Examining Trump’s Economy, Takeaways from Corporate & Government Mistakes, Sweden’s Modular Homes

17:49Jason Furman:Michael has this nice saying about mistakes are windows into ourselves.

17:53Michael Lynton:And that's where Alison Papadakis came into the picture. Papadakis is a professor of psychology who studies stress and coping at Johns Hopkins University.

18:03Jason Furman:So Josh and Michael started off with wanting to look at mistakes, and they really started off more on their own with it. And then they realized that they wanted a little bit more input, so they brought me in. But a lot of what came across in the book is their own ideas about things, and then they were sort of wanting to check it out. Does this really align with the psychological literature and research? And that's where I came in to try to help them to see this really does actually make sense, and it's not bunk. You guys are coming up with good ideas. And then around their stories, I helped them to just go a little bit deeper and then started to recognize patterns in their lives over time that got reflected.

18:40Michael Lynton:Everybody has a lot of mistakes. I had a few myself, most of them having to do with my professional career, and I wrote up one or two before that. And then I realized I was avoiding the main event, which was the cyber attack that happened to Sony 10 years ago, and that there was a mistake at the core that caused the events that led ultimately to the cyber attack. The FBI is investigating that destructive cyber attack at Sony Pictures.

19:07Jason Furman:This is costing Sony hundreds of millions of dollars. Ten minutes ago now, the FBI announced it's formally accusing North Korea of hacking Sony Pictures.

19:15Michael Lynton:So at the core, what do you look back and think was your mistake involved in the Sony situation? At the core core, it was agreeing to make the movie The Interview. You want us to kill the leader of North Korea? Yes.

19:27Jason Furman:What?

19:29Michael Lynton:And in retrospect, it was definitely a bad decision, and it was definitely one that put the company in jeopardy. You talk about three acts to the mistakes. There's the prelude, what led up to it, there's the mistake itself, and then there's the postlude. You describe in the book, you had put in place a rigorous process for greenlighting movies. Yeah, we had a very, very strong process that had been in place for many years before that. We didn't suddenly get emotionally connected to an idea or a project and say, let's go, But as opposed to that, you get people around the table from different disciplines and they give their voice to whether, you know, the marketing folks telling you whether it's a good idea, the production folks.

20:06Michael Lynton:That was not the case when we agreed to make or I agreed to make the interview. Which leads to the question why? Why on that one? I had been in the job for a while, over a decade. And I was typically the person in the room who was Mr. No. I was actually the guy in the suit. You know, everybody else around the table for the most part were people who were either directly creative executives or interacting a lot with creative executives. And I was the person who was expected to be the adult in the room. There was a moment where I really did not want to play that role. I really wanted to be on the other side of the table, so to speak, with the creative community.

20:44Michael Lynton:And I, in that moment, I said, OK, let's go. Let's make this movie. And through all of those careful processes out the window. I think it took us a while in Michael's case to figure out what the three acts were. And the first act for Michael was actually your childhood. I'd grown up in Westchester. I'd grown up in Scarsdale. And I was upended in the late 60s and moved to Holland. And, you know, my parents themselves were immigrants, so they weren't very sympathetic to my sister and my situation. We were very lonely. And that existed for a number of years, and it had a big effect on me. And I think Josh is right.

21:19Michael Lynton:That's ultimately what played a part in my decision to do this. And act two, one of the things that struck me in reading the book about what happened in that room at the table reading was the hydraulic pressure. Yeah. So what the circumstances were was everybody at that point really wanted to make that movie. We'd had great success with Seth Rogen comedies in the past. This was it read funny on the page. Everybody wanted to do it. and there was an added circumstance, which was there was a competitive studio, Universal, which also had a relationship with Seth Rogen, and they wanted to make the movie.

21:52Michael Lynton:So it had all come down to this moment to make that decision. And I sat there, and you're right, the entire room was raring to go, and I got caught up in the moment. By the time the read-through was finished, everybody was high-fiving, clapping, it was hilarious. There were things in the script I should have been paying attention to, not least of which that we assassinated the leader of a hostile nation, Kim Jong-un. But in that moment, I was so caught up in it. I so wanted to shed my suit, so to speak, and be part of the gang. Then I said, sure, let's go. So you made your mistake. You green-eyed.

22:29Michael Lynton:It went into production, went along. And at some point, you basically lost your computer system and even lost the information in it, which could be misused. Give us a sense of how large those consequences were in your world. So we say yes, the thing goes into production, and then at the June of that year we put out a trailer to say the movie's coming in the Christmas season. And at that point, the North Korean government, through the envoy in New York, sort of sent us a warning that something bad could happen. We checked with the State Department, we checked with Rand Corporation, no, these guys are all bark, no bite, don't worry about it, nothing can ever happen.

23:05Michael Lynton:As it turns out, they were referring to Kim Jong-il, not Kim Jong-un. He was new on the scene, They didn't really understand what he was capable of. We're now in the fall, and all of a sudden, I'm driving to work, and I get a panicked call from my CFO, Dave Hendler, and he says, everything is down. All of our systems are fried. And when I finally got to the studio and we started looking at it, 70 % of our laptops were knocked out. And in the weeks following, this is all well known, the email started coming out. It was like ground zero for the news. Everybody was looking at Sony. By the way, nobody was helpful.

23:41Michael Lynton:Everybody else ran for the hills because all of these emails started coming out. And by the way, movies started coming out up on our systems. We had the Karate Kid that suddenly was available for people to watch online, all because our systems got hacked. Plus, we couldn't operate the studio for at least a week because there was no way of moving material around. So you had the distinction of having the president of the United States call you out on your mistake. I was going on Fareed Zakaria's show to try and explain what was happening at that moment at the studio. It was sort of, we were a quarter way through the whole series of events.

24:19Michael Lynton:And at that point, they had not yet identified with absolute certainty that it was the North Koreans who had done it. So just before I went on the show, Fareed Zakaria said to me, oh, the president, they've just announced that it was the North Koreans and the president is going to do a quick press conference. Hello, everybody. president was taking some questions from reporters and the reporter said, A, what are you going to do about the North Koreans? And B, what do you think of what Sony has done? Sony suffered significant damage. There were threats against its employees. I am sympathetic to the concerns that they faced.

24:58Having said all that, yes, I think they made a mistake.

25:01Michael Lynton:What he didn't fully comprehend and which I sort of laid out in the interview with Freed Zakaria was that it wasn't our decision at that point because the theaters had declined to show the movie. Streaming didn't exist in that moment, so we had no way of getting the movie out. So I, in a funny way, the president misunderstood what we were trying to do, and that in and of itself was a mistake. Having said that, he, in a very gracious act, about 10 days later, called me, A, apologizing for saying what he said, which was not necessary. But secondly, he did say, but what were you thinking making a movie where you assassinate the leader of a hostile nation?

25:42Michael Lynton:Like, surely that was a mistake. And on reflection and in that moment, I suddenly realized he's right. He identified the mistake. And that was actually a mistake. Would it have been different if you'd had all the time in the world to think it through, to talk to Josh about it? Would it have come out differently? I think my life would have been different, yes. I think had I, at an earlier moment, reflected on it, understood what the root cause was, understood really how I felt about it emotionally, I would have been able to keep my head upright in a much better way than I did. Instead, what I wound up doing was, the minute it was behind me, I really never wanted to look at it again.

26:26Michael Lynton:I really took the attitude, okay, that's over. Let's not reflect on it. Let's not consider why I did that in the first place. Let's just move forward. And I can honestly say that was a, that in and of itself was a mistake. I imagined for a long time that every time I walked, years after the event, that every time I walked in the room of any event, any, a dinner, a party, just a group of people, my own family, what they see on my forehead is Sony hack. That's what I imagined. when, of course, for 99 % of the population, it was completely in the rearview mirror. It never came to their mind. This is an example of where Allison was super helpful because Allison educated us about something called the spotlight effect.

27:06Jason Furman:I mean, many of the mistakes in the book were public ones, so of course it's going to happen more in those kinds of situations. But even for people who weren't making public mistakes or talking about them in a public sort of way, it still happens on a day-to-day basis. We worry that our colleagues, our friends, our family, that they're thinking about these things when in fact usually it's just us.

27:25Michael Lynton:Is there ever a time that it actually may be healthier simply to move on rather than to dwell on your mistakes?

27:32Jason Furman:I think for some people with some mistakes, if it's a minor thing or if they actually have a pretty good understanding of it, then it's easier to do that and just move on. But if it's something like the kinds of mistakes that are in the book where it really was very meaningful to folks, it really was a watershed moment in their lives, I think you can't really move on until you really do get an understanding of it. And for most folks, it takes pausing and unpacking it a bit to really get to that level of understanding to be able to move on.

28:04Michael Lynton:Next, we turn to Josh Steiner's mistake, one very different from the one Michael Lintman made, and what we can all learn from it. This isn't like the World Series, where people are like, oh, great, I went to the World Series twice. Once is plenty. You don't need to do it twice. Trust me.

28:21Michael Lynton:Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London. We're the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday, keeping an eye on what's happening across Europe and around the world.

28:36Jason Furman:We do it early so the news is fresh, not recycled, and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break.

28:59Michael Lynton:So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning.

29:08Jason Furman:You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. on Apple, Spotify, YouTube, or wherever you get your podcasts. For decades, people traveled across the world to see John of God, desperate for cures no doctor could offer. And when they arrived, they saw things they couldn't explain.

29:34Michael Lynton:This is real. This guy's actually doing surgery and it's a miracle. I never believed that miracles were real until that point.

29:43Jason Furman:But behind those adoring crowds was something much darker. One of the reasons why I never went to the police is because I saw at least five or six men with guns everywhere he went. That was clear to me, like, close your mouth, don't open your mouth, don't say anything. I'm your host, Martina Castro. And in the podcast Two-Faced, John of God, we'll look back on a man who claimed he could perform miracles and got people from all around the world to believe him. From Exactly Right and Adonde Media, this is Two-Faced, John of God. Listen on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

30:28Michael Lynton:All of us make our share of mistakes, but not all of us are in the public eye, the way that Michael Linton was when he ran Sony Pictures and incurred the wrath of the North Korean regime, or the way that Josh Steiner was when he was in the Clinton Treasury Department and got wrapped up in the Whitewater investigation. Take us through your mistake in Washington. At the age of 27, I became the chief of staff at the Treasury Department. In the 1990s, the beginning part of the Clinton administration was a little bit fraught with scandals, the most notable of which was the Whitewater investigation.

31:01Michael Lynton:And like many senior officials, I got subpoenaed. I actually turned over all the documents that were relevant, one of which, unfortunately, was my personal diary. And in that personal diary, I had written things about Whitewater. And keeping a personal diary in Washington is not necessarily a mistake. Writing about sensitive investigations in your diary, that's a mistake. And it was a big one. So, again, it's important to identify exactly what the mistake is. It was not keeping the diary, in your view, looking back on it now. Yeah, I was a history major. I have a graduate degree in history. You couldn't write history if people who had been involved in public policy and government didn't keep diaries.

31:37Michael Lynton:That's not a mistake. But they were experienced enough, wise enough, mature enough to know that you're not supposed to write things about investigations because there was an independent counsel involved. And my diary included references to sensitive conversations. And worse still, it was the worst combination of a personal diary, therefore not particularly accurate, and about things which were highly sensitive. That's a pretty toxic combination. I made no effort to check the accuracy of my diary because this was never intended to be a precise narrative or a verbatim account of what took place.

32:11It was, more than anything, a way to reflect on events

32:15Michael Lynton:and draw lessons from my personal and professional experiences. I wish that my diary was more accurate. What's your Act I look like? What led you to that decision? One of the things that we discovered about mistakes was you really need to understand the context in which you're operating. And I had started to keep a diary when I was traveling through Asia at the age of 23. And it was totally appropriate. You're in Bali, you know, you're in Malaysia, and you're writing down your notes, probably a little bit of terrible poetry. You meet someone and you're keeping a recollection of the person you met.

32:46Michael Lynton:That's appropriate in that context. I then had a series of jobs, ultimately at Treasury. It was fine to keep a diary, but it would be better if I had kept a diary that was appropriate for Washington, not backpacking through Asia. And that contextual question keeps coming up over and over again. Like, know your context, apply the right rules and processes and systems, decision-making skills to the context in which you're operating. One of the things I admire, but maybe was a little surprising, doesn't it appear you ever thought about just not giving them the diary? Yeah. I received a fair amount of criticism at the time for being naive enough to think that I needed to turn it over.

33:27Michael Lynton:And my view was that the subpoena was very clear and the law is the law. And I really, really regretted writing what I did in my diary. I have no regret about complying with the subpoena. So what was the price you paid personally or within the larger context? In the Clinton administration, you were still working in the Clinton administration, right? Yeah. First of all, Secretary Benson was unbelievably gracious to me. I tendered my resignation and he said, no. He said, no, you're doing a good job. This wasn't so awesome. That's a little bit of an understatement. And he said, nevertheless, you've got to keep going.

34:00Michael Lynton:So the price I paid was certainly I lost some credibility with my colleagues appropriately enough. I had made some bad decisions, and I think they questioned my judgment over it, and that was appropriate. The bigger price was I'd lost some self-confidence and sense of self. And I thought of myself as someone who had good judgment, who was able to operate at a senior level within the government. and I questioned whether this was evidence of the fact that I was in fact too young for my job. There's no question I carried with me embarrassment and shame as a result of what happened. Again, if you had the time to reflect on it, the three acts at the time, would you have done anything differently?

34:39Michael Lynton:Yes. I think in hindsight, I tried to massage it too much and I shouldn't have been as concerned about whether it all lined up perfectly and just should have said, look, I wrote what I wrote. You can interpret it the way you want to interpret it. There are a number of other chapters in this book with different people, some of whom we all know very well, some we may not know quite as well. What were the ones that either surprised you or stood out for you, Michael? Malcolm Gladwell. So if I were to tell you that Malcolm Gladwell considers it to have been a mistake that he decided to become a writer, that that was the professional path that he chose, given his success, I dare say you'd be surprised.

35:18Michael Lynton:Every person we asked had a mistake that they'd been carrying with them for a long period of time, that they were eager to get off their chest. And they were very moving. Some of them related to family dynamics. Some of them related, as Michael said, to career choices. And their willingness to talk was very generous. Having gone through this process, unpeeled the onion, as you describe it, does it make you better at what you do today? You'd have to ask Michael what he does today first. It's not obvious to me. It's not clear to me either, frankly. so I wouldn't answer it that way. Yeah, I think it does.

35:52Michael Lynton:I think, you know, one of the ideas in the book is something called a cheetah pause, which means that before you react to something, you take a breath and you actually try and understand what your emotional state is and what your real thinking is before you actually commit yourself to that action. I've spent a lot of my career in the investing community, and you grew up in the investing community, and you always think about the balance between fear and greed. Which is it? You know, you think to yourself, Every position size is either too big or too small. The work that we did on this book helped me understand that a lot of things in life are sort of like this.

36:24Michael Lynton:It's approach avoidance. It's both. We're really attracted to something and we're really scared about something. And one of the ways to make fewer mistakes, and I think one of the things that we discovered, is a willingness to recognize that both can be true. You're attracted to it. You're afraid of it. And how do you balance fear and greed? It's not all one or the other. It's finding that path.

36:45Jason Furman:There's the making a decision in the moment, right? And I think sometimes we get overwhelmed by emotion or we get so focused in on the rational decision-making that we forget to kind of take a step back.

36:55Michael Lynton:Johns Hopkins psychology professor Alison Papadakis says one tried and true way to avoid mistakes is taking a pause before a plunge.

37:04Jason Furman:So there's a great example in the book with Irv Gotti, who is a music producer who really blew up his relationship with J. Lo by allowing his emotion in one situation to move over into another one. Had he, for totally legitimate reasons, he had a lot of emotion response to the situation. But had he been able to take a moment and not answer the phone that then led to this major mistake that he made, I think he might have made a different decision in it. And it's that kind of allowing yourself the time, the space to do it. Now, not all decisions allow that, right? But if we can do what's called a cheetah pause, right?

37:42Jason Furman:So cheetahs run incredibly fast, but they can also decelerate and stop very quickly, too. So if we've got the cheetah running, right, or the train going, right, we've got to make a decision. If we can figure out how to make a little pause in there to allow ourselves to use our wise minds, right, to make these rational decisions that include both emotion and our rationality, that can be very helpful.

38:03Michael Lynton:So one thing I've had in my mind for a long time, which is if you're not making some mistakes, you're not trying enough risky things. But is the real lesson here, it's not a question of taking the risk, it's how you take the risk. I think our book is less about not taking the risk or taking the risk per se. One way to think about it to your point is if you're a loan officer and you're so risk adverse, you never make a loan, you're unlikely to be a successful loan officer. And if you approve every loan, you're unlikely to be successful. Our book is slightly different, which is loan officers are going to make bad loans.

38:34Michael Lynton:Investors are going to make bad decisions. If the inclination of that loan officer and that investor is to hide that mistake, to not talk about the mistake, they're making a whole new mistake. And the real premise of our book is acknowledgement that we all are going to make mistakes and that it's a natural part of life and that the way to make fewer of them and to carry less shame, less guilt, less regret is just to talk about them. This is a lot of work you've gone through with Allison. If it works perfectly, 100%, what does the reader take away? What have you accomplished? What did you take away?

39:13Michael Lynton:Well, I have my own mistake. Okay, let's hear it. When I was president of ABC News, we had Leonardo DiCaprio front an Earth Day special for us because he was the chair of the organization at that time. And it was a decision I made on the spur of the moment. I was relatively new in the job. I wanted acceptance from the journalists. I was trying to do something I thought was noble. It was environmental. And my team decided to have him go into the White House and interview President Clinton, and I got killed. I mean, it was brutal. And it built up to President Clinton at a big black tie dinner with a thousand people in Washington getting up and doing the whole talk about me.

39:50Jason Furman:But I just want to say this to David Weston. You know, I've been in a lot of tough spots. Don't let this get you down. You may not be America's news leader, but you're king of the world.

40:06Michael Lynton:Have you talked about that on television before? No, I've never heard this. Well, so this is the hope. I've talked about it with my wife. Okay, this is really the hope. No, but this is exactly the hope, that someone who's been super successful across a whole stage of different careers, seriously, as a lawyer, as an executive, as someone who's done really interesting television, this book hopefully has given you permission for the first time to talk about something publicly, which had stayed with you for a long time. And that's our aspiration, that more people have that sense that it's okay, that you don't just have to talk about the success, you don't have to suppress the mistake, that it's okay to go public.

40:38Michael Lynton:I don't think what people should take away from this is by reading this book, you're never going to make another mistake. That is naive and that's actually not what we're hoping for. Will you reduce the number of mistakes you make? Maybe. hopefully will you understand better why you made those mistakes and perhaps over time make fewer probably in fact i think most likely and equally importantly and this is the big fact that after you've made that mistake and by examining that mistake you can get rid of the shame you don't have to live with that burden the way that i lived with it the way that josh lived with it the way that lots of people live with it all the time by actually trying to examine why you did it to understand what your emotional state was, you can live with yourself in a better way.

41:25Michael Lynton:And that, to me, would be 100 % success. Up next, getting the cost of housing down. We travel to Sweden to see how manufacturing a house, rather than building it, may be part of the answer.

41:47Michael Lynton:I'm Carol Masser. And I'm Tim Stenevec, inviting you to join us for the Bloomberg Business Week Daily Podcast.

41:53Jason Furman:Now, every day we are bringing you reporting from the magazine that helps global leaders stay ahead.

41:58Michael Lynton:We've got insight on the people, the companies and trends that are shaping today's complex economy.

42:02Jason Furman:That's right, Tim. We're all over global business, finance, tech news, all as it is happening in real time. And we've got complete coverage of the U.S. market close. Gotta say, basically, if it impacts financial markets, if it impacts companies, if it's impacting trends and narratives that are out there, we are on it.

42:17Michael Lynton:We also have a lot of fun doing it. Bloomberg Business Week also brings you the analysis behind the headlines through conversations with our expert guests.

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42:34Jason Furman:Check it out on your way home from work to catch up on the conversations that you miss

42:38Michael Lynton:during the business day. And on the weekend, check it out for a complete wrap-up of your business week. That's the Bloomberg Business Week daily podcast. I'm Carol Masser. And I'm Tim Stenevec. Subscribe today wherever you get your podcasts.

42:52Jason Furman:For decades, people traveled across the world to see John of God, desperate for cures no doctor could offer. And when they arrived, they saw things they couldn't explain.

43:05Michael Lynton:This is real. This guy's actually doing surgery and it's a miracle. I never believed that miracles were real until that point.

43:13Jason Furman:But behind those adoring crowds was something much darker. One of the reasons why I never went to the police is because I saw at least five or six men with guns everywhere he went. That was clear to me, like, close your mouth, don't open your mouth, don't say anything. I'm your host, Martina Castro. And in the podcast Two-Faced, John of God, we'll look back on a man who claimed he could perform miracles and got people from all around the world to believe him. From Exactly Right and Adonde Media, this is Two-Faced, John of God. Listen on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

43:57Michael Lynton:Home ownership has long been a key part of the American dream. But today, it's further out of reach than it's been in decades. Our new contributor, Chrystia Freeland, former finance minister and deputy prime minister of Canada, has first-hand experience with this from her time in government, where her party promised to expand prefab housing. She travels to Sweden to take a closer look at how homes are built and how rethinking that process could mean less expensive houses rather than helping people pay higher and higher prices.

44:32Jason Furman:In the far north of Sweden, the marvels of modern manufacturing are on full display. This looks more like a factory than a housing site. I hope so. Otherwise, we would have been failing. Here at Lindbeck's, 500 miles north of Stockholm, houses aren't built piece by piece. They roll off an assembly line. The company produces roughly 40 units a week, a rarity in an industry known for drawn-out timelines. In Sweden, nearly half of single-family homes and about 20 % of all residential buildings are built this way. International visitors, when they come to talk to you, what do they say about their own situation?

45:17Jason Furman:What brings them here? They say the price is too high. It's too costly to buy a home, to rent an apartment. And they come to us to see if our way of doing it is the solution or part of the solution. Housing affordability. It's a growing concern that unites Americans on both sides of the aisle. America will not become a nation of renters. We're not going to do that. You don't have to be in Congress to understand how badly we need to bring down the cost of housing. And people on both sides of the Atlantic. This is more than a housing crisis. This is a social crisis. Apollo's Housing Affordability Index shows that buying a home in the United States hasn't been this difficult since the 1980s.

46:04Jason Furman:Over the past decade alone, home prices have doubled. And those who can afford to buy are significantly older. In 2010, the median age of all U.S. homebuyers was 39. Today, it's 59. The median age of a first-time homebuyer has also climbed to 40. It's a dynamic that Beata Karanchi, chief economist at TD Bank Group, has spent much of her career analyzing. Housing, a huge preoccupation. How important is it? It's important on a couple of levels. It's a large share of the economy in terms of workers it employs, in terms of output. So it's a large contributor. And then it's important because it's probably the most important thing people think about when they think about affordability.

46:48Jason Furman:Lifestyle, ability to pay for rent or home ownership. So I know what myself, when I'm out speaking with our clients, I think it's like the second or third question that comes up is about whether their children will be able to afford a home and what that outlook looks like. When it comes to housing affordability, the issue comes down to a familiar equation, supply versus demand. Purchasing power on one side, production constraints on the other. You have pointed to astonishing lack of productivity in the construction sector. What's going on there? Yeah, it's beyond lack of productivity. it's regressing.

47:23Jason Furman:What we find is it's contracting. So to build a home, it actually takes more resources today than it would have taken 10 years ago. And so that's the disturbing aspect. Some of that is being related to the regulatory environment, the difference in standards and fees and permitting. So there's definitely a factor there. And the other factors that are being attributed to is in the residential sector. It's largely a small company game, which means they often have 50 employees or less. And from that perspective, they're going to be slower to adopt innovation. And there's a very high reliance on doing things the same old way, manual processes.

48:04Jason Furman:One innovation that could help break that pattern is what Lindbex is doing in Sweden, building homes in factories instead of on site. And while modular housing production does exist in the United States, it still makes up only about 3 % of new single-family home construction. So to what extent is modular housing, prefab housing, a solution to productivity challenges in the housing sector? Yeah, it's been cited as having some clear advantages and potentially lowering the cost of housing by 20 to 30%. That productivity advantage shows up most clearly in multifamily housing, Lynn Beck's specialty.

48:42Jason Furman:It's pretty much like if you go to an automotive industry. You see machinery, you see people, you see processes, and you see computers and robotics and material and so on. So we produce housing very like other organizations produce cars. We do it indoors, year-round, eight hours per day. If I'm a potential client of yours, what are the financial benefits of buying a home from you rather than having someone build my building on site. The first thing is cost for money. With our process, you pay very late in the process, so the interest cost is lower. Traditional build you pay for the foundation, you pay for the structure, you pay for the roof and blah blah blah, so you end up having quite high cost for the interest, and you pay very late with our method.

49:35Jason Furman:The second thing is the engagement as a customer in the process. You don't need to supervise car manufacturing. You don't need to supervise housing done in a factory. For all the cost advantages that come with manufactured housing, it has also met with resistance, something I myself encountered when advocating for its use while serving in the Canadian government. One of the policies the Prime Minister campaigned on was building modular housing. That is a way to get more homes built faster. I've had people heckling me in the House of Commons in Canada saying, oh, you want everyone to live in a trailer park.

50:12Jason Furman:No. Is there sort of a stigma about prefab housing? I think so. And there's like some factors like, you know, prefab, you need wood frames, for example. And so some people will be, oh, the quality of the construction isn't as good. Or, you know, I want to put my personal stamp on it, which you can in prefab, especially with 3D printing and other factors in terms of technology. It's not like it was 10, 15 years ago. So part of it is the stigma. And part of it is making sure you have the right skills to do this, right? To make these design changes and to do it in an economical way so that people don't feel like it's all a cookie-cutter factor coming through, right?

50:53Jason Furman:So, you know, it's breaking through that mentality of what prefab meant. It's not just buyer resistance that can be a challenge for manufactured housing. It's also the need for steady demand in an industry that is notoriously cyclical. We try to maneuver to have a backlog that is about one year. We can be one year ahead of what's happening. And one year is, for us, it's a good time to have the backlog that long. But you need to take into consideration customers who have to wait for one year before we can hand over the next project. And if we see market going down, we need to address other kind of products so we can fill the production flow with products.

51:37Jason Furman:And then there's the issue of regulation, something not unique to North America when it comes to home building. Elisabeth Svanteson is finance minister of Sweden. Everywhere you go, certainly in the Western industrialized world, housing, especially the ability of young people to afford a home, is a pressing political issue. It's something you and I talked about as finance ministers. How big an issue is it here in Sweden? It's a big issue, especially in bigger cities. Many young people feel they don't really can afford to move quite early. But it's difficult to afford it because the prices have risen so much.

52:15Jason Furman:One of the largest problems in the housing market is it is over-regulated. So rules added, rules added, new rules all the time. and that makes it difficult and very expensive to build. Tell me a little bit about what you've done on cutting red tape. Many rules have been added, and probably good purpose for every rule, but all the rules make it very expensive to build. So that's why we are really trying to do, like, now you can build, like, a Swedish house, a small house. It's not so regulated at all. It's small, but you can live one or two in the house, so you can come in, so you can have your own home.

52:53Jason Furman:And governments aren't alone in grappling with how to build more and build faster. Wall Street is, too. It's increasingly seeing affordable housing as both a need and an opportunity. JPMorgan plays a really big role in affordable housing. It is part of our mission. Just to give you some statistics, I think in 2025, we lent and invested$10 billion towards the new construction or preservation of about 60 ,000 units nationwide. Sharmie Saban leads community development banking at J.P. Morgan, overseeing investments aimed at scaling affordable housing solutions. And increasingly, that includes modular construction.

53:30Jason Furman:Time is money when it comes to construction. It costs money to build. It costs money to carry a loan. And if there's ways to make it shorter, you're going to save money. And when something is cheaper to build, it's going to be more affordable for the person that is ultimately renting or going to own the building. I mean, with modular housing, for example, units are built in weeks. They're put online in months. I think when you're doing ground-up bricks and mortar, it takes months or years to get a building online, depending on where you are. But the cost of building or manufacturing housing is only one part of what goes into making a home affordable.

54:07Jason Furman:Or not. They're all linked. The cost is one piece. The interest rates are one piece. the regulations, the local zoning codes, if you're allowed to build multifamily here versus just single family, all of that leads to the constraints. I think what is great right now is that there is a lot more focus on this at the federal level and at the state level. I know they're looking more closely at how to ease some of those supply constraints and look at more streamlining of building, creating a national building code, building a code for modular housing to help chip away again at some of these challenges that make it harder to bring units online.

54:45Jason Furman:Modular construction could reshape parts of the industry, but even its most vocal advocates caution against viewing it as a silver bullet. Ten years from now, 20 years from now, do you think most homes are going to be built in factories? No. Should they be? No, I don't think so. Maybe 50 % to go 100 % I think we would lose so much of the building organisation skills. And I think we need to see in different products, different way of producing things. We need the challenge to be better. If everybody would do the same, where would the challenge be then? Modular construction may never fully replace building houses one at a time on site.

55:38Jason Furman:traditional building. But few major industries have changed so little over the past half century. While manufacturing, logistics, even farming have reaped enormous productivity gains from automation and technology, home building largely hasn't. In a moment defined by shortages and a lack of affordability, the debate may be less about finding a perfect solution and more about whether an industry under this much pressure can afford to keep building the way it always has.

56:06Michael Lynton:That does it for us here at Wall Street Week. I'm David Weston. See you next week for more stories of capitalism.

56:27Michael Lynton:I'm Barry Ritholtz, inviting you to join me for the Masters in Business podcast. Every week, we bring you fascinating conversations with the people who shape markets, investing, and business.

56:41Jason Furman:CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market. Whether you own stocks, bonds, real estate, commodities, crypto, you really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Schiller. Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio. Sometimes it's authors, Michael Lewis, author of The Big Short, and Moneyball. Regardless of the conversation, these are the folks that move markets each week. That's the Masters in Business podcast with me, Barry Ritholtz.

57:22Jason Furman:Listen on Apple, Spotify, or wherever you get your podcasts.

57:30Jason Furman:People who didn't do what John of God wanted them to do, they usually disappeared. John of God was once Brazil's most famous spiritual healer. But in this limited series podcast, we uncover the darker truth behind his global empire of faith and fear. From Exactly Right and Adonde Media, this is Two-Faced, John of God. Listen on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.