How bars fuel innovation and economic growth : The Indicator from Planet Money There's a long history of bars playing a vital role in innovation and economic growth. What happens when they all close down?

An Economist Walks Into A Bar

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ALEX MAYYASI: Hey, Stacey.

VANEK SMITH: I am late. I am sorry.

MAYYASI: No worries.

VANEK SMITH: Hello (laughter). Alex Mayyasi from Atlas Obscura...


VANEK SMITH: ...Gastro Obscura - so we should explain where we are. We're at a bar in Brooklyn, the Bearded Lady.

MAYYASI: Great name.

VANEK SMITH: Yes, it is. That's actually why we're here. And we are sitting outside. We're all socially distanced. But we're at this bar for a very particular reason.

MAYYASI: Right, because it is apropos. We are here to talk about new ideas, innovation, invention. And that leads us, somewhat surprisingly, to the bar.

VANEK SMITH: Yes, and to a man named Mike Andrews. So a few years ago, Mike Andrews also was at a bar.

MIKE ANDREWS: Joe's Place in Iowa City.

MAYYASI: Joe's was the hangout spot for all the econ grad students at the University of Iowa, including for Mike.

VANEK SMITH: What does it look like, that bar?

ANDREWS: You know, it's got a bar. It's got some stuff on the walls. It's got wood tables. They've got beer - checks a lot of boxes.

VANEK SMITH: (Laughter).

MAYYASI: As a grad student, Mike had gotten really interested in innovation and new ideas.

ANDREWS: Thing that gets me excited is I want to understand, where do new ideas come from?

VANEK SMITH: So this is a really central question in economics because innovation, new ideas - it fuels economic growth. I mean, think about things like the combustion engine, the lightbulb, the computer, the Internet, smartphones. Think about how many jobs those inventions have created, how much money they have generated, how much they've changed our lives, how we work.

MAYYASI: Right. And so Mike was spending all this time studying patent data. Patents are the paperwork people file when they want to lock down an invention, make a claim to it as their own.

VANEK SMITH: So Mike is mulling all of this over at Joe's Place over a beer.

ANDREWS: I was a Fat Tire guy a lot, I guess, and just sort of brainstorming things you could look at. And I think it was an accounting grad student, Steve (ph) - my buddy Steve said, hey, you should look at if people come up with more ideas out at bars.

VANEK SMITH: Do bars foster innovation? I mean, it's a good question. There is a long history of bars and innovation and ideas.

MAYYASI: Right. So a famous example of this is Steve Jobs and Steve Wozniak, the co-founders of Apple. Before they were the Steves, before they were famous...

VANEK SMITH: The Steves.

MAYYASI: ...They were part of a group of computer hobbyists called the Homebrew Computer Club. And they would meet up at a bar and restaurant in Menlo Park, Calif.

VANEK SMITH: Yeah. And other inventions - things like Buffalo wings, Southwest Airlines and Shark Week - apparently all were ideas sparked over beers at bars. And so Mike thought, is drinking at bars with friends, like, one of the keys to having great innovations?

This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.

MAYYASI: I'm Alex Mayyasi.

VANEK SMITH: And, Alex, you are the editor of Gastro Obscura, the food and travel guide.

MAYYASI: That's right. And that's why I was so interested to hear about Mike and his research into patents and beer. And today we'll be talking with him about what the connection is between bars and great ideas.

VANEK SMITH: And, of course, what does that mean now that a lot of bars are closed and a lot of us are working from home?

MAYYASI: And so we want to do some boots-on-the-ground research.


MAYYASI: And that is why we are here...

VANEK SMITH: Making the sacrifice...

MAYYASI: ...At the Bearded Lady.

VANEK SMITH: ...At the Bearded Lady. Yes.

MAYYASI: So we'll get the creative juices flowing.

VANEK SMITH: Yes. And, Alex, here at the Bearded Lady, they specialize in sort of fancy cocktails. And you got one of the fancy cocktails. What did you get?

MAYYASI: It is called the Bedford Nostrum. The drink has mezcal, which is very tasty.

VANEK SMITH: I have a margarita. It's frozen. I went way the less sophisticated route (laughter).

MAYYASI: Mike Andrews is an economics professor at the University of Maryland. But a few years ago, he was a grad student with an idea. What role do bars play in innovation? There was a really easy way to measure this.

ANDREWS: Federal alcohol prohibition - right? - the 18th Amendment, which went into effect a hundred years ago last January, actually.

VANEK SMITH: Prohibition - it lasted for more than 10 years in the U.S. All of the bars were shut down all across the country. And so Mike looked at patent applications before Prohibition and then after Prohibition had started to see if shutting down all the bars had had an effect on ideas and innovations.

ANDREWS: What I found was - frankly, was pretty striking. You see a drop in patents by, depending on exactly how you measure things, 5- to 15%, so it's large.

MAYYASI: It is really large. In fact, Mike says that the same drop-off happened during the Great Depression.

VANEK SMITH: Yeah, the Great Depression, when unemployment hit 25%, people were starving and living in their cars. At that time, patent applications dropped by 15%.

MAYYASI: Oh, wow. So if you closed the bars somewhere, that's basically - you have caused a patent recession in terms of the fact.

VANEK SMITH: Depression even.

ANDREWS: Yeah, basically.

VANEK SMITH: Are you saying that the secret sauce for innovation is, like, beer?


VANEK SMITH: Is that the secret sauce?

ANDREWS: This is not a story about alcohol. And, in fact, that's something I can look at in the data.

VANEK SMITH: So across the U.S., all the prohibitions were not created equal. Some counties just closed down bars. They were dry. But people could still have alcohol at home, and selling alcohol wasn't necessarily illegal.

MAYYASI: Other counties, though - they banned alcohol entirely. These were bone-dry counties. And so if beer was the secret sauce to invention, we would have seen less invention in those places, fewer patents. The places that still had some booze would have been more inventive and innovative. But there was no difference, so it wasn't the alcohol at the bars that was key to new ideas.

ANDREWS: It's really the conversation. I think it's the fact that there's this setting where people are able to get together - right? They're off the clock. There's no one setting an agenda. You can just mingle.

VANEK SMITH: Yeah. And, in fact, companies have tried to manufacture this kind of setting with some success. Bell Labs, which invented the laser, the cellphone...

MAYYASI: The Unix operating system.

VANEK SMITH: That also - apparently, they famously used to have these really long hallways in their buildings. And the reason they did that was so that people would stop and chat and that it would spark ideas.

MAYYASI: But right now we are not chatting in long hallways with our coworkers on our way to the bathroom. I have had no watercooler conversation in months, and we are not striking up conversations in bars and coffee shops or at least not nearly as much.

ANDREWS: That might lead you to be very pessimistic or very worried about this involuntary shift to remote work. But I think there's also an optimistic way to think - to look at these results.

VANEK SMITH: So here's the thing. Prohibition lasted for more than 10 years, but the patent slump did not. It actually recovered after about five years. The patents started rolling in again because people started finding other places to unwind and chat and congregate, other watercoolers.

ANDREWS: So instead of going to the bar, maybe I'll go to the church picnic or I figure out where the speakeasies open up. And we're able to rebuild those informal social networks and really recover. Sure, things like this are disruptive, but people are resilient. And people are creative, and they can figure out ways to work around and come back after disruptions like this.

MAYYASI: So right now a lot of people have been finding ways to do this online.

VANEK SMITH: Yes, the rise of Zoom.

ANDREWS: You know, it's funny that you mention Zoom. I've been on countless virtual happy hours over the last six months. And, to me, it's been a very poor substitute for in-person interaction.

VANEK SMITH: Oh, they're the worst. Zoom happy hours are terrible. It's worse than nothing. I don't know. Sorry. Keep going.

MAYYASI: Stacey has an opinion.


VANEK SMITH: I have feelings about it. I do (laughter).

ANDREWS: I'm 100% with you, Stacey. I mean, I think the spontaneity is the key thing that you lose. You know, it's tough to have side conversations. It just devolves into people talking over one another. I think they are a poor substitute for the kind of things that happens in places like bars or coffee shops.

VANEK SMITH: But, you know, online conversations, as imperfect as they are, might be all we have for a really long time. I mean, offices are starting to reopen, but a lot of people are going to keep working remotely. Places like Twitter, Pinterest, Facebook and Slack - they are basically planning on having a huge chunk of their workforce work from home indefinitely.

MAYYASI: Mike says it'll take a while before we can actually use data to answer this question. There's a lag between innovation that happens and his patent data, so we'll have to see.

VANEK SMITH: Just to be safe, though, Alex, we decided that it was very important that we come here to the Bearded Lady and have some cocktails and discuss ideas for the economy.

MAYYASI: America is counting on us to innovate.

VANEK SMITH: I mean, it's the least we can do - to the economy.

MAYYASI: Cheers.



VANEK SMITH: And, Alex, you have all kinds of other cool stories people should check out at Gastro Obscura.

MAYYASI: That's right. A personal favorite of mine is about the time the Soviet Union paid Pepsi entirely in warships.

VANEK SMITH: Oh, my gosh. We're going to have to discuss this over drinks (laughter).

This episode of THE INDICATOR was produced by Brittany Cronin, who is currently here having a beer, Jamila Huxtable; fact-checked by Sean Saldana. THE INDICATOR is edited by Paddy Hirsch and is a production of NPR.


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