David Shor and Byrne Hobart on the Politics of a White-Collar Wipeout

22:04You actually have to build a different kind of building. And you also have to finance it a different kind of way, or you can finance it a different kind of way. So if you have a factory that has some kind of mechanical power source, you tend to expand your business in these discrete factory-sized increments. And what that means is that to your investors, you pay out most of your earnings as dividends because there's nothing to do with retained earnings. If you're going to grow, you want to issue a bunch of stock, you want to issue a bunch of bonds, and then grow in one shot. But once you have electrified factories where they can expand, they can just add another assembly line, or they can upgrade this machine to a newer machine, etc., they can actually expand more organically and incrementally.

22:40And so that's when you start to see dividend payout ratios come down, and that's when you start to see the growth company as a concept emerge. Like if you read investor accounts from the 1920s and they're talking about the stock market, one of the weird things is they're very fixated on whether the stock is above or below$100 a share because that was the par value. That was just like the standard value for the stock and it was supposed to be the book value, et cetera. Then people kind of viewed equity as just the most junior claimant, like the way you view equity, the equity slice of a CDO or something like that.

23:07And now we view equities completely differently. And so we deploy money completely differently. It would be incomprehensible to an investor circa 1926 to say, I'm going to invest in this company that has no operations. It's just people. And I'm going to put the actual money into this business, but most of it will be owned by these people. And then the business, my stock could be worth 50 times as much in a few years if things go perfectly. That wouldn't make any sense to them. The idea of a stock going from par value to 50 times par value is just insane. So we, but that change actually was part of, I think it was like causal and in both directions with America just having a really flexible financial system.

23:49We also have a really flexible labor market relative to every other country, which means we will be patient zero for like all the job loss stuff. Like it'll hit us before it hits anyone else and it'll hit us harder than anyone else. On the other hand, one of the unique things about this particular general purpose technology rollout is that it is happening much, much faster than before. But the thing that slightly offsets that is that the specific technology actually gives you access to information and cognition such that you can ask chat GPT, like, here is my job. Like, I've been selling insurance for 20 years.

24:18How should I reskill? Like, what should I do? And it will ask follow-up questions. It'll ask, okay, well, you know, what other problems do the companies and people you work with have? Or, you know, let's break down the skills that you have. What makes you a particularly good or bad insurance person? And then what are the other jobs that might be less AI exposed that you could do? Or, you know, as the models get smarter, you could just tell it, hey, I want you to invent a new job for me, like a bespoke job I was born for. No, you already have that job. That's right. Podcasters are safe, I guess.

24:48We can ask questions. But, I mean, it does seem kind of dystopian when the upside is, well, you can ask the chat GPT what your alternative job is. No, but this stuff always feels dystopian at the time. Like if you told someone 200 years ago, hey, it's going to be completely non-viable for you to inherit your father's farm and work on that farm and then give that farm to your son. And if you said, you know, not only is that economically non-viable, but you're also not going to be so fixated on is it your son or your daughter. And also you're probably going to move to a city. You'll be surrounded by complete strangers.

25:17You'll have a job like in this loud, noisy, very uncomfortable building, like messing around with, you know, whatever these physical things you're manufacturing are. Like a lot of people would say that's kind of nightmarish. And in fact, a lot of contemporary observers did talk about that being kind of nightmarish, but it did end up working out reasonably well over time. It was just new and weird and completely incomprehensible from the original standpoint. Let me ask the question in a slightly different way, which is like, who captures the productivity gains here and how are they distributed?

25:45Because I can imagine a situation where we all have jobs, there are certain tasks in our job that we don't necessarily like doing. And if we can use AI to do them more efficiently, then maybe that's great for us. But history is full of examples of new technology that is pitched as, you know, a productivity enhancer, like email is going to let you do things faster. And then it turns out that actually email means we have to reply to emails 24 hours a day and we just get more volume and it actually makes us more miserable. Who captures the efficiency gains here? People who don't feel miserable when they can produce more economic output but have to pay different kinds of attention or put in more effort.

26:25It is true that these things have negative side effects, but when the cost of communication goes down, the amount of coordination you can do goes way up and you can coordinate in different ways. And I think this also illustrates that it's very hard to predict the demand for service sector work because a lot of it is so meta. A lot of it is interacting with other parts of the service sector. So like Excel is kind of the trite example, but there's also word processing where you could think, OK, word processing makes it easier for lawyers to just quickly draft contracts. And so we'll need fewer lawyers.

26:54But actually, it meant they could turn a two page contract into a 50 page contract. And then you need more lawyers to handle that. Joe, did I tell you I met someone in Connecticut who was training to be a copy editor? He started two years ago. And I just thought, my God, what bad timing.

27:11Tracy Alloway:I've heard a few other stories. I heard someone recently, they went to a coding boot camp six months ago. And I'm like, that's awkward timing. David, in your polling, who likes AI the most and who likes AI the least? Yeah, there's a pretty clear coalition. The actual levels depend a lot on how you ask it. But the main demographic split is that young people like AI a lot more than older people, then men more than women, which is probably unsurprising. And then I think interestingly, generally educated people have much more positive views. Ironically, despite all the talk of the white collar job loss, it's the people with degrees who I think are the most optimistic and then working class people are a lot less optimistic.

27:53And then finally, after all of that, generally speaking, white people are more pessimistic about AI and black and Latino voters are generally more optimistic. You know, the Mississippi Delta, for example, actually has the highest rate of folks who are excited about AI. That's interesting. Wait, explain the difference in attitudes between the educated and more like working class. Is that just because the working class is, I guess, maybe historically more used to getting screwed over, for lack of a better word? Well, I think that is exactly it. He painted the story of, well, the jobs are going to change, but there's going to be tons of growth.

28:31There's going to be new jobs. And I think it's just really worth saying that voters are extremely skeptical of this claim. Like if you go and you say, oh, how much do you trust the statement that AI is going to create lots of new jobs? I think it's something like minus 40. The reality is that, you know, voters are extremely negative about the economy right now. It's really impossible to overstate where something like two thirds of the public thinks the economy is rigged. Only 35 percent of the public think feels that they're financially secure. And in that context where people are genuinely quite angry, they are extremely skeptical of the claim that things are just going to be OK.

29:11And obviously, you know, working class people remember the decline in manufacturing. They're like basically every economic big economic shift has had winners and losers. And the winners generally have been either the top one or the top 10 percent. The economists argue about that. But other people have lost. And so, you know, the main point I want to make is just I think the picture that Bryn is painting isn't going to be allowed to happen because the public has a say.

29:40Tracy Alloway:This is a really important point. The public will sort of it's almost impossible to talk about the future without knowing what the politics are going to be. Let me ask you, so you work with Democrats. And when I think about the Democrats and AI, I think there's a few different things. There's a pretty big contingent on the sort of capital L left that thinks it's all a fraud, that thinks it's like, this is Theranos again. This is NFTs. This is completely economic sustainable. Then there's sort of like the anti-data center people. They don't want them in the backyard. They don't want them around, period.

30:16Tracy Alloway:Then there's sort of like what's been building in the Democratic Party for a while, just this sort of like anti-big tech and this sort of the anti-oligarchs, stuff like that. Like, is there anyone that you talk to who's most, I'm trying to think of the exact term, taking it very seriously as an important technology that is going to evolve? Like, is there anyone you talk to who's like, no, this actually works. This is real. This could be a productivity gains, et cetera. Or is it almost just various flavors of political negativity? Well, I think the backdrop is that this is a very new political issue.

30:54You know, even since last year, the share of voters who care about AI has increased more than any of the other 39 issues that we're tracking. And so politicians obviously are catching up. Usually politicians are pretty reactive. But you know what I will say is I think that Democrats are in a much better position to capitalize on this than Republicans are just for the basic reason that Republicans have really painted themselves in a corner on this. You know, Donald Trump is on tape saying that AI is going to create tons of new jobs, that job loss isn't going to happen. J.D. Vance gave the speech where he was like, oh, we will never regulate AI.

31:30And so I think, you know, just for my conversations, I'm seeing Democratic politicians care a lot more about this than they did six months ago. And I think that folks are kind of ambling about to figure out what the right way to respond is. Wait, say more about why you think AI has become a concern so quickly, because, you know, everyone in this room has probably played around with chat GPT and things like that. But I would imagine for a big chunk of the population, it hasn't necessarily impacted their day-to-day lives just yet. So it's kind of surprising to see AI concerns rise the ranks of worries so fast.

32:04Well, I do think people see the writing on the wall, you know, that basically, as it stands, something like 60 % of the public has used these tools, 13 % of the public uses them every day. And I think that people really underestimate the extent to which the public is concerned. I think these tools really are being rolled out quite widely across a whole host of different sectors. I was talking this weekend to a medical tech who was like, oh yeah, no, the AI is being deployed. She was in a rural hospital in Montana. And even then, she was like, oh yeah, no, AI is being deployed quite widely. And I think that, again, this is happening in the context of voters feeling extremely negatively about the economy.

32:45And so whenever they see the prospect of a large scale revolution and how all of their jobs are going to happen. I think that they're very concerned they're going to be screwed.

32:54Tracy Alloway:Bern, you're plugged into the opposite side of the aisle, I believe. Yes. And on there, there's some interesting cleavages as well, because obviously we have the sort of the tech right that's very enthusiastic, the progress and acceleration and so forth. And then you have the sort of obvious like populist coalition, You have like politicians talk about how awful it would be if, you know, we ever had self-driving trucks and how terrible that would be for drivers. What do you how do you see the tectonic plates moving around on the other side? Well, I like AI, so I'm very pessimistic on the political dimension.

33:33And I think part of it is that when you ask people about AI, when you're making it salient, they have one set of views. But if you look at their behavior, they have a different set of views. And I think this is like a broader point about the large scale deployments of technologies is that they do increase measured income and wealth inequality, but they decrease consumption inequality. So things like flying on a plane is just a much more attainable, affordable thing. There were some recent stats on how DoorDash usage is heaviest among lower income people. And so you just have access to a lot of things where it used to be that either nobody had it or only very wealthy people had it.

34:06And actually, chat GPT, it is the kind of thing where if it didn't exist and I were much, much wealthier, I would just hire people to do that kind of thing. I would just ask them weird questions about history or just send them off on little research tasks. And I wouldn't feel at all bad if they get back to me, you know, a week later and present me with this report. And I say, oh, I actually changed my mind. I don't care about that anymore. But here's the next one. But like you can do that with an LLM. But also older demographics nominally don't like AI, but they spend a lot of time on Facebook, which means they actually do really like AI.

34:35They like AI recommendation engines. They are very tolerant of AI recommended ads. They love AI-generated images and AI-generated text. They feel much more comfortable on a site where an AI is actually going to tell them what the comment should say, and they don't have to come up with a comment. People actually love AI from a consumption perspective and hate it from the outside abstract perspective. So the thing that makes me more optimistic is just the salience of these different issues fluctuates over time. maybe AI deployment is so fast that becomes just part of the background noise, like the internal combustion engine or electricity or even the internet.

35:08We're like, the internet is not a campaign issue right now. It was sort of an issue in 2000. And it's been, I guess, you know, there were internet-y issues in 2016 and 2020, but it's becoming less and less salient. We just don't think about like, are you pro or anti? Like it just is. And I think that with a lot of these invisible productivity gains from AI or less salient productivity gains from AI, we're in a better world where people are not thinking AI is and is only the homework cheating and plagiarism, like denial of plagiarism machine, plus the thing that's taking away my best potential job.

36:01It always happens right before the whistle. There's a little voice that says, what if I mess up? What if I'm not ready? I see a whole highlight reel of everything I don't want to happen. Missed shots, turnovers, letting my team down. And for a second, there's doubt. But then I realize I've done enough to be where I'm at. The early mornings, the extra reps, the days I wanted to quit and didn't. So, I smile. Self-doubt is natural, but my smile is a reminder that I'm resilient. To put more smiles out into the world, Colgate has supported female athletes for over 50 years with the Colgate Women's Games.

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37:53Thousands of businesses have made the switch, so why not you? Try Odoo for free at odoo.com. That's O-D-O-O dot com. Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. Hi, I'm Karen Moscow. And I'm Nathan Hager. Each morning, we're up early putting together the latest episode of Bloomberg Daybreak U.S. Edition.

38:16Tracy Alloway:It's your daily 15-minute podcast on the latest in global news, politics, and international relations. Listen to the Bloomberg Daybreak U.S. edition podcast each morning for the stories that matter with the context you need. Find us on Apple, Spotify, or anywhere you listen. Do either of you have a favorite historical analogy for AI right now in terms of understanding it from a political or social perspective? You know, for me, as I said before, I think it's COVID where I think that this is going to hit very quickly. People get obsessed about, you know, exactly when it will happen or exactly how it will happen.

38:54But I think voters hate change. I think that that's one of the most underrated status quo bias of politics is very strong. If you look at who are the most popular politicians in the country, it's always, you know, the governors who do absolutely nothing, you know, underrated political fact. So I think if you're talking about a world where every single job is being simultaneously transformed and there are tons of winners or losers, like, you know, obviously people get hung up on this question of will everyone lose their job because of AI? But if like 3 % of people lose their job because of AI, it's just going to be the biggest issue in the world.

39:28You know, whenever you have diffuse benefits and concentrated losers, that's just like a public choice recipe for chaos. And so I really like the COVID analogy because COVID happened basically all at once. And then our political system was scrambled and new coalitions were created and it was very difficult to respond. And I think whenever you go back, as we talked about before, it's really hard to think of an economic transition that happened that quickly. Yeah, I think I think the COVID analogy might be revealing in another way, which is like the coalition's completely shifted multiple times.

40:02It was like in January, it's only the weird online, extremely online right wing anonymous people and then a handful of rationalist people who say this is a really big deal. And it's like we need to shut down air travel from China. And like for the EA types, for the rationalist types, that was more like this is a prudent response to a potential existential threat. And then I think for a lot of people on the far right, it was like this is a way to make China look bad and also to have fewer flights to and from China. And therefore, we want to do it. And then, you know, Trump, I think, was very just tied to what the S &P was telling him about whether this was a good thing or a bad thing.

40:38Like, you could kind of see it. I think if he had a live ticker telling him how the market was reacting to some of his early COVID speeches, we would have had a completely different COVID policy of the country. And then we kind of did this flip where now then the right became the more COVID libertarian, you know, just let it rip. we're all going to be immune to this at some point faction, which was really weird to me because the right skews older and older people were more at risk. But I guess it goes back to salience and information environment. And if you're in the cohort where you're sedentary, you're elderly, and you are sedentary because you're spending a lot of time watching TV, if what you're watching on TV is Fox, then maybe you just get a very different view of the world.

41:16So I think the coalitions probably fluctuate a lot. I don't think there's actually any, I don't think either major party is a good home for the pro-growth slash abundance faction. And they can be a minority among Democrats or a minority among Republicans and will have to sell out in some ways to have any kind of influence whatsoever. So in that sense, again, pretty pessimistic. But when you were talking about the issues that changed in salience, I think in the data you had, it was like a year ago, it was trade. And everyone was obsessed with trade. And then trade became a huge thing and was like the main producer of headlines for a while.

41:49And then it kind of faded. So even though the situation is still very messed up in terms of global trade. In fact, it is more messed up than it was a few weeks ago in terms of oil trade. That's right. So in that sense, trade is like the day-to-day, like, are you better off than you were a week ago question. Trade is still the most salient issue. I mean, maybe if there's a new model release, that'll change things. But for now, that's the case. So yeah, it's all pretty volatile. In terms of the technology that I think maps most closely to this, I think the transistor and integrated circuits are probably the closest mapping.

42:21like one in the literal sense of they are a way to make everything in your life a little bit smarter and it is just astonishing to think of how many little idiot savant devices we have in our homes that can do little calculations and computations and have a nice little interface and how that stuff got so cheap that it basically became free like it would not make sense to think about can we build a microwave that has entirely mechanical controls with no transistors inside of

42:44Tracy Alloway:it like why would you do that speaking of politics like david do you think it's plausible let's say the president were for it a future president or for it someone puts up a bill and says we're going to ban a new ai data center construction could you see a world where that actually passes because i feel like that's like that seems crazy but also i more i think about it it almost seems like it could pass yeah i i could see all kinds of things passing uh we're gonna we will probably have divided government and so it's always good yeah that against any specific thing happening in that situation. But like we just, you know, there's it's very popular, for example, to ban investors from owning homes, for example, which is both parties seem to be like very into that idea that corporations shouldn't own large swaths of single family homes totally seems to cut across both parties.

43:35Tracy Alloway:The anti data center thing strikes me as similar where it does not seem like a right or left thing. It seems like a very broad populist TikTok politics sort of thing. Yeah. You know, what I'll say about the polling on data centers is it's true that if you poll, you know, do you want a data center in your neighborhood? People say no. But the flip side is if you add literally anything to it, if you're like, what if it's built by clean energy or what if it lowered your tax bills by 10 percent, then suddenly it becomes really popular. I've seen a lot of politicians like kind of grab for the data center thing because this is just like a big, scary issue.

44:11And the data center stuff is just like a really legible land use and this and that. But I think it would be a mistake, not because I care that much personally about whether we ban data centers or not, but really just because I think the public really wants something else. Like if we ban data centers tomorrow, that really doesn't change the fact that voters think that the economy is rigged or that they're very scared about the future. And, you know, in our testing, you know, we've generally tested dozens of different ways to talk about AI. And, you know, the data center stuff, I think, just doesn't move the public very much.

44:50while what does, I think, is actually just being a lot more radical, talking about job guarantees or income guarantees or eviction protections. Like, I think that there's just an enormous amount of fear and the political system should try to address it. And it's not just should. I think it will, you know, because we do live in a democracy. Actually, Bern, that reminds me. One of the things we hear a lot when it comes to AI is this idea of electricity as a limiting factor. Everyone talks about how that's the big constraint. When you yourself think about adoption of the technology and it's spread across America and I guess around the world, how much are you actually thinking about things like data centers and electricity consumption?

45:33Well, I'm thinking less about those right now just because everyone who is in that supply chain has all their capacity booked out so far in the future. Like new supply is pretty inelastic. I wouldn't be entirely surprised to see the AI companies just guaranteeing that they will take delivery on something from Siemens Energy or GE in the year 2032 or whatever, just so that they break ground on new manufacturing capacity. But I kind of view that because it's such a long lag thing. It's kind of a given. I think that the actual constraints are more on the internal organization side. just, you know, do you even have an org chart if you have AI everywhere that's always routing messages to whoever needs them?

46:17Like, could you just have, there's one person who's the CEO and everyone else is an individual contributor and you AI-ify all middle management? Probably not, because the other limiting factor is just liability, is that you do want a human in the loop. You know, I was joking about this earlier, but it is true. Like, the person who's in an ideal position right now is someone who is in a regulated job where there is some kind of trade association that limits new entrants into that job, but there's excess demand for the services they provide, then AI can increase their output per hour. Like these people will be minting money and they will continue to do so as long as they can limit supply inflows.

46:51And so what we might end up with is a more kind of guildified economy where we have limits on who specifically, not who can do the job, but who can actually stamp it and say, I'm taking credit for this and you can sue me if it goes wrong. Because that's actually a really valuable thing. And it's still like, you can't really sue a data center. You can try to sue OpenAI, but they can probably afford better lawyers than you. It's probably more economically efficient to sue me for something ChatTPT told me to do that I didn't double check by asking Claude. And so it is weird to think that one of our economic purposes as living and sold human beings is to be an easy target for a lawsuit.

47:27But it is actually something economically valuable that we can do. And because we all have different risk preferences and risk tolerances for things, it actually means that we would get this sort of uneven deployment of AI where there would be people who just demonstrate that you can go way too far. And that if you decide that you're going to be the CPA who does taxes for 1 ,000 1040s a day, you're probably the first CPA to go to prison specifically for something that an LLM told you to do if that hasn't happened yet. But I think that that kind of model where you want a human in the loop because so many structures that we have economically and socially just assume there's a person, that will probably stick around.

48:06Tracy Alloway:You write a lot about finance as well as technology. And I've been thinking a lot about the future of finance and AI. One of the things that comes up is we did a really good episode with the CEO of PNC Bank. We were talking a little bit about AI and lending. And he said, you know, if you deny a loan to someone, you have to have a reason for it. There are various laws that, you know, anti-discrimination laws and stuff. So if someone has denied credit, you have to be able to explain why. One of the things with AI is that it can make very good decisions, but it's hard to interpret. And the AI often can't explain how it arrived at a conclusion.

48:41Tracy Alloway:And I'm curious, like from just thinking about the finance industry, how much do you think that's going to be a limiting constraint on the degree to which AI disrupts the industry? the fact that a lot of things need to be articulable in English, basically? Well, I think AI, like humans, is bad at knowing why it actually did things and really, really good at explaining why whatever it did was the right thing to do. So it probably, I mean, I'm not the head of PNC, so I don't know for sure. But I would imagine it actually makes it easier to just come up with some very solid-sounding rationalization for anything.

49:15They're just really good at rationalizing. So I would be less concerned with that. Like, I actually think it's nice to have more open, accessible kind of reasoning. Like you can actually read the reasoning traces. And one of the effects I think it has on finance is that people who are coming up with recommendations like make this loan, don't make that loan, it will make a lot of sense to have much more detailed records of their entire thought process. So you might have them, you know, working in Databricks notebooks or something equivalent to that specifically so you could see, okay, first they asked this question and then they went down this rabbit hole, then they decided it's irrelevant.

49:48And then they went to this question and then they spent some time on it, et cetera. Because if you have just, here's the question and here's the polished answer someone came up with and edited, you're missing a lot of the intermediate layers. And so it's hard to train a model that can trace through that and reproduce it. Now, if you have a smart enough model, it's basically implicitly reproducing all of that reasoning on its own. But that means that it does worse when the reasoning is really, really clever and the person didn't show their work. And a lot of clever people just figure things out and then they're already bored with the problem.

50:16So they don't want to tell you how they did it. And they move on to the next thing. I did have like a home DIY project recently. And I was asking chat GPT how to do it. And it basically told me to defy gravity and could not explain why it had to arrive at that conclusion. I'll tell you more about it later because it's a long story. But anyway, if we could do a little bit of like political polling, navel gazing for a second, David, when I think about AI and some of what you do, I think it could be very helpful to you because you can identify even more granular issues for the population. You can come up with like even better polling questions.

50:50But then I think that everyone's going to have access to basically the same technology. And so the worst case outcome is probably going to come to fruition, which is we're just going to get more identity and sort of cultural grievance politics. How do you see that going? Like does political campaigning get smarter with AI or do we just kind of descend more into culture politics? Well, obviously, it's very hard to make predictions about the future, which I guess I've said already today. But it's easy to imagine really bad things happening, deep fakes, the inability to track what's true and what's not, you know, the ability now of lots of people to make content that's persuasive, that argues for things that previously weren't within the domain.

51:33But, you know, I do think in this discussion, people kind of underestimate how dysfunctional the status quo is. Where if you look at social media, for example, something like 5 % of the public is responsible for a majority of social media content, which is crazy. And I think that right now, because content is expensive to produce, if you are a influencer or a writer about politics, your economic incentives are really to focus on the 5 % of the public that is consuming way, way more political content than everyone else. And really basically no one in the political spectrum right now is making content focused on regular people who don't care that much about politics.

52:15You know, just to give an example, someone I know had a panel of TikTok users where he, you know, recorded their phones and it was like 200 people and he was paying them to do that and he could see who was watching what. And after Charlie Kirk got shot, there was one person who was responsible for a majority of the Charlie Kirk videos. Just that day he was like really swiping and watching hundreds of Charlie Kirk assassination videos. And, you know, if you are a content producer, that is currently your incentive. And so my point is really the status quo is really quite bad. And I think that if you look at who these people are, they tend to be quite anxious.

52:51They tend to be quite neurotic. Like right now, the attention game really pushes you toward being more negative, while the persuasion game of like, how do you actually get someone to change their mind really pushes you in the opposite direction? Every time I've done a poll, every time I've done a test, it's generally said you should be more positive. You should focus more on regular things that affect people's lives. And the reason why that doesn't happen are the incentives of the actual content creators. And so I could see lowering the costs of producing content and kind of broadening out who is able to make content.

53:24It could be good, but also, to be clear, there's a lot of ways it could be bad. We're just entering, I think, a totally different world where it's hard to predict anything.

53:34Tracy Alloway:It is weird how much like politics, discourse and ideas truly seem disconnected from anything that affects people, many people on a day to day life. I mean, this has been brought up before. Why has no politician really made a big issue about like getting rid of like spam texts or something like we all find it incredibly annoying? And yet you wouldn't. It's almost unimaginable. I'm sure you could find some one issue voters on spam text. Right. But like that would be great if someone actually like let's take this seriously as a thing that annoys everybody. And let's try to make a push. And yet it doesn't happen, does it?

54:09Yeah. The stat I really like on this is if you ask people what issue do you care about the most, it's cost of living by an enormous margin. But the flip side is that if you look at the 0.7 percent of the population that is donated to a Democratic campaign in the last year, then cost of living goes from number one to like number five and like climate change is on top. And so I think, you know, if you look at like, I think the status quo is that politicians right now, if you look at what they talk about, it's much more explained by what their donors care about than, you know, what the public cares about.

54:41And that's really pretty, pretty bad. I think a lot, an enormous source of our political dysfunction right now is really that people on both sides aren't listening enough to what regular people care about. Do either of you have a good read on the policies you would expect to be actually politically viable if we do start to get, I'm not going to say an AI doom case scenario, because I know you disagree on that, but a painful AI adjustment process? I think that the public is much more radical on this issue than people think. Me personally, I'm not usually the person who goes out and says, ah, the people crave radical policy change.

55:18But we really are in a very radical time. Right now, if you ask voters, do you support price controls? The answer is yes, by two to one, which is not something that was true five years ago. When we've done tests, we had one test where we had a really quite radical thing where we're like, oh, we're going to guarantee your income up to$150 ,000. We're going to make sure that you have a job. We're going to make sure that you won't be evicted. And it tested better than like 98 percent of the clips that were made by Democratic professionals. That specific policy, which I think is quite radical, I think is something like plus 30 and plus 15 among Trump voters.

55:54And so that's that's just the thing I want to say is, you know, right now everyone has this discussion about timelines and policy specifics. And, you know, the public is in a much more radical place than politicians or commentators are. So that's, I think, the big thing I'd say is I think it's the most underpriced issue. The very best testing topic, better than populism, better than AI, is AI populism. And I think that's the direction things are going to go. So this is ominous. I did want to return to two of the points that you had made on deepfakes and on how everyone in media is writing for the tiny minority of people who really care about – or everyone in political media is writing for this tiny minority that cares about politics.

56:36And one, I actually – I do think deepfakes are a net positive development in the specific sense that – This is great. We can get to a whole hour on this question. I've been writing about this one for a long time. My view is that it is always possible to create manipulative cuts of some media. It's always possible to say, OK, there have been, you know, 50 videos recorded in the last day of some egregious happening. Here's the one we're choosing to make a new story. That's always been possible with sufficient resources. And now it's possible for everyone. And so to the extent that when you choose what narrative, if you're in a position to choose what narrative is promoted, it's I think of it as kind of the modern.

57:13And it's like it is the de facto electoral college is that people opt into viewing certain kinds of media that will then shape their views to make them more more correlated with that kind of medium. So what we're kind of doing is democratizing democracy. We're saying anyone can make a misleading video like you don't have to watch 20 hours of footage of this person talking to find the one gaffe. You can just fake it. And the fake is actually like for the fake to be a plausible, you know, opinion shifting fake. It has to be something fairly similar to reality. It can't just be like Donald Trump is actually an alien.

57:45It has to be something like Donald Trump took a bribe in cash from a Qatari businessman or something like that. But then if you can only make fakes that are actually kind of plausible, then they just exist in this space that is not that far from reality. And similarly, the big viral videos, they are often a sample from reality. They are a sample from reality, but they are something where you can magnify the perceived frequency of an event if there's just wall-to-wall coverage of that event on video. So that was one point. I do think that it actually just makes us a culture that is less likely to make up our minds on important issues by watching a grainy, shaky 12 seconds of footage of something.

58:23I think that's good. I think we should read more and watch less. But I also think that when the other piece of AI, just the targeting recommendation algorithms, there's a huge chunk of AI spending and AI's impact. That probably does mean that it's potentially more likely that someone could make a career out of something like agitating against spam techs. And we did actually see click to cancel is kind of moving along. So there's little quality of life things. Click to cancel is the kind of thing a mayor would be really proud of, but it has to be done at more of a federal level. But maybe if it's possible to actually target whatever population niche really wants to bring back paid toilets because they think that banning paid toilets creates all kinds of perverse economic outcomes, which it does.

59:05You can find those people, you can mobilize them, and you can get them to, you know, if there is like some very close race somewhere, the house race, for example, and one of the politicians happens to support this particular pet issue, they could be like the crypto people and just money bomb the person who happens to also support the thing that they like. So we could actually have – that's another way we could potentially see AI democratizing democracy further is that you can actually coordinate interest groups for people who are just less politics-brained but still actually care about problems that should be solved through the political process.

59:36I just wanted to jump in quickly because you said that – Brent said that this is ominous. And I want to push back on that a little bit. There's an Ed Glazer quote that I really like, which is, you know, everyone wants macroeconomics to have micro foundations, but micro foundations itself should be micro founded. That we are not going to experience any of the potential productivity gains or only experience a fraction of the productivity gains unless we can give voters some sense of security. That public is really crying out that they want economic security and that they want to be able to look out at the next five years without fear.

1:00:15And if you can provide a new social contract, if you can actually provide economic security at a high level, then you can actually have all of these like sector specific shifts to have higher productivity. But if politicians don't advance a vision like that, then we're just going to collapse into a Byzantine series of sector specific regulations and guilds, which I think you don't want either. And so I think, you know, the libertarians should really choose, you know, what world they want. You know, either we can have a large scale solution that protects people's incomes and prevents them from being losers, or we can just kind of have this giant negative sum fight playing out in every single sector simultaneously.

1:00:59And I'll also say, you know, we're not really in the ideal political circumstances, you know, for that latter thing to happen. And so I think it really could get quite ugly.

1:01:09Tracy Alloway:David and Byrne, thank you so much. That was a fascinating chat. We really are going to have to do another hour on why deep fakes are good. Thank you all for joining and have a great rest of your day.

1:01:31That was our conversation with David Shore and Byrne Hobart, recorded live at South by Southwest in Austin. I'm Tracy Allaway. You can follow me at Tracy Allaway.

1:01:41Tracy Alloway:And I'm Jill Weisenthal. You can follow me at The Stalwart. Follow our guest, Bern Hobart. He's at Bern Hobart. And David Shore at David Shore. Follow our producers, Carmen Rodriguez at CarmenArmond, Dashiell Bennett at Dashbot, and Kale Brooks at Kale Brooks. And for more OddLots content, go to Bloomberg.com slash OddLots. We have a daily newsletter and all of our episodes. And you can chat about all of these topics 24-7 in our Discord, discord.gg slash OddLots. And if you enjoy all thoughts, if you like it when we record these live episodes, then please leave us a positive review on your favorite podcast platform.

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1:02:37Thank you.

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