The Answer Is Transaction Costs
"The real price of everything is the toil and trouble of acquiring it." -Adam Smith (WoN, Bk I, Chapter 5)
In which the Knower of Important Things shows how transaction costs explain literally everything. Plus TWEJ, and answers to letters.
If YOU have questions, submit them to our email at taitc.email@gmail.com
There are two kinds of episodes here:
1. For the most part, episodes June-August are weekly, short (<20 mins), and address a few topics.
2. Episodes September-May are longer (1 hour), and monthly, with an interview with a guest.
Finally, a quick note: This podcast is NOT for Stacy Hockett. He wanted you to know that.....
The Answer Is Transaction Costs
Money Killed Barter; Can a Platform Bring It Back?
We explore why money became the default middleman and how a modern platform can make barter practical by slashing the costs of search, matching, and trust. Founder Jassim Baqer shares the story behind Tbadel, what people actually trade, and how reputation, bundling, and scale (might) make swaps work.
• Adam Smith’s "double coincidence of wants" problem and transaction costs
• Platforms as connection engines that lower search and matching costs
• Tabottle’s origin, goals and name meaning exchange in Arabic
• How offers, counteroffers and bundles enable fair value without prices
• Building trust with profiles, ratings, in‑app messaging and reporting
• Local meetups versus future delivery options to cut transfer costs
• Why density and subcommunities unlock multi‑party and chain trades
• What trades dominate now: books, electronics, kids’ gear and services
• AI matching, alerts and global exchange as the growth roadmap
• Two‑sided market dynamics and the path to scale
Tbadel Web Site
From JJ's letter: Photos of "Parklet" in San Francisco.
If you have questions or comments, or want to suggest a future topic, email the show at taitc.email@gmail.com !
You can follow Mike Munger on Twitter at @mungowitz
This is Mike Munger, the knower of important things from Duke University. This episode is about barter and the problem of transaction cost in exchange. Adam Smith famously described the value of money or some universally accepted good as a way of getting around barter. But what if a platform could reduce the transaction costs of barter? Well, tobottle may be that app. My guest is Jasim Baker, a graduate of Kingdom University in Bahrain, a refugee from the construction industry who's pursuing a startup in the barter app space. New twedges, a letter, and a book at a month. Straight out of Creedmore, this is Tidy C.
SPEAKER_02:I thought they talk about a system where there were no transaction costs, but it's an imaginary system.
unknown:There always are transaction costs.
SPEAKER_00:When it is costly to transact, institutions matter, and it is costly to transact.
SPEAKER_01:This month's guest on the answer is transactions cost is Jossim Bacher. And he has uh created uh with the help of others, but he is the CEO of a an app called Tobottle. And the we and he in uh I met, I guess, Jasim on email after he had listened to some of this podcast and said that he he was interested in some of the issues. And it turned out that not only was he interested, he's interesting. So uh welcome to the answer is transactions cost, Jasim. And please do do as I always ask guests to do. Uh introduce yourself by saying how you came to be interested in this problem. What was uh how were you educated, and were there any particular readings or people that you encountered that inflected you in this direction?
SPEAKER_02:Sure. Um thank you so much for having me, Mike. I'm uh really happy to be here and um looking forward to our conversation. Um I've watched your videos for a long, a long, long time, so uh it feels a bit special to be talking with you directly.
SPEAKER_01:Now you're calling me old. We don't we don't we don't have to have the long, long time thing. I I understand I'm old. Everybody knows that.
SPEAKER_02:Um so I'm excited to share the story behind model. Um I'm talking uh I'll talk about uh uh how we came with the with this idea. Um first let me introduce myself. My name is Justin Balder, I'm uh founder and CEO of Itmodel. Um I've been always interested in simple ideas that make uh life easier, uh more practical, and more sustainable. Uh that's where it model came in. Um the name, by the way, means exchange in Arabic, and the idea is simple um to help people get what they need without spending money.
SPEAKER_01:What did you encounter that made you think about this? How how were you educated and what led you to because this is sort of an economics project, but it's also a social project. And so I was wondering which of those two dominated.
SPEAKER_02:Uh the idea came to me during a very personal moment in my life. On the same day my uh my son was born, I also had to leave my job. So um that moment made me stop and think about how people uh get what they need when uh when money is tight. So I started asking myself a simple question. How did people do uh how did people do this before money invented? Uh you know, um that led me to uh to to the monitoring, uh value for value, need for need. And uh one of your videos to be honest, uh Mike, especially the one uh with uh with the short trading experiment you did in the class. Uh it helped me understand uh how people became happier when they uh sought for something they actually fit their need. Um that idea stayed with me, and I thought maybe this whole system just needs a modern platform. So here we're uh with model, how this is how it model was born, to be honest.
SPEAKER_01:It's really a very deep insight. So um, as I believe I had warned you, I'm gonna read something from Adam Smith in book one of The Wealth of Nations, where he sets up the problem of barter. And usually economists dismiss barter because of the problem of the double coincidence of once. That is, the transactions costs are just too high. But the reason that we dismiss being able to find somebody else that will give me a ride is the transactions costs are too high. But an app called Uber and several others solved that problem. And so we can find ways around that. So, what I think is the deep insight of Tabottle is that the reason that we don't use barter typically is the transaction costs are too high. But that's not a fundamental condition of the world, that's a technological condition. And if an app can make barter easier, there's we can cut out the middleman. And the middleman in this case is money. So if you and I can find a way to exchange, then it's actually a lower transaction cost because we don't have to go through the the intermediate steps of I have to convert what I have into money, and then I convert money into the thing that I want. So we've cut out a kind of middleman by eliminating that. Let me read from it's page 37, which is the first uh it's chapter four of book one, and it's it's a little bit long, but it sets up the problem well, and then we'll we'll talk more about the specifics of the app. This is on page 37 of the Liberty Fund edition. When the division of labor has once has been once thoroughly established, it is but a very small part of a man's wants, which the produce of his own labor can supply. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labor, which is over and above his own consumption, for such parts of the produce of other men's labor as he has occasion for. Every man thus lives by exchanging or becomes in some measure a merchant, and the society itself grows to be what is properly called a commercial society. So pause the quote for a moment. So so far, so good. Um, no matter what you think about barter or exchange, it helps to have some sort of specific activity that you do because of division of labor, because that's how you can produce the most stuff. But probably you're not directly producing money. What you're producing is stuff that the the unless you're counterfeiting, unless you're printing cash directly, you're producing some sort of thing that you then want to exchange for things that you want. But Smith recognizes that generally we're going to need to convert that thing to money and then convert the money into the thing that we want. So, continuing the quote when the division of labor first began to take place, this power of exchanging must frequently have been very much clogged and embarrassed in its operations. One man, we shall suppose, has more of a certain commodity than he himself has occasion for, while another has less. The former consequently would be glad to dispose of, and the latter to purchase, a part of this superfluity. But if this latter should chance to have nothing that the former stands in need of, no exchange can be made between them. The butcher has more meat in his shop than he himself can consume, and the brewer and the baker would each of them be willing to purchase a part of it, but they have nothing to offer in exchange except the different productions of their respective trades. And the butcher is already provided with all the bread and beer which he can has immediate occasion for. No exchange can, in this case, be made between them. He cannot be their merchant nor they his customers, and they are all of them thus mutually less serviceable to one another. In order to avoid the inconveniency of such situations, every prudent man, in every period of society, after the first establishment of the division of labor, must naturally have endeavored to manage his affairs in such a manner as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or another, such as he imagined few people would be likely to refuse in exchange for the produce of their industry. So end quote. So what he's talking about is money. Now it might not be money, it might be some universally exchangeable good like gold. Um there, I've talked about examples in R.A. Radford's article about prison camps where cigarettes became a currency. So the advantage is if if we have some commodity that all of us will accept, that will reduce transaction costs. So Smith is making there a transaction cost argument. The mistake, if I understand your argument, the mistake people are making is to act as if that's a fundamental requirement of exchange. And you have recognized that it's not, provided we can reduce the transaction cost some other way. So I'll I'll say one more thing and then shut up. But I want to get this set up right. The reason we use money is to reduce the transaction's cost of exchange. It's hard for us to find each other. And I actually uh had AI make a cartoon about the fact that it's very difficult to get change for a cow. Adam Smith has uh an example where a rancher wants to buy some salt, but uh if all I have is a cow, I have to buy a whole bunch of salt. I can't make change for a cow. And so, is there some way to solve this problem with reduced transaction cost? And I just never made this connection. What apps do, what platforms do, is reduce transactions cost along a different margin. So, with that setup, may I ask you to describe how you tried to implement Tabottle and how it works? Just give us the nuts and bolts.
SPEAKER_02:Sure. Um, so uh Mike, the app doesn't eliminate money, uh, but it's reduced how much people can need to relay on it. Uh instead of buying something new, uh, people can trade an item for a skill uh they already have and get what they need without paying. For example, uh, someone might might trade a baby stroller for a kitchen appliance or an um, let's say offer a service like uh photography and exchange of a piece of furniture. So money is still there in life, of course, but model gives people another option, a way uh to access value without spending. So I realized early um on that we can't force one excess value on everything, of course. So instead of trying to control the price difference, uh we focused on giving people the space to decide value for themselves. Um make an offer and uh counterover or even bundle multiple items together until both sides feel the trade is fair. Um a coffee machine and a bookshelf, uh for example, may not have the same uh market uh price. Uh but if both uh people feel the exchange meet their needs, then uh the trade works. So uh we we didn't solve the price gap uh with number, but we solved uh with conversation uh well and mutual uh uh uh let's say agreement between both sides.
SPEAKER_01:So the the what's interesting is the way you solve the problem, because Smith is right, he doesn't say double coincidence of once, but that's what economists later came to say. This is the reason that barter won't work. Because if I have something and someone else wants it, that person also has to want what I have. And that's pretty difficult to arrange. However, on a platform, it is much easier for me to find someone because the cost I just announce something, and it is easy for us to contact each other at very low cost. And the what's interesting about the t-shirt example, and this had just never occurred to me until you pointed it out. For those of you, I will put up, I'll put up a link to the exchange video. But the experiment that I did in class was I gave all the students in my class of 100 a t-shirt, but I made sure to give them the wrong size. So pretty much everybody, they they come up and I give everybody the wrong size. They go back to their seats and I say, you can exchange with the person beside you. Well, it's unlikely that the person beside you is going to have a t-shirt that you want, even if they want the t-shirt that you have. So it's actually an illustration of the problem of barter. But then I said, now you can change with anybody on your row, and that that reduces the transaction cost of finding someone who very likely will be willing to barter a shirt. And then I say, Yes, now you can exchange with the whole class of 100. That's what your app does. I can exchange with anyone, and so the likelihood that I will find someone who is willing to exchange for what I have, and vice versa, is dramatically increased at very low cost. So, can can you talk about that does that actually work? Are there transactions?
SPEAKER_02:Yes. So that's a real challenge in a traditional partering because it depends on two people wanting what uh the other has at the same time. Um what the model does uh is expand the circle. And instead of looking for one exact person who wants to uh, for example, your your item, uh you post it on the app and it becomes visible for the whole community. So even if the person who has what you need doesn't want your item, um someone else might want it, and they can give you something that works for you. It turns a two-person problem into a community solution. That's what we will do.
SPEAKER_01:And what's great about that is that I I might exchange it since I know that if I can acquire something that has value, I will be able to exchange it in turn. In effect, it means that I can have three-person or four-person exchanges because I I'll accept that that that seems pretty valuable. Yes, I'll accept that, knowing that I will then exchange it for something else, but it's not money.
SPEAKER_02:And then to be honest, um Mike, uh the app idea, it's not just when you you use it when you need something. For example, um, I have a lot of things in my home I don't use anymore. Yeah, so I can take a picture, write a description of each of them and put them in the app, and uh I can get rid of them and get what I need. It's as simple as that. So you don't have to need something to use the app. That's um I can say it's that's like an adventure. Uh it's not it's not a game, that's uh like a small adventure. You can try, uh negotiate, search, evaluate, something like that.
SPEAKER_01:Well, and and once people start to use it, they might just go to the app to see what's available because it's it's kind of like a community souk, a place where we exchange things. Exactly, exactly. And so creating that kind of community is it in itself that has social value. Well, I I have a lot of questions just about nuts and bolts. You obviously have to pay for shipping, and somehow you have to solve the problem of trust. So you and I promise to ship something to each other, and it's reciprocal. And my promise to ship you something is conditional on your promise to send something I want to me. How do you police or enforce that promise? And how how is how do you pay for shipping and ensure that things are delivered?
SPEAKER_02:Um to be honest, in the beginning, Mike, uh, we knew that exchange items in real life could be challenging, uh, especially when two people live far apart or don't know how to meet safely. Uh what we did in Twitter is uh make the exchange process flexible. Uh some users prefer to meet in person in public place, and uh money swap uh happen that uh uh way because it's simple and free. And uh for people who don't want to meet uh uh or live in different areas, uh uh be partnered with the delivery service that uh can help them exchange services. Of course, uh sorry, uh I need to phrase it again. Uh for uh uh those who live uh live in separate places or far places uh from each other, uh in the future we'll uh place uh delivery service. So the drivers can take uh uh the place from uh the item from uh uh place one to place two and take the place two from place one. So that will be in the future.
SPEAKER_01:Well, and so what what's interesting? Well, yes, so what's interesting is that as this develops, what might happen is that there are some commute sub-communities in cities. Because I I was if if I have to ship something to you in Bahrain, then basically the transportation costs will dwarf whatever the value was of our exchange. But if I could find someone else, I live in Raleigh, North Carolina, it might very well that if the community grows, there may be hundreds of people in Raleigh, North Carolina, and we can just arrange to meet up in some parking lot and exchange the thing. But without the app, we would never know of each other's existence. And so we find each other and create a community. And what if if this works, I realize that this is somewhat aspirational. You're hoping that it takes off. But if this works, then there might be subcommunities, and I could just go to the app and then click on maybe a region of a country or a particular city, and then look at that and say, yes, I'd like to exchange for that. And then later that day, I can go and meet with the person in some parking lot. We exchange the thing. We both have reputations, so we get evaluations on the app of was what I delivered to you what was promised. And so we acquire a reputation that allows us to be able to trust because the three aspects of transactions cost I always talk about are triangulation, transfer, and trust. And I can see how the app really helps with triangulation and transfer. The problem with trust is that it requires a very significant density. Of transactions. And it's just, it's hard to get to that point. So, how are you finding the sort of startup problems of getting to the point where you have enough of a reputation to be evaluate trust?
SPEAKER_02:Um, I believe trust is always a challenge in peer-to-peer exchange.
SPEAKER_01:On eBay, it's a challenge. It's always a challenge. This is not your app.
SPEAKER_02:Yeah, but what we did in Twangle, we create a system that makes people feel feel safe before they trade. Uh, users can see profiles, activities, and rating so they can know uh who will who they are dealing with. Uh all communication happens inside the app, which reduces uh the uncertainty and keeps everything transparent. And uh when someone behaves uh poorly or breaks the rules, the community can report them and uh we take action quickly. So we didn't eliminate the trust problem completely, to be honest. No platform can, uh, but we reduce it enough to make the trading comfortable and uh predictable for most people. That's what uh what we did.
SPEAKER_01:There will always be predators operating around the periphery of some sort of app like this, so the problem can't be eliminated, but reducing the cost means that people might start to use it, and most of the time, most trades might very well go through very, very cleanly. Well, um, what are your hopes for the volume or for the expansion of the use of the app over the next five years? So if this is successful, what will things look like five years from now?
SPEAKER_02:Well, it's an interesting question to be honest.
SPEAKER_01:Well, it's a it's a hard question, I realize, because you're struggling day to day, but I'm it'd be interesting to take a step back and to say if we succeed, if the things that I'm working on actually happen, what sort of communities might exist?
SPEAKER_02:So our goal, or especially my dream, to expand Badal beyond Bahrain and introduce the concept to a new market in the Gulf region, in Europe, even in America. Uh, we also plan to improve the app uh with a smarter matching, uh, stronger trust features, and better tools for trading services, as well as uh physical items. Um as the community group, uh we want to make cross-city and even cross-country partering possible. And most importantly, we want to help people build a new habit, saving money, reducing waste, and uh rethinking the way they access value. So the vision is not just to grow an app, but to grow a mindset that can scale across different cultures and communities.
SPEAKER_01:Well, it it does strike me that one of the things that the app could do is I have certain preferences, there's things that I want, there's things that I have. Um, it does seem like the app could contain an agent which I have trained to act in my stead. And then I could you could just set up alerts and uh I could get an alert saying this is the sort of thing that in the past or that you have expressed an interest in. And so then I don't have to go and search every day because a lot of days uh there might not be anything. But if I had an AI agent that could act in my stead, I guess I could imagine in five years it even would go to the point where it could execute trades for me, it could execute exchanges for me, and it could it could call an Uber or some autonomous ride share that would come and pick the thing up, that could literally execute the trade. So the in thinking in in big terms, um AI and autonomous delivery would dramatically reduce even further the transactions cost, because then I no longer have to do the search myself if I have an an AI search agent and the delivery part of it where I have to drive or go somewhere and execute the trade, that the that would be great. That would be really interesting if you had these kind of autonomous communities because it's still serving people.
SPEAKER_02:Speaking of the future, uh Mike, imagine in the future where someone in the United States can trade directly with someone in Bahrain through the app. The possibilities become endless. You could see people exchange a particular item, a collectible, handmade goods, or even uh unique skills that don't exist in other countries. Um a person in Bahrain might trade a traditional craft for a vintage item from someone in New York. Someone in the USA can could offer specialized online services in exchange for something uh rare from the Gulf. So it's endless uh possibilities. Can you imagine that?
SPEAKER_01:Well, I I I couldn't until I heard of this app, and it's interesting. So the the the usual story is that those sorts of artisanal production, um, it it's too expensive to organize the transportation. But again, if you can get density, then you have let's say there's a bunch of people in Brooklyn that make something, there's a bunch of people in Bahrain that make something, they have no real way of exchanging, and the money economy doesn't really help. However, if you could organize an exchange at some sort of volume, then you could have a shipping container and it could go from Bahrain to Brooklyn, and another one could go from Brooklyn to Bahrain. And if you can do it at scale, then you might be able to empower what now is impossible just by having those sorts of connections. So it would it is interesting once you start thinking in terms of apps, apps want to become giants because the the operating at scale is the aspiration. The hard thing is to get past the initial point, but it does strike me there's several dimensions for this app that if you could achieve scale, could really be an interesting and important community.
SPEAKER_02:Of course, I totally agree.
SPEAKER_01:And um well, I'm just paraphrasing what you said, but it is it is interesting to think about what success would look like um if we can if if you can get beyond the initial stage. Because obviously, the the in the the I think when people first started Airbnb, um they had a terrible time getting any sort of uh inventory of people to rent, and they had a hard time getting people to start renting. Once they did, then it took off. The way Airbnb worked was that someone would travel, say, from New York, maybe to Abu Dhabi, and they noticed that renting in Abu Dhabi was really cheap. You could get a nice flat cheaper than a hotel, it had a kitchen, and so when they got back to New York, they then listed their um apartment on they became a supplier. And so the advantage of Tabottle is that it's a two-sided market, and the matching problem is the big problem. I have to be able to find someone who wants to exchange with me, but once I have that experience and I tell other people about it, it might start to spread.
SPEAKER_02:Yes, yes, exactly. And uh we're growing, to be honest, step by step, and we learn from each phase to improve the experience and uh then move to the next level with the community is ready. That's what what we we do. So it's taking it step by step, getting the feedback and uh improving.
SPEAKER_01:Well, and the the the important thing to emphasize is that it's peer-to-peer. Um, and in in a way, that's most of what, for example, Uber is Uber doesn't sell rides, Uber sells connections. And so somebody with a car in a few minutes finds somebody who needs a ride, and they have an exchange that otherwise would be precluded by transaction cost. Um, do you imagine one of the things that's happened to Airbnb is people imagined Airbnb would be peer-to-peer. But some companies have bought up a bunch of properties and then started to rent them out on Airbnb, basically using it as a decentralized hotel software app. So I might have a hundred properties in a city, and that that has meant that the rental costs of some Airbnbs has gone up, uh, of the rental costs of apartments has gone up because a bunch of people have bought them up and then started selling. Um, is it possible that someone, and I there's nothing wrong with this, but it is interesting to think about. Might I, as a retailer, go on to bottle and list things that I then am willing to barter, particularly in a location, because it wouldn't have to be peer-to-peer. If I make something that I can make pretty cheaply, you might get retailers. And maybe they wouldn't be just normal users, but you could have a shop. So on to bottle, there might be a place where I could go to someone who is a pretty large artisanal retailer, and maybe they make pots or they make other things that in in Bahrain are native cultural items, and they make hundreds of these things. They're selling them, but they're selling them to barter. So the it might expand beyond peer-to-peer, it strikes me.
SPEAKER_02:Yes, and um now when you say it um start to thinking of it, uh, it's possible, why not? We can do that in the future.
SPEAKER_01:Yes. Well, there's there's there's nothing about the app that prevents that, is is what I like. It's flexible.
SPEAKER_02:Yeah, of course not. Flexible and scalable. That's that's the great thing about it.
SPEAKER_01:Well, um, what what volume of transactions are you seeing now? I realize that it's new, and there tends to be an S curve. So it it's things start out slowly, and then if they take off, they jump, and then maybe they approach asymptotically something else, and you you're in the bottom part of the S-curve, but what volume of transactions are you seeing?
SPEAKER_02:Oh uh, no, uh, most of the trades on Twodel are uh for everyday practical item. Um electronics are uh very common, things like uh phones, headphones, and small gadgets. Uh maybe items also uh popular uh because kids grow fast and the parents prefer to trading instead of buying a new. Uh we see a lot of small furniture, books, uh, kitchen apply lessons, and uh fitness equipment, for example. And many people are trade services and skills like uh photography, tutoring, or simple home repairs. So it's uh mix of useful items and uh useful skills, things people actually need in their daily lives. But the number one trading still on the top is uh books. Uh people love to trade books between each other.
SPEAKER_01:Yeah, sure. And that that is books are closer to something of an apples to apples comparison. So, and what what I like about the way you describe it is I mean, I I the listeners can't see, but uh I have an extremely crowded office, so the office behind me is full of books and all sorts of little stuff. Um, I suppose I could do it on eBay, but eBay actually is kind of a hassle. You list it, you have to have some way of getting paid, and you have to pack it up and ship it. And if I if there were some way of just taking advantage of this in my community, there's this thing I have in my closet. I just take a picture of it and put it on Tabottle, and someone says, Yeah, I'd like that. Uh, and I I find out what they've got. Uh going around on my daily chores, we meet at a parking lot, we exchange the thing. It's actually way cheaper in terms of transactions cost than eBay if you have enough density of transactions, particularly in an urban area. So the I was sort of shocked when I first heard of this. This is barter, it can't possibly work. But once I start thinking through it in terms of my own understanding of transactions cost, this has a real chance of occupying at least an important niche. So your description I really like, which is I have this thing, I take a picture of it and I put it on the app.
SPEAKER_02:As simple as that. For example, you can take a picture for the box behind you, and uh you don't know, you might uh trade them with the Tesla, for example.
SPEAKER_01:And the the not having to convert it to money and back and not having to put it in a box and ship it is the big advantage. Well, um, I've I've been very interested for a long time to hear about uh the the app. You contacted me, I think, back in August. And just because of the the nature of my schedule for uh the answer is transactions cost during the school year, it has taken us a while to get together. Are there other things you would like to say about the app or about the problem of transactions cost? This is your chance to help the listeners and me think in new ways.
SPEAKER_02:Uh to be honest, uh Mike, uh I want uh to like uh to take advantage of this podcast to uh to maybe highlight some issue we're having, uh uh, which is the getting an investor. Uh we're as you know, we're trying to expand uh in Bahrain and the region. Uh so getting investors can be challenging, especially with a concept that isn't common widely understood yet. Uh-huh is not uh uh, let's say mainstream idea that some investors need time to see the potential and understood how the model creates value. Uh but the way I look at this that is a symbol. Uh every new idea feels strange in the beginning. So that's why once people see the numbers, the growth, the community engagement, and they impact saving money and reduce waste, the idea becomes much um much easier and and uh easy to believe in. So yes, it's harder at first, but uh right, investors are the ones who recognize potential before everyone else.
SPEAKER_01:And it may be true that the conventional wisdom is often correct, that's why it's conventional. But when there were so many people that were so skeptical of Airbnb, and because it is ridiculous. I am going to rent an apartment and someone else has the keys, and I'm going to go to another city I've never been before and stay at their place, and yet it has become just a gigantic. So the the fact Albert Einstein often would say when it comes to new ideas, unless it's ridiculous, there's no hope for it. Because otherwise it's not really a new idea. So all of the new ideas that work at first seem ridiculous. Now, the problem is that many that don't work also seem ridiculous. But this one, after thinking about it for a bit and talking to you, I actually see why it might work. If an investor wanted to get in touch with you, how could they do that?
SPEAKER_02:Um by email, uh by phone number, we we have a website, we have uh an Instagram account, uh, uh our app is live and uh iOS and uh Android, App Store, and uh Google Play. So we are everywhere.
SPEAKER_01:All right. So um you the I I have the link for the app, and I will put that up on the uh website when I post the podcast, which will go up uh next Tuesday. So I guess that will you and I are talking on the 9th. It will post on the 16th. Um, and I encourage people to learn more about this idea because if nothing else, it really does illustrate a component of transaction cost that harks back to Adam Smith and does create a lot of new possibilities. Well, Jasim Baker, I appreciate the fact that you were willing to talk to me and I hope that you'll keep in touch and let me know how things proceed with the app. So thanks for being on the answer is transaction cost.
SPEAKER_02:Thank you so much. Thank you so much, Mike, uh, for this great conversation. I really enjoyed sharing the story behind bundle and uh learning from uh your perspective as well. Uh parsing might might be an old idea, but with the right tools, it can create real real value for people today. So uh thank you so much, uh, Mike, again. And uh as Nelson Mandela said once, uh all the great ideas were once considered impossible. Thank you so much. Thank you for every time.
SPEAKER_01:Whoa, that sound means it's time for the twedge. Adam Smith walks into a barter market and tries to trade a book for a bottle of claret. Seller says, I only take goats. Smith sighs, darn it, this is why I invented money. That actually was an AI-generated joke. It isn't very funny, but it's hilarious that that's what AI came up with. So I thought I'd share it. More traditionally. Good news is people in barter economies never have inflation. Bad news is they may never have lunch. Australian barter humor. And actually, this is really just an old man joke, but it has to do with barter. So here's the joke An old man buys two cases of very good Australian wine, puts them in the backseat of his convertible. He stops at a gas station. A woman, filling her car with gas, sees the wine. She comes over and says in a husky voice, I'm a big believer in barter, old fellow. Would you be interested in trading wine for sex? The old man pondered and said, Well, maybe. What kind of wine have you got? As I said, that's an old man joke. I apologize. I think that's the worst thing I've ever heard. How marvelous. And then, third, a shaggy dog story. And I'll explain in a moment what a shaggy dog story is. If you don't already know, it's an interesting problem in transaction costs. But first, here's the joke. Sometime in the Middle Ages, a duke sought to overthrow an earl who was his rival. So he sent a group of his soldiers to sack the Earl's castle. As word of the soldiers coming spread through the town outside the castle, most people ran or hid. But as the soldiers passed through the market square, they heard a voice calling Wool, wool for cheap, wool for cheap. Captain of the soldiers went to investigate and found the stall. Where the voice was coming from. It was empty, except for a sheep. The sheep said, wool for sheep, wool for sheep. Surprised to find a talking sheep. Captain asked him, How much does the wool cost? Sheep says, One bag of wool for one bale of hay. Captain says, Well, I don't have any hay. I have money. I have some coins. Sheep. No coins. I don't have any pockets. I want hay. I'm hungry. Wool for hay. Wool for hay. Captain shook his head, went to rejoin his men in their advance on the castle. Men reached the castle and they found the gates shut tight and archers on the wall. Several times they attacked, riding through a hail of arrows. Each time they were turned back before they could break down the castle gate. Suddenly the captain had an idea, called up one of his men. Go back to that market square in the town. In one of the stalls there's a talking sheep. Bring it to me. Soldier goes back, found the sheep, grabs it, rode back to the castle. He passed the struggling sheep over to the captain, who then organized his men for another charge. As they neared the gates, the captain flung the sheep hard against the gate, and the gate collapsed. The Duke's men overran the castle and captured the Earl as they had been ordered to do. As they were preparing their prisoners and spoils to return to the Duke's castle, one of the soldiers rode up to the captain and asked him, Well, sir, I'm confused. Why'd you send me back to get the sheep? And how in the world did it break down the gates? And how did you know that it would happen? Captain smiled and said, Well, it's simple. It was a bartering ram. Now, that is a shaggy dog joke, and shaggy dog's jokes are about transaction costs. Now, if you've if you know the genre of shaggy dog jokes, you already know this, but a lot of people don't. The defining features of a shaggy dog story is excessive, almost absurd detail. Let me assure you, I told that joke in about a quarter of the time it should normally be told. The details of the attack and the desperate measures of the defenders should have taken another 10 minutes, but I spared you and frankly me that ordeal. But it should be absurd detail with irrelevant information, drawing out the story far beyond anything that's necessary. Second, there has to be a payoff that's deliberately disappointing. So the whole point is the audience invests in the narrative, they become interested, and that means that the narrative has to be interesting. It's a storytelling challenge. They become interested in the narrative and then they're betrayed by the fact that the joke at the end is stupid. The audience has this feeling I've been had. And if you like the joke teller and it's well done, it can be funny, but usually it is a fraud. Now, if it works, third, the humor comes from the journey, not the destination. So the humor's kind of meta. People laugh at the fact that the story keeps going, that the details are absurd, and their own increasing suspicion that the teller is actually up to something ridiculous. Finally, many shaggy dog jokes, not all, but many, end in some sort of really terrible pun. They may end in a kind of pun called a fegut, a store, a form of pun-based science fiction or fantasy joke. Now, a fegut was in the early 1950s, the science fiction writer Reginald Bretnor wrote a recurring series of ultra-short pun stories for the magazine of fantasy and science fiction. And he published them under a pseudonym, Grendel Brierton, which is an anagram of Reginald Bretnor. But the point is that all of these stories featured a time-traveling hero named Ferdinand Fagut. Now, the nice thing about that is that Fagut sounds like some old English word, and you can look up the etymology, but it was just some psycho who made this up. And so uh the point is that a shaggy dog story is one that is elaborate and wastes a lot of your time precisely for the purpose of creating a groan at the end. And as a teller, you're walking a tightrope. Because if they don't like you, and if they feel that you have wasted your time their time, there may be a riot. So please be careful telling shaggy dog jokes. But when they work, they can be pretty good. I should note that the reason that it's called a shaggy dog story is that the original version of it, or the one that gave it its name, is about a 45-minute story of a contest over someone who was sent to find the shaggiest dog, and I will spare you the details. But finally they find this incredibly shaggy dog and bring it to the judge, and the judge says, Oh no, not that shaggy. So it doesn't have to end with a pun, but it has to end with a stupid, completely unsatisfactory uh story where you think I've been had. Well, it's time for this month's letter from JJ in San Francisco. Here's the letter. Dear knower of important things, I'm from the Midwest, visiting visiting my daughter in San Francisco. I'm really confused and intrigued by a phenomenon I've seen at play in San Francisco that I've never seen in any other areas of the country. Parklets. These are three-walled, roofed structures with floors that take up a traditional parking space in the street and have their open wall facing the sidewalk. There are two signs on the structure. One, formal, owned by the city, stating that this structure is a public shelter and is open to the public for whatever use the public would want to use it for. The other's less formal. A sign promoting smoothies from the restaurant across the sidewalk. Now, during the night, the structure is empty. During business hours of the nearby restaurant, there are tables and chairs in the structure. The restaurant seats and serves its customers at these tables just as if they were inside the restaurant. Even more surprising to me, a window sign in the restaurant that next to the one that appears to have effectively annexed the parklet asks its customers to please refrain from using the parklet. So there's some kind of property rights going on here. JJ says, I have so many questions. I'm a longtime listener, so I know that the answer is transaction cost, but I'll be danged if I can connect those dots. JJ, you really are from the Midwest if you say danged. That's well done. As the knower of important things, not even considering being from Duke, I'm sure you'll have some things to say about these parklets and the rules and behaviors that govern their use. If you're fortunate, you'll say something in front of the mic and you'll share them with me in a future. The answer is transaction cost episode. Keep up the good work. Cheers, JJ. P.S. Relevant photos of the parklet are attached. End of letter. Well, thanks, JJ, but I got nothing. Any San Francisco's lit listeners out there, uh I'll put the pictures up on the website, but uh I have no idea what's going on. If there's any San Francisco listeners out there who can give us a hand, does JJ have this right? If so, what is it that's going on? Well, the book of the month is by Brian Potter. It's titled The Origins of Efficiency. It's published by Stripe Press. It was published recently in October 2025. Now, Brian Potter had a recent econ talk where he talked to Russ Roberts about manufacturing in World War II. But this book, The Origins of Efficiency, is really something. It raises fundamental questions about what economists might call the supply curve from an engineer's perspective. It's terrific, and it'll make you rethink some of the things we just take for granted as economists. Well, the next episodes will be on December 23rd and December 30th. The December 30th release will be episode number eight in the Adam Smith series. In the meantime, all you Tidy C fans, be careful out there and have a great holiday.