Farmer is the Baillie Gifford Professor of Complex Systems at Oxford's Institute for New Economic Thinking. Before joining Oxford in 2012, he worked at Los Alamos National Laboratory and the Santa Fe Institute, where he studied complex systems and economic dynamics. During the 1990s, he took a break from academia to run a successful quantitative trading firm using statistical arbitrage strategies.

Farmer has been a pioneer in chaos theory and complexity economics, including the development of agent-based models to understand economic phenomena. His work spans from housing markets to climate change, and he recently authored Making Sense of Chaos exploring complexity science and economic modeling.

In This Episode

* What is complexity economics? (1:23)

* Compliment or replacement for traditional economics (6:55)

* Modeling Covid-19 (11:12)

* The state of the science (15:06)

* How to approach economic growth (20:44)

Below is a lightly edited transcript of our conversation.

What is complexity economics? (1:23)

We really can model the economy as something dynamic that can have its own business cycles that come from within the economy, rather than having the economy just settle down to doing something static unless it's hit by shocks all the time, as is the case in mainstream models.

Pethokoukis: What does the sort of economics that people would learn, let's say, in the first year of college, they might learn about labor and capital, supply-demand equilibrium, rational expectations, maybe the importance of ideas. How does that differ from the kind of economics you are talking about? Are you looking at different factors?

Farmer: We’re really looking at a completely different way of doing economics. Rather than maximizing utility, which is really the central conceptual piece of any standard economic model, and writing down equations, and deducing the decision that does that, we simulate the economy.

We assume that we identify who the agents in the and economy are, who's making the decisions, what information do they have available, we give them methods of making the decisions — decision-making rules or learning algorithms — and then they make decisions, those decisions have economic impact, that generates new information, other information may enter from the outside, they make decisions, and we just go around and around that loop in a computer simulation that tries to simulate what the economy does and how it works.

You've been writing about this for some time. I would guess — perhaps I'm wrong — that just having more data and more computer power has been super helpful over the past 10 years, 20 years.

It's been super helpful for us. We take much more advantage of that than the mainstream does. But yes, computers are a billion times more powerful now than they were when Herb Simon first suggested this way of doing things, and that means the time is ripe now because that's not a limiting factor anymore, as it was in the past.

So if you're not looking at capital and labor per se, then what are the factors you're looking at?

Well, we do look at capital and labor, we just look at them in a different way. Our models are concerned about how much capital is there to invest, what labor is available. We do have to assign firms production functions that tells, given an amount of capital and labor and all their other inputs, how much can the firms produce? That part of the idea is similar. It's a question of the way the decision about how much to produce is made, or the way consumers decide how much to consume, or laborers decide at what price to provide their labor. All those parts are different.

Another difference — if I'm understanding it correctly — is, rather than thinking about economies that tend toward equilibrium and focusing how outside shocks may put an economy in disequilibrium, you're looking a lot more at what happens internally. Am I correct?

We don't assume equilibrium. Equilibrium, it has two senses in economics: One is supply equals demand. We might or might not run a model where we assume that. In many models we don't, and if that happens, that's great, but it's an outcome of the model rather than an assumption we put in at the beginning.

There's another sense of equilibrium, which is that everybody's strategy is lined up. You've had time to think about what you're doing, I've had time to think about what I'm doing, we’ve both come to the optimal decision for each of us to make, taking the other one into account. We don't assume that, as standard models typically do. We really can model the economy as something dynamic that can have its own business cycles that come from within the economy, rather than having the economy just settle down to doing something static unless it's hit by shocks all the time, as is the case in mainstream models. We still allow shocks to hit our models, but the economy can generate dynamics even without those shocks.

This just popped in my head: To whom would this model make more intuitive sense, Karl Marx or Adam Smith?

Adam Smith would like these models because they really allow for emergent behavior. That is, Smith's whole point was that the economy is more than the sum of its parts, that we get far more out of specializing than we do out of each acting like Robinson Crusoes. Our way of thinking about this gets at that very directly.

Marx might actually like it too, perhaps for a different reason. Marx was insightful in understanding the economy as being like, what I call in the book, the “metabolism of civilization.” That is, he really did recognize the analogy between the economy and the metabolism, and viewed labor as what we put together with natural resources to make goods and services. So those aspects of the economy are also embodied in the kind of models we're making.

I think they both like it, but for different reasons.

Compliment or replacement for traditional economics (6:55)

There are many problems where we can answer questions traditional methods can't even really ask.

The way I may have framed my questions so far is that you are suggesting a replacement or alternative. Is what you're suggesting, is it one of those things, or is it a compliment, or is it just a way of looking at the world that's better at answering certain kinds of questions?

I think the jury is out to find the answer to that. I think it is certainly a compliment, and that we're doing things very differently, and there are some problems where this method is particularly well-suited. There are many problems where we can answer questions traditional methods can't even really ask.

That said, I think time will tell to what extent this replaces the traditional way of doing economics. I don't think it's going to replace everything that's done in traditional economics. I think it could replace 75 percent of it — but let me put an asterisk by that and say 75 percent of theory. Economists do many different things. One thing economists do is called econometrics, where they take data and they build models just based on the data to infer things that the data is telling them. We're not talking about that here. We're talking about theories where economists attempt to derive the decisions and economic outcomes from first principles based on utility maximization. That's what we're talking about providing an alternative to. The extent to which it replaces that will be seen as time will tell.

When a big Wall Street bank wants to make a forecast, they're constantly incorporating the latest jobless claims numbers, industrial production numbers, and as those numbers get updated, they change their forecasts. You're not using any of that stuff?

Well, no. We can potentially could ingest any kind of data about what's going on.

But they're looking at big, top-down data while you're bottom-up, you're sort of trying to duplicate the actual actors in the economy.

That is true, but we can adjust what's at the bottom to make sure we're matching initial conditions. So if somebody tells us, “This is the current value of unemployment,” we want to make sure that we're starting our model out, as we go forward, with the right level of unemployment. So we will unemploy some of the households in our model in order to make sure we're matching the state of unemployment right now and then we start our simulation running forward to see where the economy goes from here.

I would think that the advent of these large language models would really take this kind of modeling to another level, because already I'm seeing lots of papers on their ability to . . . where people are trying to run experiments and, rather than using real people, they're just trying to use AI people, and the ability to create AI consumers, and AI in businesses — it would have to be a huge advance.

Yes. This is starting to be experimented with for what we do. People are trying to use large language models to model how people actually make decisions, or let's say, to simulate the way people make decisions, as opposed to an idealized person that makes perfect decisions. That's a very promising line of attack to doing this kind of modeling.

Large language models also can tell us about other things that allow us to match data. For example, if we want to use patents as an input in our modeling — not something we're doing yet, but we've done a lot of studies with patents — one can use large language models to match patents to firms to understand which firms will benefit from the patents and which firms won't. So there are many different ways that large language models are likely to enter going forward, and we're quite keen to take advantage of those.

Modeling Covid-19 (11:12)

We predicted a 21.5 percent hit to UK GDP in the second quarter of 2020. When the dust settled a year later, the right answer was 22.1. So we got very close.

Tell me, briefly, about your work with the Covid outbreak back in 2020 and what your modeling said back then and how well it worked.

When the pandemic broke out, we realized right away that this was a great opportunity to show the power of the kind of economic modeling that we do, because Covid was a very strong and very sudden shock. So it drove the economy far out of equilibrium. We were able to predict what Covid would do to the UK economy using two basic ideas: One is, we predicted the shock. We did that based on things like understanding a lot about occupational labor. The Bureau of Labor Statistics compiles tables about things like, in a given occupation, how close together do people typically work? And so we assumed if they worked closer together than two meters, they weren't going to be able to go to their job. That combined with several other things allowed us to predict how big the shock would be.

Our model predicted how that shock would be amplified through time by the action of the economy. So in the model we built, we put a representative firm in every sector of the economy and we assumed that if that firm didn't have the labor it needed, or if it didn't have the demand for its product, or if it didn't have the inputs it needed, it wouldn't be able to produce its product and the output would be reduced proportional to any of those three limiting factors.

And so we started the model off on Day One with an inventory of inputs that we read out of a table that government statistical agencies had prepared for each sector of the economy. And we then just looked, “Well, does it have the labor? Does it have demand? Does it have the goods?” If yes, it can produce at its normal level. If it's lacking any of those, it's going to produce at a lower level. And our model knew the map of the economy, so it knew which industries are inputs to which other industries. So as the pandemic evolved day by day, we saw that some industries started to run out of inputs and that would reduce their output, which, in turn, could cause other industries to run out of their inputs, and so on.

That produced quite a good prediction. We predicted a 21.5 percent hit to UK GDP in the second quarter of 2020. When the dust settled a year later, the right answer was 22.1. So we got very close. We predicted things pretty well, industry by industry. We didn't get them all exactly right, but the mistakes we made averaged out so that we got the overall output right, and we got it right through time.

We ran the model on several different scenarios. At the time, this was in April of 2020, the United Kingdom was in a lockdown and they were trying to decide what to do next, and we tested several different scenarios for what they might do when they emerged from the full lockdown. The one that we thought was the least bad was keeping all the upstream industries like mining, and forestry, and so on open, but closing the downstream, customer-facing industries like retail businesses that have customers coming into their shop, or making them operate remotely. That was the one they picked. Already when they picked it, we predicted what would happen, and things unfolded roughly as we suggested they would.

The state of the science (15:06)

Mainstream models can only model shocks that come from outside the economy and how the economy responds to those shocks. But if you just let the model sit there and nothing changes, it will just settle down and the economy will never change.

I'm old enough to remember the 1990s and remember a lot of talk about chaos and complexity, some of which even made it into the mainstream, and Jurassic Park, which may be the way most people heard a little bit about it. It's been 30 years. To what extent has it made inroads into economic modeling at central banks or Wall Street banks? Where's the state of the science? Though it sounds like you're really taking another step forward here with the book and some of your latest research.

Maybe I could first begin just by saying that before Jurassic Park was made, I got a phone call and picked up the phone, and the other end of the line said, “Hi, this is Jeff Goldblum, have you ever heard of me?” I said, “Yeah.” And he said, “Well, we're making this movie about dinosaurs and stuff, and I'm going to play a chaos scientist, and I'm calling up some chaos scientists to see how they talk.” And so I talked to Jeff Goldblum for about a half an hour. A few of my other friends did too. So anyway, I like to think I had a tiny little bit of impact on the way he behaved in the movie. There were some parallels that it seemed like he had lifted.

Chaos, it's an important underlying concept in explaining why the weather is hard to predict, it can explain some forms of heart arrhythmias, we use it to explain some of the irregular behavior of ice ages. In economics, it was tossed around in the ’90s as something that might be important and rejected. As I described in the book, I think it was rejected for the wrong reasons.

I'm proposing chaos, the role it plays in here is that, there's a debate about business cycles. Do they come from outside? The Covid pandemic was clearly a business cycle that came from outside. Or do they come from inside the economy? The 2008 financial crisis, I would say, is clearly one that came from inside the economy. Mainstream models can only model shocks that come from outside the economy and how the economy responds to those shocks. But if you just let the model sit there and nothing changes, it will just settle down and the economy will never change.

In contrast, the kinds of models we build often show what we call endogenous business cycles, meaning business cycles that the model generates all on its own. Now then, you can ask, “Well, how could it do that?” Well, basically the only plausible way it can do that is through chaos. Because chaos has two properties: One is called sensitive dependence on initial conditions, meaning tiny changes in the present can cause large changes in the future; but the other is endogenous motion, meaning motion that comes from within the system itself, that happens spontaneously, even in very simple systems of equations.

Would something like consumer pessimism, would that be an external shock or would something more internal where everybody, they're worried about the futures, then they stop spending as much money? How would that fit in?

If the consumer pessimism is due to the fear of a nuclear war, I would say it's outside the economy, and so that's an external shock. But if it's caused by the fact that the economy just took a big nose dive for an internal reason, then it's part of the endogenous dynamics

I spent many years as a journalist writing about why the market's going up, the market's going down, and by the end of the day, I had to come up with a reason why the market moved, and I could — I wasn't always quite confident, because sometimes it wasn't because of a new piece of data, or an earnings report, they just kind of moved, and I had no real reason why, even though I had to come up . . . and of course it was when I was doing that was when people started talking about chaos, and it made a lot of intuitive sense to me that things seem to happen internally in ways that, at least at the time, were utterly unpredictable.

Yeah, and in fact, one of the studies I discuss in the book is by Cutler, Poterba, and Summers — the Summers would be Larry Summers — where they did something very simple, they just got the 100 largest moves of the S&P index, they looked up what the news was the next day about why they occurred in the New York Times, and they subjectively marked the ones that they thought were internally driven, versus the ones that were real news, and they concluded they could only find news causes for about a third of them.

There is always an explanation in the paper; actually, there is one day on the top 12 list where the New York Times simply said, “There appears to be no cause.” That was back in the ’40s, I don't think journalists ever say that anymore. I don't think their paper allows them to do it, but that's probably the right answer about two-thirds of the time, unless you count things like “investors are worried,” and, as I point out in the book, if the person who invests your money isn't worried all the time, then you should fire them because investors should worry.

There are internal dynamics to markets, I actually show some examples in the book of simple models that generate that kind of internal dynamics so that things change spontaneously.

How to approach economic growth (20:44)

I'm not saying something controversial when I say that technological change is the dominant driver of economic growth, at least for the economy as a whole.

You recently founded a company, Macrocosm, trying to put some of these ideas to work to address climate change, which would seem to be a very natural use for this kind of thinking. What do you hope to achieve there?

We hope to provide better guidance through the transition. We're trying to take the kind of things we've been doing as academics, but scale them up and reduce them to practice so they can be used day-in and day-out to make the decisions that policymakers and businesspeople need to make as the transition is unfolding. We hope to be able to guide policymakers about how effective their policies will be in reducing emissions, but also in keeping the economy going and in good shape. We hope to be able to advise businesses and investors about what investments to make to make a profit while we reduce emissions. And we think that things have changed so that climate change has really become an opportunity rather than a liability.

I write a lot about economic growth and try to figure out how it works, what are the key factors. . . What insights can you give me, either on how you think about growth and, since I work at a think tank, the kind of policies you think policy makers should be thinking about, or how should they think about economic growth, since that seems to be on top-of-mind in every rich country in the world right now?

I'm not saying something controversial when I say that technological change is the dominant driver of economic growth, at least for the economy as a whole. And we've spent a lot of time studying technological change by just collecting data and looking for the patterns in that data: What does the technology cost through time and how rapidly is it deployed? We've done this for 50 or 60 technologies where we look at past technological transitions, because typically, as a technology is coming in, it's replacing something else that's going out, and what we've seen are a couple of striking things:

One is, many technologies don't really improve very much over time, at least in terms of cost. Fossil fuels cost about the same as they did 140 years ago once you adjust for inflation. In fact, anything we mine out of the ground costs about the same as it did a hundred years ago.

In contrast, solar energy from solar photovoltaic panels costs 1/10,000th what it did when it was introduced in the Vanguard satellite in 1958. Transistors have been going down at 40 percent per year, so they cost about a billionth of what they did back in 1960. So some technologies really make rapid progress, and the economy evolves by reorganizing itself around the technologies that are making progress. So for example, photography used to be about chemistry and film. Photography now is about solid-state physics because it just unhitched from one wagon and hitched itself to another wagon, and that's what's happening through the energy transition. We're in the process of hitching our wagon to the technologies that have been making rapid progress, like solar energy, and wind energy, and lithium ion batteries, and hydrogen catalyzers based on green energy.

I think we can learn a lot about the past, and I think that when we look at what the ride should be like, based on what we understand, we think the transition is going to happen faster than most people think, and we think it will be a net saving of money

So then how do you deal with a wild card, which I think if you look at the past, nuclear power seems like it’s super expensive, no progress being made, but, theoretically, there could be — at least in the United States — there could be lots of regulatory changes that make it easier to build. You have all these venture capital firms pouring money into these nuclear startups with small reactors, or even nuclear fusion. So a technology that seems like it's a mature technology, it might be easy to chart its future, all of a sudden maybe it's very different.

I'm not arguing we should get rid of nuclear reactors until they run their normal lifetime and need to be gotten rid of, but I think we will see that that is not going to be the winning technology in the long run, just because it's going to remain expensive while solar energy is going to become dirt cheap.

In the early days, nuclear power had faced a very favorable regulatory environment. The first nuclear reactors were built in the ’50s. Until Three Mile Island and Chernobyl happened, it was a very regulatorily friendly environment and they didn't come down in cost. Other countries like France have been very pro-nuclear. They have very expensive electricity and will continue to do so.

I think the key thing we need to do is focus on storage technologies like green hydrogen. Long-term storage batteries have already come down to a point where they're beginning to be competitive; they will continue to do so. And in the future, I think we'll get solid-state storage that will make things quite cheap and efficient, but I don't think small modular reactors are going to ever be able to catch up with solar and wind at this point.

On sale everywhere The Conservative Futurist: How To Create the Sci-Fi World We Were Promised

Micro Reads

▶ Economics

* United States Economic Forecast - Deloitte

* The Hidden Threat to National Security Is Not Enough Workers - WSJ

▶ Business

* DOGE Can’t Do It All. Here’s What It Can Do. - Politico

* AI Startup Perplexity Closes Funding Round at $9 Billion Value - Bberg

▶ Policy/Politics

* US Homeland Security chief attacks EU effort to police AI - FT

* The Trump Bump: The Republican Fertility Advantage in 2024 - IFS

* House unveils AI ‘road map’ but punts on setting priorities - Wapo

* Did Tariffs Make American Manufacturing Great? - Cato

▶ AI/Digital

* Call ChatGPT from any phone with OpenAI’s new 1-800 voice service - Ars

* Homo-Silicus: Not (Yet) a Good Imitator of Homo Sapiens or Homo Economicus - SSRN

* Is AI finally ready to replace your doctor? - NS

* The Age of Quantum Software Has Already Started - WSJ

* This is where the data to build AI comes from - MIT

* The New AI Stock Pickers Are Destined to Disappoint - Bberg Opinion

▶ Clean Energy/Climate

* Fusion Start-Up Plans to Build Its First Power Plant in Virginia - NYT

* Will the World's First Nuclear Fusion Power Plant Be Built in Virginia? Here's Why We're Skeptical - SciAm

* The deepest hole on Earth: Inside the race to harness unlimited power from our planet's core - SF

* Dubai transforms into walkable city with air-conditioned paths - New Atlas

* Oklo inks record deal for using nuclear to power data centers - E&E

▶ Robotics/AVs

* AI Robots Are Coming, and They’ll Be Made in Asia - Bberg Opinion

▶ Space/Transportation

* Boeing Starliner crew’s long awaited return delayed to March - Wapo

▶ Up Wing/Down Wing

* What Could Go Right? The Best News of 2024 - The Progress Network

▶ Substacks/Newsletters

* Why Don’t EU Firms Innovate? The Hidden Costs of Failure - Conversable Economist

* Why Did the Industrial Revolution Happen? - Oliver Kim

* One Down, Many To Go - Hyperdimensional

* The Experience Curve - Risk & Progress

* The case for clinical trial abundance - Slow Borin

* Nuclear Waste: Yes, In (or Under) My Backyard - Breakthrough Journal

* Answer Time: Can We Imagine Pluralistic Futures? - Virginia’s Newsletter

* What just happened - One Useful Thing

Faster, Please! is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

The future will be built on the big ideas we dare to conjure up today. We know that the most groundbreaking ideas often seemed ludicrous or simply impossible when first dreamed up, from the telephone, to human flight, to artificial intelligence. The key was a willingness to be creative and test the limits.

While many of us might not consider ourselves creative people, Duncan Wardle assures us that we can take our ideas and brainstorms to the next level, no matter who we are or what we do. Today on Faster, Please! — The Podcast, Wardle and I explore some concrete tools for breaking down our own barriers to innovation and accessing the genius within all of us.

Wardle is the former Head of Innovation and Creativity at Disney and founder of ID8. He has delivered multipl eTED Talks and teaches innovation Master Classes at Yale,Harvard, and the University of Edinburgh. His interactive book, The Imagination Emporium: Creative Recipes for Innovation has just been released.

In This Episode

* Creativity is learnable (1:37)

* Building a career of creativity (8:09)

* Tools for unlocking innovation (13:50)

* Expansionist vs. reductionist tools (18:39)

* Gamifying learning (25:20)

Below is a lightly edited transcript of our conversation.

Creativity is learnable (1:37)

I believe we're all born creative with an imagination. We're all born curious. We're all born with intuition. We're all born with empathy. They may not have been the most employable skill of our entire careers. They are now.

Pethokoukis: One of my favorite economists, Paul Romer, loves to use recipes as a metaphor to explain how innovation works in an economy. Like cooking recipes, innovation and ideas can be used repeatedly without being used up, you can combine different ideas as ingredients and create something new. I love that idea, and I love the way you present the book as kind of a recipe book you can sort of dip in and out of to help you be more creative and innovative.

How should someone use this book, and who is it broadly for?

Wardle: Me. Seriously. When I say me, I mean the busy, normal, hardworking person who says 10 times a day, “I don't have time to think.” And often considered the number one barrier to innovation and creativity: “I don't have time to think.” And I thought, “Okay, when you walk into a business office and you will look around, where's the book?” It's on the bookshelf, it's on the coffee table — nobody reads them. I thought, “Well, that's a waste of their money.” So I thought, “What book have I ever read — nonfiction — that I could read one page, know exactly what I need to do, and don't have to read the rest of the book today?” I thought, “My mom's cookbook! You want shepherd's pie? You go to page 67.” So I've designed the contents page the same way. It says, “Have you ever been to a brainstorm where nothing ever happened? Go to page 14. Fed up with your boss, shooting your ideas down? Go to page 12.”

So it is designed to be hop in and hop out, but I also designed the principles around: take the intimidation out of innovation, make creativity tangible for people who are uncomfortable with ambiguity and gray, far more importantly, make it fun, give people tools they choose to use when you and I are not around. I also designed it around this principle and I'll see if this works: Close your eyes for me for a second. How many days are there in September?

31?

Well, we'll pretend it's 30.

Or 30! That's the one thing I always confuse, which is the 30 and the 31.

Close your eyes for a second. Just think about how you might have known there were 30 days in September. How might you have remembered? What might you have learned or what can you see with your eyes closed?

Well, if I was a more melodic, musical person, loved a good rhyme, I might've used that very famous rhyme, which apparently I don't know very

Well, that's okay, neither do I, but I'll attempt it. About 30 percent of people go, “30 days has September, blah, blah, blah, and November.” They've just told me they're an auditory learner. That's their preferred learning style. They probably read a lot. How do I know that? Because when they learned it, they were six. When I asked the question, they learned it because they'd heard it.

I'm sure you've seen somebody at some point in your life count their knuckles: January, February, March, April, May, June, July, et cetera. You may not remember this because you might not be a kinesthetic learner. Those are the people who learn by doing. Again, how do we know this? They learned it when they were six. How did they remember it? By doing it.

And then 40 percent of an audience would just go, “No, no, I could just see a calendar with a number 30.” They're your visual learners. So I've designed the book to appeal to all three learning styles. It has a QR code in each chapter with a Spotify playlist for the auditory learners, animated videos where Duncan is now an animated character (who knew?) who pops out with a bunch of characters to tell you how to use the tools. And then hopefully, as of next Tuesday, the QR code on the back for kinesthetic learners will allow you to engage with the book and learn kinesthetically through artificial intelligence and ChatGPT and actually ask the book questions.

The fundamental conceit of the book, though, is that being innovative, being creative, that can be learned. You can get better at it. Some people say, “I'm not a math person,” which I also don't believe. They'll say, “I'm not a super creative person. I'm not super innovative.” One, I'm assuming you think that's wrong; and two, you mentioned AI, if people are worried about robots doing more repetitive kinds of tasks, then having the tools to bring out or enhance that imagination seem more important now than ever.

There's one thing I firmly believe in: We were all born a human, shockingly enough, and when you were given a gift for a holiday, perhaps, it came in an enormous box and it took you ages of time to take the toy out of the box because the box was the same height as you were. What do you spend the rest of the week playing with?

I love a good box.

Right? It was your castle, it was your rocket.

Love a good box. Oh man, that box can be a time machine, anything.

It was anything you wanted it to be until you went to the number one killer of creativity in imagination: western education, and the first thing you were told to do was, “Don't forget the color in between the lines.” Children are very curious. They ask, “Why, why, why, why?” Again, because they're after the insight for innovation. The insight for innovation comes on the sixth or seventh, why not the first one?

If I were to survey you and ask you, “Why do you go to Disney on holiday?” People would say they go for the new attractions. But that's not strictly true, is it?

So if you say, “Well, why do you go for the new attractions?”

“Well, no, I like the classics.”

“Well, why do you like the classics?” Why?

“I like It's a Small World.”

“Well, why do you like It’s a Small World?”

“I remember the music.”

“Why the music?”

“Well, that's my mom's favorite ride. We used to go every summer.”

“Why is that important to you 25 years later?”

“Oh, I take my daughter now.”

There's your insight for innovation. It has nothing to do with the capital investment strategy whatsoever and everything to do with that person's personal memory and nostalgia. But then we go to the number one killer of curiosity: western education. And the next thing our teacher tells us to do is stop asking “why,” because there's only one right answer.

We know when somebody is staring at the back of our head. When you've stared at the back of the head of somebody that you think is really hot, a stranger, they turn around and look at you. You have to look away really quickly. It's okay, we've all done it. We have 120 billion neurons in our first brain and 120 million neurons in our second brain, the brain with which we say we make lots of our decisions, when we say “with our gut.” We are all empathetic.

I believe we're all born creative with an imagination. We're all born curious. We're all born with intuition. We're all born with empathy. They may not have been the most employable skill of our entire careers. They are now. Why? Because I've been working with Google on DeepMind with their chief programmer — this is the AI program — and I asked her, “How the hell am I going to compete with this? How will any of us compete with this?” She said, “Well, by developing the things which will be the hardest for her to program into AI.” And I asked her what they were. She said, “The ones with which you were born: creativity, imagination, curiosity, empathy, and intuition.”

Will they be programmed one day? Interestingly enough, she said intuition will go first. I was like, oh, that hurt. So I said, “Why intuition?” She said, “It's built on experience and we could build an algorithm that will give them experience.” I'm like, oh, so will they be programed one day? Perhaps. Anytime in the short term? No.

Building a career of creativity (8:09)

Your subconscious brain is 87 percent of the capacity. Every innovation you've ever seen, every creative problem you've ever solved, is back here to work as unrelated stimulus, but when the door is shut, you can't access it. So what do I do? I'm playful. I'm deliberately playful.

In a moment, I want to briefly roll through the book, but first I want to ask about your job as the former head of innovation and creativity at Disney, which sounds like a fake job. It sounds like the kind of job someone would dream up and they wish there was such a job. It sounds like a dream job, but that was a real job. And what did you do there? Because it sounds fairly awesome.

I finished as Head of Innovation — I didn't start that way. I started as a coffee boy in the London office. In 1986, I used to go and get my boss six cappuccinos a day from Bar Italia, and about three weeks into the role, I was told I would be the character coordinator, the person that looks after the walk-around characters at the Royal Premier of Who Framed Roger Rabbit in the presence of the Princess of Wales, Diana. I was like, “What do I do?” They said, “Well you just stand at the bottom of the stairs, Roger Rabbit will come down the stairs, the princess will come in on the receiving line, she'll greet him or blow him off and move into the auditorium.” How could you possibly screw that up? Well, I could. That was the day when I found out what a contingency plan was, because I didn't have one.

A contingency plan would tell you, if you're going to bring a very tall rabbit with very long feet down a very large staircase towards the Princess of Wales, one might want to measure the width of the steps first before Roger trips on the top stair, is now hurdling like a bullet, head over feet at torpedo speed directly down the stairs towards Diana's head, whereupon he was taken out by two royal protection officers. There’s a very famous picture of Roger being taken out on the stairs and a 21-year-old PR guy in the background from Disney. “Oh s**t, I'm fired.” I got a call from somebody called a CMO — didn't know who that was, I thought I was going to tell me I'm fired. He goes, “That was great publicity.” I was like, “Wow, I can make a career out of this.”

So for the first 20 years I had some of the more mad, audacious, outrageous ideas for Disney, and then Disney purchased Pixar, then they purchased Marvel, then they purchased Lucasfilm, and we found that we all had different definition of creativity and different innovation models. I tried four models of innovation.

Number one, I hired an outside consultant and said, “Make me look good.” They were very good at what they did, but they weren't around for execution and they weren't going to show us how they did what they did. They were worried we wouldn't hire them again.

Model number two, innovation team. Duncan will be in charge. What could possibly go wrong? Well, when you have a legal team, nobody outside of legal does legal. When you have a sales team . . . So when you have an innovation team, the subliminal message you've sent to the rest of the organization is: You are off the hook, we've got an innovation team.

Third model was an accelerator program where we were bringing some young tech startups and take a 50-50 stake in their business. They could help us bring it to market much quicker than we could. We could help them scale it. But we had failed in the overall goal that Bob Iger had set for us: How might we embed a culture of innovation and creativity into everybody's DNA? So I set out to create a toolkit. A toolkit that takes the intimidation out of innovation, makes creativity tangible, and the process fun. And essentially, that's what the book is. It's not a book, it's a toolkit. Why? Because I want you to use it. It's broken up into creative behaviors, which I think if you don't get the creative behaviors right, the tools won't matter. They'll just be oblivious. I think the creative behaviors are the engine, and I'll explain what I mean by that.

Let me ask you a question. Close your eyes if you would?

I've done very poorly on the questions. Very poorly, but I will continue to answer them.

Where are you usually, and what are you doing when you get your best ideas?

I would say either on walks or, I think a lot of people say, in the shower, one of the two.

There we go. Alright. But here's the thing. I've done it with 20,000 people in the audience. Do you know how many people say at work? Nobody ever says at work. Why do we never have our best ideas at work?

Well, think about that last argument you were in. You turn to walk away from that argument, now you're still a bit angry, but you're beginning to relax, you're 10 seconds away, 20 seconds, and what pops into your brain? The killer one liner, that one perfect line you wish you'd used during but you didn't, did you? No. Why? Because when you are in an argument, your brain is moving at a thousand miles an hour defending yourself.

When you're in the office, you're doing emails, reports, quarterly results, and meetings. And I hear myself say, “I don't have time to think.” When you don't have time to think, the door between your conscious and subconscious brain is firmly closed. You're in the brain state called beta, and you're only working with your conscious brain. 90 percent of your working day — you can look this up — your conscious brain is 13 percent of the capacity of your brain. Your subconscious brain is 87 percent of the capacity. Every innovation you've ever seen, every creative problem you've ever solved, is back here to work as unrelated stimulus, but when the door is shut, you can't access it. So what do I do? I'm playful. I'm deliberately playful. There's a chapter of energizers in the book. They’re 60-second exercises. What are they for? To make you laugh, laughter with purpose.

What's an example of one of those?

Okay, I'll tell you what then, you are the world's leading designer of parachutes for elephants. I will now interview you about your job. So question, “How did you get into this industry in the first place?”

I was actually interviewing for a different job, I walked in the wrong door, and I ended up interviewing for that job.

Okay, and do you have to use different material for the parachutes? What are the parachutes made of? How big are they? Do you have to make bigger ones for elephants with smaller ears and smaller ones for elephants with big ears, the African and Indian elephants?

Thankfully the kind of material is changing all the time. A lot of advances: graphene, nanotechnology materials. So the kind of material is changing, which actually gives us a lot more flexibility for the kind of material and the sizes, depending, of course, on the size of the elephants and perhaps even their ears, and tails, and tusks.

So we'll stop there. You do that in a room full of people and you'll hear laughter. And the moment I hear laughter, I've opened the door between your conscious subconscious brain and placed you metaphorically back in the shower where you are when you have your best idea. I don't expect people to be playful every minute of every day. I do expect, particularly leaders, to be playful when they're trying to get other people to open up their brains and have big ideas.

Tools for unlocking innovation (13:50)

If you like breaking rules, this tool is for you. It's about breaking rules metaphorically. So step one, you list the rules of your challenge. Step two, you take one and ask the most audacious question. Step three, you land a big idea.

In the book, you sort of create these three animated characters representing . . . there's Spark who represents creative behaviors; Nova, innovation tools; and then Zing for these energizing exercises. But you sort of need all three of those?

You do, but you don't have to know them all at the same time, and that's the beauty of the book. But here's the thing: I created a character called Archie. Archie was a direct descendant of Archimedes, because when I ask people where they are when they get the best ideas, they say the shower. Archimedes was in the bath. And my daughter, who’s about 25, walks in the room and she goes, “Dad, he's an old white guy. You are an old white guy. You can't do that s**t anymore.” So I created three new characters. Spark is male, introduces creative behaviors; Zing, gender-neutral, introduces the energizers; and Nova, the brains of the organization, introduces innovation tools. The tools are split between what I call expansionist tools and reductionist tools. The more expertise and the more experience we have, the more reasons we know why the new idea won't work.

But here's the challenge: Up until 2020, we pretty much got away with doing what we did, and then came a global pandemic, enormous climate change, generation Z entering the workplace who don't want to work for us, and here comes AI. We don't get to think the way we thought four years ago. So the tools are designed specifically to stop you thinking the way you always do and give you permission to think differently.

I'll give you an example of one, it's called “What If.” A lot of people will say, “Oh, but we work in a very heavily regulated industry.” If you like breaking rules, this tool is for you. It's about breaking rules metaphorically. So step one, you list the rules of your challenge. Step two, you take one and ask the most audacious question. Step three, you land a big idea. So for example, it was created by Walt, but that's in the book, I won't go through the whole Walt Disney story because I want people to understand that this tool can work for them too.

There was a very tiny company in Great Britain in the late ’60s, before the days of mass automation, that used to make glasses that we drink out of, and they found too much breakage and not enough production when the glasses were being packaged and shipped. So they went down to the shop floor, observed the process for eight hours, and just wrote down the rules. Don't think about them, because then you'll think of all the reasons you can't break them, just write them down. So they wrote them down. 26 employees convey about cardboard box, six glasses on the top, six on the bottom, separated by corrugated cardboard, glasses wrapped in newspaper, employees’ reading newspaper. So somebody asked these somewhat provocative “what if” question, “What if we poke their eyes out?” Well, that's against the law and it's not very nice, but because they had the courage to ask the most audacious “what if” question of all, the lady sitting next to them immediately got out of her river of thinking — her expertise and experience — and said, “Well, hang on a minute, why don't we just hire blind people?” So they did. Production up 26 percent, breakage down 42 percent, and the British government gave them a 50 percent salary subsidy for hiring people with disabilities. Simple, powerful, fun.

You just mentioned briefly this notion of the river of thinking, which is sort of your thoughts and the assumptions that really come from your lifetime of experience. People obviously really, when evaluating ideas, they really value their own personal experience. You could have a hundred studies saying this will work, but if something about their personal experience says it won't, they won't listen to it. Now, I believe experience is important, it helps you make judgments, but sometimes I think you're right, that it's an absolute trap that leads us to say no when we should say yes, and yes when we should say no.

So that was one of the expansionist tools. One of the reductive tools is ideas. Ideas are the most subjective thing on the planet. You like pink, I like green, our boss likes yellow, there's a very good chance we're going to be doing the yellow idea. Well, wait a minute, was that the right one targeted for our consumer? Was it aligned with our brand? So there's a tool called stargazer. I borrowed it with pride from Richard Branson of Virgin. Virgin is the most elastic brand on the planet, right? They've done condoms, they've done space travel, and everything in between. Disney is a non-elastic brand. They do family magical experiences. So how does Virgin decide, of all these ideas they get pitched, how do they decide which ones to bring to market?

They have a tool, I call it stargazer, it looks like a starfish, it's got five prongs on it, you'll see it in the book, and each one has three criteria, and you can make up your own criteria at the beginning of the project. Let's say, is this a strategic brand fit? Is this aligned with who we stand for as a brand? Is this embedded in consumer truth? Is it relevant to our consumer? Can I get this into the market the next 18 to 24 months? Is it going to hit my financial goals? And is it socially engaging? Is it going to get people excited? And all you do with all of your ideas at the end is go around those five criteria and ask, does this do a poor job, a good job, or an outstanding job of being aligned with our brand, a poor job, a good job, or an outstanding job of being targeted at our consumer, relevant to our consumer? And then guess what? With different colors for each idea, you join the dots just as you did when you were a kid. And one idea will rise to the top as to meeting your criteria, objectives, the most, not the one you like the best.

Expansionist vs. reductionist tools (18:39)

I define creativity as the ability to have an idea. We all have hundreds a day. I define innovation is the ability to get it done. That's the hard part, and that's what the tools are designed and helping you with.

Do you think that the book and your approach is most helpful in helping people be more creative and come up with ideas or helping other people judge ideas as being good ideas and being open to ideas and closed to the wrong ideas?

I think people use confusing terms just to make themselves more intelligent. The amount of times I've been in a meeting and somebody used an acronym, nobody knows what it is, but nobody's going to put their hand up. I call it expansionist and reductionist, the official name is divergent and convergent, who cares? Expansionist tools are the ones that help you get out of your river of thinking and help you think differently, and the reductionist tools are okay, now we've got all of these ideas, which one goes to market, how do we take it to market, how do we actually get it done?

A lot of people say, as you said at the beginning, “I'm not creative.” Well, if you define yourself as a musician or an artist, then guess what? I'm not creative either. I define creativity as the ability to have an idea. We all have hundreds a day. I define innovation is the ability to get it done. That's the hard part, and that's what the tools are designed and helping you with.

If you're running a business and you're like, “I want to implement this,” how do you . . . I'm sure you would love this, buy everybody the book, buy everybody three copies of the book. How do you implement it? I mean, I'm just curious how you do that job.

How do I do the job? Or how does the business?

How would someone do that job if they're like, I'm trying to make my workforce more creative, I'm trying to make sure that we are open to good ideas. How do you institute that at an existing business?

Here's a tool that can change a culture overnight: Now you and I have been tasked with coming up with an idea for a birthday party. We've been given a $100,000, which is a reasonable budget for a birthday party. The theme could be Star Wars or Harry Potter. What would you like it to be?

I'd probably go with Star Wars.

Okay, so I'm going to come at you some amazing ideas for a Star Wars birthday. I'd like you to start each and every response with the words “No, because.” They'll be the first two words you use in each response, and then you'll tell me why not.

So I was thinking of coming to your house, painting your kitchen dark, turn it into the Death Star canteen, and we'll have a food and wine festival from Hoth and Naboo and Tatooine.

No, no, no. We can't do that because I like the way it looks now, I'm worried about repainting it and matching those colors. That's too significant of a change.

What if, then, we just turn the lights out, we do a glow-in-the dark lightsaber fight full of our favorite alcoholic liquid?

Well, that sounds like a better idea. Am I still supposed to say “no, because?”

“No, because.” Stay on the “no, because.”

No, can't do it. Listen, I worry about those lightsabers breaking, I'll be honest with you, and that alcohol flying over the place. Also, there are going to be kids there, and I just worry about the alcohol aspect. Because I’m an American, and we're very tight.

So perhaps if there's kids there, we could do a cosplay party, and all the tall people could come as Vader and all the little people could come as ewoks.

No, because I think some of the tall people would like to be the good guy, and I think some of the people who are not quite as tall might feel we were infantilizing them by turning them into ewoks.

I’ll tell you what, then, we'll do a movie marathon and we’ll show all seven films back-to-back with some popcorn and coke. What do you say?

No, because that would be a really long event. I think people would be super sick of even watching their favorite movies after about two movies, so can't do it.

Alright, so we'll stop there. When somebody's constantly saying “no, because” to you, how does that make you feel?

Like I really don't feel like coming up with any more ideas and like they will just not get to “yes.”

And we started there with a food and wine festival and we ended up with showing the movies. Would you say the idea was getting bigger as we were going, or was it getting smaller? Which direction was it?

It was getting progressively smaller and less imaginative.

So let's try that again. Can we do Harry Potter?

Well, I don't know as much, but I'll do my best.

Okay, so have you seen a couple of the films?

Kind of?

You pick the theme, then. What do you want?

Marvel. A beautifully licensed property. Yes, Marvel.

I'm going to come at you with some ideas for a Marvel party. I'd like you to start each and every response this time with the words, “yes, and,” and we'll just build it together, okay?

I tell you what, we could do a Spider-Man party where everybody gets those little web things that they could shoot out of their hands, but are actually made out of cotton candy, so we could eat it, we could eat the webs.

Oh yes, and perhaps we could have villain-themed targets the shoot at?

Oh, yes, and we could have a room full of superheroes and a room full of villains, and we have cosplay party and there'll even be a make-your-own Iron Man suit!

Yes, we can have an Iron Man suit, obviously, and we can have the other costumes, and perhaps some of their other tools, like Thor’s hammer, those could somehow also be candy-related.

Oh yes, and we could actually invite the stars of the film, we could have Chris Hemsworth, Robert Downey, Jr., and Chris Pratt, and Rocket, and Groot.

Yes. Love the idea. And perhaps if that's not quite possible —

— That was a “no, because!”

Oh that sounded like a “no.”

Come on, come on.

We've reached the limits of my creativity.

We'll stop there. A couple of observations: a lot more laughter, a lot more energy.

Bigger or smaller?

We're taking our steps into an ever-wider world!

We work in big organizations, we work in small organizations, we have colleagues, we have constituencies, we have bosses, we have local regulators, et cetera, to bring on board with our ideas. By the time we just finished building that idea together, whose idea was it by the time we'd finished?

That is lost to the fog of history. It is now a collaborative idea that we both can take credit for when it's a huge success.

Ours. Two very simple words from the world of improv that have the power to turn a small idea into a big one really quickly. You can always value-engineer a big idea back down again, but you can't turn a small idea into a big idea. Far more importantly, it transfers the power of “my idea,” which we know never goes anywhere outside an organization, to “our idea” and accelerate its opportunity to get done.

For people listening today, I'll give you one word of advice to take away: Don't let the words “no, because” be the first two words you use when somebody comes bouncing into your office with an idea you are not thinking of. They may have genius two seconds from now, two weeks from now — they ain't coming back.

Just remind yourselves: I know you have responsibilities, I know you've got deadlines, I know you've got quarterly results. We are not green-lighting this idea for execution today, we are mainly green-housing it together using “yes, and.”

Gamifying learning (25:20)

Gaming is the future of education, there's no question.

So now I have one more question I think that's super valuable advice, actually. As you were talking about western education squashing the creativity. . . Do you have you any thoughts about how to change that, keeping the best of what we do?

Gamify. Gamify everything. Gaming is the future of education, there's no question. Universities will fall, but why will universities fall? That's a fairly outrageous statement. Well, let me think. Blue-collar workers, the white collar workers laughed at them because they didn't go to university. Let me think — people who use their hands, artificial intelligence, probably not taking them out anytime soon. White collar workers, not so much. Goodbye. Not quite, that's a slight exaggeration, but universities are teaching the same thing that we learned.

So I walk into a classroom, a professor says, “In the year 3 AD, Brutus stabbed Julius Caesar in the back on the steps of the Senate of Rome.” Okay, well I'm asleep already. However, if I could walk into the Senate in Rome, in virtual reality, or in Apple Vision Pro — hello, thank you very much — walk right up to Julius Caesar and Brutus debating with the senators and say, “Hey Julius, look behind you!”

I tell you for why: My son sat down at the breakfast table many years ago, he was probably about 13 or 14 at the time, and he said, “Do you know the Doge’s Palace in Venice was built in 14 . . .” And he went on this whole diatribe. I was like, where the hell did you learn that? He goes, “Oh, Assassin's Creed.” Gaming will annihilate.

See, when you say online training, the first words out of somebody's mouth are, “Boring!” So, what I aim to develop within a year from today is to gamify the Imagination Emporium and actually help people, train them how to be more imaginative using gaming.

On sale everywhere The Conservative Futurist: How To Create the Sci-Fi World We Were Promised

Micro Reads

▶ Economics

* AI and the Future of Work: Opportunity or Threat? - St. Louis Fed

* Industrial policies and innovation in the electrification of the global automobile industry - CEPR

▶ Business

* What Is Venture Capital Now Anyway? - NYT

* When IBM Built a War Room for Executives - IEEE

▶ Policy/Politics

* How U.S. Firms Battled a Government Crackdown to Keep Tech Sales to China - NYT

* Was mocking Musk a mistake? Democrats think about warmer relationship with the billionaire - Politico

* Recent Immigration Surge Has Been Largest in U.S. History - NYT

* The DOJ’s Misguided Overreach With Google Is An Opportunity for Trump - AEI

* Harding, Coolidge and the Forerunner of DOGE - WSJ Opinion

* We Are All Mercantilists Now - WSJ Opinion

* Exclusive: Trump transition recommends scrapping car-crash reporting requirement opposed by Tesla - Reuters

* Trump’s Treasury Pick Is Poised to Test ‘Three Arrows’ Economic Strategy - NYT

* This Might Be the Last Chance for Permitting Reform - Heatmap

▶ AI/Digital

* Are LLMs capable of non-verbal reasoning? - Ars

* Google’s new Project Astra could be generative AI’s killer app - MIT

* The Mystery of Why ChatGPT Couldn’t Say the Name ‘David Mayer’ - WSJ

* OpenAI’s ChatGPT Will Respond to Video Feeds in Real Time - Bberg

* Google and Samsung’s first AI face computer to arrive next year - Wapo

* Why AI must learn to admit ignorance and say 'I don't know' - NS

* AI Pioneer Fei-Fei Li Has a Vision for Computer Vision - IEEE

* Broadcom soars to $1tn as chipmaker projects ‘massive’ AI growth - FT

* Chip Cities Rise in Japan’s Fields of Dreams - Bberg Opinion

* Tetlock on Testing Grand Theories with AI - MR

* The mysterious promise of the quantum future - FT Opinion

▶ Biotech/Health

* RFK Jr.’s Lawyer Has Asked the FDA to Revoke Polio Vaccine Approval - NYT

* Designer Babies Are Teenagers Now—and Some of Them Need Therapy Because of It - Wired

* The long shot - Science

▶ Clean Energy/Climate

* What has four stomachs and could change the world? - The Economist

* Germany Sees Huge Jump in Power Prices on Low Wind Generation - Bberg

▶ Space/Transportation

* NASA’s boss-to-be proclaims we’re about to enter an “age of experimentation” - Ars

* Superflares once per Century - MPI

* Gwynne Shotwell, the woman making SpaceX’s moonshot a reality - FT Opinion

▶ Substacks/Newsletters

* The Changing US Labor Market - Conversable Economist

* How we'll know if Trump is going to sell America out to China - Noahpinion

* Can RFK Kneecap American Agriculture? - Breakthrough Journal

Faster, Please! is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Washington’s initial thinking about AI regulation has evolved from a knee-jerk fear response to a more nuanced appreciation of its capabilities and potential risks. Today on Faster, Please! — The Podcast, I talk with technology policy expert Neil Chilson about national competition, defense, and federal vs. state regulation in this brave new world of artificial intelligence.

Chilson is the head of AI policy at the Abundance Institute. He is a lawyer, computer scientist, and former chief technologist at the Federal Trade Commission. He is also the author of “Getting Out of Control: Emergent Leadership in a Complex World.”

In This Episode

* The AI risk-benefit assessment (1:18)

* AI under the new Trump Administration (6:31)

* An AGI Manhattan Project (12:18)

* State-level overregulation (15:17)

* Potential impact on immigration (21:15)

* AI companies as national champions (23:00)

Below is a lightly edited transcript of our conversation.

The AI risk-benefit assessment (1:18)

Pethokoukis: We're going to talk a bit about AI regulation, the future of regulation, so let me start with this: Last summer, the Biden administration put out a big executive order on AI. I assume the Trump administration will repeal that and do their own thing. Any idea what that thing will be?

We have a lead on the tech, we have the best companies in the world. I think a Trump administration is really going to amp up that rhetoric, and I would expect the executive order to reflect the need to keep the US and the lead on AI technology.

Chilson: The Biden executive order, repealing it is actually part of the GOP platform, which does not say a lot about AI, but it does say that it's definitely going to get rid of the Biden executive order. I think that's the first order of business. The repeal and replace process . . . the previous Trump administration actually had a couple of executive orders on AI, and they were very big-picture. They were not nearly as pro-regulatory as the Biden executive order, and they saw a lot of the potential.

I'd expect a shift back towards a vision of AI as a force for good, I'd expect to shift towards the international dynamics here, that we need to keep ahead of China in AI. We have a lead on the tech, we have the best companies in the world. I think a Trump administration is really going to amp up that rhetoric, and I would expect the executive order to reflect the need to keep the US and the lead on AI technology.

That emphasis differs from the Biden emphasis in what way?

The Biden emphasis, when you read the executive order, it has some nice language up top about how this is a great new technology, it's very powerful, but overwhelmingly the Biden executive order is directed at the risk of AI and, in particular, not existential risk, more the traditional risks that academics who have talked about the internet have had for a long time: these risks of bias, or risks to privacy, or risks to safety, or deepfakes. And to be honest, there are risks to all of these technologies, but the Biden executive order to really pounded that home, the emphasis was very much on what are the problems that this tech could cause and what do we as the federal government need to do to get in here and make sure it's safe for everybody?

I would expect that would be a big change. I don't see, especially on the bias front, I don't see a Trump administration emphasizing that as a primary thing that the federal government needs to fix about AI. In fact, with people like Elon Musk having the ear of the president, I would expect maybe to go in the opposite direction, that these ideas around bias are inflated, that these risks aren't really real, and, to the extent that they are, that it's no business of the federal government to step in and tell companies how to bias or de-bias their products.

One thing that sort of confuses me on the Elon Musk angle is that it seemed that he was — at least used to be — very concerned about these somewhat science-fictional existential risks to AI. I guess my concern is that we'll get that version of Musk again talking to the White House and maybe he says, “I'm not worried about bias, but I'm still worried about it killing us all.” Is there any concern there, that that theme, which I think seems to have faded a little bit from the public conversation (maybe I'm wrong) that that will reemerge.

I agree with you that I think that theme has faded. The early Senate hearings were very much in that vein, they were about the existential risk, and some of that was the people who were up there talking. This is something that's been on the mind of some of the leaders of the cutting edge of the tech space, and it's part of the reason why they got into it. There's always been a tension there. There is some sort of dynamic here where they're like, “This stuff is super dangerous and super powerful, so I need to be the one creating it and controlling it.” I think Musk still kind of falls in that bucket, so I share a little bit of that concern, but I think you're right that Congress has said, “Oh, those things seem really farfetched. That's not how we're going to focus our time.” I would expect that to continue even with a Musk-influenced administration.

I actually don't think that there is necessarily a big tension between that and a pushback against the sort of red-tape regulatory approach to AI that was kind of the more traditional pessimistic, precautionary approach to technology, generally. I think Musk is a guy who hates red tape. I think he's seen it in his own businesses, how it's slowed down launches of all sorts. I think you can hate red tape and be worried about this existential risk. It's not necessarily in intentioned, but it'll be interesting to see how those play out, how Musk influences the policy of the Trump administration on AI.

AI under the new Trump Administration (6:31)

One issue that seemed to be coming up over and over again is differing opinions among technologists, venture capitalists, about the open-source issue. How does that play out heading into a Trump administration? When I listen to the Andreessen Horowitz podcast, those guys seem very concerned.

They're going to get this software. They're going to develop it themselves. We can't out-China China. We should lean into what we're really good at, and that is a dynamic software-development environment, of which open source is a key component.

So there's a lot of disagreements about how open source plays out. Open source, it should be pointed out first, is a core technology across everything that people who develop software use. Most websites run on open source software. Most development tools have a huge open source component, and one of the best ways to develop and test technology is by sharing it with people and having people build on it.

I do think it is a really important technology in the AI space. We've seen that already, people are building smaller models, doing new things in open source that it costs a lot of money to do in the first instance, maybe in a closed source.

The concerns that people raise is that this, especially in the national security space or the national competition, that this sort of exposes our best research to other countries. I think there's a couple of responses to that.

The first one is that closed source is no guarantee that those people don't have that technology as well. In fact, most of these models fit on the thumb drive. Most of these AI labs are not run like nuclear facilities, and it's much easier to smuggle a thumb drive out than it is to smuggle a gram of plutonium or something like that. They're going to get this software. They're going to develop it themselves. We can't out-China China. We should lean into what we're really good at, and that is a dynamic software-development environment, of which open source is a key component.

It also offers, in many ways, an alternative to centralized sources of artificial intelligence models, which can offer a bunch of user interface-based benefits. They're just easier to use. It's much easier to log into OpenAI and use their ChatGPT than it is to download and build your own model, but it is really nice as a competitive gap filler to have thousands and thousands of other that might do something specific, or have a specific orientation, which you can train on your own. And those exist because of the open source ecosystem. So I think it solves a lot of problems, probably a lot more than it creates.

So what would you expect — let's focus on the federal level — for this congress, for the Trump administration, to do other than broadly affirm that we love AI, we hope it continues? Will there be any sort of regulatory rule, any sort of guidance, that would in any way constrain or direct this technology? Maybe it's in the area of the frontier models, I don't know.

I think we're likely to see a lot of action at the use level: What are the various uses of various applications and how does AI change that? So in transportation and healthcare . . . this is a general purpose technology, and so it's going to be deployed in lots of spaces, and a lot of these spaces already have a lot of regulatory frameworks in place, and so I think we'll see lots of agencies looking to see, “Hey, this new technology, does it really change anything about how we regulate medical devices? If it does, how do we need to accommodate that? What are the unique risks? What are the unique opportunities that maybe the current framework doesn't really allow for?”

I think we'll see a lot of that. I think, once you get up to the abstract model level, it's much harder to figure out what problem both are we trying to solve at the model level and do we have the capability to solve at the model level. If we're worried about people developing bio weapons with this technology, is making sure the model doesn't allow that, is that useful? Is it even possible? Or should we focus those attentions maybe down on, people can't secure the components that they need to execute a biohazard? Would that be a more productive place? I don't see a lot of action, honestly, at the model level.

Maybe there'll be some reporting requirements or training requirements. The executive order had those, although they used something called the Defense Production Act — I think probably unconstitutionally, how they use that. But that's going to go away. If that gets filled in by Congress, that there's some sort of reporting regime — maybe that's possible, but Congress doesn't seem to be able to get those types of really high-level tech regulations across the line. They haven't done it with privacy legislation for a long time and everybody seems to think that would be a good idea.

I think we'll continue to see efforts at the agency level. One thing Congress might do is they might spend some money in this space, so maybe there will be some new investment or maybe the national laboratories will get some money to do additional AI research. That has its own challenges, but most of them are financial challenges, they're not so much whether or not it's going to impede the industry, so that's kind of how I think it'll likely play out at the federal level.

An AGI Manhattan Project (12:18)

A report just came out (yesterday, as we're recording this) from the outside advisory group on US-China relations that advises the government, and they're calling for a Manhattan Project to get to an artificial general intelligence, I assume before China or anybody else.

Is that a good idea? Do you think we'll do that? What do you make of that recommendation, which caused quite a stir when it came out?

For the most part, artificial general intelligence, I don't understand what the appeal of that is, frankly . . . Why not train something that could do something specific really well?

Yeah, it's a really interesting report. If you read through the body of the report, it's pretty standard international competitiveness analysis that says, “What are the supply chains for chips? How does it look? How do we compare on talent development? How do we compare on the industry backing investment?” Things like that. And we compare very well, overall, the report says.

But then, all of a sudden at the top level, the first recommendation talks about artificial general intelligence. This is the kind of AI that doesn't exist yet, but it's the kind that could basically do everything a human could do at the intellectual level that a human could do it. It's interesting because that recommendation, it doesn't seem to be founded on anything that's actually in the report. There's no other discussion in the report about artificial general intelligence, or how important it is strategically, or anything like that, and yet, they want to spend Manhattan Project-level amounts of money — I think in today's dollars, that'd be like $30 billion to create this artificial general intelligence. I don't know what to make of that, and, more than that, I think it's very unlikely to move the policy discussion. Maybe it moves the Overton window, so people are talking like, “Yeah, we need a Manhattan Project,” but I don't think that it's likely to do anything.

For the most part, artificial general intelligence, I don't understand what the appeal of that is, frankly. It has a sort of theoretical appeal, that we could have a computer that could do all the things that a person could do, but in the modern economy, it's actually better to have things that are really good at doing a specific set of things rather than having a generalist that you can deploy lots of different places, especially if you're talking about software. Why not train something that could do something specific really well? I think that would slot into our economy better. I think it's much more likely to be the most productive value of the intense computation time and money that it takes to train these types of models. So it seems like a strange thing to emphasize in our federal spending, even if we're talking about the national security implications. It would seem like it'd be much better to train a model that's specifically built for some type of drone warfare or something rather than trying to make it good at everythi ng and then say, “Oh, now we're going to use you to fly drones.” That doesn't seem to make a ton of sense.

State-level overregulation (15:17)

We talked about the federal level. Certainly — and not that the states seem to need a nudge, but if they see the Washington doing less, I'm sure there'll be plenty of state governments saying, “Well then we need to do more. We need to fill up the gap with our state regulation.” That already seems to be happening. Will that continue to happen and can the Trump administration stop that?

I think it will continue to happen, the question is what kind of gap is left by the Trump administration. I would say what the Biden administration left was a vision gap. They didn't really have an overarching vision for how the US was going to engage with this technology at the federal level, unlike the Clinton administration which set out a pretty clear vision for how the federal government planned to engage on the early version of the internet. What it said was, for some really good reasons, we're going to let the commercial sector lead on development here.

I think sending a signal like that could have sort of bully-pulpit effect, especially in redder states. You'll still see states like California and New York, they're listening to Europe on how to do stuff in this space.

Still? Are we still listening to . . . Who are the people out there who think, “They've got it figured out”? I understand that maybe that's your initial impulse when you have a new technology and you're like, “I don't know what to do, so who is doing something on it?” But we've had a little bit of time and I just don't get anybody who would default to be like, “Man, we're just going to look at a couple of EU white papers and off to the races here in our state.”

I think we're starting to see . . . the shopping of bills that look a lot like the way privacy has worked across the states, and in some cases are being pushed by the same organizations that represent compliance companies saying, “Hey, yeah, we need to do all this algorithmic bias auditing, or safety auditing, and states should require it.”

I think a lot of this is a hangover of the social media fights. AI, if you poll it just at that level, if you're like, “Hey, do you think AI is going to be good or bad for your job or for the economy?” Americans are somewhat skeptical. It's because they think of AI in the cultural context that includes Terminator, and automation, and so they think of it that way. They don't think about the thousands of applications on their phones that use artificial intelligence.

So I think there's a political moment here around this. The Europeans jumped in on and said, “Hey, we're the first to regulate in this space comprehensively.” I think they're dialing that back since some of their member states are like, “Hey, this is killing our own homegrown AI industry.” But for some reason, you're right, California and New York seem to be embracing that, and I think they probably will continue to. At the very local level, at the state level, there's just weird incentives to do something and then you don't really pay a lot of consequences down the road.

Having said that, there was a controversial bill that was very aggressively pushed, SB 1047, in California over the summer, and it got killed. It got canned by Gavin Newsom in the end. And I think that's a sort of a unique artifact of California's “go along to get along” legislature process where even people who don't support bills vote for them, kind of knowing that Gavin, or that the governor, will bring down the veto when it doesn't make political sense.

All of this is to say, California's going to California. I think we're starting to see, and what concerns me is, we're starting to see the shopping of bills that look a lot like the way privacy has worked across the states, and in some cases are being pushed by the same organizations that represent compliance companies saying, “Hey, yeah, we need to do all this algorithmic bias auditing, or safety auditing, and states should require it.”

There's a Texas draft bill that has been floated right now, and you wouldn't think that Texas would be on the frontier of banning differential effects in bias from AI. It doesn't really sound particularly red-state-y, but these things are getting shopped around and if it moves in Texas, it'll move other places too. I worry about that level of red tape coming at the state level, and that's just going to be ground warfare on the legislative front at the state level.

So federal preemption, what is that and how would that work? And is that possible?

It's really hard in this space because the technology is so general. Congress could, of course, write something that was very broad and preempted, certain types of regulation of models, and maybe that's a good idea, I've seen some draft language around that.

On the other hand, I do believe in federalism and these aren't quite the same sort of network-based technologies that only make sense in a national sweep. So maybe there's an argument that we should let states suffer the consequences of their own regulatory approaches. That hurts my heart a little bit just to think about the future because there are a lot of talented people in those states who are going to find out it's the lawyers who are their main constraint. Those types of transaction costs, they will slow us down. I think if it looks like we're falling behind in the US because we can't get out of our own way regulatorily, I think there will be more impulse to fix things.

There are some other creative solutions such as interstate compacts to try to get people to level up across multiple states about how they're going to treat AI and allow innovation to flourish, and so I think we'll see more of those experiments, but it is really hard at the federal level to preempt just because there's so many state-based interests who are going to push back against that sort of thing.

Potential impact on immigration (21:15)

As far as AI influencing what we do elsewhere — one thing you wrote about recently in a really great essay, which I've already drawn upon in some of these questions is — thinking about immigration and AI talent coming to the United States — what I think is now a widely accepted understanding, that this is an important technology and we certainly want to be the leader in this technology — does that change how we think about immigration, at least very high-skilled immigration?

We should be wanting the most talented people to come here and stay here.

I think it should. Frankly, we should have changed our minds about some of this stuff a long time ago. We should be wanting the most talented people to come here and stay here. The most talented people in the world already come here for school often. When I was in computer science grad school, it was full of people who really desperately wanted to stay in the US and build companies and build products, and some of them struggled really hard to figure out a way to do it legally.

I think that making it easier for those people to stay is essential to keeping not just our lead in the world, I don't want to say it that way — I mean that's important, I think national competitiveness is sort of underrated, I think that is valuable — but those people are the most productive in the US system where they can get access to venture capital that's unlike any other part of the planet. They can get access to networks of talent that are unavailable on other parts of the planet. Keeping them here is good for the US, but I think it's good overall for technological development, and we should really, really, really focus on how to make that easier and more attractive.

AI companies as national champions (23:00)

This isn't necessarily a specific AI issue, but again, as you said earlier, it seems like a lot of the debate, initially, is really a holdover from the social media debates about moderation, and bias, and all that, and a lot of those sorts of people, in many cases, and frameworks just got globed onto AI.

Another aspect is the antitrust, and now we’re worried about these big companies owning these platforms, and they're biased.

Do we begin to look at issues of how we look at our big companies who have been leading in AI, doing a lot of R&D — does the politics around Big Tech change if we begin to see them as our vanguard companies that will keep us ahead of China?

. . . in contrast to the Biden sort of “big-is-bad” rhetoric that they sort of leaned into entirely, I think a Trump administration is going to bring more nuance to that in some ways. And I do think that there will be more of a look towards our innovative companies as being the vanguard of what we do in the US.

I think it already has, honestly. You saw early on, the Senate hearings around AI were totally inflected with the language of social media and that network-effects type of ecosystem. AI does not work like that. It doesn't work the same way. In fact, the feedback loops are so much faster from these models, we saw things like Google Gemini that had ahistorical renderings of the founding fathers, and that got so much shouting on Twitter, and on X, and lots of other places that Google very quickly adjusted, tweaked its path. I think we're seeing the toning down of that rhetoric and the recognition that these companies are creating a lot of powerful, useful products, and that they are sort of national champions.

Trump, on the campaign trail, when asked about breaking up Google for an ongoing antitrust litigation was like, “Hold on guys, breaking up these companies might not be in our best interest. There might be other ways we can solve these types of problems.” I think that that level of, in contrast to the Biden sort of “big-is-bad” rhetoric that they sort of leaned into entirely, I think a Trump administration is going to bring more nuance to that in some ways. And I do think that there will be more of a look towards our innovative companies as being the vanguard of what we do in the US.

Now, having said that, obviously I think there's tons of AI development that is not inside of these largest companies in the open source space, and especially in the application layer, building on top of some of these foundation models, and so I think that ecosystem is also extremely important. Things that sort of preference the big companies over the small ones, I would have a lot of concerns about, and there have been regulatory regimes proposed that, even while opposed by some of the bigger companies, would certainly be possible for them to comply with in a way that small companies would struggle to comply with, and open-source developers just don't have any sort of nexus with which to comply, since there is no actual business model that's propping that type of approach up. So I'd want to keep it pretty neutral between the big companies, the small companies, and open source, while having the cultural recognition that big companies are extremely valuable to the US innovation ecosystem.

If you had some time with, I don’t know, somebody, the president, the vice president, the Secretary of Commerce, someone in an elevator going from the first to the 10th floor, and you had to quickly say, “Here's what you need to be keeping in mind about AI over the next two to four years,” what would you say?

I think the number one thing I would say is that, at the state level, we're wrapping a lot of red tape around innovative companies and individuals, and that we need to find a way to clear that thicket or stop it from growing any further. That's the number one challenge that I see facing this.

Secondary to that, I would say the US government needs to figure out how to take advantage of these tools. The federal government is slow to adopt new technologies, but this technology has a lot of applications to the types of government work that hundreds of thousands of federal employees do every day, and so finding ways to streamline using AI to do the job better I think is really valuable, and I think it would be worth some investment at the federal level to think about how to do that well.

On sale everywhere The Conservative Futurist: How To Create the Sci-Fi World We Were Promised

Micro Reads

▶ Economics

* Productivity During and Since the Pandemic - San Francisco Fed

* The Effect of COVID-19 Immigration Restrictions on Post-Pandemic Labor Market Tightness - St. Louis Fed

* Trump Plans Tariffs on Canada, China and Mexico That Could Cripple Trade - NYT

▶ Business

* Nvidia’s new AI audio model can synthesize sounds that have never existed - Ars

* Europe’s Mistral expands in Silicon Valley in hunt for AI staff - FT

▶ Policy/Politics

* Musk Wants $2 Trillion of Spending Cuts. Here’s Why That’s Hard. - WSJ

* AI Governance: From Fears and Fearmongering to Risks and Rewards - AEI

* Newsom says California to offer EV subsidies if Trump kills federal tax credit - Wapo

▶ AI/Digital

* A new golden age of discovery - AI Policy Perspectives

* How Do You Get to Artificial General Intelligence? Think Lighter - Wired

* Is Creativity Dead? - NYT Opinion

* The way we measure progress in AI is terrible - MIT

* AI's scientific path to trust - Axios

* AI Dash Cams Give Wake-Up Calls to Drowsy Drivers - Spectrum

▶ Biotech/Health

* Combining AI and Crispr Will Be Transformational - Wired

* Neuralink Plans to Test Whether Its Brain Implant Can Control a Robotic Arm - Wired

* Scientists are learning why ultra-processed foods are bad for you - Economist

▶ Clean Energy/Climate

* Taxing Farm Animals’ Farts and Burps? Denmark Gives It a Try. - NYT

* These batteries could harness the wind and sun to replace coal and gas - Wapo

▶ Robotics/AVs

* On the Wings of War - NYT

▶ Up Wing/Down Wing

* ‘Genesis’ Review: Rise of the New Machines - WSJ

* The Myth of the Loneliness Epidemic - Asterisk

▶ Substacks/Newsletters

* The Middle Income Trap - Conversable Economist 

* America's Productivity Boom - Apricitas Economics

* The Rise of Anthropic powered by AWS - AI Supremacy

* Data to start your week - Exponential View

* Trump's economic team is on a collision course with reality - Slow Boring

* Five Unmanned SpaceX Starships to Mars in 2026 with Thousands of Teslabots - next BIG future

Faster, Please! is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Housing in the United States has come to be known as a panacea problem. Gone are the days when tossing the graduation cap meant picking up the keys to a front door, and the ripple effects of unaffordable housing stretch across society: poor social mobility, smaller families, worse retirement-readiness, just to name a few.

Today on Faster, Please — The Podcast, I talk to Bryan Caplan about the seemingly obvious culprit, government regulation, and the growing movement to combat it.

Caplan is a professor of economics atGeorge Mason University. His essays have been featured in the New York Times, Wall Street Journal, Washington Post, and TIME Magazine. He is editor and chief writer of theBet On It Substack, and is the author of several books, including Build, Baby, Build: The Science and Ethics of Housing Regulation.

In This Episode

* America’s evolving relationship with housing (1:31)

* The impact of regulation (3:53)

* Different regulations for different folks (8:47)

* The YIMBY movement (11:01)

* Homeowners and public opinion (13:56)

* Generating momentum (17:15)

* Building new cities (23:10)

Below is a lightly edited transcript of our conversation.

(Note: This was recorded just before the presidential election.)

America’s evolving relationship with housing (1:31)

The main thing that changed is that we've seen a long-run runup of housing prices.

Pethokoukis: What was going on with housing prices and housing affordability from the war to the 1970s? Was it kind of flattish? People were recovering from the Great Depression; what was going on then?

Caplan: Yeah, it was quite flat, so there were decades where we had rapidly expanding population, the Baby Boom, and markets were working the way that markets normally do: You get demand going up, raises prices in the short run, but then that means the prices are above the cost of production, and so you get entry, and you build more until prices come back down to the cost of production. That's the way markets are supposed to work!

I don't know how people thought about their homes in the late ’40s, ’50s, and ’60s, but did they view them as, “This is our primary investment,” or did they view them more as a place to live? Were there any expectations that this was their retirement plan?

I honestly don't know. I don't remember reading anything about that. I grew up in Los Angeles where in the ’70s and ’80s people already had some sense of, “Your home is an important retirement vessel,” but it is plausible that when you are going back to earlier decades, people did have a different view.

I've often heard Americans say that Japanese don't think about their homes as retirement vessels, but I've never talked to anyone in Japan to assure me this is so, so I don't know.

But that scenario changed.

It did.

How did it change and are we confident we know why it changed?

The main thing that changed is that we've seen a long-run runup of housing prices. Depending upon what series you're looking at, the runup might be starting in the early ’70s or the early ’80s, but in any case, there was what economists would call a structural break where a series that was generally flat over the long term started rising over the long term. There have been a few times when prices fell back down, like after the Great Recession, but now, inflation adjusted, we are higher than the peak right before the Great Recession.

Now, is that the same as affordability? Because I assume incomes could be going up, so has it outpaced median income over that period?

Probably not, although it's in the right ballpark, and maybe.

One thing you can say is, well, there's regulation before, there's regulation after, so how can you go and blame the rise on the regulation?

The impact of regulation (3:53)

I would like to blame regulation. Intuitively, that makes sense to me, but I suppose we need more than intuition here.

. . . there's a lot of regulation almost everywhere a lot of people live.

I would say that we do have very good evidence that regulation is indeed to blame. If you look at it very quickly, you might say, “Well, there was regulation before; it didn't seem to matter that much.” The answer to this really was death by a thousand cuts, where we just piled regulation on regulation, but also where regulations that have been interpreted mildly before started being interpreted strictly afterwards.

How do we know that it really is regulation? The easiest thing to do is just to look at the strictness of regulation in different parts of the country, and you can see that there are some places that are crazy strict and the prices are crazy high. There's other places where the regulation is a lot lighter and even though they're getting plenty of population increase, they nevertheless do not have these long-run rises.

So the contrast between the Bay Area and the Texas Triangle is very strong. So these are both areas that, in some sense, they are growth areas, a lot of tech there, but the Bay Area has seen very little rise in the amount of housing and massive increase in prices, whereas Texas has, in contrast, seen a large rise in the number of houses and very low rises in the price of housing.

The main method that economists have used in order to disentangle all this is it really starts with trying to figure out: What is land that you are not allowed to build anything on worth? So just think about whatever your excess land is in a single-family area, you're not allowed to put another structure there, you can put a volleyball court or something like that. So you just find out, well, what is land where you can't build anything worth? And usually, even in a good area, that land is not worth much. If you can't build on it, it's like, I guess we can put some grass, but that's not that good. Then the next step is to just go to a construction manual and to see what the cost of construction is in a given area and then compare it to the price. This is a quite reasonable approach and it has gotten better over time because data has gotten better.

The main thing is that Joe Gyourko, who's been working on this for about 20 years, in his last big paper, he got data on actual vacant lots, and so you can see, this is a vacant lot, usually because you just can't build anything on it, can't get the permission, and as a result of this, he's also able to find out, how bad does the regulation get as you move away from the city center. We've got details like Los Angeles looks like it's regulated out to the horizon. You’ve got 50 miles away from downtown LA and it's still pretty bad regulation. On the other end, a city like Chicago is very regulated in the downtown, but 30 miles out, then there's not that much effect anymore.

The punchline of all this work is that there's a lot of regulation almost everywhere a lot of people live. If you want to go and build a skyscraper in the middle of nowhere in Kansas, you could probably do it, but you wouldn't want to build a skyscraper in the middle of nowhere in Kansas, that defeats the whole purpose of building a skyscraper.

That leads to two questions: The first question is, just to be clear, when we're talking about regulation, is it single-family homes versus multifamily? Is it also the coding, what the home has to be made out of? Do the walls have to be so thick, or the windows? What are we talking about?

The honest answer is that most economists’ estimates are just giving you an estimate of all regulation combined with a considerable agnosticism about what actually are the specific regulations that matter. There are other papers that look at specific kinds of regulation and come up with at least very credible claims that this is a big part of the puzzle.

The main things that matter a lot in the US: We've got height restrictions — those matter in your biggest, most expensive cities; you can just look at a place like Central Park or get a helicopter shot of San Francisco and say, don't tell me you can't build more stuff here. There's endless room to build more stuff here as long as you can go vertically.

It's also very standard to say that you are only allowed to have single-family homes in most residential land in the US, it's just zoned single family only, so you just are not legally allowed to squeeze in a larger number of dwellings.

Then you've got, even with single-family regulation, it's very standard to have minimum lot sizes, which just says that you've got to have at least like an acre of land per house, which, whenever I'm speaking in metric countries, I'm always telling, what is that . . .? It's a lot. It's a lot of land, and the amount of land that's normally required has gone up a lot. One-acre zoning in the past would've seemed crazy. Now plenty of places have five-acre zoning. You could obviously just squeeze way more houses in that space. And what is clear is that builders normally build the absolute maximum number they're allowed to build. Anytime someone is going up to the very border of a rule, that is a strong sign the rule is changing behavior.

Different regulations for different folks (8:47)

Very rarely did someone sit around saying, “You know what's great about Texas? Our lack of housing regulation.”

Why are these rules different in different places? That may be a dumb question. Obviously San Francisco is very different from Texas. Is the answer just: different places, different people, different preferences? Do we have any idea why that is?

Matt Kahn, who is based in Los Angeles, he's been I think at UCLA and USC, he's got a very good paper showing, at least in California, it's the most progressive left-wing places that have the worst regulation, and it just seemed to be very philosophical. On the other hand, I spent a lot of time during Covid in Texas. Very rarely did someone sit around saying, “You know what's great about Texas? Our lack of housing regulation.” It’s not so much that they are opposed to what's going on in California, it just doesn't occur to them they could be California.

In a way, you might actually get them to be proud about what they're doing if you could remind them, “Oh, it's really different in California,” and just take them on a tour, then they might come back and say, “God bless Texas.” But it's more of, there's the places where people have an ideological commitment to regulation, and then the rest of the country is more pragmatic and so builders are able to get a lot more done because there just aren't fanatics that are trying to stop them from providing the second most basic necessity for human beings.

Now, this is all striking because the YIMBY [Yes In My Backyard] movement, and my book Build, Baby, Build — I definitely think of that as a YIMBY book. My goal is to make it the Bible of YIMBY, and it's in comic book form, so it's a Bible that can be read by people starting at age five.

In any case, the YIMBY movement is definitely left-coded. People that are in that movement, they think of themselves as progressives, usually, and yet they are just a small piece of a much broader progressive coalition that is generally totally hostile to what they're doing. They are punching above weight and I want to give them a lot of credit for what they've been able to accomplish, and yet, the idea that YIMBYs tend to be left-wing and therefore they are the main people that are responsible for allowing housing is just not true. Most places in the country basically don't have a lot of pro- or anti-housing activism. They just have apathy combined with a construction industry that tries to go and build stuff, and if no one stops them, they do their job.

The YIMBY movement (11:01)

Who the hell decided that was a good idea that everybody should have an acre of land?

I want to talk a bit more about the economic harms and benefits of deregulation, but if I was a center-left YIMBY, I would think, “Oh, I have all kinds of potential allies on the right. Conservatives, they hate regulation.” I wonder how true that is, at least recently, it seems to me that when I hear a lot of conservatives talking about this issue of density, they don't like density either. It sounds like they're very worried that someone's going to put up an apartment building next to their suburban home, YIMBY people want every place to look [the same] — What's the home planet in Star Wars?

Coruscant.

Yeah Coruscant, that that's what the YIMBYs want, they want an entire planet to look like a city where there's hundreds of levels, and I'm not sure there's the level of potential allyship on the right that center-left YIMBYs would want. Is that a phenomenon that you've noticed?

I actually I have a whole chapter in Build, Baby, Build where I try to go and say we can sell these policies to very different people in their own language, and if they actually believe their official philosophy, then they should all be coming down to very similar conclusions.

I think the main issue of center-left YIMBYs talking to people who are right wing or conservative, it's much more about polarization and mutual antipathy than it is about the people on the right would actually object to what they're hearing. What I say there is there are certain kinds of housing regulation that I think the conservatives are going to be sympathetic to. In particular, not liking multifamily housing in suburbs, but I don't really think there is any conservative objection to just allowing a lot more skyscrapers in cities where they don't even go. There's not going to be much objection there and it's like, “Yeah, why don't we go and allow lots of multifamily in the left-wing parts of the country?”

But I think the other thing is I don't think it's really that hard to convince conservatives that you shouldn't need to have an acre of land to go and have a house. That one, I think, is just so crazy, and just unfair, and anti-family, you just go and list all the negative adjectives about it. Did you grow up in a house on a one-acre lot? I didn't! Who the hell decided that was a good idea that everybody should have an acre of land? Wouldn't you like your kids to be able to walk to their friends' houses?

A lot of it seems to be that government is just preventing the development of something that people would actually want to live in. I remember when my daughter finally made a friend within walking distance, I wanted to light a candle, hallelujah! A child can walk to be friends with a child! This has not happened in all my years! But that was the normal way things were when you'd be on a quarter-acre or a third of acre when I was growing up.

Homeowners and public opinion (13:56)

People generally favor government policies because they believe . . . the policies are good for society.

If someone owns a house, they like when that price goes up, and they might see what you're saying as lowering the price of homes. If we were to have sort of nationwide deregulation, maybe deregulation where the whole country kind of looks like wherever the lightest-regulated place is. People are going to say, “That's bad for me! I own a home. Why would I want that?”

Lots of people think this, and especially economists like this idea of, of course we have all this regulation because it's great for homeowners; homeowners are the main wants to participate in local government. Sounds likely, but when we actually look at public opinion, we see that tenants are strong advocates regulation too, and it's like, gee, that really doesn't make any sense at all. They're the ones that are paying for all this stuff.

But it does make sense if you switch to a much simpler theory of what's going on, which fits the facts, and that is: People generally favor government policies because they believe —underscore believe — the policies are good for society. So many people from the earlier decades say, “Oh, all those Republicans, they just want tax cuts.” Now we're finally at the level where Republicans are poorer than Democrats. It's like, “Yeah, I guess it's getting a little bit hard to say that people become Republicans to get tax cuts when they're the ones paying lower taxes.” How about there's an actual disagreement about what policies are good for society, which explains why people belong to different parties, support different policies.

So most of what I'm doing in Build, Baby, Build is trying to convince people, look, I'm not impugning your motives, I don't think that you're just favoring whatever policies are selfishly best for you. I think that whatever policies you're into are ones that you think are genuinely good for your community, or your area, or your country, but we are not thinking very well about everything that's going on.

So part of it is that a lot of the complaints are just overblown or wrong, but another thing is that generally we base a regulation purely on complaints without any thought of any good thing that we might be losing. I make a big deal in the book about how, if you don't want to have noise, and traffic, and pollution, it's really easy — just move to some remote part of the country and you solve all those problems; yet hardly anybody wants to do that.

Why are people staying in congested areas with all these problems and paying a lot of extra money for them? Many of these people now have telework jobs, they don't even have a job reason to stay there. And the answer's got to be, there's just a bunch of really good things about living near other people that we hardly ever talk about and which have no political voice. There's almost no one's going to show up in a meeting and [say], “I favor this because I want there to be more commercial opportunities. I favor this because I want there to be more social opportunities, more cultural opportunities, more economic opportunities,” and yet these are all the reasons why people want to live near other people. So we have a set of regulation just based upon complaints: complaints which are generally out of context, not quantified. So we just see that people are willing to pay a lot of money for the package of living in an area with a bunch of other people, so that's got to mean that the good of other people exceeds the bad of the other people; otherwise, why aren't you living out in the middle of nowhere?

Generating momentum (17:15)

The sad truth is that symbolic issues are much more likely to get people excited, but this is something that determines the quality of life for most people in this country.

When I read the book, and I read a really good New York Times essay —

Would that be my essay, Jim?

I think it is your essay! In fact, it was, I should have been clearer on the author of that essay. The brilliant Bryan Caplan was the author of that essay.

If you look at the potential benefits on inequality, there's environmental impact, maybe people are really worried about birth rates, it really seems like housing really is sort of the “everything problem.”

Panacea problem, or the “housing theory of everything.”

It really does. I think the current election season, it's probably the most I've heard it talked about, and not really talked about very much.

And thoughtlessly. Spoken of thoughtlessly.

To me there seems to be a lot more — I'll use a nice think tank word — there's been a lot more ideation about the issue in recent years, and maybe it's only now kind of breaking through that filter where politicians start talking about it, but boy, when you look through what you've written about it, it seems like it should be a top three issue that politicians talk about.

The sad truth is that symbolic issues are much more likely to get people excited, but this is something that determines the quality of life for most people in this country. It's the difference between: Are you going to keep living with your parents until you're 30, or are you going to be able to afford to get your own place, start your own family? And again, it's one where older people remember how things used to be, and the idea of, well, why can't things just be like that? Why can't it be that a person who gets out of college can go and immediately afford to get a pretty good house?

At AEI, Mark Perry, for example, who is one of your colleagues, I think probably a remote colleague, he has done stuff on how new houses are better and so on, and that's also true, so I don't want to go and act like there's been no progress at all. But still, of course a lot of people are not moving into those new houses, they’re moving into old houses, which are the same as they were in the past, but just way more expensive if you want to go and live in that area

The other thing that is worth pointing out is that it's really temping to say, well, of course housing naturally gets more expensive as population rises. The period after World War II that we were mentioning, that's the Baby Boom era, population was rising at a much faster rate then than it did now, even counting immigration, and yet prices were much flatter because we were able to just go and legally build way more stuff.

I feel like you feel like you need to drive home the point about demand not being met by supply for this artificial reason: regulation. Even though, to me, it seems utterly natural and a classic case, people struggle to come up with alternative reasons that it's really not that. That it's because of . . . there’s private equity firms buying up all the homes, or the reason apartment rents go up is because there’s a cabal of apartment owners . . . They look for these other reasons, and I don’t quite get that when there seems to be a pretty obvious reason that we theoretically know how to fix.

Some of these other stories, they are half-truths, but they're not helpful. So the thing of, “Gee, if we just shut down tourism and letting foreign buyers buy stuff here, then demand will be lower, and prices will be lower, and we won't need to build anything new.” And it's like, do you realize what you're saying? You're basically saying that you want to destroy one of your best export industries.

If people around the world want to go and buy houses in your area, why do you want to turn them away instead of saying, cha-ching, let's capitalize on this by building a ton of housing for them? If there's a lot of tourists that want to go and rent a place in your area, why is it you want to go and strangle the market, which obviously it's a great industry — Build stuff and rent it to people, and it's not like there's some fixed amount unless the law says it must be fixed.

One benefit I didn't mention was social mobility where we need people, if they want to be able to move towards high-wage, high-productivity cities, to find good jobs, and then not have the wages of those good jobs mostly gobbled up by housing costs. That kind of circulation system, if that's the right phrase.

Certainly in some parts of the country, that has just been stopped and that has been a traditional way people move up the ladder.

We’ve got very good data on this. In earlier periods of US history, there was basically a foolproof way for someone in a low-income part of the country to get a big raise, and that was just to move. Steinbeck’s Grapes of Wrath not withstanding, this almost always works. It wasn't normally the case that you starve to death on your way to California from Oklahoma. Instead, normally, it's just a simple thing: You move from a low-wage area to a high-wage area and you get a lot more money, and you get a much higher take-home salary. But then in those days, there was not much difference in housing prices between different areas of the country, and therefore you would actually have a rise in not just your paycheck, but your standard living.

Now it's still true that you can get a rise in your paycheck by moving to the Bay Area. The problem is your standard of living, if you're coming from Mississippi, will generally crash because the housing cost eats up much more than 100 percent of the raise.

I remember I had a colleague who had a son who was an investment banker in the Bay Area. He and his wife were sharing a small apartment with two roommates, and it's like investment bankers can't afford apartments! Things have gotten out of hand, I think we can say with great confidence now.

Building new cities (23:10)

. . . politics is an area where there's a lot of ideas where it's like no one's trying it, it must be because it wouldn't work if tried, and then someone tries it with a little panache, or a little twist, and it catches on, and you're like, alright, maybe that's the real story.

Should we be building new cities somewhere? I think former President Trump has talked about this idea that we, is that something you've thought about at all?

Yes. I didn't put it into the book, but when I was writing up some follow-up posts on things that I wished I would've talked about, or just more speculative things, I do have some friends who are involved in that project to go and build a new city in the Bay Area. I hope it works.

There is always the problem of there's almost always going to be some existing people where you want to build your new city, and then what do you do about them? You can try buying them out. There is this holdout problem, a few people are going to stay there and say, “I'm not going to sell.” Or you could just go and do what happened in the movie Up: We'll buy everybody around you, and if you don't like it, too bad.

But on the other hand, it may be that activists will put a stop to your plan before you can get it off the ground. So in that case, it was going and selling off empty federal or state land, which we have in abundance. If I remember, I think that 23 percent of the land of the United States is owned by the federal government. Another 10 percent is owned by state governments. And even if you subtract out Alaska, there's still a ton. If you look at the map, it's really cool because you might think, “Oh, it's just that the government owns land no one in the right mind would want.” Not true.

Desert land in Nevada next to Area 51 or something.

Virtually all of Texas, even those western deserts, are privately owned. I've driven through them. Have you ever driven through West Texas?

I have.

Alright, so you're there and you're like, “Who wants to own this stuff?” And it's like, well, somebody at whatever the market price is considers this worth owning, and as to whether it's for mineral extraction, or for speculation on one day it'll be worth something when the population of Texas is greater, or they're going to do ranching there, I don't know. But it is at a price someone is willing to go and own almost every piece of land.

What the map really shows is it was ideology that led all this land to be held by the government. It's basically the ideology of conservation that we hear about. You get John Muir and Teddy Roosevelt, and as a result, they didn't just wind up protecting a few really beautiful national parks, they wind up putting millions of square miles of land off-limits for most human use.

Again, when the population of the country is lower, maybe it didn't even matter that much, but now it's like, “Hey, how about you go and sell me a hundred square miles so I can put a new city here?” The idea that an Elon or Zuckerberg couldn't go and just say, “I'm putting a pile of money into this. I'm going to build a new city and have a decent chance of it working.” Maybe it would be just a disaster and they waste their money. Then more likely I think it's going to be like Seward’s Folly where it's like, “What's the point of buying Alaska?” Oh, actually it was fantastic. We got a great bargain on Alaska and now it is an incredible, in hindsight, investment.

As we were talking, I started thinking about Andrew Yang who ran for president, I think that was in 2020, and he had one issue, really: Universal Basic Income. He thought that he had found an issue that was going to take him to the White House. It did not.

I kind of think if you were going to have a candidate focus a lot on one issue, this would not be a bad issue, given how it touches all these concerns of modern American society.

As an economist, I always hesitate to say that anyone who is a specialist in an area and is putting all their resources into it is just royally screwing up. At the same time, politics is an area where there's a lot of ideas where it's like no one's trying it, it must be because it wouldn't work if tried, and then someone tries it with a little panache, or a little twist, and it catches on, and you're like, alright, maybe that's the real story.

Just to give Trump credit where credit is due, there's just a lot of things that he said that you would think would've just destroyed his candidacy, and instead it seemed like he came out and he was more popular than ever. Maybe he just saw that there were some ideas that are popular that other people didn't realize would be popular.

Now I'm not optimistic about what he's going to do about housing, although anytime he says one good thing, it's like, I don’t know, maybe he'll just get fixated on that, but more likely ADHD will kick in, unfortunately.

But just to go and allow one new laissez-faire city to be built on federal land in some non-crummy area of the country — just as a demonstration project, the value of that would be enormous, just to see, hey, there's no reason why you can't have spacious, cheap homes in a really nice area that is not that remote from the rest of the country. Just imagine the airport you could build there, too — before all the noise complaints. You probably know about the noise complaints against Reagan Airport and how one single guy filed over half the complaints. It's like, how are we going to build anything? Let's build it all before that guy shows up!

On sale everywhere The Conservative Futurist: How To Create the Sci-Fi World We Were Promised

Micro Reads

▶ Economics

* Trump Could Win the Contest With China Once and for All - NYT Opinion

▶ Business

* Nvidia’s message to global chipmakers - FT Opinion

* The Great American Microchip Mobilization - Wired

* ASML Sticks to Long-Term Growth Targets Amid AI Frenzy - WSJ

▶ Policy/Politics

* Trump and the future of AI regulation - FT

* Silicon Valley eyes a windfall from Trump’s plans to gut regulation - Wapo

* Environmental Policy Act Ruling Casts Doubt On White House Authority - Forbes

* How Elon Musk could disrupt Washington - Politico

* Semiconductors and Modern Industrial Policy - Journal of Economic Perspectives

▶ AI/Digital

* Google DeepMind has a new way to look inside an AI’s “mind” - MIT

▶ Biotech/Health

* Why we now think the myopia epidemic can be slowed – or even reversed - NS

* Canada Detects Its First Human Case of Bird Flu - NYT

▶ Clean Energy/Climate

* Climate Summit, in Early Days, Is Already on a ‘Knife Edge’ - NYT

▶ Robotics/AVs

* Nvidia Readies Jetson Thor Computers for Humanoid Robots in 2025 - WSJ

▶ Space/Transportation

* Former Officials Warn Lawmakers of Alleged Secret UAP Programs Operating Beyond Congressional Oversight - The Debrief

▶ Up Wing/Down Wing

* Stand-Up, Drama and Spambots: The Creative World Takes On A.I. - NYT

* Is Europe running out of chemistry teachers? - C&EN

▶ Substacks/Newsletters

* Here's What I Think We Should Do - Hyperdimensional

* What is OpenAI's Operator and Blueprint? History and Tips of Prompt Engineering from 2020 to 2025 - AI Supremacy

* People want competence, seemingly over everything else - Strange Loop Canon

Please check out the website or Substack app for the latest Up Wing economic, business, and tech news in this edition of the newsletter.

Faster, Please! is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

In this episode of Faster, Please! — The Podcast, I talk with economist Robin Hanson about a) how much technological change our society will undergo in the foreseeable future, b) what form we want that change to take, and c) how much we can ever reasonably predict.

Hanson is an associate professor of economics at George Mason University. He was formerly a research associate at the Future of Humanity Institute at Oxford, and is the author of the Overcoming Bias Substack. In addition, he is the author of the 2017 book, The Elephant in the Brain: Hidden Motives in Everyday Life, as well as the 2016 book, The Age of Em: Work, Love, and Life When Robots Rule the Earth.

In This Episode

* Innovation is clumpy (1:21)

* A history of AI advancement (3:25)

* The tendency to control new tech (9:28)

* The fallibility of forecasts (11:52)

* The risks of fertility-rate decline (14:54)

* Window of opportunity for space (18:49)

* Public prediction markets (21:22)

* A culture of calculated risk (23:39)

Below is a lightly edited transcript of our conversation

Innovation is Clumpy (1:21)

Do you think that the tech advances of recent years — obviously in AI, and what we're seeing with reusable rockets, or CRISPR, or different energy advances, fusion, perhaps, even Ozempic — do you think that the collective cluster of these technologies has put humanity on a different path than perhaps it was on 10 years ago?

. . . most people don't notice just how much stuff is changing behind the scenes in order for the economy to double every 15 or 20 years.

That’s a pretty big standard. As you know, the world has been growing exponentially for a very long time, and new technologies have been appearing for a very long time, and the economy doubles roughly every 15 or 20 years, and that can't happen without a whole lot of technological change, so most people don't notice just how much stuff is changing behind the scenes in order for the economy to double every 15 or 20 years. So to say that we're going more than that is really a high standard here. I don't think it meets that standard. Maybe the standard it meets is to say people were worried about maybe a stagnation or slowdown a decade or two ago, and I think this might weaken your concerns about that. I think you might say, well, we're still on target.

Innovation's clumpy. It doesn't just out an entirely smooth . . . There are some lumpy ones once in a while, lumpier innovations than usual, and those boost higher than expected, sometimes lower than expected sometimes, and maybe in the last ten years we've had a higher-than-expected clump. The main thing that does is make you not doubt as much as you did when you had the lower-than-expected clump in the previous 10 years or 20 years because people had seen this long-term history and they thought, “Lately we're not seeing so much. I wonder if this is done. I wonder if we're running out.” I think the last 10 years tells you: well, no, we're kind of still on target. We're still having big important advances, as we have for two centuries.

A history of AI advancement (3:25)

People who are especially enthusiastic about the recent advances with AI, would you tell them their baseline should probably be informed by economic history rather than science fiction?

[Y]es, if you're young, and you haven't seen the world for decades, you might well believe that we are almost there, we're just about to automate everything — but we're not.

By technical history! We have 70-odd years of history of AI. I was an AI researcher full-time from ’84 to ’93. If you look at the long sweep of AI history, we've had some pretty big advances. We couldn't be where we are now without a lot of pretty big advances all along the way. You just think about the very first digital computer in 1950 or something and all the things we've seen, we have made large advances — and they haven't been completely smooth, they've come in a bit of clumps.

I was enticed into the field in 1984 because of a recent set of clumps then, and for a century, roughly every 30 years, we've had a burst of concern about automation and AI, and we've had big concern in the sense people said, “Are we almost there? Are we about to have pretty much all jobs automated?” They said that in the 1930s, they said it in the 1960s — there was a presidential commission in the 1960s: “What if all the jobs get automated?” I jumped in in the late ’80s when there was a big burst there, and I as a young graduate student said, “Gee, if I don't get in now, it'll all be over soon,” because I heard, “All the jobs are going to be automated soon!”

And now, in the last decade or so, we've had another big burst, and I think people who haven't seen that history, it feels to them like it felt to me in 1984: “Wow, unprecedented advances! Everybody's really excited! Maybe we're almost there. Maybe if I jump in now, I'll be part of the big push over the line to just automate everything.” That was exciting, it was tempting, I was naïve, and I was sucked in, and we're now in another era like that. Yes, if you're young, and you haven't seen the world for decades, you might well believe that we are almost there, we're just about to automate everything — but we're not.

I like that you mentioned the automation scare of the ’60s. Just going back and looking at that, it really surprised me how prevalent and widespread and how serious people took that. I mean, you can find speeches by Martin Luther King talking about how our society is going to deal with the computerization of everything. So it does seem to be a recurrent fear. What would you need to see to think it is different this time?

The obvious relevant parameter to be tracking is the percentage of world income that goes to automation, and that has been creeping up over the decades, but it's still less than five percent.

What is that statistic?

If you look at the percentage of the economy that goes to computer hardware and software, or other mechanisms of automation, you're still looking at less than five percent of the world economy. So it's been creeping up, maybe decades ago it was three percent, even one percent in 1960, but it's creeping up slowly, and obviously, when that gets to be 80 percent, game over, the economy has been replaced — but that number is creeping up slowly, and you can track it, so when you start seeing that number going up much faster or becoming a large number, then that's the time to say, “Okay, looks like we're close. Maybe automation will, in fact, take over most jobs, when it's getting most of world income.”

If you're looking at economic statistics, and you're looking at different forecasts, whether by the Fed or CBO or Wall Street banks and the forecasts are, “Well, we expect, maybe because of AI, productivity growth to be 0.4 percentage points higher over this kind of time. . .” Those kinds of numbers where we're talking about a tenth of a point here, that's not the kind of singularity-emergent world that some people think or hope or expect that we're on.

Absolutely. If you've got young enthusiastic tech people, et cetera — and they're exaggerating. The AI companies, even they're trying to push as big a dramatic images they can. And then all the stodgy conservative old folks, they're afraid of seeming behind the times, and not up with things, and not getting it — that was the big phrase in the Internet Boom: Who “gets it” that this is a new thing?

I'm proud to be a human, to have been part of the civilization to have done this . . . but we've seen that for 70 years: new technologies, we get excited, we try them out, we try to apply them, and that's part of what progress is.

Now it would be #teamgetsit.

Exactly, something like that. They're trying to lean into it, they're trying to give it the best spin they can, but they have some self-respect, so they're going to give you, “Wow 0.4 percent!” They'll say, “That's huge! Wow, this is a really big thing, everybody should be into this!” But they can't go above 0.4 percent because they've got some common sense here. But we've even seen management consulting firms over the last decade or so make predictions that 10 years in the future, half all jobs would be automated. So we've seen this long history of these really crazy extreme predictions into a decade, and none of those remotely happened, of course. But people do want to be in with the latest thing, and this is obviously the latest round of technology, it's impressive. I'm proud to be a human, to have been part of the civilization to have done this, and I’d like to try them out, and see what I can do with them, and think of where they could go. That's all exciting and fun, but we've seen that for 70 years: new technologies, we get excited, we try them out, we try to apply them, and that's part of what progress is.

 The tendency to control new tech (9:28)

Not to talk just about AI, but do you think AI is important enough that policymakers need to somehow guide the technology to a certain outcome? Daron Acemoglu, one of the Nobel Prize winners, has for quite some time, and certainly recently, said that this technology needs to be guided by policymakers so that it helps people, it helps workers, it creates new tasks, it creates new things for them to do, not automate away their jobs or automate a bunch of tasks.

Do you think that there's something special about this technology that we need to guide it to some sort of outcome?

I think those sort of people would say that about any new technology that seemed like it was going to be important. They are not actually distinguishing AI from other technologies. This is just what they say about everything.

It could be “technology X,” we must guide it to the outcome that I have already determined.

As long as you've said, “X is new, X is exciting, a lot of things seem to depend on X,” then their answer would be, “We need to guide it.” It wouldn't really matter what the details of X were. That's just how they think about society and technology. I don't see anything distinctive about this, per se, in that sense, other than the fact that — look, in the long run, it's huge.

Space, in the long run, is huge, because obviously in the long run almost everything will be in space, so clearly, eventually, space will be the vast majority of everything. That doesn't mean we need to guide space now or to do anything different about it, per se. At the moment, space is pretty small, and it's pretty pedestrian, but it's exciting, and the same for AI. At the moment, AI is pretty small, minor, AI is not remotely threatening to cause harm in our world today. If you look about harmful technologies, this is way down the scale. Demonstrated harms of AI in the last 10 years are minuscule compared to things like construction equipment, or drugs, or even television, really. This is small.

Ladders for climbing up on your roof to clean out the gutters, that's a very dangerous technology.

Yeah, somebody should be looking into that. We should be guiding the ladder industry to make sure they don't cause harm in the world.

The fallibility of forecasts (11:52)

I'm not sure how much confidence we should ever have on long-term economic forecasts, but have you seen any reason to think that they might be less reliable than they always have been? That we might be approaching some sort of change? That those 50-year forecasts of entitlement spending might be all wrong because the economy's going to be growing so much faster, or the longevity is going to be increasing so much faster?

Previously, the world had been doubling roughly every thousand years, and that had been going on for maybe 10,000 years, and then, within the space of a century, we switched to doubling roughly every 15 or 20 years. That's a factor of 60 increase in the growth rate, and it happened after a previous transition from forging to farming, roughly 10 doublings before.

It was just a little over two centuries ago when the world saw this enormous revolution. Previously, the world had been doubling roughly every thousand years, and that had been going on for maybe 10,000 years, and then, within the space of a century, we switched to doubling roughly every 15 or 20 years. That's a factor of 60 increase in the growth rate, and it happened after a previous transition from forging to farming, roughly 10 doublings before.

So you might say we can't trust these trends to continue maybe more than 10 doublings, and then who knows what might happen? You could just say — that's 200 years, say, if you double every 20 years — we just can't trust these forecasts more than 200 years out. Look at what's happened in the past after that many doublings, big changes happened, and you might say, therefore, expect, on that sort of timescale, something else big to happen. That's not crazy to say. That's not very specific.

And then if you say, well, what is the thing people most often speculate could be the cause of a big change? They do say AI, and then we actually have a concrete reason to think AI would change the growth rate of the economy: That is the fact that, at the moment, we make most stuff in factories, and factories typically push out from the factory as much value as the factory itself embodies, in economic terms, in a few months.

If you could have factories make factories, the economy could double every few months. The reason we can't now is we have humans in the factories, and factories don't double them. But if you could make AIs in factories, and the AIs made factories, that made more AIs, that could double every few months. So the world economy could plausibly double every few months when AI has dominated the economy.

That's of the magnitude doubling every few months versus doubling every 20 years. That's a magnitude similar to the magnitude we saw before from farming to industry, and so that fits together as saying, sometime in the next few centuries, expect a transition that might increase the growth rate of the economy by a factor of 100. Now that's an abstract thing in the long frame, it's not in the next 10 years, or 20 years, or something. It's saying that economic modes only last so long, something should come up eventually, and this is our best guess of a thing that could come up, so it's not crazy.

The risks of fertility-rate decline (14:54)

Are you a fertility-rate worrier?

If the population falls, the best models say innovation rates would fall even faster.

I am, and in fact, I think we have a limited deadline to develop human-level AI, before which we won't for a long pause, because falling fertility really threatens innovation rates. This is something we economists understand that I think most other people don't: You might've thought that a falling population could be easily compensated by a growing economy and that we would still have rapid and fast innovation because we would just have a bigger economy with a lower population, but apparently that's not true.

If the population falls, the best models say innovation rates would fall even faster. So say the population is roughly predicted to peak in three decades and then start to fall, and if it's falls, it would fall roughly a factor of two every generation or two, depending on which populations dominate, and then if it fell by a factor of 10, the innovation rate would fall by more than a factor of 10, and that means just a slower rate of new technologies, and, of course, also a reduction in the scale of the world economy.

And I think that plausibly also has the side effect of a loss in liberality. I don't think people realize how much it was innovation and competition that drove much of the world to become liberal because the winning nations in the world were liberal and the rest were afraid of falling too far behind. But when innovation goes away, they won't be so eager to be liberal to be innovative because innovation just won't be a thing, and so much of the world will just become a lot less liberal.

There's also the risk that — basically, computers are a very durable technology, in principle. Typically we don't make them that durable because every two years they get twice as good, but when innovation goes away, they won't get good very fast, and then you'll be much more tempted to just make very durable computers, and the first generation that makes very durable computers that last hundreds of years, the next generation won't want to buy new computers, they'll just use the old durable ones as the economy is shrinking and then the industry that commuters might just go away. And then it could be a long time before people felt a need to rediscover those technologies.

I think the larger-scale story is there's no obvious process that would prevent this continued decline because there's no level at which, when you get that, some process kicks in and it makes us say, “Oh, we need to increase the population.” But the most likely scenario is just that the Amish and [Hutterites] and other insular, fertile subgroups who have been doubling every 20 years for a century will just keep doing that and then come to dominate the world, much like Christians took over the Roman Empire: They took it over by doubling every 20 years for three centuries. That's my default future, and then if we don't get AI or colonize space before this decline, which I've estimated would be roughly 70 years’ worth more of progress at previous rates, then we don't get it again until the Amish not only just take over the world, but rediscover a taste for technology and economic growth, and then eventually all of the great stuff could happen, but that could be many centuries later.

This does not sound like an issue that can be fundamentally altered by tweaking the tax code.

You would have to make a large —

— Large turn of the dial, really turn that dial.

People are uncomfortable with larger-than-small tweaks, of course, but we're not in an era that's at all eager for vast changes in policy, we are in a pretty conservative era that just wants to tweak things. Tweaks won't do it.

Window of opportunity for space (18:49)

We can't do things like Daylight Savings Time, which some people want to change. You mentioned this window — Elon Musk has talked about a window for expansion into space, and this is a couple of years ago, he said, “The window has closed before. It's open now. Don't assume it will always be open.”

Is that right? Why would it close? Is it because of higher interest rates? Because the Amish don't want to go to space? Why would the window close?

I think, unfortunately, we've got a limited window to try to jumpstart a space economy before the earth economy shrinks and isn't getting much value from a space economy.

There's a demand for space stuff, mostly at the moment, to service Earth, like the internet circling the earth, say, as Elon's big project to fund his spaceships. And there's also demand for satellites to do surveillance of the earth, et cetera. As the earth economy shrinks, the demand for that stuff will shrink. At some point, they won't be able to afford fixed costs.

A big question is about marginal cost versus fixed costs. How much is the fixed cost just to have this capacity to send stuff into space, versus the marginal cost of adding each new rocket? If it's dominated by marginal costs and they make the rockets cheaper, okay, they can just do fewer rockets less often, and they can still send satellites up into space. But if you're thinking of something where there's a key scale that you need to get past even to support this industry, then there's a different thing.

So thinking about a Mars economy, or even a moon economy, or a solar system economy, you're looking at a scale thing. That thing needs to be big enough to be self-sustaining and economically cost-effective, or it's just not going to work. So I think, unfortunately, we've got a limited window to try to jumpstart a space economy before the earth economy shrinks and isn't getting much value from a space economy. Space economy needs to be big enough just to support itself, et cetera, and that's a problem because it's the same humans in space who are down here on earth, who are going to have the same fertility problems up there unless they somehow figure out a way to make a very different culture.

A lot of people just assume, “Oh, you could have a very different culture on Mars, and so they could solve our cultural problems just by being different,” but I'm not seeing that. I think they would just have a very strong interconnection with earth culture because they're going to have just a rapid bandwidth stuff back and forth, and their fertility culture and all sorts of other culture will be tied closely to earth culture, so I'm not seeing how a Mars colony really solves earth cultural problems.

Public prediction markets (21:22)

The average person is aware that these things, whether it's betting markets or these online consensus prediction markets, that they exist, that you can bet on presidential races, and you can make predictions about a superconductor breakthrough, or something like that, or about when we're going to get AGI.

To me, it seems like they have, to some degree, broken through the filter, and people are aware that they're out there. Have they come of age?

. . . the big value here isn't going to be betting on elections, it's going to be organizations using them to make organization decisions, and that process is being explored.

In this presidential election, there's a lot of discussion that points to them. And people were pretty open to that until Trump started to be favored, and people said, “No, no, that can't be right. There must be a lot of whales out there manipulating, because it couldn't be Trump's winning.” So the openness to these things often depends on what their message is.

But honestly, the big value here isn't going to be betting on elections, it's going to be organizations using them to make organization decisions, and that process is being explored. Twenty-five years ago, I invented this concept of decision markets using in organizations, and now in the last year, I've actually seen substantial experimentation with them and so I'm excited to see where that goes, and I'm hopeful there, but that's not so much about the presidential markets.

Roughly a century ago there was more money bet in presidential betting markets than in stock markets at the time. Betting markets were very big then, and then they declined, primarily because scientific polling was declared a more scientific approach to estimating elections than betting markets, and all the respectable people wanted to report on scientific polls. And then of course the stock market became much, much bigger. The interest in presidential markets will wax and wane, but there's actually not that much social value in having a better estimate of who's going to win an election. That doesn't really tell you who to vote for, so there are other markets that would be much more socially valuable, like predicting the consequences of who's elected as president. We don't really have much markets on those, but maybe we will next time around. But there is a lot of experimentation going in organizational prediction markets at the moment, compared to, say, 10 years ago, and I'm excited about those experiments.

A culture of calculated risk (23:39)

I want a culture that, when one of these new nuclear reactors, or these nuclear reactors that are restarting, or these new small modular reactors, when there's some sort of leak, or when a new SpaceX Starship, when some astronaut gets killed, that we just don't collapse as a society. That we're like, well, things happen, we're going to keep moving forward.

Do you think we have that kind of culture? And if not, how do we get it, if at all? Is that possible?

That's the question: Why has our society become so much more safety-oriented in the last half-century? Certainly one huge sign of it is the way we way overregulated nuclear energy, but we've also now been overregulating even kids going to school. Apparently they can't just take their bikes to school anymore, they have to go on a bus because that's safer, and in a whole bunch of ways, we are just vastly more safety-oriented, and that seems to be a pretty broad cultural trend. It's not just in particular areas and it's not just in particular countries.

I've been thinking a lot about long-term cultural trends and trying to understand them. The basic story, I think, is we don't have a good reason to believe long-term cultural trends are actually healthy when they are shared trends of norms and status markers that everybody shares. Cultural things that can vary within the cultures, like different technologies and firm cultures, those we're doing great. We have great evolution of those things, and that's why we're having all these great technologies. But things like safetyism is more of a shared cultural norm, and we just don't have good reasons to think those changes are healthy, and they don't fix themselves, so this is just another example of something that’s going wrong.

They don't fix themselves because if you have a strong, very widely shared cultural norm, and someone has a different idea, they need to be prepared to pay a price, and most of us aren’t prepared to pay that price.

If we had a healthy cultural evolution competition among even nations, this would be fine. The problem is we have this global culture, a monoculture, really, that enforces everybody.

Right. If, for example, we have 200 countries, if they were actually independent experiments and had just had different cultures going different directions, then I'd feel great; that okay, the cultures that choose too much safety, they'll lose out to the others and eventually it'll be worn out. If we had a healthy cultural evolution competition among even nations, this would be fine. The problem is we have this global culture, a monoculture, really, that enforces everybody.

At the beginning of Covid, all the usual public health efforts said all the usual things, and then world elites got together and talked about it, and a month later they said, “No, that's all wrong. We have a whole different thing to do. Travel restrictions are good, masks are good, distancing is good.” And then the entire world did it the same way, and there was strong pressure on any deviation, even Sweden, that would dare to deviate from the global consensus.

If you look about many kinds of regulation, it's very little deviation worldwide. We don't have 200, or even 100, independent policy experiments, we basically have a main global civilization that does it the same, and maybe one or two deviants that are allowed to have somewhat different behavior, but pay a price for it.

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Faster, Please! is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Micro Reads

▶ Economics

* The Next President Inherits a Remarkable Economy - WSJ

* The surprising barrier that keeps us from building the housing we need - MIT

* Trump’s tariffs, explained - Wapo

* Watts and Bots: The Energy Implications of AI Adoption - SSRN

* The Changing Nature of Technology Shocks - SSRN

* AI Regulation and Entrepreneurship - SSRN

▶ Business

* Microsoft reports big profits amid massive AI investments - Ars

* Meta’s Next Llama AI Models Are Training on a GPU Cluster ‘Bigger Than Anything’ Else - Wired

* Apple’s AI and Vision Pro Products Don’t Meet Its Standards - Bberg Opinion

* Uber revenues surge amid robust US consumer spending - FT

* Elon Musk in funding talks with Middle East investors to value xAI at $45bn - FT

▶ Policy/Politics

* Researchers ‘in a state of panic’ after Robert F. Kennedy Jr. says Trump will hand him health agencies - Science

* Elon Musk’s Criticism of ‘Woke AI’ Suggests ChatGPT Could Be a Trump Administration Target - Wired

* US Efforts to Contain Xi’s Push for Tech Supremacy Are Faltering - Bberg

* The Politics of Debt in the Era of Rising Rates - SSRN

▶ AI/Digital

* Alexa, where’s my Star Trek Computer? - The Verge

* Toyota, NTT to Invest $3.3 Billion in AI, Autonomous Driving - Bberg

* Are we really ready for genuine communication with animals through AI? - NS

* Alexa’s New AI Brain Is Stuck in the Lab - Bberg

* This AI system makes human tutors better at teaching children math - MIT

* Can Machines Think Like Humans? A Behavioral Evaluation of LLM-Agents in Dictator Games - Arxiv

▶ Biotech/Health

* Obesity Drug Shows Promise in Easing Knee Osteoarthritis Pain - NYT

* Peak Beef Could Already Be Here - Bberg Opinion

▶ Clean Energy/Climate

* Chinese EVs leave other carmakers with only bad options - FT Opinion

* Inside a fusion energy facility - MIT

* Why aren't we driving hydrogen powered cars yet? There's a reason EVs won. - Popular Science

* America Can’t Do Without Fracking - WSJ Opinion

▶ Robotics/AVs

* American Drone Startup Notches Rare Victory in Ukraine - WSJ

* How Wayve’s driverless cars will meet one of their biggest challenges yet - MIT

▶ Space/Transportation

* Mars could have lived, even without a magnetic field - Big Think

▶ Up Wing/Down Wing

* The new face of European illiberalism - FT

* How to recover when a climate disaster destroys your city - Nature

▶ Substacks/Newsletters

* Thinking about "temporary hardship" - Noahpinion

* Hold My Beer, California - Hyperdimensional

* Robert Moses's ideas were weird and bad - Slow Boring

* Trading Places? No Thanks. - The Dispatch

* The Case For Small Reactors - Breakthrough Journal

* The Fourth Industrial Revolution and the Future of Work - Conversable Economist

Faster, Please! is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

On October 13, SpaceX and Elon Musk successfully launched their Starship rocket into low-Earth orbit. Then, in a milestone moment for space technology, they successfully captured the rocket’s Super Heavy booster with “chopstick” arms on the launch tower upon reentry, marking the first time a booster was ever caught in mid-air.

The achievement is a mind-blowing feat of human engineering — one that hasn’t gotten nearly the recognition that it deserves. Today on Faster, Please! — The Podcast, I talk with must-read space journalist Eric Berger about the role of SpaceX in the new, 21st-century Space Race, the significance of the company’s achievements, and our potential to become a spacefaring, inter-planetary species.

Berger is the senior space editor at Ars Techica, and is the author of both Liftoff: Elon Musk and the Desperate Early Days that Launched SpaceX and his most recent excellent book, Reentry: SpaceX, Elon Musk, and the Reusable Rockets that Launched a Second Space Age.

In This Episode

* Starship’s big reentry (1:43)

* Race (back) to the moon (8:54)

* Why Starship? (11:48)

* The Mars-shot (18:37)

* Elon in the political area (22:10)

* Understanding SpaceX (24:06)

Below is a lightly edited transcript of our conversation

Starship’s big reentry (1:43)

James Pethokoukis: After the launch tower caught that booster stage of the rocket, I saw someone on Twitter a day later say, “Hey, do you guys remember over the weekend when SpaceX sent a Statue-of-Liberty-sized object to space and then caught it when it came back down? That was amazing!”

So two things: First, as a space guy, what was your reaction? Two, beyond the sheer coolness of it, why was this an important thing to happen?

It seemed inconceivable a few years ago, but now, all of a sudden, it's the future of rocketry, just like that.

Eric Berger: Just from a space perspective, it’s epic to see, to use your adjectives, the Statue of Liberty comparison. I mean, it's a small skyscraper, but they essentially launch that thing to space at thousands of miles per hour, then it slows down, it comes back right where it took off from, hovers, and it falls precisely into these two arms that are designed to catch it. The cool thing is that we'd never seen anything like that before. It seemed inconceivable a few years ago, but now, all of a sudden, it's the future of rocketry, just like that.

the significance of this, of course, is SpaceX has shown that with the reusability of the Falcon 9 rocket, it can really change the economics of launch. This year they've launched 101 times. No country had ever done that many launches before in a year. They're going to launch 95 percent of all the mass into orbit this year with primarily the Falcon 9 Rocket, and all that's because the first stage is entirely reusable, they're flying them more than 20 times now, and so they're just taking that and scaling it.

What was amazing about the tower catch this weekend was the fact that it really removes the need for landing legs. You may think, “Well, what's the big deal about that?” Well, there's a lot of mass involved with those landing legs: You need powerful actuators to drive them, you need hydraulic fluid, and that's a lot of dead mass in the vehicle. Also, it's not insignificant to transport the rocket from wherever it lands, either on a boat or on land, to the factory and to refurbish the rocket and launch again. Ideally, with this step, they're eliminating days from that process of reuse and ideally, in the future, they're literally going to be catching the rocket, setting it back on the launch mount and then potentially flying again.

So it's not just the Starship, right? So for the other launches, is this is going to become the landing procedure?

No, it will be just for Starship. They will continue to fly Falcon 9 as is. That's a mature product, everyone's pretty comfortable with that vehicle. But, look, other companies have tried different things. When Rocket Lab was trying to reuse its small Electron vehicle, its plan was to have the first stage come back under a parachute and then basically swoop in with a helicopter and catch it so that the rocket didn't fall into the ocean. That ended up not working.

It seems very whimsical.

Well, it made sense from an engineering standpoint, but it was a lot more difficult to snag the rocket than they ended up finding out. So, up until now, the only way to get a rocket back vertically was on a drone ship or landing straight up, and so this is a brand new thing, and it just creates more efficiencies in the launch system.

What is the direction now, as far as launch costs and the continued decline of launch costs if this will be the new landing procedure for Starship?

It's impossible to say that, of course. We can look to a Falcon 9 for an analog. SpaceX sales started out selling Falcon 9 for $60 million, it's upped that price to about $67 or $68 million — still the lowest-cost medium-lift launch vehicle in the world, but that's the price you or I or NASA would pay for a rocket. Internally, the estimate is that they're re-flying those vehicles for about $15 million. So, in effect, SpaceX has taken the cost of the lowest-price vehicle on the market and divided it by four, basically.

Starship, of course, can lift much more payload to orbit than Falcon 9. By some measures, five to 10 times as much, eventually. And so if they can get the cost down, if they can make the first and second stage reusable, I think you're talking about them bringing the cost down potentially another order of magnitude, but they've got a lot of work to get there.

I think the second most common comment I saw on social media — the first one being like, “This is amazing, I'm crying, this is so cool” — the second one is, “Why is NASA not using this Starship to get to the moon?” It seems like progress is being made quickly, and you mentioned the costs, I think people are just befuddled. It's a question you must get a lot.

The reality is that if we want to go to the moon before 2030, we probably need to do it with a combination of NASA's Space Launch System rocket and Starship.

It's a complicated answer, but the reality is that NASA, in conjunction with Congress, has basically, over the last quarter of a century, pivoted away from reusable launch vehicles, and at one point in the early 2000s, they were actually funding three different reusable launch vehicles. The most famous of those, of course, was the Space Shuttle. It stopped funding the Space Shuttle in 2011 and it went back to developing this large, expendable rocket called the Space Launch System. That was the tried and true pathway, and no one really had faith in what SpaceX is doing. And so now here we are, almost 15 years later, and SpaceX has gone out and proved it with the Falcon 9, the Falcon Heavy, and now Starship.

The reality is that if we want to go to the moon before 2030, we probably need to do it with a combination of NASA's Space Launch System rocket and Starship. In 2021, NASA did select Starship as its lunar lander. So Starship is a critical part of the architecture. Probably the most challenging part, actually, is getting down to the lunar surface and then getting back up reliably. And so Starship plays a key role, and I just really think that it's inevitable that Starship and potentially Blue Origin’s architecture will be how humans get to the moon and back, but we're kind of in an interim period right now.

Is it just sort of too late to switch?

Yeah, it is. It's too late to switch. You could conceive of scenarios in which humans launch in Crew Dragon, transfer over to a Starship, and then come back in Crew Dragon, but even then you've got some challenges. And the problem — problem is the wrong word, but one of the major issues with Starship is that it has no redundancy when you come back and land. It has got to nail the landing or people inside of it die. So you're going to want to see hundreds of Starship launches and many, many successful landings in a row before you put people on the vehicle. And to have the idea of launching humans from Earth to the moon at this point, we're pretty far from that. I would think a decade from now, at least, and by then China will be on the moon. And so it's really a matter of, do you want to sort of continue to delay the human return of the moon, or do you want to take the tools that you have now and make your best run for it?

Race (back) to the moon (8:54)

Since you brought it up, are we going to beat China to the moon with the SLS?

Very much an open question. The SLS Rocket is basically ready. In its current form, it performed very well during Artemis I. It's obviously super expensive. You may have seen the Europa Clipper launch on Monday of this week, that launched on a Falcon Heavy. For almost a decade, Congress mandated NASA that it launched on the SLS rocket, and that would've cost 10 times as much. NASA paid about $200 million for the Clipper launch on Falcon Heavy, SLS would've been in excess of $2 billion, so it's a very expensive rocket, but it does work, it worked well during Artemis I. The best way we have right now, Jim, to get astronauts from Earth out to lunar orbit is SLS and the Orion deep spacecraft vehicle. That will change over time, but I think if we want to put humans on the moon this decade, that's probably the best way to do it.

Is it going to be a close call? I don't want to overemphasize the competition aspect, but I guess I would like to see America do it first.

It's going to be close. NASA's current date is 2026 for the Artemis III moon landing. There's no way that happens. I think 2028 is a realistic no-earlier-than date, and the reality is SpaceX has to make a lot of progress on Starship. What they did this past weekend was a great step. I think the key thing about the fact of this weekend's launch is that it was a success. There were no anomalies, there's going to be no investigation, so SpaceX is going to launch again. As long as they continue to have success, then they can start popping these off and get to some of the really key tests like the in-space propellant transfer tests, which they hope to do sometime next year.

[W]hen you're on the moon, there's no launch tower, there's no launch crew, you’ve just got the astronauts inside Starship, and if that vehicle doesn't take off on the moon, the crew's going to die. So it's got to work.

What Starship will do is it'll launch into low-earth orbit, and then it'll be refueled, and it'll go to the moon, and you need lots of launches to refuel it. And then really the key test, I think, is landing on the moon, because the South Pole is pretty craterous, you've got to have high confidence in where you land, and then the big challenge is getting back up to lunar orbit safely.

Think about it: When you watch any rocket launch, you see this very detailed, very intricate launch tower with all these umbilicals, and all of these cables, and power, and telemetry, and stuff, and humans are looking at all this data, and if there's any problem, they abort, right? Well, when you're on the moon, there's no launch tower, there's no launch crew, you’ve just got the astronauts inside Starship, and if that vehicle doesn't take off on the moon, the crew's going to die. So it's got to work. And so that's really a big part of the challenge, as well, is getting all that to work. So I think 2028, for all that to come together, is a realistic no-earlier-than date, and China's pretty consistently said 2030, and they're starting to show off some hardware, they recently demonstrated that suggests they have a chance to make 2030.

On sale everywhere The Conservative Futurist: How To Create the Sci-Fi World We Were Promised

Why Starship? (11:48)

What is the commercial case for Starship, assuming that these next launches continue to go off well? What is it supposed to be doing here on Earth and in Earth orbit?

The next big race is to deliver internet, not to a dish that you set up, but actually to your mobile phone. It's called direct-to-cell, and you need much bigger satellites for this. And so SpaceX needs the Starship to launch these satellites, so that will really be the commercial use case for Starship in the near term.

Its primary function, and I think the most important function for SpaceX in the near term, is launching these much larger Starlink satellites. I think it's been pretty well proven that there's a large demand for broadband internet from low-earth orbit. Starlink has now up to four million customers and they're actually signing almost at an exponential rate. Then growth, the business is profitable. So that's been super impressive. The next big race is to deliver internet, not to a dish that you set up, but actually to your mobile phone. It's called direct-to-cell, and you need much bigger satellites for this. So SpaceX needs the Starship to launch these satellites, so that will really be the commercial use case for Starship in the near term.

I think once the vehicle starts flying reliably, we're going to see where the commercial customers go because we've never really been in a launch environment where you're not really constrained by mass and, more importantly, by volume. You can just build bigger, less-efficient things. Instead of hyper-managing your satellite to be small, and light, and compact, you can kind of make trades where maybe you have a lower-cost vehicle that's bigger. The capability of Starship with its voluminous payload fairing and being able to lift a hundred or more tons to low-earth orbit for low cost — entirely new regime. And so I think it's a case of Field of Dreams, “If you build it, they will come,” and in the near term, Starship will be the business case, and longer-term we'll see some unique opportunities.

You've been covering this for quite a while, documenting, books, including your most recent book. Really an amazing ride as a space journalist for you here.

I've been covering space now for two decades, and really with a focus on commercial space over the last decade because I think that's where a lot of the excitement and innovation is coming from. But the reality is that you've got this whole ecosystem of companies, but the 800-pound gorilla is SpaceX. They're the company that has consistently had success. They are the only provider of crew transportation services for NASA, still, even five years after their initial success, and they're the only provider right now that's launching cargo missions to the space station. They've got huge Starlink satellites, constellation. As a journalist, you really want to understand the biggest, most dominating force in the industry, and that's clearly SpaceX, and so that's why I've chosen to dedicate a lot of time to really understand where they started out and how they got to where they are, which is at the top of the heap.

The story that you lay out in your book, which came out last month — Reentry: SpaceX, Elon Musk, and the Reusable Rockets that Launched a Second Space Age — to me, it’s still a story people mostly don’t know, and one that I think a lot of non-space reporters don’t understand. What are some common misunderstandings that you come across that make you feel like you need to tell this story?

I think, until recently, one of the things that people might say about SpaceX is, “Well, what's the big deal? NASA's launched humans to orbit in the past, NASA's launched cargo, they had a reusable space vehicle in the Space Shuttle.” What's different is that SpaceX is doing this at scale, and they're building for a long-term plan that is sustainable.

I'll give you an example: The Space Shuttle was reusable. Everything was reusable except the external tank. However, you needed a standing army of thousands of people to pour over the Space Shuttle after it came back from space to make sure that all of its tiles and every piece of equipment was safe. Now, when it was originally sold to Congress back in the 1970s, the program manager for the space shuttle, George Mueller said that the goal was to get the cost of payload-to-orbit for the Space Shuttle down to $25 a pound, which sounded great because then they were saying dozens of people could fly on the vehicle at a time. Well, of course, at the end of the day, it only ever flew at a maximum of seven people, and the cost of payload-to-orbit was $25,000. So yes, it was reusable, but it was the kind of thing that was super expensive and you couldn't fly very often. You could do limited things.

It's really the first vehicle we ever developed to go to Mars. SpaceX is doing some of the same things that NASA did, but it's doing them better, faster, and a lot cheaper.

SpaceX is proposing kind of an order-of-magnitude change. We went to the moon in the 1960s with the Lunar Module, and everyone remembers it carried two astronauts down to the lunar surface. And that whole thing launched on a giant stack, the Saturn V rocket. So if you were to take the Lunar Module and replace the astronauts and just use it to deliver cargo to the moon, it could take five tons down to the lunar surface. Starship, in a reusable mode, can take a hundred tons. If you send an expendable version of Starship, it's 200 tons. And oh, by the way, even if you're not bringing that Starship back, you're getting the whole first stage back anyway.

And so that's really the promise here, is you're building a sustainable system in space where it doesn't cost you $6 billion to go to the moon, it costs you half a billion dollars or to go to the moon, and you can then go on and do other things, you can fill your Starship up with methane repellent and go further. It's really the first vehicle we ever developed to go to Mars. SpaceX is doing some of the same things that NASA did, but it's doing them better, faster, and a lot cheaper.

That $25-a-pound number you gave for Space Shuttle, where are we with SpaceX? Where is SpaceX, or where are they and what's their goal in that context?

They're getting down in a couple of thousand dollars a pound with a Falcon 9, and the idea is, potentially, with Starship, you get down to hundreds of dollars a pound or less. They have a big challenge too, right? They're using tiles on Starship as well. They showed some of them off during the webcast this weekend, and I think we have yet to have any kind of information on how reusable, or how rapidly reusable Starship will be, and we'll have to see.

The Mars-shot (18:37)

To the extent the public understands this company — this is my understanding — the point here is to build Starship, to further this satellite business, and then that satellite business will fund the eventual Mars mission and the Mars colonization. I think that's the public perception of what is happening with this business. How accurate is that? Is that how you look at it? I mean, that's how I look at it from my uninformed or less-informed view, but is that really what we're talking about here?

Yeah, fundamentally, I think that is accurate. There is no business case right now to go to Mars. AT&T is not going to pay $5 billion to put an AT&T logo on a Starship and send a crew to Mars. There are no resources right now that we really can conceive of on Mars that would be profitable for humans to go get and bring back to Earth. So then the question is: How do you pay for it?

Financially, the business case for Mars is not entirely clear, so you’ve got to figure out some way to pay for it. That was one reason why Elon Musk ultimately went with Starlink. That would pay for the Mars vision.

Even when settlers went to the New World in the 1500s, 1600s, in United States, they were exporting tobacco and other products back to Europe, and there's no tobacco that we know of on Mars, right? Financially, the business case for Mars is not entirely clear, so you’ve got to figure out some way to pay for it. That was one reason why Elon Musk ultimately went with Starlink. That would pay for the Mars vision.

I think that's still fundamentally the case. It's effectively going to be paying for the entire development of Starship, and then if it becomes highly profitable, SpaceX is not a public company, so they can take those revenues and do whatever they want with them, and Elon has said again and again that his vision is to settle Mars, and he's building the rockets to do it, and he's trying to find the funding through Starlink to accomplish it. That is the vision. We don't know how it's all going to play out, but I think you're fundamentally correct with that.

I think when he mentions Mars, there are some people that just give it a roll of the eye. It just sounds too science fictional, despite the progress being made toward accomplishing that. It sounds like you do not roll your eyes at that.

Well, it's interesting. He first really talked publicly about this in 2016, eight years ago, back when there was no Starship, back when they just were coming off their second Falcon 9 failure in about a year, and you kind of did roll your eyes at it then . . . And then they got the Falcon 9 flying and they started re-flying it and re-flying it. They did Falcon Heavy, and then they started building Starship hardware, and then they started launching Starship, and now they're starting to land Starship, and this is real hardware.

And yes, to be clear, they have a long, long way to go and a lot of technical challenges to overcome, and you need more than just a rocket in a spaceship to get to Mars, you need a lot of other stuff, too: biological, regulatory, there's a lot of work to go, but they are putting down the railroad tracks that will eventually open that up to settlement.

So I would not roll my eyes. This is certainly the only credible chance, I think, for humans to go to Mars in our lifetimes, and if those early missions are successful, you could envision settlements being built there.

Elon in the political arena (22:10)

Given SpaceX's accomplishments and their lead, is that company politics-proof? Obviously there's always going to be controversy about Elon, and Twitter, and who he gives money to, and things he says, but does any of that really matter for SpaceX?

I think it does. We've already seen a couple examples of it, especially with Elon's very public entree into presidential politics over the last several months. I think that does matter. In his fight with Brazil over what he termed as free speech, they were confiscating Starlink, and so they were trying to shut Starlink down in their country, and that directly affects SpaceX. In California, over the last week we have seen a commission vote to try to limit the number of launches Falcon 9 launches from Vandenberg Space Force Base, and they clearly did that because they were uncomfortable with Elon's behavior publicly. So yeah, this is going to bleed over.

Now, in the near term, there will be limited impacts because the US Department of Defense clearly needs SpaceX rockets. They need SpaceX’s Starlink, they use a branded version of it called Starshield for military communications. The launch and Starlink capabilities are essential for the military. NASA is even more reliant on SpaceX for the International Space Station and beyond; the entire moon program runs through Starship, so it's not going to change in the near term, but longer term you could see this having impacts, and it's not clear to me exactly what those would be — I don't think you could really nationalize SpaceX, and I think if you did try to nationalize SpaceX, you would sort of destroy its magic, but I do think there will ultimately be consequences for the Elon's political activity.

Understanding SpaceX (24:06)

About Reentry, is there a particular story in there that you think just really encapsulates, if you want to understand SpaceX, and what it's doing, and where it's come from, this story kind of gets at it?

The point of the book was to tell the story behind the story. A lot of people knew, generally, what SpaceX has accomplished over the last decade, or the last 15 years, but this really takes you behind the scenes and tells the stories of the people who actually did it.

It's a company that's moving so fast forward that, like I said, there are all these challenges they're facing and they're just tackling them one-by-one as they go along.

I think one of the best stories of the book is just how they were making this up as they went along. The very first time they were going to try to land on the barge was in January of 2015, the drone ship landing, and the night before that barge was going to set out to sea, the guy who had developed the barge realized that, wait a minute, if we come back with a rocket this week, we have nowhere to put it in the port of Jacksonville, because they were staging out of Jacksonville at the time. And there had been this whole discussion at SpaceX about where to put these pedestals, but no one had actually done it. That night, he and another engineer stayed up all night drinking red wine and CADing out designs for the pedestals, and they met the concrete pores the next morning and just built these pedestals within 24 hours. It's a company that's moving so fast forward that, like I said, there are all these challenges they're facing and they're just tackling them one-by-one as they go along.

Elon has spoken about there's sort of this window of opportunity open for space. In the United States, at least, it was open and then it kind of closed. We stopped leaving Earth orbit for a while, we couldn't even get our people into Earth orbit; we had to use another country's rockets.

Is this window — whether for space commerce, space exploration — is it sort of permanently open? Are we beyond the point where things can close — because satellites are so important, and because of geopolitics, that window is open and it's staying open for us to go through.

I think he's talking about the window for settlement of Mars and making humans a multi-planetary species. And when he talks about the window closing, I think he means a lot of different things: One, the era of cheaper money could end — and that clearly did happen, right? We've seen interest rates go way up and it's been much more difficult to raise money, although SpaceX has been able to still do that because of their success. I think he's thinking about his own mortality. I believe he's thinking about a major global war that would focus all of our technological efforts here on planet Earth trying to destroy one another. I think he's thinking about nuclear weapons — just all the things that could bring human progress to a screeching halt, and he’s saying, “Look, the window may be 100 years or it may be 20 years.” So he's like, “We should seize the opportunity right now when we have it.”

Faster, Please! is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Micro Reads

▶ Economics

* Larry Summers on the Economics of AI - Conversable Economist

* Landing Softly Is Just the Beginning - San Francisco Fed

* More Babies Aren’t the Only Solution to Falling Birthrates - NYT Opinion

* Generative AI at work: Survey evidence from three Central Banks - SSRN

▶ Business

* Nvidia Chief Makes Case for AI-First Companies - WSJ

* Apple Intelligence Isn’t Very Smart Yet—and Apple’s OK With That - WSJ

* Andreessen Horowitz Backs Infinitus to Bring AI to Medical Calls - Bberg

* Breaking Up Google Is a Fool’s Game - WSJ Opinion

▶ Policy/Politics

* The US is the world’s science superpower — but for how long? - Nature

* Can A.I. Be Blamed for a Teen’s Suicide? - NYT

* Former OpenAI Researcher Says Company Broke Copyright Law - NYT

* The tragedy of a 50-50 America - FT Opinion

* Both Harris and Trump pose problems for U.S. energy producers. - AEI

* Why Harris and Trump Are Pandering to Crypto Plutocrats - NYT Opinion

* Trump’s Tariffs and Economic Risk - WSJ Opinion

* China asks: what is an e-bike? - FT Opinion

* This Startup Shows Why the U.S. CHIPS Act Is Needed - Spectrum

▶ AI/Digital

* Big frontier AI systems will emerge from global, distributed efforts, not just big tech: Meta’s Yann LeCun - Techcircle

* Does ChatGPT Have a Poetic Style? - arXiv

▶ Biotech/Health

* Danes to Use New Nvidia AI Supercomputer for Drug Discovery - Bberg

▶ Clean Energy/Climate

* Averting Climate Catastrophe Requires Economic Growth - PS

* The Energy Transition We Really Should Be Focusing On - RealClearScience

* To Fight Climate Change, Clean Up Carbon Markets - Bberg Opinion

* A Mexican Electric Car? Only If Private Firms Lead the Way - Bberg Opinion

▶ Robotics/AVs

* Crop-spraying robot is designed to reduce emissions and use less herbicide - Atlas

▶ Space/Transportation

* Beetlejuice, Betelgeuse, Betelbuddy? Astronomers Find Something Unexpected Orbiting Infamous “Doomed Star” - Debrief

▶ Up Wing/Down Wing

* Meet Hollywood’s AI Doomsayer: Joseph Gordon-Levitt - WSJ

* Here’s What the Regenerative Cities of Tomorrow Could Look Like - Wired

* Archimedes Rediscovered: Technology and Ancient History - JSTOR Daily

* Energy expert Vaclav Smil on how to feed the world without trashing it - NS

▶ Substacks/Newsletters

* Yes, You’re Still Imagining a Migrant Crime Spree - Alex Nowrasteh's Immigration Insights and Other Deep Dives

* How long can we sustain economic growth? - Noahpinion

* What is Anthropic's AI Computer Use? - AI Supremacy

* An AI intern in your pocket - Exponential View

* Industrial Policy’s Inescapable Uncertainty Problem - The Dispatch

* NEPA Nightmares IV: Tule Wind - Breakthrough Journal

* When you give a Claude a mouse - One Useful Thing

* Larry Summers on the Economics of AI - Conversable Economist

Faster, Please! is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Eli Dourado is on a mission to end the Great Stagnation, that half-century period of economic and technological disappointment that began in the 1970s (what I refer to in my 2023 book, The Conservative Futurist, as the Great Downshift). If we want to turn the page on this chapter of slow progress and deserved skepticism, we’re going to have to accept some creative destruction.

Dourado believes that the courage to embrace major change is key to meeting our potential. Today on Faster, Please! — The Podcast, I talk with Dourado about the future of the US job market and energy production in a world of AI.

Dourado is chief economist at the Abundance Institute, and author of his own Substack newsletter.

In This Episode

* The dawn of a productivity boom? (1:26)

* Growing pains of job market disruption (7:26)

* The politics of productivity growth (15:20)

* The future of clean energy (23:35)

* The road to a breakthrough (30:25)

* Reforming NEPA (35:19)

* The state of pro-abundance (37:08)

Below is a lightly edited transcript of our conversation

The dawn of a productivity boom? (1:26)

Pethokoukis:  Eli, welcome to the podcast.

Dourado: Thanks for having me on, Jim.

I would like to think that what we are experiencing here in the 2020s is the beginnings of an extended productivity boom. We have some good economic data over the past year and a half. I know this is something that you care about, as I do . . . What's your best guess?

I think the seeds of a boom are there. There's plenty of low-hanging fruit, but I'd say the last few quarters have not been that great for TFP growth, which is what I followed most closely. So we actually peaked in TFP in the US in Q4, 2021.

Now what is that, what is TFP?

Total factor productivity. So that's like if you look at inputs and how they translate into outputs.

Capital, labor . . .

Capital and labor, adjusting for quality, ideally. We've gotten less output for the amount of inputs in the last quarter than we did at the end of 2021. So slight negative growth over the last three years or so, but I think that you're right that there is room for optimism. Self-driving cars are coming. AI has immense potential.

My worry with AI is other sociopolitical limits in the economy will hold us back, and you kind of see the news breaking today as we're recording this, is there's a strike at the ports on east coast, and what's at issue there is are we allowed to automate those jobs? Are the owners of the ports allowed to automate those jobs? And if the answer ends up being “no,” then you can say goodbye to productivity gains there. And so I really think the technology is there to do a lot more to kick off a productivity boom, but it's the sociopolitical factors that are slowing us down.

And I definitely want to talk about those sociopolitical factors, and the port strike is hopefully not a harbinger. But before I leave this topic, I suppose the super bullish case for productivity is that AI will be so transformative, and so transformative throughout the economy, both automating some things, helping us do other things more efficiently, and creating brand new high-productivity things for us to do that we will have maybe an extended 1990s, maybe more, I might hope?

What is your bullish case, and does that bullish case require what they call artificial general intelligence, or human-level, or human-level plus intelligence? Is that key? Because obviously some people are talking about that.

Can we have an important productivity boom from AI without actually reaching that kind of science-fictional technology?

I don't actually think that you need one-to-one replacement for humans, but you do need to get humans out of the loop in many, many more places. So if you think about the Baumol effect, the idea here is if there are parts of the economy that are unevenly growing in productivity, then that means that the parts of the economy where there is slow productivity growth, perhaps because you have human labor still being the bottleneck, those parts are going to end up being massive shares of the economy. They're going to be the healthcares, the educations, the parts of the economy where we have lots of inflation and increased costs. So the real boom here, to me, is can you replace as many humans as possible? Over the short run, you want to destroy jobs so that you can create a booming economy in which the jobs are still available, but living standards are much higher.

If you think about these big chunks of GDP like health, housing, energy, transportation, that's what you need to revolutionize, and so I can think of lots of ways in health that we could use AI to increase productivity. And I also have very little doubt that even current levels of AI could massively increase productivity in health. I think the big question is whether we will be allowed to do it.

So you don't need AGI that is as good as a human in every single thing that a human might do to limit the number of humans that are involved in providing healthcare. Housing, I think there's construction robots that maybe could do it, but I think the main limits are, like land use regulation, more sociopolitical. In energy, it's kind of the same thing, NIMBYism is kind of the biggest thing. Maybe there's an R&D component that AI could contribute to. And then in transportation, again, we could automate a lot of transportation. Some of that's happening with autonomous cars, but we are having trouble automating our ports, for example, we're having trouble automating cargo railroads for similar make-work reasons.

I think the bull case is you don't need AGI, really, really sophisticated AI that can do everything, but you do need to be able to swap out human workers for even simpler AI functions.

I don't actually think that you need one-to-one replacement for humans, but you do need to get humans out of the loop in many, many more places.

Growing pains of job market disruption (7:26)

I'm sure that some people are hearing you talk about swapping out human workers, replacing human workers. They're thinking, this is a world of vast technologically-driven unemployment; that is what you are describing. Is that what you're describing?

Not at all. If we had the kind of productivity boom we're talking about, the economy would be so incredibly hot, and you need that hot market. People have all kinds of fantasies about how good AI could get. Can it substitute for a human in every single thing? And I'm not even positing that. I'm saying if we could just get it good enough to substitute in some things, the economy's going to be booming, it's going to be hot, there will still be things that humans can do that AIs can’t. There's lots of things that maybe we want a human to do, even if the AI can do it, and we will be able to afford that a lot better.

I think that the world I'm thinking about is one where living standards are way higher for everybody — and higher levels of equality, even. If you have the sort of uneven productivity gains that we've had for the last several decades, where tech does really well, but every other part of the economy does badly, well, that drives a lot of regional inequality, that drives a lot of different kinds of demographic inequality, and if we had broad-base productivity growth, that means better living standards for everybody, and I think that's what we should aim for.

When I talk about what you've been referring to as these sociopolitical factors or how we might slow down progress, slow down automation, the whimsical example I use is there being a law saying that yes, you can have kiosks in every McDonald's, but you have to have an employee standing next to the kiosk to actually punch the buttons.

As you mentioned with this port worker strike, we don't need my scenario. That is kind of what's happening on these ports, where there could be a lot more automation, but because of both unions and our acquiescence to these unions, we don't have the kind of automation — forget about sci-fi — that doesn't exist in other places in the world. And I wonder if that doesn't sort of encapsulate, at least in this country, the challenge: Can we get our heads around the idea that it's okay in the long run, that there will be some downsides, and some people might be worse off, and we need to take care of those people, but that's the disruption we need to tolerate to move forward?

You can't have a growing economy where there's no churn, where there's no displacement, where it's complete, where there's no dynamism. You need to be able to accept some level of change. I sympathize with people whose jobs get destroyed by automation. It is hard, but it's much less hard if the economy is super hot because we've been prioritizing productivity growth, and if that were the case, I think we'd find new jobs for those people very quickly. The process is not automatic, but it's much slower when you have low productivity growth and a stagnant economy than it is when you have high productivity growth and a booming economy.

The question I always get is, what about the 60-year-old guy? What's he going to do? And I'm not sure I have a much better answer. Maybe there's other jobs, but it's tough to transition, so maybe the answer there is you cut him a check, you cut that 60-year-old a check, and if you have a high-productivity economy, you have the resources for that to be an option.

Right! So that's the other thing is that we can afford to be generous with people if we have a really rapidly growing economy. It’s that we don't have the resources if we're stagnating, if we're already overextended fiscally, that's a terrible position to be in because you can't actually afford to be generous. And if there are people that truly, like you said, maybe they're very old and it doesn't make sense to retrain, or something like that, they’re near retirement, yeah, absolutely, we can afford that much better when GDP is much higher.

Where do you think, as a nation, our head is at as far as embracing or not being fearful of disruption from technological change? If I only looked at where our head was at with trade, I would be very, very worried about entering a period of significant technological disruption, and I would assume that we will see lots and lots of pushback if AI, for instance, is the kind of important, transformative, general purpose technology that I hope it is.

Again, if I look at trade, I think, “Boy, there's going to be a lot of pushback.” Then again, when I think about risk broadly, and maybe it's not quite the same thing, I think, “Well, then again, we seem to be more embracing of nuclear energy, which shows maybe — it's not the same thing, but it shows a greater risk tolerance.” And I'm always thinking, what's our societal risk tolerance? Where do you think we're at right now?

I think most people, most Americans, don't actually think in those terms. I think most Americans just think about, “How are things going for me?” They kind of evaluate their own life, and if their communities, or whatever, have been struggling due to trade stuff, or something like that, they'll be against it. So I think the people who think in these more high-level terms, it’s like societal elites, and I think normal people who have just lived under 50 years of stagnation, they're kind of distrustful of the elites right now: “I don't pay attention to policy that closely, and my life is bad, at least in some dimensions is not as good as I wanted it to be, it's hasn't had the increase that my parents' generation had,” or something like that. And they're very distrustful of elites, and they're very mad, and you see this nihilistic populism popping up.

You see kind of a diverse array of responses to this nihilistic populism. Some people might say, “Well yeah, elites really have messed up and we need to do what the common people want.” And then the other people are like, “No, we can't do that. We need to stay the course.” But I think that there's a hybrid response, where it's like, the elites really have done bad, but we don't just want to do what the populists want, we want to just have better elite-led policies, which include things like, we have to take productivity growth seriously, we can't just paper over a lot of the tensions and the conflicts that arise from that, we need to embrace them head-on and do everything we can to produce an economy that is productive, that works for everybody, but maybe not in the way that the populists think it will work.

You can't have a growing economy where there's no churn, where there's no displacement, where it's complete, where there's no dynamism. You need to be able to accept some level of change.

The politics of productivity growth (15:20)

I would love to see what American politics looks like if the rest of this decade we saw the kind of economic productivity and wage growth that we saw in the fat part of the 1990s. We act like the current environment, that's our reality, and that's our reality as far as the eye can see, but I'll tell you, in the early ’90s, there was a lot of gloom and doom about the economy, about productivity, how fast we could grow, the rise and fall of great powers, and America was overstretched, and after really three or four years of strong growth, it's like America Triumphant. And I’m wondering if that would be the politics of 2030 if we were able to generate that kind of boom.

Yeah, I think that's totally right. And if you look at total factor productivity, which is my KPI [key performance indicator] or whatever, if you look at 1995 to 2005, you were back to almost two percent growth, which is what we had from 1920 to 1973. So you had a slow period from 1973 to 1995, and an even slower period since 2005, and you get back to that two percent. That's the magic number. I think if we had TFP at two percent, that changes everything. That's a game-changer for politics, for civility, for social stability, we'd really be going places if we had that.

I was mentioning our reaction to trade and nuclear power. The obvious one, which I should have mentioned, is how we are reacting to AI right now. I think it's a good sign that Congress has not produced some sort of mega regulation bill, that this recent bill in California was not signed by Governor Newsom. Congress has spent time meeting with technologists and economists trying to learn something about AI, both the benefits and risks.

And I think the fact that it seems like, even though there was this rush at some point where we needed to have a pause, we needed to quickly regulate it, that seems to have slowed down, and I think that's a good sign that perhaps we're able to hit a good balance here between wanting to embrace the upside and not utterly panicking that we're producing the Terminator.

Absolutely. I think AI is something where the benefits are very clear, we're starting to see them already. The harms are extremely hypothetical, it's not evidence-based, it’s really a lot of sci-fi scenarios. I think the right attitude in that kind of world is to let things ride for a while. If there are harms that arise, we can address them in narrowly tailored ways.

I think government is sometimes criticized for being reactive, but reactive is the right approach for a lot of issues. You don't want to slow things down preemptively. You want to react to real facts on the ground. And if we need to react quickly, okay, we'll react quickly, but in a narrowly tailored way that addresses real harms, not just hypothetical stuff.

I love what you're saying there about reaction. I'm a big preparer. I love preparation. If I'm going to go anywhere, I over-prepare for all eventualities, I will bring a messenger bag so if the world should end while I'm out, I'll be okay. I love to prepare. But one lesson I draw from the pandemic is that only gets you so far, preparation, because before the pandemic, there were a gazillion white papers about the possibility of a pandemic, all kinds of plans as a culture, we were sort of marinating in pandemic apocalypse films, maybe about turning us into zombies rather than giving us a disease.

And then when we finally have a pandemic, it's like, “Where's the respirators? Where's this, where's that? We didn't have enough of this.” And so, while I'm sure preparation is great, what really helped us is we reacted. We reacted in real time because we're a rich country, we're a technologically advanced country, and we came up with a technological fix in a vaccine. To me — and again, I'm not sure how this is you meant it — but the power of being able to react effectively, boy, that's a pretty good capability of a well-functioning country.

Yeah, and a slight difference between the pandemic and AI is it was not the first pandemic. AI is just such a unique set of theorized risks that people are like, nothing like this has ever happened before. This is like the introduction of a brand new super-intelligent species to the planet. This is the first time two intelligent species — if you want to count humans as an intelligent species — two intelligent species will the planet at the same time. And the theorization here is just so far out of the spectrum of our experience that it is hard to even see how you could prepare if those risk materialize. The only intelligent thing that is likely to do any good is to have our eyes open, and let's see what the harms are as they materialize.

The problem with coming up with remedies for theorized harms is that the remedies never go away once they're implemented. Safety regulation never gets laxer over time. And so if you're implementing safety regulations because of real safety problems, okay, fair play, to some extent. I think in some dimensions we're too safe, but it kind of makes sense. But if you're doing it to just theorized harms that have never materialized, I think that's a big mistake.

And you've written about this fairly recently. To me, there's a good kind of complexity with an economy that you have a high-functioning economy where people can connect, and colleges and universities, and businesses, and entrepreneurs, these networks work together to produce computer chips or large language models. That's a good kind of complexity.

But then there's the other kind of complexity, in which you just have layer after layer of bureaucracy, and programs meant to solve a problem that was a problem 20 years ago and is no longer a problem, and that kind of complexity, that's not the kind we want, right?

Yeah, I think you want the sophistication in the economy, but in a way that works for everybody. There have to be benefits to it. If you increase the burden of complexity without producing any net benefits, then people start to rebel against it, they start to be indifferent to or apathetic about the health of society. And there's an anthropologist, Joseph Tainter, who wrote this book, The Collapse of Complex Societies, and his theory is that once you have complexity without the marginal benefits of complexity, you're in for a shock, at some point, when people start becoming apathetic or hostile to the current order. And the complexity grows and shrinks as a system, you can't ever just control like, “Oh, let's do more, or let's do one percent less complexity.” Once people start to rebel against it, it snowballs and you could end up with a very bad situation.

The problem with coming up with remedies for theorized harms is that the remedies never go away once they're implemented. Safety regulation never gets laxer over time.

The future of clean energy (23:35)

Nuclear versus solar versus geothermal: What do you like there?

Solar panels have massively come down in cost, and we're not that far away from — in sort of number of doublings of deployment, and sort of long-deployment space — we're not that far away from the cost being so low that . . . you could almost round the panels cost to free. It almost makes sense. And the problem is, if you look at the solar electricity costs on utility-scale farms, they have not really moved in the last few years. And I think this is in large part because we're designing the solar farms wrong, we're not designing them for the era of cheap panels, we're designing them, still, to track the sun, and complex mechanisms, and too much space between the panels, and too much mowing required, and all that. So as we adapt to the new paradigm of very, very cheap panels, I think that you'll get lower solar costs.

I think the other thing that is obviously complimentary to all of these sources actually is battery innovation. I'm very excited about one particular new cathode chemistry that maybe could drive the cost way, way down for lithium ion batteries. And so you're in a world where solar and batteries is potentially very, very cheap. And so for nuclear and geothermal, they have some advantages over solar.

If batteries get cheap, the advantage of not the firmness . . . I think people think that the advantage of these sources versus solar is just that solar is variable and the other sources are constant, but that's less of an advantage if batteries are cheap, and I think you also want batteries to be able to respond to the fluctuations in demand. If we had an entirely nuclear-powered economy, the nuclear plants actually want to run at constant speed. You don't want to ramp them up and down very quickly, but demand fluctuates. And so you still want batteries to be a buffer there and be the lowest-cost way to balance the network.

So the things that nuclear and geothermal can really compete on is land density — even gigawatt-scale nuclear where you have these giant exclusion zones and tons of land around them and so on, they're still more dense per acre than solar, and geothermal is maybe even denser because you don't need that exclusion zone, and so they could be much, much better in terms of density.

There's an advantage — if you want a lot of power in a city, you probably want that to be supplied by nuclear. If you're more rural, you could do solar. Another possibility is portability. So there's future versions of nuclear that are more mobile. People have talked about space-based nuclear for being able to go to Mars or something like that, you want thermonuclear propulsion and you can't do that with solar. Or powering submarines and stuff. So I think there's always a place for nuclear.

And then the other advantage for both nuclear and geothermal is if you don't need to produce electricity. So if you're producing just the heat — it turns out a big part of the cost of any sort of thermal source is converting it to electricity. You have to have these giant steam turbines that are very capital intensive. And so, if you just need heat, say up to 600 degrees C heat for nuclear and maybe 400 degrees C heat for deep geothermal, those are really good sources for doing that, and maybe if we had continued advances in drilling technology for geothermal or if we could figure out the regulatory stuff for nuclear, I think you could have very cheap industrial thermal energy from either of those sources.

Nuclear and geothermal are competing against a backdrop where we'll probably have pretty cheap solar, but there's still some advantages and these sources still have some utility and we should get good at both of them.

What do you think that energy mix looks like in 25 years, the electrical generation mix for this country?

It would be surprising if it wasn't a lot of solar. My friend Casey Handmer thinks it's going to be 90-plus percent solar, and I think that's a little crazy.

Do you happen to know what the percent is now?

Oh, I don't know. It's probably like three or four or something like that, off the top of my head, maybe less. The other question is, what's the base? I think a lot of people just want to replace the energy we have now with clean energy, and much more we need to be thinking about growing the energy supply. And so I think there's a question of how much solar we could deploy, but then also how much other stuff are we deploying? Let's do a lot of everything. You do have to drive the cost of some of these sources down a bit for it to make sense, but I think we can.

And then the real gains happen when maybe some of these . . . what if you could do some sort of conversion without steam turbines? What if you had ways to convert the thermal energy to electricity without running a steam cycle, which is hundreds-of-year-old technology? Essentially

You're just finding a new way to heat it up.

Yeah, so you look at why has solar come down so much? It's because it’s solid-state, easy to manufacture, any manufacturing process improvements just move forward to all future solar panels. If we had thermoelectric generators or other ways of converting the heat to electricity, that could be really great, and then there's other kinds of nuclear that are like solid-state conversion, like alpha voltaics and things like that. So you could have a box with cobalt 60 in it that's decaying and producing particles that you're converting to electricity, and that would be solid state. It's sometimes called a “nuclear battery,” it's not really a battery, but that would be a way to power cars maybe with something like that. That would be awesome.

Nuclear and geothermal are competing against a backdrop where we'll probably have pretty cheap solar, but there's still some advantages and these sources still have some utility and we should get good at both of them.

The road to a breakthrough (30:25)

When, if ever, this century, do you think we get AGI, and when, if ever, this century, do you think we get a commercial fusion reactor?

AGI, I'm still not really a 100 percent clear on how it's defined. I think that AI will get increasingly more capable, and I think that's an exciting future. Do we even need to emulate every part of the human brain in silicon? I don't think so. Do we need it to have emotions? Do we need it to have its own independent drive? We definitely don't need it to be a perfect replica of a human brain in terms of every capability, but I think it will get more capable over time. I think there's going to be a lot of hidden ways in which AGI, or powerful AI, or highly capable AI is going to happen slower than we think.

I think my base reasoning behind this is, if you look at neurons versus transistors, neurons are about a million times more energy efficient. So six orders of magnitude is kind of what we have to traverse to get something that is equally capable. And maybe there's some tricks or whatever that you can do that means you don't have to be equally capable on an energy basis, but you still need to get four orders of magnitude better. And then the other thing about it is that, if you look at current margins that people are working on, things like the ChatGPT o1 model, it's a lot slower, it does a lot of token generation behind the scenes to get the answer, and I think that that's the kind of stuff that could maybe drive progress.

Let's say we have a world where you ask an AI for a cure for cancer, and you run it on a big data center, and it runs for six months or a year, and then it spits out the answer, here's the cure for cancer, that's still a world where we have very, very powerful AI, but it's slow and consumes a lot of resources, but still ultimately worth it. I think that might be where we're headed, in a way, is that kind of setup. And so is that AGI? Kind of. It's not operating the same way as humans are. So this is different.

You're not going to fall in love with it. It's nothing like that.

I’m pretty uncertain about AGI: A) what it means, but what does it even look like in the end?

Fusion, I'll give you a hot take here, which is, I think there will be net energy gain fusion developed in this decade. I think that someone will have it. I think that probably the first people to get it will be doing it in a completely uneconomical way that will never work economically. Most of the people that are working on fusion are working on DT fusion, which is another one of these sources that basically produces heat, and then you use a steam turbine, and then that produces electricity. I think that the steam turbine is just a killer in terms of the added costs.

So all these sources are basically fancy ways of boiling water and then running a steam turbine. So what you want to look at is: What is the cheapest way to boil water? With fission, you just hold two magic rocks together and they boil water. With geothermal, you drill a hole in the ground and send water down there and it boils. With these DT fusion reactors, you build the most complex machine mankind has ever seen, and you use that to boil water — that's not going to be as cheap as fission should be. So I think that we'll struggle to compete with fission if we can ever get our act together.

There's other kinds of fusion called aneutronic fusion. That's harder to do. I think it’s still possible, maybe this decade, that someone will crack it, but that's harder to do. But the nice thing about that is that you can harvest electricity from those plasmas without a steam turbine. So if it's going to be economical fusion, I think it's plausible by 2030 somebody could crack it, but it would be that aneutronic version, and it is just technically a bit harder. You'll see some reports in a couple of years, like, “Oh, these people, they got net energy out of a fusion reactor.” It's like, okay, it's a scientific breakthrough, but look for the cost. Is it going to be competitive with these other sources?

Do we even need to emulate every part of the human brain in silicon? I don't think so . . . We definitely don't need it to be a perfect replica of a human brain in terms of every capability, but I think it will get more capable over time.

Reforming NEPA (35:19)

Do you think we've sort of got a handle, and we've begun to wrangle the National Environmental Policy Act [NEPA] to the ground? Where are we on reforming it so that it is not the kind of obstacle to progress that you've written so much about and been a real leader on?

My base scenario is we're going to get reforms on it every two years. So we had some a year and a half ago with the Fiscal Responsibility Act, I think we were possibly going to get some in the lame duck session this year in Congress. None of these reforms are going to go far enough, is the bottom line. I think that the problem isn't going to go away, and so the pressure is going to continue to be there, and we're just going to keep having reforms every two years.

And a lot of this is driven by the climate movement. So say what you will about the climate movement, they're the only mainstream movement in America right now that's not complacent, and they're going to keep pushing for, we’ve got to do something that lets us build. If we want to transform American industry, that means we've got to build, and NEPA gets in the way of building, so it's going to have to go.

So I think my baseline case is we get some reforms this year in the lame duck, probably again two years later, probably again two years later, and then maybe like 2030, people have kind of had enough and they just say, “Oh, let's just repeal this thing. We keep trying to reform it, it doesn't work.” And I think you could repeal NEPA and the environment would be fine. I am pro-environment, but you don't need NEPA to protect the environment. I think it's just a matter of coming to terms with, this is a bad law and probably shouldn't exist.

I am pro-environment, but you don't need NEPA to protect the environment. I think it's just a matter of coming to terms with, this is a bad law and probably shouldn't exist.

The state of pro-abundance (37:08)

What is the state of, broadly, a pro-abundance worldview? What is the state of that worldview in both parties right now?

I think there's a growing, but very small, part of each party that is thinking in these terms, and I think the vision is not really concrete yet. I think they don't actually know what they're trying to achieve, but they kind of understand that it's something in this general direction that we've been talking about. My hope is that, obviously, the faction in both parties that is thinking this way grows, but then it also develops a little bit more of a concrete understanding of the future that we're trying to build, because I think without that more-concrete vision, you're not actually necessarily tackling the right obstacles, and you need to know where you're trying to go for you to be able to figure out what the obstacles are and what the problems you need to address are.

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Some signs of tech progress are obvious: the moon landing, the internet, the smartphone, and now generative AI. For most of us who live in rich countries, improvements to our day-to-day lives seem to come gradually. We might (might), then, forgive some of those who claim that our society has not progressed, that our lives have not improved, and that a tech-optimist outlook is even naïve.

Today on Faster, Please! — The Podcast, I talk with economist Noah Smith about pushing the limits in areas like energy technology, how geopolitical threats spur innovation, and why a more fragmented industrial policy might actually be an advantage.

Smith is the author of the popular Noahpinion Substack. He was previously an assistant finance professor at Stony Brook University and an economics columnist for Bloomberg Opinion.

In This Episode

* Recognizing progress (1:43)

* Redrawing the boundaries of energy tech (12:39)

* Racing China in research (15:59)

* Recalling Japanese economic history (20:32)

* Regulating AI well (23:49)

* Rethinking growth strategy in the EU (26:46)

Below is a lightly edited transcript of our conversation

Recognizing progress (1:43)

Pethokoukis: Noah, welcome to the podcast.

Smith: Great to be here!

Not to talk about other podcast guests, but I will very briefly — Last year I did one with Marc Andreessen and I asked him just how tech optimistic he was, and he said, “I'm not sure I'm an optimist at all,” that the most reasonable expectation is to expect the future to be like the past, where we have a problem building things in the real world, that some of our best ideas don't necessarily become everything they could be, and I think a perfectly reasonable baseline forecast is that, for all our talk about optimism, and “let's go,” and “let's accelerate,” that none of that happens. Does that sound reasonable to you or are you more optimistic?

I'm optimistic. You know, a few years ago we didn't have mRNA vaccines. Now we do. And now we have a magical weight loss drug that will not only make you lose weight, but will solve half your other health problems for reasons we don't even understand yet.

So much inflammation.

Right. We didn't even have that a few years ago. That did not exist. If you told someone that would exist, they would laugh at you. A magic pill that not only makes you thin, but also just solves all these other health issues: They would laugh at you, Scott Alexander would laugh at you, everyone would laugh at you. Now it's real. That's cool.

If you had told someone a few years ago that batteries would be as insanely cheap as they are, they would've been like, “What? No. There's all these reasons why they can't be,” but none of those reasons were true. I remember because they did actually say that, and then batteries got insanely cheap, to the point where now Texas is adding ridiculous amounts of batteries for grid storage. Did I predict that was going to happen? No, that surprised me on the upside. The forecasters keep forecasting sort of a leveling off for things like solar and battery, and they keep being wrong.

There's a lot of other things like reusable rockets. Did you think they'd get this good? Did you think we'd have this many satellites in the low-earth orbit?

AI just came out of nowhere. Now everyone has this little personal assistant that's intelligent and can tell them stuff. That didn't exist three years ago.

So is that, perhaps, growing cluster of technologies, that's not just a short-term thing. Do you think all these technologies — and let's say particularly AI, but the healthcare-related stuff as well — that these taken together are a game-changer? Because people always say, “Boy, our lives 30 years ago didn't look much different than our lives today,” and some people say 40 years ago.

But that’s wrong!

Yes, I do think that is wrong, but that people's perception.

When I was a kid, people didn't spend all day looking at a little screen and talking to people around the world through a little screen. Now they do. That's like all they do all day.

But they say that those aren't significant, for some reason, they treat that as a kind of a triviality.

Like me, you're old enough to remember a thing called “getting bored.” Do you remember that? You’d just sit around and you're like, “Man, I’ve got nothing to do. I’m bored.” That emotion just doesn't exist anymore — I mean, very fleetingly for some people, but we've banished boredom from the world.

Remember “getting lost?” If you walk into that forest, you might get lost? That doesn't happen unless you want to get lost, unless you don't take your phone. But the idea that, “Oh my God, I'm lost! I'm lost!” No, just look at Google Maps and navigate your way back.

Being lost and being bored are fundamental human experiences that have been with us for literally millions of years, and now they're just gone in a few years, just gone!

Remember when you didn't know what other places looked like? You would think, “Oh, the Matterhorn, that’s some mountain in Switzerland, I can only imagine what that looks like.” And then maybe you'd look it up in an encyclopedia and see a picture of it or something. Now you just type it into Google Images, or Street View, or look at YouTube, look at a walking tour or something.

Remember not knowing how to fix things? You just had no idea how to fix it. You could try to make it up, but really what you'd do is you'd call someone who was handy with stuff who had this arcane knowledge, and this wizard would fix your cabinet, or your dresser, or whatever, your stereo.

Being lost and being bored are fundamental human experiences that have been with us for literally millions of years, and now they're just gone in a few years, just gone!

So why does that perception persist? I mean, it's not hard to find people — both of us are probably online too much — who just will say that we've had complete and utter stagnation. I don't believe that, yet that still seems to be the perception, and I don't know if things haven't moved fast enough, if there are particular visions of what today should look like that haven’t happened, and people got hung up on the flying-car, space-colony vision, so compared to that, GPS isn’t significant, but I think what you have just described, not everybody gets that.

Because I think they don't often stop to think about it. People don't often stop to think about how much the world has changed since they were young. It's like a gradual change that you don't notice day-to-day, but that adds up over years. It's like boiling the frog: You don't notice things getting better, just like the frog doesn't notice the water getting hotter.

Do you think it's going to get hotter going forward, though? Do you think it's going to boil faster? Do you think that AI is such a powerful technology that it'll be indisputable to everybody that something is happening in the economy, in their everyday lives, and they look a lot different now than they did 10 years ago, and they're going to look a whole lot different 10 years from now?

Utility, remember — back to econ class — utility is concave. A utility of wealth, utility of consumption, is concave, which means that if you get 10,000 more dollars of annual income and you're poor, that makes a hell of a lot of difference. That makes a world of difference to you. But if you're rich, it makes no difference to you. And I think that Americans are getting rich to the point where the new things that happen don't necessarily increase our utility as much, simply because utility is concave. That's how things work.

In the 20th century, people escaped material poverty. They started out the century with horses and buggies, and wood-burning stoves, and freezing in the winter, and having to repair their own clothes, and having food be super expensive, and having to work 60-hour weeks, 80-hour weeks at some sweatshop, or just some horrible thing, and horrible conditions with coal smoke blackening the skies; and then they ended in nice, clean suburbia with computers and HDTVs —I guess maybe we didn't get those till the 2000s — but anyway, we ended the 20th century so much richer.

Basically, material poverty in rich countries was banished except for a very few people with extreme mental health or drug problems. But then for regular people, material want was just banished. That was a huge increment. But if you took the same increment of wealth and did that again in the next century, people wouldn't notice as much. They'd notice a little bit, but they wouldn't notice as much, and I think that it's the concavity of utility that we're really working against here.

In the 20th century, people escaped material poverty. They started out the century. . . having to work 60-hour weeks, 80-hour weeks at some sweatshop. . . and then they ended in nice, clean suburbia with computers and HDTVs . . .

So is economic growth overrated then? That kind of sounds like economic growth is overrated.

Well, no. I don't know that it's overrated. It's good, but I don't know who overrates it. Obviously it's more important for poor countries to grow than for rich countries to grow. Growth is going to make a huge difference to the people of Bangladesh. It's going to be life-changing, just as it was life-changing for us in the 20th century. They're going to have their 20th century now, and that's amazing.

And, to some extent, our growth sustains their growth by buying their products; so that helps, and contributing to innovations that help them, those countries will be able to get energy more easily than we were because they're going to have this super-cheap solar power, and batteries, and all this stuff that we didn't have back in the day. They're going to have protections against diseases, against malaria, and dengue fever, and everything. We didn't have those when we were developing, we had to hack our way through the jungle.

So growth is great. Growth is great, and it's better for the people in the poor countries than for us because of concavity of utility, but it's still good for us. It's better to be advancing incrementally. It's better to be feeling like things are getting better slowly than to be feeling like things aren't getting better at all.

So many things have gotten better, like food. Food has gotten immeasurably better in our society than it was in the ’90s. The food you can eat at a regular restaurant is just so much tastier. I don't know if it's more nutritious, but it's so much tastier, and so much more interesting and varied than it was in the ’90s, and people who are in their 40s or 50s remember that. And if they stop to think about it, they'll be like, “You know what? That is better.” We don't always stop to remember what the past was. We don't remember what food was like in the ’90s — I don't. When I'm going out to a restaurant to eat, I don't think about what a restaurant was like in 1994, when I was a kid. I don't think about that. It just doesn't come to mind. It's been a long time.

In Japan I noticed it a lot, because Japan had, honestly, fairly bland and boring food up until about 2010 or so. And then there was just this revolution where they just got the most amazing food. Now Japan is the most amazing place to go eat in the world. Every restaurant's amazing and people don't understand how recent that is. People don't understand how 20 years ago, 25 years ago, it was like an egg in a bowl of rice and sort of bland little fried things. People don't remember how mediocre it was, because how often did they go to Japan back in 2005?

It's better to be feeling like things are getting better slowly than to be feeling like things aren't getting better at all.

Redrawing the boundaries of energy tech (12:39)

Your answer raised several questions: One, you were talking about solar energy and batteries. Is that enough? Is solar and batteries enough? Obviously I read about nuclear power maybe too much, and you see a lot of countries trying to build new reactors, or restart old reactors, or keep old nuclear reactors, but over the long run, do we need any of that other stuff or can it really just be solar and batteries almost entirely?

Jesse Jenkins has done a lot of modeling of this and what would be the best solutions. And of course those models change as costs change. As battery costs go down and battery capabilities improve, those models change, and we can do more with solar and batteries without having to get these other things. But the current models that the best modelers are making right now of energy systems, it says that we're probably looking at over half solar and batteries, maybe two thirds, or something like that. And then we'll have a bunch of other solutions: nuclear, wind, geothermal, and then a little bit of gas, we'll probably never completely get rid of it.

But then those things will all be kind of marginal solutions because they all have a lot of downsides. Nuclear is very expensive to build and there's not much of a learning curve because it gets built in-place instead of in a factory (unless it's on a submarine nuclear plant, but that's a different thing). And then wind takes too much land, really, and also the learning curve is slower. Geothermal is only certain areas. It's great, but it's only certain areas. And then gas, fossil fuel, whatever.

But the point is that those will all be probably part of our mix unless batteries continue to get better past where we even have expected them to. But it's possible they will, because new battery chemistries are always being experimented with, and the question is just: Can we get the production cost cheap enough? We have sodium ion batteries, iron flow batteries, all these other things, and the question is, can we get the cost cheap enough?

Fortunately, China has decided that it is going to pour untold amounts of capital and resources and whatever into being the Saudi Arabia of batteries, and they're doing a lot of our work for us on this. They're really pushing forward the envelope. They're trying to scale every single one of these battery chemistries up, and whether or not they succeed, I don't know. They might be wasting capital on a lot of these, or maybe not, but they're trying to do it at a very large scale, and so we could get batteries that are even better than we expect. And in that case, I would say the share of solar and batteries would be even higher than Jesse Jenkins and the other best modelers now predict.

But you don't know the future of technology. You don't know whether Moore's Law will stop tomorrow. You don't know these things. You can trace historical curves and forecast them out, and maybe come up with some hand-wavy principles about why this would continue, but ultimately, you don't really know. There's no laws of the universe for technological progress. I wish there were, that'd be cool. But think solar and batteries are on their way to being a majority of our total energy, not just electricity, but total energy.

Racing China in research (15:59)

Does it concern you, in that scenario, that it's China doing that research? I understand the point about, “Hey, if they want to plow lots of money and lose lots of money,” but, given geopolitical relations, and perhaps more tariffs, or war in the South China Sea, does that concern you that that innovation is happening there?

It absolutely does concern me. We don't want to get cut off from our main sources of energy supply. That's why I favor policies like the Inflation Reduction Act. Basically, industrial policy is to say, “Okay, we need some battery manufacturing here, we need some solar panel manufacturing here in the country as a security measure.” Politicians always sell it in terms of, “We created this many jobs.” I don't care. We can create jobs anyway. Anything we do will create jobs. I don't care about creating specific kinds of jobs. It is just a political marketing tactic: “Green jobs, yes!” Okay, cool, cool. Maybe you can market it that way, good for you.

But what I do care about is what you talked about, which is the strategic aspect of it. I want to have some of that manufacturing in the country, even if it's a little inefficient. I don't want to sacrifice everything at the altar of a few points of GDP, or a few tenths of a percent of points of GDP at most, honestly. Or sacrifice everything in the altar of perfect efficiency. Obviously the strategic considerations are important, but, that said, what China's doing with all this investment is it's improving the state of technology, and then we can just copy that. That's what they did to us for decades and decades. We invented the stuff, and then they would just copy it. We can do that on batteries: They invent the stuff, we will copy it, and that's cool. It means they're doing some of our work, just the way we did a lot of their work to develop all this technology that they somehow begged, borrowed, or stole.

. . . what China's doing with all this investment is it's improving the state of technology, and then we can just copy that. That's what they did to us for decades and decades. We invented the stuff, and then they would just copy it. We can do that on batteries. . .

The original question I asked about: Why should we think the future will be different than the recent past? Why should we think that, in the future, America will spend more on research? Why do we think that perhaps we'll look at some of the regulations that make it hard to do things? Why would any of that change?

And to me, the most compelling reason is, it's quite simple just to say, “Well, what about China? Do you want to lose this race to China? Do you want China to have this technology? Do you want them to be the leaders in AI?” And that sort of geopolitical consideration, to me, ends up being a simple but yet very persuasive argument if you're trying to argue for things which very loosely might be called “pro-progress” or “pro-abundance” or what have you.

I don't want to whip up any international conflict in order to stimulate people to embrace progress for national security concerns. That wouldn't be worth it, that’s like wagging the dog. But, given that international conflict has found us — we didn't want it, but given the fact that it found us — we should do what we did during the Cold War, during World War II, even during the Civil War, and use that problem to push progress forward.

If you look at when the United States has really spent a lot of money on research, has built a lot of infrastructure, has done all the things we now retrospectively associate with progress, it was for international competition. We built the interstates as part of the Cold War. We funded the modern university system as part of the Cold War. And a lot of these things, the NIH [National Institutes of Health], and the NSF [National Science Foundation], and all these things, of course those came from World War II programs, sort of crash-research programs during and just before World War II. And then, in the Civil War, of course, we built the railroads.

So, like it or not, that's how these things have gotten done. So now that we see that China and Russia have just decided, “Okay, we don't like American power, we want to diminish these guys in whatever way we can,” that's a threat to us, and we have to respond to that threat, or else just exceed to the loss of wealth and freedom that would come with China getting to do what it wants to us. I don't think we should exceed to that.

I don't want to whip up any international conflict in order to stimulate people to embrace progress. . . But, given that international conflict has found us. . . we should do what we did during the Cold War, during World War II, even during the Civil War, and use that problem to push progress forward.

Recalling Japanese economic history (20:32)

You write a lot about Japan. What is the thing you find that most people misunderstand about the last 30 years of Japanese economic history? I think the popular version is: Boom, in the ’80s, they looked like they were ahead in all these technologies, they had this huge property bubble, the economy slowed down, and they've been in a funk ever since — the lost decades. I think that might be the popular economic history. How accurate is that?

I would say that there was one lost decade, the ’90s, during which they had a very protracted slowdown, they ameliorated many of the effects of it, but they were very slow to get rid of the root cause of it, which was bad bank debts and a broken banking system. Eventually, they mostly cleaned it up in the 2000s, and then growth resumed. By the time per capita growth resumed, by the time productivity growth and all that resumed, Japan was aging very, very rapidly, more rapidly than any country has ever aged in the world, and that masked much of the increase in GDP per worker. So Japan was increasing its GDP per worker in the 2000s, but it was aging so fast that you couldn't really see it. It looked like another lost decade, but what was really happening is aging.

And now, with fertility falling all around the world right now in the wake of the pandemic, probably from some sort of effect of social media, smartphones, new technology, whatever, I don't know why, but fertility's falling everywhere — again, it looked like it had bottomed out, and then now it's falling again. We're all headed for what happened to Japan, and I think what people need to understand is that that's our future. What happened to Japan in the 2000s where they were able to increase productivity, but living standards stagnated because there were more and more old people to take care of. That is something that we need to expect to happen to us, because it is. And, of course, immigration can allay that somewhat, and it will, and it should. And so we're not because of immigration

Will it in this country? In this country, the United States, it seems like that should be something, a major advantage going forward, but it seems like it's an advantage we seem eager to throw away.

Well, I don't know about eager to throw away, but I think it is in danger. Obviously, dumb policies can wreck a country at any time. There's no country whose economy and whose progress cannot be wrecked by dumb policies. There's no country that's dumb-proof, it doesn't exist, and it can't exist. And so if we turn off immigration, we're in trouble. Maybe that's trouble that people are willing to accept if people buy the Trumpist idea that immigrants are polluting our culture, and bringing all kinds of social ills, and eating the pets, and whatever the hell, if people buy that and they elect Trump and Trump cracks down hard on immigration, it will be a massive own-goal from America. It will be a self-inflicted wound, and I really hope that doesn't happen, but it could happen. It could happen to the best of us.

There's no country whose economy and whose progress cannot be wrecked by dumb policies. There's no country that's dumb-proof, it doesn't exist, and it can't exist.

Regulating AI well (23:49)

Do you think what we're seeing now with AI, do you think it is an important enough technology that it is almost impossible, realistically, to screw it up through a bad regulation, through a regulatory bill in California, or something on the national level? When you look at what's going on, that if it's really as important as what perhaps the most bullish technologists think it is, it's going to happen, it's going to change businesses, it's going to change our lives, and unless you somehow try to prohibit the entire use of the technology, there's going to be an Age of AI?

Do people like me worry too much about regulation?

I can't say, actually. This is not something I'm really an expert on, the potential impact of regulation on AI. I would never underestimate the Europeans' ability to block new technologies from being used, they seem to be very, very good at it, but I don't think we'll completely block it, it could hamper it. I would say that this is just one that I don't know.

But I will say, I do think what's going to happen is that AI capabilities will outrun use cases for AI, and there will be a bust relatively soon, where people find out that they built so many data centers that, temporarily, no one needs them because people haven't figured out what to do with AI that's worth paying a lot of money for. And I have thoughts on why people haven't thought of those things yet, but I'll get to that in a second. But I think that eventually you'll have one of those Gartner Hype Cycles where eventually we figure out what to do with it, and then those data centers that we built at that time become useful. Like, “Oh, we have all these GPUs [graphics processing units] sitting around from that big bust a few years ago,” and then it starts accelerating again.

So I predict that that will happen, and I think that during the bust, people will say, just like they did after the Dot-com bust, people will say, “Oh, AI was a fake. It was all a mirage. It was all useless. Look at this wasted investment. The tech bros have lied to us. Where's your future now?” And it's just because excitement about capabilities outruns end-use cases, not all the time, obviously not every technology obeys this cycle, for sure . . . but then many do, you can see this happen a lot. You can see this happen with the internet. You can see this happen with railroads, and electricity. A lot of these things, you've seen this pattern. I think this will happen with AI. I think that there's going to be a bust and everyone's going to say, “AI sucks!” and then five, six years later, they'll say, “Oh, actually AI is pretty good,” when someone builds the Google of AI.

Rethinking growth strategy in the EU (26:46)

To me, this always gets a lot of good attention on social media, if you compare the US and Europe and you say, the US, it's richer, or we have all the technology companies, or we're leading in all the technology areas, and we can kind of gloat over Europe. But then I think, well, that's kind of bad. We should want Europe to be better, especially if you think we are engaged in this geopolitical competition with these authoritarian countries. We should want another big region of liberal democracy and market capitalism to be successful.

Can Europe turn it around? Mario Draghi just put out this big competitiveness report, things Europe can do, they need to be more like America in this way or that way. Can Europe become like a high-productivity region?

In general, European elites’ answer to all their problems is “more Europe,” more centralization, make Europe more like a country. . . But I think that Europe's strength is really in fragmentation . . .

I think it can. I wrote a post about this today, actually, about Mario Draghi's report. My bet for what Europe would have to do is actually very different than what the European elites think they have to do. In general, European elites’ answer to all their problems is “more Europe,” more centralization, make Europe more like a country. You know, Europe has a history of international competition. France, and Germany, and the UK, and all these powers would fight each other. That's their history. And for hundreds of years, it's very difficult to change that mindset, and Mario Draghi's report is written entirely in terms of competitiveness. And so I think the mindset now is “Okay, now there's these really big countries that we're competing with: America, China, whatever. We need to get bigger so we're a big country too.” And so the idea is to centralize so that Europe can be one big country competing with the other big countries.

But I think that Europe's strength is really in fragmentation, the way that some European countries experiment with different institutions, different policies. You've seen, for example, the Scandinavian countries, by and large, have very pro-business policies combined with very strong welfare states. That's a combination you don't see that in Italy, France, and Germany. In Italy, France, and Germany, you see policies that specifically restrict a lot of what business can do, who you can hire and fire, blah, blah, blah. Sweden, and Denmark, and Finland, and Norway make it very easy for businesses to do anything they want to do, and then they just redistribute. It's what we in America might even call “neoliberalism.”

Then they have very high taxes and they provide healthcare and blah, blah, and then they basically encourage businesses to do business-y things. And Sweden is more entrepreneurial than America. Sweden has more billionaires per capita, more unicorns per capita, more high-growth startups per capita than America does. And so many people fall into the lazy trap of thinking of this in terms of cultural essentialism: “The Swedes, they're just an entrepreneurial bunch of Vikings,” or something. But then I think you should look at those pro-business policies.

Europeans should use Sweden as a laboratory, use Denmark, use Norway. Look at these countries that are about as rich as the United States and have higher quality of life by some metrics. Look at these places and don't just assume that the Swedes have some magic sauce that nobody else has, that Italy and Greece and Spain have nothing to learn from Sweden and from Denmark. So I think Europe should use its fragmentation.

Also, individual countries in Europe can compete with their own local industrial policies. Draghi talks about the need to have a Europe-wide industrial policy to combat the industrial policies of China and America, but, often, when you see the most effective industrial policy regimes, they're often fragmented.

So for example, China until around 2006, didn't really have a national industrial policy at all. At the national level, all they did was basically Milton Friedman stuff, they just privatized and deregulated. That's what they did. And then all the industrial policy was at the provincial and city levels. They went all out to build infrastructure, to attract FDI [foreign direct investment], to train workers, all the kinds of things like that. They did all these industrial policies at the local level that were very effective, and they all competed with each other, because whichever provincial officials got the highest growth rate, you'd get promoted, and so they were competing with each other.

Now, obviously, you don't want to go for growth at the expense of anything else. Obviously you'd want to have things like the environment, and equality, and all those things, especially in Europe, it's a rich country, they don't just want to go for growth, growth, growth only. But if you did something like that where you gave the member states of the EU more latitude to do their local policies and to set their local regulations of things like the internet and AI, and then you use them as laboratories and copy and try to disseminate best practice, so that if Sweden figures something out, Greece can do it too, I think that would play to Europe's strength, because Draghi can write a million reports, but Europe is never going to become the “United States of Europe.” Its history and ethno-nationalism is too fragmented. You'll just break it apart if you try.

The European elites will just keep grousing, “We need more Europe! More Europe!” but they won't get it. They'll get marginally more, a little bit more. Instead, they should consider playing to Europe's natural strengths and using the interstate competitive effects, and also laboratory effects like policy experimentation, to create a new development strategy, something a little bit different than what they're thinking now. So that's my instinct of what they should do.

Faster, Please! is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Micro Reads

▶ Business/ Economics

* Behind OpenAI’s Audacious Plan to Make A.I. Flow Like Electricity - NYT

* OpenAI Pitched White House on Unprecedented Data Center Buildout - Bberg

* OpenAI Executives Exit as C.E.O. Works to Make the Company For-Profit - NYT

* OpenAI to Become For-Profit Company - WSJ

* Mark Zuckerberg’s AI Vision Makes Metaverse a Slightly Easier Sell - WSJ

* Intel’s Foundry Shake-Up Doesn’t Go Far Enough - WSJ

* OpenAI CTO Mira Murati Is Leaving the Company - Wired

* Meta unveils augmented reality glasses prototype ‘Orion’ - FT

▶ Policy/Politics

* The Schumer Permitting Exception for Semiconductors - WSJ Opinion

* Biden breaks with environmentalists, House Dems on chip bill - Politico

* Mark Zuckerberg Is Done With Politics - NYT

▶ AI/Digital

* I Built a Chatbot to Replace Me. It Went a Little Wild. - WSJ

* Meta's answer to ChatGPT is AI that sounds like John Cena or Judi Dench - Wapo

* Want AI that flags hateful content? Build it. - MIT

* The Celebrities Lending Their Voices to Meta’s New AI - WSJ

▶ Biotech/Health

* Why do obesity drugs seem to treat so many other ailments? - Nature

* Antimicrobial resistance is dangerous in more ways than one - FT Opinion

* Who’s Really Keeping Ozempic and Wegovy Prices So High? - Bberg Opinion

▶ Clean Energy/Climate

* Microsoft’s Three Mile Island Deal Is Great News - Bberg Opinion

* China’s accelerating green transition - FT

* Microsoft’s Three Mile Island Deal Isn’t a Nuclear Revival — Yet - Bberg Opinion

* A Faster, Cheaper Way to Double Power Line Capacity - Spectrum

* A Public Path to Building a Star on Earth - Issues

▶ Space/Transportation

* Hypersonic Weapons — Who Has Them and Why It Matters - Bberg

▶ Up Wing/Down Wing

* Trump Offers Scare Tactics on Housing. Harris Has a Plan. - Bberg Opinion

* The Sun Will Destroy the Earth One Day, Right? Maybe Not. - NYT

* How supply chain superheroes have kept world trade flowing - FT Opinion

* Can machines be more ‘truthful’ than humans? - FT Opinion

▶ Substacks/Newsletters

* America's supply chains are a disaster waiting to happen - Noahpinion

* The OpenAI Pastiche Edition - Hyperdimensional

* The Ideas Anticommons - Risk & Progress

* Sam Altman Pitches Utopian impact of AI while Accepting UAE Oil Money Funding - AI Supremacy

* The Government’s War on Starter Homes - The Dispatch

* NEPA Nightmares III: The Surry-Skiffes Creek-Whealton Transmission Line - Breakthrough Journal

* Dean Ball on AI regulation, "hard tech," and the philosophy of Michael Oakeshott - Virginia’s Newsletter

Faster, Please! is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

When it comes to sports, everybody is basically aligned that the goal here is helping every kid reach their potential. We celebrate talent, we give athletes the resources and personalized support they each need to develop their skills. We have varsity leagues, we have junior varsity leagues. We make sure that kids are challenged at the appropriate level for their current level abilities. And for some reason, when it comes to academics, we throw all of that out the window.

Our progress as a society depends a lot on the brilliant ideas of our greatest thinkers. To improve our way of life, we should be promoting our best and brightest to the highest heights of their potential. Instead, we seem to be stemming the flow of great minds at the source: in our public schools. With a one-size-fits-all, equality-of-outcome model, we rob our kids, and our society, of their potential.

Today on Faster, Please — The Podcast, I talk with Niels Hoven, founder and CEO of Mentava, an educational software company. Hoven’s goal: to help kids learn at their own pace, whether that includes additional support, or simply the resources to excel beyond expectations.

Hoven is the father of four, former product manager at Cloudflare, and was VP of product development at Pocket Gems.

In This Episode

* Treating academics like athletics (1:35)

* School as childcare and instruction (5:44)

* The role of parents (8:04)

* Mentava’s mission (10:04)

* Reframing the public school (15:20)

* The San Francisco algebra ban (17:50)

* Investing in our future (20:05)

Below is a lightly edited transcript of our conversation

Pethokoukis: Niels, welcome to the podcast.

Hoven: Thank you so much. I appreciate you having me here.

Treating academics like athletics (1:35)

You argue that the current American education system is fundamentally flawed.

I do think it has some issues.

How does closing achievement gaps hurt our education system? How does it hold students back?

So obviously my problem is not with closing achievement gaps, my problem is what happens when you set up policies with that as the only goal. I think what we've seen is that the goal of today's modern education policy is closing the gaps between high achievers and low achievers, which is, of course, wonderful, but the way that has actually manifested in schools is by slowing down high achievers and not giving them the opportunity to achieve their potential. In San Francisco, you're literally not allowed to teach material above grade level, which I think is crazy.

Most school systems have gifted programs. Doesn't that meet your concern?

So those gifted programs, I think they don't go far enough to support the learning needs of students who are really capable of achieving dramatically more, and, in a lot of places they're very, very hard to get into. So in our school district right now, in order to qualify for the gifted program, you have to take a series of tests and you basically have to score 99th percentile on all of those tests. All of those tests are basically grade-level tests, so they're not really teaching seeing how far above grade level you are, so it's really, “Are you really, really good at taking the tests, so well that three times in a row you can score 99th percentile on grade level stuff?” That's not really getting the kids who need their learning needs supported by these special programs, and these programs really only operate a single grade above grade level. What about the kids who could be doing calculus in middle school, or want to be moving much faster than that: Two years of math a year, every single year — we aren't supporting them.

You've proposed treating academics more like sports. What does that look like in practice and how might that change how we approach education and how we think about education more broadly?

When it comes to sports, everybody is basically aligned that the goal here is helping every kid reach their potential. We celebrate talent, we give athletes the resources and personalized support they each need to develop their skills. We have varsity leagues, we have junior varsity leagues. We make sure that kids are challenged at the appropriate level for their current level abilities.

And for some reason, when it comes to academics, we throw all of that out the window. We just say, “Okay, everybody must progress at the same speed, learn the same thing at the same time.” To me that's like saying, “Okay LeBron, you are not allowed to dunk until everybody else can dunk also.” And so I want to see us treat academics more like sports, where we encourage students to pursue their interests, to develop their talents to the fullest potential, and respect the diversity of kids' ability and motivations.

To what do you attribute the staying power of this — I don’t know if it's a one-size-fits-all system, but of a system that, in many key ways, isn't different than it was a hundred years ago?

It is a government-sponsored monopoly, so I guess that would be my answer. How did the taxi cab medallion system last so long, even though it was dramatically underserving everybody who wanted to take a taxi? There's no competition.

What does that more sports-like environment look like? It sounds like there'd be more freedom, there'd be less regimentation. What does that world look like?

What I'm really pushing for is I would like to see students receiving instruction appropriate for their current level. I talk a lot about high-achieving students, but this is also true for struggling students. Right now we have a very one-size-fits-all model of education, and that means students who are struggling and need extra attention to get caught up aren’t given the opportunity that they need to perhaps move at a slower pace or get extra support, and kids who want to be moving faster and maybe learning two years of math a year, every single year, so that they can be doing college-level math in middle school, they're also not getting that support. We managed to do that in sports, we have lots of different leagues so that kids can find the level of competition that is appropriate for them, but for some reason, when it comes to academics, we refuse to allow that amount of differentiation.

School as childcare and instruction (5:44)

You advocate reducing instruction time to two hours a day. One, is that enough? And two, what are the kids doing for the other . . . are they getting into mischief? What are they doing for the rest of the day if they're not studying?

I think we've really conflated the role of school, and I think an important question to ask is: Is school as we provide it now, is it childcare or is it academics? And I think it is both. An interesting fact about school is, despite all of the problems that we all understand our schools have, schools have like an 80 percent approval rating from parents, and that's because the job that schools do for most parents is actually childcare. It is free childcare for while the parents are at work, it is finding a place where your children are entertained and loved, and that is super important.

But somehow we have also layered this layer of academic theater on top of that childcare instead of saying, “Okay, these kids can play in the woods for eight hours a day, or they can play dodgeball or grow their social-emotional skills and build their friendships with a friend.” We had to say, “No, they have to be learning something – but not too fast at this very, very slow pace.” And if you look at things like homeschoolers, you see most homeschoolers do two hours of academics a day, and they have the same outcomes as kids who are going to public schools, so we really don't need that much more time doing academics as long as that time is being spent efficiently.

Is this new world possible within a mostly public school system as it exists today? Can you do this, or are you talking about private school, homeschooling, but does this have anything to do with the public school system, which seems to me fairly resilient? Certainly, I think the changes of the sort of magnitude you're talking about.

I like the public school system. I went to public school, I had a really positive experience in public school. My own kids go to public school. And I think the difference is that when I was in public school, people were much more accepting of the idea of kids who wanted to move at their own pace. And so Mentava, certainly we're happy to support kids who are homeschoolers, who are in private school, but the real vision is to allow kids to be part of, essentially, their local public school community, go to school with friends from the neighborhood, but still have the opportunity to progress at their own pace

The role of parents (8:04)

Tell me a little bit about your personal educational experience and how that shaped your views and how it eventually led to your company.

Education has always been very important to my family. My dad taught me to read early, when I arrived at kindergarten, I could already read, I was roughly a year ahead in math. And so he negotiated with my school to just let me, during math class, just for an hour a day, could I just go to the next grade up and sit in on their math class and then come back to my own class for the rest of the day. And we did that, and that worked great until third grade, because my school only went up to third grade, so there wasn't a class for me. So at that point, I just started doing independent study. Just during math class, for an hour a day, I would go to the back of the classroom, I would study out of a math book, and then at the end of that hour I would come back and rejoin my friends for the rest of the day.

And I did that for the next four years, and basically, thanks to that accelerated support, I ended up taking calculus in eighth grade. There are kids who can be moving that fast if you just kind of get out of their way. My own son — he goes to a public school — we also got permission for him to do independent study last year, and now in fourth grade he'll probably be ready to start pre-algebra.

This is doable now. This was doable when I was a kid with textbooks, this is doable now with off-the-shelf software, but it's harder than it needs to be. And so our vision is: We can make this easier. I think a lot of kids could have done what I did, but they weren't given the opportunity. We want to make sure that more kids have this opportunity to have their learning needs supported.

Do you think parents underestimate what their kids are capable of doing?

Parents have no idea what their kids are capable of doing, especially parents of high-achieving kids. We've seen this over and over again with the families who are entering in Mentava’s learn-to-read software now. We target our software at kids as young as two, but often age three and four, we're trying to teach them to read, trying to get them to about a second grade reading level in maybe six to 12 months. We just had a three-year-old complete our entire curriculum, which gets us close to a second grade reading level, in about six months. So it is doable, it can move fast, and we have parents who say, “I had no idea that my kid was capable of doing this at this point!”

Mentava’s mission (10:04)

So walk me through what your company does, the service it provides, how it all works.

The long-term vision for our company is to support the learning needs of kids who are not being supported in school. If you have a child who wants to learn two years of math in a year, the real gating factor of that is, a lot of times it's teacher availability, or it's school policy that says there's no one available to give them that instruction. But imagine that they had the opportunity to just go open a math book.

It's a resource issue. We'd love to do it, but we don't have the resources.

We don’t have the resources. Sometimes that's true, sometimes that's not true, sometimes it's policy, but whatever. But they could go get a math book, they could just study that book and go as fast as they wanted — but that's boring. Not every kid is going to have that motivation. And so, to some extent, we're not really solving for curriculum, we are solving for motivation. We want to build software that can deliver that same curriculum — we know how to teach math, we know how to teach reading — deliver it in a more sort of fun, entertaining, motivating way, and allow kids to essentially continue to progress at their own pace without being gate-kept by the availability of teachers to essentially unlock that knowledge for them. And so we are starting at a very young age by teaching kids to read with software.

What I really want to teach is math. I want to get kids to learn math as fast as possible, but in order for kids to be able to teach themselves math, they have to be able to read, and so that is our first piece of software: learn-to-read software for preschoolers.

And obviously preschoolers, these are young kids, so is your expectation that software will be done at home? Are there schools trying to incorporate in some way? How's that working?

We've started talking to schools about pilots, but I think, right now, we get a lot of attention from parents. Incentives are just better aligned that way. Schools right now are not particularly concerned with, “Are we supporting our kids achieving their fullest potential or are we ensuring our kids can learn as fast as possible?” But parents really care about that. And so right now we have a lot of customers who are basically parents at home who realize, “Oh, my three- or four-year-old is ready to start reading, what can I do to best support them now?”

How long has the company been in business?

We kind of accidentally launched about six months ago.

Was this a pandemic-related idea?

This was. I have four kids. I had three kids during the pandemic and the fourth one arrived during the pandemic. They were at home, doing school at home, and I also had a job at the time, so did my wife, we had two working parents trying to take care of three kids at home, we were trying to figure out how to help them learn, and really the only way to make that work was to give them the skills that they needed to teach themselves. And at that time, my kids were five and three. And so how can I get my five-year-old teaching themselves math? How do I get my three-year-old teaching themselves to read? And the solution to that is software. We know the curriculum, we know if you want to teach reading, it's phonics, but how do you get the kid to sit down and memorize the 44 sounds in the English language? Well, turns out that software and games are really, really good at solving motivation, so we just needed to package that all together and that was how Mentava was started.

So during this exact period that you've thought of this idea, you're putting together a company, putting together the software, we have sort of a new stage in software happening with chatbots and large language models. Are those technologies that compliment what you're doing? Are you going to have to do something different to use those technologies? How's that going to work out for you?

It's very complimentary. So we're not using AI right now, but we see it coming. There is kind of this perfect storm of timing right now where, I think because of Covid, parents started to realize that, “Oh, my kid is not learning as much in school as I thought. This is what they're doing in school?” We had all that visibility when our kids were doing homeschool in front of screens at home.

Technology has gotten to a point where we can give screens to every kid, and iPads, and other tablets. Touchscreens make learning much more accessible. We're seeing the effectiveness of some learning software — a lot of learning software is really, really bad, but some of it is good, and people are seeing that. And then, at the same time, like you see AI coming out and getting people very excited about the potential of software to affect education.

It’s funny, when we were raising money, the idea that software could be a teacher was a very contrarian perspective. Everybody said, “How could software possibly be a teacher? You’re going to need a human there.” And then about 12 months later, AI came out, people said, “Oh, of course you're going to have software teachers. We've always believed that.”

But my take on AI is that the power of AI is really in its adaptability, and you actually don't need that much adaptation for teaching reading or teaching math. You memorized the 26 letters, the 44 sounds in the English language, you learn addition, and then you learn subtraction, then you learn multiplication, then you learn division. It's pretty linear. It's pretty sequential. And so my belief is that there's actually this core learning pathway that you can really, really optimize, and we should focus on that. And it's fairly sequential, and it's fairly deterministic. And then the power of AI is to catch the kids who fall off of that and get confused and ask, “Okay, what are you confused about? I see you're confused about this thing. Let me give you some custom instruction and then get you back on that main pathway.”

Reframing the public school (15:20)

In an ideal world — and let's just stick with, I think it's reasonable to think that, for the time being, most kids are going to be educated by public schools. That's a lot of kids, a magnitude difference in how many kids are in private school or are homeschooled. What should that public school day look like, ideally, given what you've learned going through this process?

The biggest challenge for public school is that there's such a diversity of student needs there. Public schools are simultaneously academics, but they're also childcare, and they're also a social support network. They're a safety net for a lot of kids, and they're trying to provide all those services to all these different kids by giving them all the exact same thing. To me that makes no sense, and what I would really love to see in our public schools is just more differentiation, more acceptance of diversity of needs, diversity of motivations, diversity of abilities, and saying, “Okay, these children need this particular service from our public schools. Let's make sure that they're in a place where they can get those services. But we have these other kids who want to learn two years of math every year. They can do that in two hours a day, and then they want to spend the rest of the day playing in the forest.” That would be amazing.

Should that actual classroom time look markedly different? I'm sure that if I went into most classrooms — I had kids, one currently in high school and ones who were in high school not that long ago — that those classrooms, blackboards, teachers, lecturing: That's the classroom experience. That's in 2024, that was the classroom experience in 1924. Should that classroom experience look fundamentally different?

I think that's an interesting question. I think it's going to look different for different kids. I think there is a sense that some of the rigor I would say of the old days has been lost, and I think that there's good and bad to that. I think a lot of that is a result of conflating childcare with academics. You can't do rigorous academics for eight hours a day. It’s sort of like weightlifting; you can't do squats for eight hours a day, but you can do them very effectively for half an hour. But if you want to pretend that you're exercising for eight hours a day, then you, by definition, have to remove a lot of that rigor. So I would like to get rid of the academic theater and be very clear about, “Okay, this time is play time, this is childcare time, and this time is academic time, and we're really going to buckle down and focus here.”

The San Francisco algebra ban (17:50)

A few years back, there was a ban on teaching middle school algebra in San Francisco. Can you give me some background on that?

So this was passed about 10 years ago. The way it used to work is that most kids took algebra in eighth grade. If you were ready earlier, you could take algebra in seventh grade, but essentially in San Francisco, because some kids were not prepared to take algebra in eighth grade, they said across the board, all kids must take algebra in ninth grade. So even the kids who used to take it in seventh grade, the kids who used to take it in eighth grade, “Sorry, we're not doing it in middle school anymore. You all have to take it in ninth grade.”

Usually these sorts of educational decisions, they're just lost in the noise, parents don't have time to focus on the nitty and gritty of curriculum, but this was a big problem for parents because this meant that you could not get through calculus in high school without essentially taking summer school or getting private tutoring. And for a lot of competitive colleges, you need to be in calculus, have taken calculus, in high school. And so parents had a real problem with this particular curriculum change.

The irony of all of this is that this was enacted with the hope of increasing equity, of driving more equal outcomes, and it had the opposite effect because now it’s just the parents with the resources who are able to go out and do summer school, and private tutors, and then get their kids the math support that they needed. So this happened a decade ago, and it has been a battle for 10 years to get algebra back into middle schools in San Francisco, and it actually went the other way: California statewide nearly got rid of algebra in their statewide middle school curriculum because of the quote-unquote “success of San Francisco,” which is basically, if you look into it, it's just San Francisco cooking the books, literally lying about their outcomes.

And so finally, this past year, parents essentially had enough and they put it on the ballot and said, “We're going to take a vote about, should middle schoolers be allowed to learn algebra.” It's funny because a lot of times people think that this cuts along party lines: Conservatives versus Democrats, red versus blue, but even in San Francisco, the most progressive city in the United States, 80 percent of families were like, “Yes, we should support all kids learn these. Yes, if a kid is ready to take algebra in middle school, we should allow them to do that.”

Investing in our future (20:05)

I'll tell you the one thing I kept thinking of as I was learning more about your company and your outlook was it seems to me like it'd be really important, as a country, that every kid can reach their potential, but especially the very smartest kids, that we get everything out of them that we can, right? That's pretty important. These are people who are going to be designing the next stage of AI, they're going to be designing the new computer chips, they're going to be in biotechnology. If we can get more out of those kids, there's a huge multiplier there.

I believe that very deeply. I believe leaders are important. I believe in the power of single individuals to create huge amounts of change, but not everybody agrees with that. I was at a school the other day, and a bench outside the school literally has carved into it —a bench that every student sees as they go into the school — it says, “Strong people do not need strong leaders.” And I fundamentally disagree with that. I think we need strong people and we also need strong leaders, and the way we get both of those is ensuring that every student has the opportunity to have their learning needs supported and have the opportunity to achieve their potential.

What's the direction of the company? Where are you going to be in five years? What's the dream?

Right now, we are in the process of officially launching our learn-to-read app, targeted at preschoolers, and then what I really want to do is start transitioning into math. So once we have taught kids to read, we have essentially unlocked their ability to teach themselves. And so our goal is to keep up with this earliest cohort of kids who are learning to read and support them as they continue through their K–12 career. If they want to learn two years of math a year, then I would love to build two years of math curriculum each year so that they continue using Mentava to support their K–12 experience, and then they discovered that, I don't know, they're done with math in middle school, and then they get to figure out what's next after that. Do I go start a company? Do I do internships? Do I go learn marine biology? I don't know.

What about computer science? Does that play a role here?

When I say math, I would say specifically math and computer science are what I'm most passionate about. I think of it almost as vocational school. Those are the skills that we can teach that directly contribute to, okay, this person is able to create more value in the world because they know these two fundamental skills now.

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American global leadership is due in great part to its innovators — visionaries who drive society beyond the preconceived limits. Historically, government-led initiatives like the Manhattan Project or the Apollo Project pushed boundaries. Today, too often, government lags behind technologically.

Today on Faster, Please! — The Podcast, I talk with Katherine Boyle about American Dynamism, the spirit of pro-progress innovation, and how a new generation of Silicon Valley startups is spurring government to break out of its old habits.

Boyle is a general partner at VC giant Andreessen Horowitz, having previously been a partner at General Catalyst and a general assignment reporter at The Washington Post. She primarily invests in national security, aerospace and defense, and public safety companies, among others.

In This Episode

* American Dynamism (1:25)

* From software to the physical world (7:23)

* Government collaboration: challenges & opportunities (11:29)

* Playing the long-game in Washington (21:16)

* Building the American Dream (24:35)

Below is a lightly edited transcript of our conversation

American Dynamism (1:25)

Let's just start with a little bit of definition about American Dynamism. Broadly, what challenges or problems is this effort directed toward?

It's a bit of a long story as to what American Dynamism is, how it arrived to be a category of innovation, but the short definition is American Dynamism is built for companies that support the national interest. So a very broad category of companies, everything from aerospace, defense, national security, companies that sell directly to the US government and to our allies, but also things like housing, education, transportation, infrastructure, things that are built in the physical world where Washington or states usually like to regulate those things.

So one of the things that we saw in our own portfolio is that there are a lot of companies that we used to be classifying as “enterprise” or “consumer,” and really what they were were government companies because they had to interface with a regulator much earlier in their trajectory, or they saw government as a potential buyer of the product. So in cases of things like aerospace and defense, those are very obvious government buyers, but things like public safety, where we have companies like Flock Safety, for example, that started out selling to homeowners associations thinking they were a consumer company, but ultimately got extraordinary pull from local governments and from public safety officials because of how good the technology was. So the companies, in some ways, they were these N-of-One companies, really solving really important civic problems, but over time it became very clear that this was a growing category of technology.

But the broader underlying thesis, I'd say, of where the movement came from, and when we really started seeing this as an area where founders, in particular, were excited to build, I think it did come out of “It’s Time to Build,” my partner Mark Andreessen's canonical post where he basically said during Covid that we have to be able to build things in the physical world. And there was sort of this realization that technology has solved many, many problems in the digital realm that I think, in some ways, the last 15 years of the Silicon Valley technology story has really been about changes in consumer technology or changes in the workplace, but now we're finally seeing the need for changes in government and civic goods, and there's just an extraordinary amount of momentum from young founders who really want to build for their country, build for the needs of the citizenry.

Does it change what you do, or maybe the kinds of expertise that are needed, to think about these things as a category, rather than different companies scattered in these other kinds of categories. Thinking of them as like, “Oh, there's some sort of commonality,” how is that helpful for you?

The thing that's interesting is that there's sort of a “yes” and “no” part to that question. The yes is that the founders are coming from different places. So the companies that have led to this sort of, I would say, extraordinary wealth of engineering talent where people are not afraid to tackle these problems, there's a handful of the companies that have scaled: it's companies like SpaceX, companies like Palantir, where, 20 years ago, they were banging their heads against the wall trying to figure out, “How do we sell to government?” In many cases, they had to sue the government in order to be able to sell and compete against the larger incumbents that have been around for, in many cases, 50, 70 years. But now you have these talented engineers who've sort of seen those playbooks, both in terms of, they understand what good engineering looks like, they understand the pace of innovation, how quickly you have to bring new products to market, and they also understand that you have to be in touch with your customer, constantly iterating.

And so you now have companies that have scaled in these categories where there is this nice thing that happens in Silicon Valley, and I always say it's a mark of a really successful company when three, four, five years into the journey, you start seeing the early people at that company say, “Well, I want to solve this problem,” or “I want to go be a founder, myself,” and they start building more companies. So I think that, in some ways, the natural order of how Silicon Valley progresses, in terms of, do you need to have different expertise, or are there different talent pools? Yes, they're coming from different companies, but it's the same story of Silicon Valley Dynamism, which is, someone comes in, I always joke, they go to the University of Elon Musk and they learn how to manufacture, and then they say, “Well, actually, I don't want to just work on rockets anymore, I'd like to work on nuclear.” And so then you have companies like Radiant Nuclear that have spun out of SpaceX several years ago that are building in a totally different category for the built world, but have that sort of manufacturing expertise, that engineering expertise, and also know what it's like to work in a highly regulated environment.

Does it require a different expertise, then, to advise these companies because of that government interface?

I think in some ways it does, yes, the types of people who are investing in this category, maybe there's a number of investors where they got their start at Palantir, for example, or they understand the early journey of SpaceX. But at the same time, the thing that I think has been most surprising to us is just how quickly this movement caught on among the broader Silicon Valley ecosystem. And I think that's a very good thing, because, at its core, these are software companies in many cases. Yes, they're building hardware, but software is the lever that's allowing these companies to scale. So you are seeing the traditional venture capital firms that used to say, “Oh, I would never touch anything that is operating in the physical world,” or the meme you had five years ago, which is, “You'll never be able to sell anything to the US government, I'm not wasting my money there.” You've seen a complete 180 in the Silicon Valley ecosystem in terms of venture firms where they're now willing to take bets on these types of companies.

And you're also seeing, there's a number of founders where their first company, for example, might've done very well, and it might've just been pure software, or in a consumer enterprise, sort of a more classical Silicon Valley domain, and now you're seeing those founders say, “Actually, I want to build for the civic need. I want to build for the national interests. These are issues I care about.” And so you're seeing those founders actually decide to build in the category and team up with founders who maybe have a little bit more experience in government, or maybe have a little more experience in terms of how they're building in the physical world.

From software to the physical world (7:23)

That period you referred to, which seems like a lot of what Silicon Valley was doing with the first 15 years or so of this century: they're doing internet, social media, very consumer-facing. How valuable was that period? Because that is a period that, here in Washington, is much criticized as trivial, “Why wasn't Silicon Valley solving these huge problems like we did in the ’60s?” Again, there were some critics who just looked at it as a waste of brainpower. To what extent is that a fair criticism, and do you think, is that unfair? That stuff was valuable, people valued the kinds of products that were produced

You would actually be better able to speak to this than me, but I'll say, the graph or the chart that's going viral today, as we speak, is the comparison of 2009 US GDP versus Eurozone GDP, which were roughly equal in 2009, coming right off the Great Recession, to today, which I actually think it was tweeted something like, I think it's. . .  the US is 77 percent greater in terms of GDP than the Eurozone countries, which means that, for some reason, the Silicon Valley ecosystem — and it is largely attributed to Silicon Valley. When I first wrote the thesis on American Dynamism, I looked actually at 1996, because it was 25 years when I published it, but 1996, if you looked at the top US companies by market cap, all six of them were outside of technology as an ecosystem. They were energy companies, I would say almost archaic industries that had grown over a long period of time, but if you look at those six companies today, they are all tech companies. And so something has happened in the 21st century. You could say the new American Century is actually built off the back of software. It's built off of these large tech companies that were built in California, in many cases. And so the 15-year period that you're talking about, which is this sort of, it was a zero-interest-rate environment, cost of capital was very low, there was a lot of experimentation going on, it was, in many ways, the canonical example of American Dynamism broadly, that you had risk capital going after many new ideas in many different areas, but they were particularly really focused on the areas that government was not interested in regulating.

And that's always been the theme of innovation in Silicon Valley is, “Let's go where they're not necessarily paying attention.” Maybe you had some one-offs in terms of, you'll always have to meet with your regulator at some point—in the case of Uber or Airbnb—but these companies were really born of the needs that founders understood. They were built off the back of a platform shift in terms of, 2007, 2008, the iPhone becomes the thing that everyone wants to build on, it becomes the mobile era. And so you really did have this focus of software, and enterprise software, and consumer, and companies were able to grow to extraordinary heights. And if you just look at what it has done for US GDP in comparison to even something like Europe, it is really extraordinary. So that is a story that I think we should be celebrating and telling.

But what has happened, I think, since Covid is this new shift, which is, we've explored many of the digital frontiers that we can. And of course there's always a new digital frontier. Every time we think it's over, we get hit with a new one — in the case of AI. But the thing that I think has really changed is that entrepreneurs now are not afraid of the physical world, and they are realizing — and I hate to use the word “inevitable,” but in some ways this is an inevitability — that you are going to have to interface with government at a certain point if you are going to build in the physical world. And there are so many opportunities, there are so many different places where founders can build, that that really did take on new meeting post- this slew of black swan events, in the case of Covid, and then of course Russia invaded Ukraine, where I think it did wake up a lot of founders who said, “I want to work on these really hard problems.” And thankfully we have companies that have scaled during that time, that have trained these manufacturing capabilities, they've trained engineers how to do these things. So it is our view that that 15-year period was extraordinary for software, but the next 10 years are going to be extraordinary for these American Dynamism companies, as well.

Government collaboration: challenges & opportunities (11:29)

When you talk about interfacing with government, what popped into my head was a bit of video of a congressional hearing, and they were trying to decide, do we want to bring the private sector and SpaceX into the space program, and so not just have it be a government effort by NASA? And I just remember these senators just lambasting the idea. And I think they might've brought in some astronauts, too. And if I was interested in interfacing with government and I had seen that video, I'm like, “Boy, oh boy, I hope the attitude of government has changed since then, because it seems like that's a wall.” What is the attitude on the other side? You said the attitude of the entrepreneurs has changed, of funders, but what about on the other side? What is the openness to the kinds of solutions that your companies are presenting?

I think it's changed because it has to, and I always point to the late former Secretary of Defense Ash Carter, who in 2015 started DIUx [Defense Innovation Unit Experimental] as an innovation unit for the DoD [Department of Defense], recognizing that there's a talent problem that US government has had; and it didn't start in the last 10 years. When I was exploring this talent problem, I actually realized that there had been a commission on the lack of talent going into the bureaucracy at the federal level.

In the 1990s, Paul Volcker actually chaired the commission, it was called a “Quiet Crisis.” Basically that young people today, unlike in the ’50s and the ’60s where government was seen as this extraordinary job that you could have or that you could go into one of these companies and work in a company for 30 years and then draw a pension, that young people today want to go work in the private sector, and the growth and dynamism of the private sector has actually been an issue for government, and that is not a new issue. It was explored in the late ’80s, early ’90s, and it has gotten precipitously worse because of tech. I would say that the technological innovation risk capital going to Silicon Valley and saying, “We're going to fund young people as they come out of college because they understand this new type of engineering.” You're seeing some of the best and brightest young people decide not to go to traditional companies, which has been a huge issue for the prime contractors that supply 40 percent of the government programs for the DoD, but what has happened is you're seeing this extraordinary engineering talent go to startups. And so I think what even — this is 10 years ago now — DIU saw, if all of our best and brightest software talent is avoiding government, or much of it is avoiding government, they're avoiding traditional companies that we work with, we have to meet them where they are.

And so the DoD I actually think was the first government organization to really recognize this crisis and to decide, we're going to need to have new interfaces. Now, whether that means new procurement, that's always going to be a debate, and that's a Washington issue that I think we've been fighting for several years now in order to change how these companies are able to work with the DoD on these big programs, but I think even just recognizing that this was an issue 10 years ago was a huge step for government.

And over time now, we've seen a handful of what we would call “defense 1.0” companies, in terms of startups, many of them kind of built off the back of a company like SpaceX, now realizing that you can build for USG [US Government], you can build hardware-software hybrid that you can then sell into production contracts, and it's companies like Anduril that were started in 2017 when people said, “This is impossible to do. You're never going to be able to sell to USG,” and this year was chosen for a massive program, the CCA [Collaborative Combat Aircraft] program with the Air Force, over many prime contractors.

And so I think that is the story now that Silicon Valley has seen, and I always joke that, particularly investors and founders, they really only need to see a handful of winners to know that something is a category, and so you're going to see more and more of these companies being founded, scaling, and I think that circuitous cycle and that virtuous cycle actually leads more to the DoD saying, “Okay, this is a real ecosystem now.” It's not as risky to take a chance on a startup, which is what government is always worried about, if we take a chance on anything innovative, are we going to look foolish? And so I think, in some ways, you are seeing the government respond to what's happened in the private sector, but this is not something that's a year old, two years old, or three years old, this is something that's been talked about for almost 10 years now, and of course SpaceX now is an over-20-year-old company.

Is this still primarily a Defense Department-focused effort? Are there other areas of government who are looking at what's happening with DoD and they're drawing lessons? How diverse of an effort has this become?

We see this across every sector that government cares about. So it's not just defense, it's aerospace, it's energy, it's logistics, it's transportation. We always joke, if there is a department in Washington that exists to regulate a sector, that is American Dynamism, and you are seeing innovation in those sectors. But it's happening at different rates. I'd say the DoD is one of the largest spenders. The largest private US company right now is SpaceX, so there's success in those categories, so you're seeing a lot of interest in it now, but then there's companies in public safety. That's an area where I think there's just been an extraordinary explosion of innovation in the last few years, largely driven by the fact that there is a labor crisis happening in public safety across America, but it is a different sale, it's not selling to federal government, selling to state and local.

One of our companies, Flock Safety, which I mentioned at the beginning of our chat, they now are involved in solving 10 percent of vehicular crimes in America.

What do they do?

So, it's a great story about a company that was founded in Atlanta in 2017, and they built a very small modular license plate reader that only tracks cars, not people, and started building for homeowners associations with the recognition that most crimes in America are committed with a car, and so if you can put these in areas of high traffic, areas to augment the work of law enforcement, crime will go down. And they started selling to homeowners associations and immediately got pull around Atlanta and suburban Atlanta from police chiefs who said, “I need 10 of these in areas where we don't have enough people who can look at different areas.”

So now this company is operating across America, they're in all 50 states, and what's extraordinary about what they've been able to do as a technology company, just putting up cameras in different sectors and following cars, is one of the hardest problems for law enforcement is when a car that has committed at theft or — one of the most extraordinary stories they've told us recently was there was a young girl kidnapped, a young child kidnapped in Atlanta, and the car went into a different county. And so when that happens, for law enforcement it's often one of the most difficult things, if a car goes into a different county, to do data sharing across these places. But if you have a network of cameras that can track the car, you find that kidnapped child, or you find that stolen vehicle much, much faster. In many ways, catching the cars at the moment where they've moved from county to county has actually solved one of the bigger data issues that law enforcement has.

What's interesting about this example — and it provides a nice lead-in to my next question — is, in that situation, the solution wasn't to help the various databases communicate better, it was a completely different sort of solution. So, are what these companies doing — it seems like what they're not doing is taking existing operations and improving efficiency, but providing a new way to approach the problem that they're trying to tackle.

Yes. And what's incredible about that story is it was not started as a company that was supposed to support law enforcement. It was started for homeowners associations, it was a consumerization of a civic problem. And I think that's what's really interesting is, one of the biggest issues, and this is why I think you're now seeing really interesting technology companies enter government at all levels is, you have a population that has grown up with consumer technology now. So as the boomers retire, the boomers remember what it was like to be in government, or to be in office places without Zoom, without the consumer internet, and without the things that make life much easier and tangible, as those people retire, you have young people demanding, “We have to use better technology.”

And so the solutions are not, “Okay, let's iterate on the existing systems that we've used for the last 10 or 20 years,” it's, “Why can't my experience when I walk into my job in government feel exactly the same way that it does when I walk into my home and I experience the consumerization of everything around me?”

So I think that is part of it, that you have this millennial generation that's now coming into leadership. In many cases, you have people who don't necessarily remember the world before the internet or didn't have formative experiences in the workplace or in government before the internet. And that is shaping and reshaping all of how government functions, and likely will for the next 20 years. The thing that, especially when we talk about the Department of Defense and the warfighter, the thing that has always been tragic is that you have more technology in your phone than you do when you go onto the battlefield. And so I think there's this understanding that young people are demanding to have the same level of technology and the same ease-of-use in all aspects of governance, in all aspects of civic goods.

Playing the long-game in Washington (21:16)

You seem like a very upbeat, positive person. My experience as people from Silicon Valley — or now, in your case, from Miami, a new startup hotbed — they come through Washington, they bring that optimism with them, then after a few days of dealing with people on Capitol Hill, the optimism is drained out of them, they go back shells of their former selves, because if you've dealt with a lot of people on Capitol Hill and staffers, what they're really good at saying is, “That will never pass . . . that will take 20 years . . . three of my predecessors worked on it, it didn't work . . .” How have you been able to maintain a fairly upbeat attitude, given that this is the world that your companies have to deal with?

I agree with you that one of the biggest problems that we see, and which we joke about, is that the only reason why people in Silicon Valley 10 years ago were going to Washington was to apologize for the things that they did. They would get hauled in front of Congress, say they're sorry, and so I think what we've seen in these sectors, in particular, is it's a specific type of founder and person who knows that this is very mission-driven. They are called to build these companies. They care about these companies. They're passionate about the national interest. And so they know they have to go to Washington repeatedly, and I think some of the mistakes that, say, founders who had no exposure to Washington, or have no exposure to regulated industries, when they would go to Washington, they'd say, okay, maybe I go once a year, shake some hands, it's kind of fun, and then I go back and I build, and they would be surprised when they got nowhere. And of course, I think that the most sophisticated companies recognize that they have to learn to play the game that Washington cares about. And there is a totally different culture in Washington, there's a totally different set of incentives. I say it's really the difference between, Silicon Valley is a positive-sum culture: Everyone helps everyone, knowing that the pie can always get bigger, and you always want a piece of that bigger pie as it's growing, and so the more things that you're doing, the better. It's why we have this beautiful angel investing network. It's why we have all of these things that make no sense to people in Washington where it's elections, where 10,000 votes in a state could decide the election, and it's a zero-sum game, and that is what decides who is in office and who is in think tanks. And so it's a very different way of thinking about things.

The thing that I think has changed the most about Silicon Valley is recognizing, we might not be good at zero-sum games and zero-sum thinking, but that is the people that we are interfacing with, and we need to understand their incentive systems when they decide to make a purchasing decision, when they decide whether they're going to vote on a bill in a certain way, when they think about, what do their constituents care about back home in a place that has nothing to do with Silicon Valley or California. So I think that level of empathy for what Washington does, which is very different than what Silicon Valley does, is important.

Is it hard to stay optimistic? There are times where you're banging your head against the wall, we're on very short time horizons, Washington can go in perpetuity doing what it does without necessarily seeing much change. But having those points of connection, and constantly having the conversation, and recognizing that it is a long game and not a short game, I think has been very beneficial, and now there are success stories: Palantir, Anduril, Shield AI, these companies that have been around for 10 years now, that have really shown that it is possible to do good work and to support the needs of the DoD, and to speak the language of the DoD, as well, I think has really led to this next generation of founders understanding what they need to do to be successful as well.

Building the American Dream (24:35)

What kind of world are you trying to create? I'm sure it's intellectually challenging, I'm sure it's well-paying, but, fundamentally, why are you doing this? And I would think it's to create some world that is better than the one we're currently living. What is the world you're trying to create?

I think there is a recognition post-Covid, in particular, for a lot of young people, a lot of engineers, that things were broken, things are broken in this country. The physical world has not kept up with the digital world, and there's been extraordinary changes, technology is moving as fast as it possibly can, and a lot of the things that people care the most about have been left out of that story: Education, which is something we haven't necessarily talked about yet, but education needs to be completely transformed in an era where technology is at our fingertips and where people who are good at learning learn faster than they ever possibly could, and people who are not good at learning don’t, and so you have a disparity between those people.

But there's an extraordinary amount of change that has happened in the last 25 years where the things that American citizens care most about have not changed in the way that they need to keep up with, again, the changes in the consumer internet and what we've seen in the enterprise.

And so the story of, how do we make America strong? How do we continue to be the most dynamic country in the world? How do we make sure that all American citizens and the things they care about most in terms of the American Dream are part of that story? I think that is something that the founders who work in American Dynamism care deeply about. They recognize, and I always point this out, but there are so many founders now who are working at companies like Anduril, like Saronic, where they don't necessarily even remember September 11th — they weren't old enough — but they care deeply about the idea that America needs to be a strong country, and that we need to have a mode of deterrence, and we need to have a strong national defense that keeps America the most dynamic country so that people can build inside of it. The same thing with recognizing that there needs to be changes in housing, needs to be changes in education, these are things that were part of the American Dream when our parents were growing up and feel a little bit distant for a lot of other young people growing up today. So I think there is a recognition that technology has to be a part of those big sectors in order to support the American Dream that many of us grew up with and that many of us aspire to.

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