid.

25:55Tim Harford:It's also a story about China developing battery technology. It's a story about China developing rare earths. Whatever those things are, they're important for electric cars. Magnets. But not only that, they're also key building blocks for drones and for missiles and for high-tech electronics, all of this other stuff that you're indirectly supporting by backing your car industry. So this is the dream, right?

26:20John DeLorean:This is why governments have a point when they throw money at car industries. And in fact, when John DeLorean, this glamorous former General Motors executive with this idea for a beautiful car, starts shopping around for a place to build a factory, governments basically throw money at him. He's talking to people in Spain, in Detroit, at home. He's in Puerto Rico. He gets really close to going to Puerto Rico. But in the end, he gets a better offer from the United Kingdom, home of Tim Harford. The U.K. government is going to give him something like$100 million. Maybe it seemed cheaper in pounds.

27:01John DeLorean:Most of it in grants, some of it in loans. But there is a catch. And the catch is, to get the money, he has to build the factory in Northern Ireland. This is another classic move by governments. They don't want the factory to just be anywhere. Once they can convince a factory to come to their country, they look around at which part of their territory is struggling the most. Because that way you can get the most bang for your buck. And it solves sort of two problems, a political problem and an economic problem at the same time.

27:33Tim Harford:So why Northern Ireland, Tim? So why Northern Ireland? So Northern Ireland is part of the United Kingdom, but it is physically on the island of Ireland, so next to the Republic of Ireland. And it's been contested politically for a long time. So you've got the Protestants and the Catholics in Northern Ireland. Some of the Catholics want to be reunited with the Republic of Ireland. A lot of the Protestants do not. They want to stay part of the United Kingdom. this disagreement gets extremely violent. There are bombs, there are killings, there are soldiers on the streets, there's barbed wire, they are building walls, they call them peace walls, just between Protestant and Catholic neighbourhoods.

28:18Tim Harford:And I don't know whether the peace walls were a good idea or a bad idea, but they're not a good sign, right? So it's a very tense situation. And of course, Northern Ireland is suffering economically as a result of that. And so you have the decision makers who are in London, of course. They've got the money, they've got the power, and they're trying to do something to make this problem less of a problem. It's probably worth mentioning as well, you might think of Northern Ireland as, well, maybe it's a rural economy, maybe it's a bit economically backward. Actually, Northern Ireland historically has a lot of manufacturing and amazing shipbuilding industry, but that shipbuilding industry itself was under pressure from competition at the time from Japan, from Korea.

29:02Tim Harford:So there's another question like, we're losing these manufacturing jobs, where are we going to get the manufacturing jobs to replace them? So for all of these reasons, the idea of putting a car factory in Northern Ireland seemed attractive to the decision makers, most of whom were in London. Tim Harford, what's the most famous ship ever built in Northern Ireland? You want to go there? It's the Titanic. I'm not going to blame Belfast for that. No. We blame the iceberg for that.

29:29John DeLorean:So this is the context. Unemployment in Northern Ireland is something like 10 % at the time. It's even higher in this sort of rust belt parts of Northern Ireland. And so, of course, when beautiful John DeLorean comes along with his beautiful car and his promise of his beautiful factory, of course they want him to put it in Northern Ireland. And they don't just want him to put it anywhere in Northern Ireland. They wanted to put it in this particular spot on this marshy field in between a Catholic neighborhood and a Protestant neighborhood in an industrial town called Dunmarie, just outside of Belfast.

30:03John DeLorean:I can imagine the Protestants and the Catholics coming together through the factory door, wrenches in hand, building together a new tomorrow and a new car. Spoiler alert, they're going to have to build two different doors, one for the Protestants and one for the Catholics. The Lorian says, yes, sure, we will build the factory there. And on October 2nd, 1978, he broke ground. There's a picture of it that I saw. He's there. He's got a suit and a shovel with some dirt. He's under a tent, I guess because it was raining, I infer. And so this is going to be hard. It's always hard to build a, you know, Greenfield new factory for a new car.

30:39John DeLorean:It's really hard to do it in the middle of violent civil unrest. There's barbed wire everywhere. When executives come to stay in a hotel to work on the factory to get into the hotel, they have to be frisked in this special trailer. They're supposed to start production in 1979. They don't. In 1980, DeLorean goes back to the government for more money. And the government then starts like looking at the books of this company. And, you know, they're like, why are you spending so much? Sure, it's a lot to build a factory. But just we're just noticing that you have these U.S. offices where you're millions of dollars over budget.

31:15John DeLorean:Why is this happening? And somebody working with DeLorean actually looks at, you know, looks at the situation and goes to DeLorean and makes the case like, you know, maybe we could spend a little less on the U.S. offices. We're millions over. Robert, give us DeLorean's reply to this guy. John DeLorean says a$2.5 million shortfall for the U.S. is peanuts. I'm not going to be nickel and dimed by those bastards. I'm not going to run a nickel shit company. If they don't like it, I will close it down next Friday.

31:45Tim Harford:Tim, just to translate for you, nickel shit would be like tuppence shite, I believe. He sounds like a nice guy, but that's the threat. If they don't like it, I'll close it down next Friday. Jacob, do people believe this? Well, they give him more money.

32:01John DeLorean:Yeah, it's the government of the UK. They're not really known for overcoming the sunk cost fallacy. Right. Well, and think about it. They've put all this money into the project. They have promised that they're going to bring thousands of jobs to this place that desperately needs it. Right. DeLorean is not a nice guy here, but he is savvy. He is right. What they end up doing is largely giving him more loan guarantees, which, you know, is like money, as we have seen time and again in history. The government would say, no, no, it's not money. It's just a loan guarantee. But there is something quite money-like about a loan guarantee in the end quite often.

32:35John DeLorean:And in early 1981, these beautiful silver cars start coming off the line. And they're, you know, shipped to auto dealers in America. And people start buying this car. And every car comes with a letter from John Z. DeLorean asking the new owner for feedback. Tim, give us a hit of the letter.

32:57Tim Harford:Okay. There are no curse words in the letter. There are not. Not a one. Okay. If, as you come to know your car better, you want to comment on how well we have achieved our goals or how we might even improve, I do hope you will do so. Warmest personal regards, John Z. DeLorean. It's nice. Nice letter.

33:17John DeLorean:Sounds like a nice guy. He really cares. Robert Smith, please read to us from one representative letter from a DeLorean owner in Chicago who says he's noticed a number of small problems and who actually lists them. Yeah. Number one, side window sticks in the up position. Number two, fuel pump is excessively noisy. Number three, dye from the optional floor mats comes off and stains clothing, shoes and skin. Number four, interior body fit of the door is not excellent. Number five, owner's manual does not state the type of light bulbs to use. Several were burned out upon delivery. Number six, the radio is terrible, especially in the FM stereo position.

34:04John DeLorean:With the exception of the above, I have found the car to be great. So good. So good. Is he joking or not? Is he joking or not? This is a question. I don't think he's joking because the kind of car nuts who are buying this car, they love it.

34:22Tim Harford:They love it. Also, I guess it is possible to have all of those faults and to still, you know, the car could still look great, handle brilliantly. You know, I could imagine you could still like your car even with those problems, but it's not a good sign, is it? The DeLoreans were bad. It's not a good sign. They were lemons.

34:40John DeLorean:They were cars that did not work well. But what about the doors, the going doors? They got stuck. The doors got stuck. There was actually some car show in Cleveland where somebody got stuck inside for an hour. It's like the spinal tap seed room where the guy gets stuck inside the egg. Derek Smalls, his name is. That's DeLoreans. DeLoreans were bad cars. They leaked. Windows fell out. And in fact, the company winds up setting up what they call quality assurance centers around the United States, which sounds like it's like, oh, we're just assuring that every car is built to the highest standard of quality.

35:19John DeLorean:But this is obviously not what they were doing. They were fixing the cars that came off the line that didn't work. They actually came up with this fix for the doors where they added some kind of a metal latch, I guess, to prevent them from getting stuck. And what they had to do for a while before they could do it in the factory was pay a machinist in California to just make them one by one. So this guy would like show up every week or whatever with a paper bag full of metal latches to put on, you know, the beautiful doors of the beautiful car of the future. So much for the economies of scale. Yeah, right, right.

35:51Tim Harford:Your marginal cost is high at this point. This is not good. We'll get to more of this, but this is the kind of thing that happens.

35:58John DeLorean:Great moments in industrial policy with your host, Tim Harford.

36:02Tim Harford:Yeah, but I mean, DeLorean have kind of got themselves into this situation where the skills exist to make these cars work, but not in Northern Ireland, where they're shipbuilders. They exist in the United States. And so you're shipping these bad cars to the US and then lavishing all this extra expense and all this extra skill to make them actually work.

36:22John DeLorean:And yet for a moment, for a moment, people are very excited about these cars. When they get to dealers, it's news. You know, local news might do a story. The cars are actually selling for more than the sticker price because everybody wants one and there aren't that many. Everybody, you know, rich people want them anyway. And at some point in the second half of 1981, DeLorean is telling the factory, like, increase production. You know, let's get up to scale. Let's get more cars. And then comes the winter. The winter is bad. Sales often go down for cars in the winter. In addition, it's 1981. Paul Volcker is hiking rates.

37:05John DeLorean:As we have all talked about many times, the Federal Reserve is basically creating a recession to fight inflation. An economic winter? An economic winter along with the climatological, meteorological winter. And now DeLorean really is in trouble. They have all these loans they've taken out from the government, from private lenders, and they're just not – they don't have the cash flow. They're not selling enough cars to pay their debts. And on top of that, on top of that, it is becoming clear that John DeLorean, executive, may not be entirely on the level, may not be the straight arrow we thought he was.

37:43John DeLorean:Should have known from the genes. Should have known from the genes. You can't trust a man in genes. In particular, people start asking questions about millions of dollars that DeLorean, the company, sent to a firm called GPD Services. And GPD Services is really what winds up turning the DeLorean story from a failing business to a scandal. It wasn't the cocaine in the hotel room. I mean, it was the 80s, right? People were putting cocaine in their coffee, as I understand it. GPD, though. GPD was the big story. So GPD stands for General Product Development, or maybe Grand Prix drivers. I've actually seen both reported.

38:29John DeLorean:Okay. This is suspicious already. You're sending checks to General Product Development. The firm is registered in Panama. Oh. But don't worry. The checks aren't going there. They're going to a P.O. Box in Geneva. P.O. Box 33. Okay. These are bad signs all around. Swiss banks were really Swiss banks. You could really trust them to hide your money.

38:50Tim Harford:Swiss bankers, Panamanians, tax lawyers. It's pretty good, right? Nothing can go wrong. Yeah.

38:56John DeLorean:In all, DeLorean sent something like$18 million to GPD Services. And from what I've read, I'm pretty sure at least some of that, and maybe all of it, was actually just paper checks, big paper checks mailed to that P.O. box. So eventually, investigators figured out that GPD services had been created by a guy named Colin Chapman, who was the head of Lotus, that British carmaker.

39:23Tim Harford:Oh, yes. The submarine. The submarine. Oh, yes. So Colin Chapman's a Bond villain. Is this what we're saying? Yes.

39:33John DeLorean:He is at least a small time Bond villain. You know, Lotus, as we mentioned earlier, had done work helping to design the car. So like that doesn't seem villainous. Like, oh, Lotus did this work. DeLorean sending this money to this firm set up by the Lotus guy. But but the money DeLorean sent to GPD at 18 million or so dollars never made it to Lotus. Oh, Lotus got paid separately for its work. And so what happened to that money? At least according to prosecutors, these guys took it. DeLorean was accused of taking something like eight million dollars and using it to buy a company in Utah that built snow cats, snow groomers.

40:15John DeLorean:So the Lotus CFO, what happened in court? The Lotus CFO pleaded guilty to fraud and was sentenced to three years in prison. The judge in the case called it a barefaced, outrageous and massive fraud. DeLorean couldn't be extradited to the UK under, I guess, the law. You don't get extradited for this kind of thing. Let's do the cocaine. DeLorean is running the company. He wants to save it. Things are going down. And around this time, he is approached by his neighbor, his friendly neighborhood drug dealer. It is Southern California. So the neighbor basically offers DeLorean the chance to get in on a drug deal.

40:52John DeLorean:In DeLorean's mind, it's like, oh, I can use that money to save the company. And so this is how DeLorean ends up in that hotel room with the bag full of cocaine because his neighbor, the nice drug dealer, is secretly working for the FBI. Don't trust a neighbor who offers you a drug deal is the lesson. This is a setup. Classic, classic setup. So DeLorean gets arrested, you know, handcuffed, arrested. And a week later or so, the company files for bankruptcy. The last DeLorean came off the line in late 1982. In 1984, DeLorean goes to trial for financing the cocaine deal. And he argues in court that he was entrapped.

41:37John DeLorean:I mean, he kind of was, right?

41:40Tim Harford:I mean, what I'm curious about, Jacob, is do we know why they decided that they were going to do this thing with the FBI? because it seems really random. He's running a car company and then the FBI decide they're going to try and get him involved in a drug deal. Did they have some reason to believe?

41:56John DeLorean:It is weird, right? I think, and so going back to that Hillel Levin book, which is the best source book that I found on this, he talks about this neighbor, and I'm quoting here, had been caught in a drug deal by federal authorities and to reduce his sentence, agreed to be a confidential informant in other narcotics investigations. So the neighbor's shopping around for deals that he can turn over to the FBI. It seems that way. That is the best I can figure out.

42:23Tim Harford:Maybe the neighbor thought DeLorean was a likely prospect. And he was right. DeLorean was a likely prospect.

42:30John DeLorean:In any case, the jury actually agreed with DeLorean. If you, you know, are in a room full of cocaine and you say it's as good as gold and a jury finds you're entrapped, you are not guilty. And that is what a jury found. So there were also a bunch of civil cases, people trying to get their money back. One lawsuit I found particularly interesting was the UK government sued Arthur Anderson, the accounting firm that was the accounting firm for DeLorean. Basically, the government is arguing that Arthur Anderson should have detected the fraud. And in the end, Arthur Anderson wound up paying tens of millions of dollars to the UK government in a settlement.

43:06Tim Harford:Yeah, you don't hear the name Arthur Anderson that much anymore. Why is that?

43:12John DeLorean:They were the Enron accountants, right? They were the Enron accountants. And that one being Enron's accountant was so bad that they ceased to exist, right? After that firm.

43:22Tim Harford:They stopped existing, yeah. There was no more Arthur Anderson. Cautionary Tales is all about learning lessons from historical mistakes. And I would like to get it on record that Arthur Anderson clearly did not learn the lesson of this case.

43:33John DeLorean:R.I.P. Arthur Anderson. DeLorean, of course, got sued too. and ultimately wound up giving a lot of his money, most of his money, his mansions, his riches, to his creditors. People did get money back out of him. Wait a minute. We've got to go back in time here because we didn't talk about the movie. We didn't talk about Back to the Future. It's true. We only mentioned it in passing. And it came just like a little bit too late for DeLorean, right? 85, they're already done. So I was the target audience for Back to the Future. I was a child when it came out in 1985. And I would not have known what a DeLorean was like.

44:08John DeLorean:I wasn't particularly into cars. But the car was like the star of that movie. Right. There's actually a line when Michael J. Fox looks at the car and says, you built a time machine out of a DeLorean. And when I was a kid watching that, I was like, oh, they built a time machine out of DeLorean because it's such a cool looking car. Incredible advertising. I, of course, realize now after hearing this whole story that for the adults in the theater, this was a comedy line. This was a joke line, which is you built a time machine out of a DeLorean. I love it. It was in the news and was kind of a failure.

44:44John DeLorean:In a minute, we are going to get the classic Tim Harford cautionary tales big lesson from the story. And we're also going to have one last fun fact from the life of John DeLorean. One late move from John DeLorean.

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47:34John DeLorean:So there is a real question that I have, Tim, and I was truly happy when you agreed to do this show with us because I want to talk about industrial policy. Is it a good idea or when is it a good idea or how is it a good idea for a government to try and direct the economy? That's the big question here.

47:50Tim Harford:Yeah. A big question. It's a very big question and it's at the heart of the DeLorean story. The basic idea with industrial policy is government might want to do something, something, something. The details kind of matter to help certain industries flourish. It's been fashionable and unfashionable over time. So there was this moment in the 50s, the 60s, the 70s, where lots of developing countries in Latin America, so Brazil, for example, lots of African economies would be adopting industrial policy. If we're going to compete on a global scale with the Americans and with the Europeans, our guys are going to need a little bit of help to get started because of this problem that we described, the economies of scale.

48:40Tim Harford:Otherwise, we'll just be these rural agrarian economies for the rest of time. In many cases, it didn't work. Governments, as with DeLorean, spent a lot of money, didn't get anything in return. So it then really fell out of fashion. The 1980s, the 1990s, there came to be this consensus, sometimes called the Washington Consensus, or that covered various things, that government should just get out of the way. Yeah, you need to set the rules, you need to enforce the rule of law, you need efficient laws, efficient bureaucracies, roads that work, that kind of stuff. But you do not want to be giving loan guarantees to John Z.

49:22Tim Harford:DeLorean. I stand by that. You still do not want to be giving loan guarantees to John Z. DeLorean. But then something's changed, which is the rise of China. And I think the superficial perception is China's doing really well and the Chinese government intervenes in all kinds of ways. So hasn't the Chinese government proved that industrial policy works? Including in cars, notably, right?

49:44John DeLorean:China poured tons of money into the car industry and lost and lost and lost. And then it worked. Now they have this amazing car industry.

49:52Tim Harford:They have this amazing car industry and it's not just cars. They've got this amazing battery industry, solar panels, amazing solar panel industry. And a lot of this had government support. You know, the Germans had a solar panel industry and it's kind of been wiped out by the Chinese, for example. So maybe the European Union, the United States and so on, maybe we need to learn something from the Chinese and maybe we need to think again about industrial policy.

50:16John DeLorean:Well, one of the things that the Chinese government did that is different than the DeLorean story is they had dozens and dozens of car companies. They didn't just subsidize one big Chinese car company. Every local region had car manufacturers and they competed against each other within the country. So that sense of competition was still there. And maybe the lesson for the UK government should have been maybe they should have built a factory also in Manchester from a different car company or in Birmingham or outside of London where you could have these car companies compete and so become more efficient and hopefully come out with a car for the ages instead of a DeLorean.

50:57Tim Harford:Yeah, I think that is a very sensible conclusion. But what you do not want to get yourself into is we're going to back this one guy and lend him money. Because first of all, maybe he's not a good guy. Turns out maybe Mr. DeLorean, maybe he was a great guy. But I think we have reason to suspect that he was not a good guy. But also, you're going to be taken advantage of, right? You've put yourself in a position where this company suddenly has lots of leverage over you. Whereas if you're backing five companies and one seems to be doing pretty badly, well, you know, you could just let them sink. They've got a lot less influence.

51:34Tim Harford:There's a really helpful idea, I think, that it's a phrase that was used by actually a guy I used to work for a long time ago. I used to be his research assistant, an economist called John Kay. but one of his books is called The Truth About Markets. And he, in that book, said, look, the thing that works about capitalism is not the kind of all the technical stuff that you read about in the economics textbooks about kind of price equilibration and competitive equilibrium and all that. It's a much bigger picture thing. It delivers something called disciplined pluralism. Pluralism is, well, there are lots of different ideas out there and you never really know which one's going to work.

52:14Tim Harford:So you need space for lots of, maybe it's the gull wings that work. Maybe it's an electric car. Maybe that's the solution. Maybe it's not cars at all. Maybe it's like electric bikes. Maybe it's trains. Loads and loads of different ways to make things that make people happy. So the pluralism is important, but the discipline is also important. And the discipline is where at a certain point you say, guys, this is a bad idea and it's not working. And the real challenge for industrial policy, and it is a challenge that people can rise to, is how does government support industries in a way that maintains the pluralism so you've still got lots of ideas and also maintains the discipline?

52:53Tim Harford:And one way that has worked a lot for East Asian economies, so Japan, Korea, a lot of these economies have gone through this process of industrial policy on their way to growth, has been to rely on export markets. So we're going to back our companies, but only if they can produce something that somebody wants to buy. We don't mind subsidizing. We don't mind supporting. But if you cannot produce some kind of product that somebody outside this country wants, there's a problem. And so the discipline is coming from the need to compete on the international market. Okay, last thing. As I mentioned, there's one more John DeLorean fun fact.

53:32John DeLorean:And it is a patent. You know I love to read a patent on the show. And this is a patent he got late, late in life, after sort of after our story has ended. It looks like 93, 94. This is his comeback idea. Transportation system, vehicle, and method. You know what it is? Monorail. Monorail.

53:49Tim Harford:Monorail. Monorail. It's a monorail. Wow. We still got the Bond aesthetic. Nothing can ever go wrong with a monorail. Yeah, I love it. I love bond on a monorail. A bondorail. Tim, thank you for doing this with us, truly. Oh, thank you for inviting me. It's a pleasure. This really was Caution Tales plus business history. This is what we wanted. We did it.

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