Stanford's AI Economist: The Next 10 Years Will Be the Best AND the Worst in History | Erik Brynjolfsson

25:40So instead of humans or cows providing muscle power, you had steam engines. And it just unleashed this amazing explosion of productivity growth. a couple percent per year, which may not sound like much, but when you compound it, it's, like I said, 30 to 50 times richer. That was a real, it was kind of like a singularity, the first singularity where we transitioned from stagnant growth to much faster growth. The current era is what we call the second machine age because now we're doing the same thing for our brains, our minds. We're augmenting them. And in my view, that's going to be at least as big.

26:17It's going to be bigger. It's going to be faster. It's going to affect a much bigger share of the economy. Most workers in the United States and other advanced economies are doing cognitive work. Like, you know, most of what your job is is not like lifting boxes. It's, you know, communicating ideas. Mine too. And even, you know, even people who are doing a lot of physical work, they're also usually doing a lot of cognitive work as well. So AI is going to be even bigger than the industrial revolution. It's clearly happening a lot faster. and that's the good news. The bad news is, like we were talking before, we're not really prepared for the size of this tidal wave of change.

26:53So people make money these days because they have this scarce resource, which is intelligence. If intelligence is automated, what is left for humans to make money with? Oh my God, that's the trillion dollar question. And I don't think there's a clean answer, but you're totally right. People like me, I kind of prize intelligence because it's helped me make a lot of money and it's kind of where I get my status from. But AI is going to have intelligence on demand. So one thing that's going to be more valuable is initiative or agency. My closing class, my students will remember me saying, I think whenever they hear the words AI, they should think of amplifying intention, not artificial intelligence.

27:39Because what it does is it takes your agency, your intention, and it amplifies it. If you don't have any, it doesn't do much for you. But if you've got a plan, this can totally amplify it. So the people in the future are the ones with a lot of high agency. The second thing I think that will be increasingly important is human connection. You know, when AI was able to defeat humans at chess, that was not the end of chess playing for humans. People today play chess more than they did before. My son, Xander, he likes to play chess. And I asked him, do you play against machines or humans? He said, well, humans, of course.

28:13It's no fun to play against machines. And, you know, there was this Knicks basketball game last night that millions of people watched. I don't think it would have been nearly as fun if it was a bunch of machines playing each other. So in the future, we will value things that are certified human, that are, you know, authentic, that real people are creating. I think that's another big area. A third area that, at least for a little window, will be valuable is just like physical work. I mean, AI is getting very good at cognitive work. And if you are a plumber or carpenter, if you have particular skills, that's something that turns out is harder for machines to do.

28:50That said, I think the window is closing on that one. And then the fourth category, I would say, is all the things I haven't thought of. Every time in history that we have tried to think of what the future holds, we've always way underestimated. If you and I were having this conversation 200 years ago, we'd be like, well, all the farmers, they're going to disappear. 90 % of people are farmers. I'm pretty sure we wouldn't have thought of, you know, podcaster or all the other jobs that exist today. And there will be new ones that are invented and created. And it's not necessarily my job to invent those.

29:23You know whose job it is? It's your viewers. It's entrepreneurs. And here in Silicon Valley, people are constantly trying out new ideas. A lot of them are really dumb, honestly. And some of the really dumb ideas turn out to be brilliant. Later, you've turned out that, oh, my God, you know, space data centers? Well, maybe that can work. I don't know. And so we have an ecosystem here. I had brunch with a VC this morning, and she was telling me that all of her payoff is just from like 5 % or 10 % of her investments or less. And the other ones, they don't pan out. And thank God we've got an ecosystem where people like her are willing to take those gambles and the entrepreneurs willing to take those gambles, and they try out things.

30:04And America is leading the world in this kind of innovation of inventing new things. and I'm looking forward to seeing what they invent next. Yeah, we're always good with coming up with new things, new bottlenecks and things to solve. That's the definition of a human. Yeah, that's our superpower. I know you had Reid Hoffman on this before and he told me something really valuable when you asked this question about what will humans do? And he said, human superpower is improvisation. And you define the problem really well and the machine can do it. But if there's something unexpected that comes up, you know, then the human figures out how to do it.

30:42Actually, if you have time, he had told me this funny little example that really crystallized it for me. He said, imagine that you have like an ordinary person from my class had to play chess against the world's best chess computer. And the game was in 30 days. And, you know, whoever wins, you know, great that the loser dies. He said that he wasn't sure, but he thought there'd be a decent chance that the human would win. not because the human could play chess better but let's face it if that human was life or death they would probably figure out some way to short circuit you know maybe there'd be a virus in there maybe there'd be a lightning bolt that day you know something water would spill in the wrong way and they would just they'd figure something out and they would they would find a way to win and that's what humans are good at doing how do you see um resource distribution when it's not companies hiring humans, what is it?

31:34I'm super worried about this. You heard me earlier say that I'm optimistic about growth and I think we're going to have higher productivity growth, a lot more wealth creation. I'm concerned that that's going to be very concentrated, more concentrated than it is right now. It's not an inevitability. We have choices going forward. And one of the things I want people to think about is what kind of values we have and what kind of future we want to create. I would like to see a world where we not only have prosperity, but shared prosperity. But one scenario that worries me is AI will automate a lot of work, a lot of jobs, and people will be entrepreneurial.

32:10But if it becomes too focused in just a few companies, or one big government owned entity, then all the wealth and power gets concentrated. And we need to plan for a future where lots of people can participate and where everybody has a stake in the society. I don't think either of those paths is inevitable. But I do worry that we are right now on a bit of a path towards that growing concentration of economic wealth and therefore political power. And we need to be mindful of that. What can someone like me do? Or someone who doesn't have a podcast, like how can they make sure they participate? Buy stocks?

32:51Well, literally one of the reasons I created, no, no, I think, well, stocks is a bit, but I think what you really need to do is create the value. And that's why I created the master class. That's what I teach in my Stanford class is how can you use AI to create new goods and services? Not to be a rule follower who, you know, just does stuff because you're going to be replaced by a machine if you do that. But how can you be one of those people who ask the right questions? How can you use AI to create new products and services? And in a world where there's more entrepreneurship and value creation, then I think we continue to have widely dispersed economic power.

33:27But if everybody's just following instructions, then we're going to have that concentration of wealth. So that's the number one thing. Another thing, look, I think we do have to look at different kinds of redistribution. It's not my first choice, but we need to have it as a backup plan. that if we have a lot of concentration of wealth, then we need to have things like universal basic income and progressive income taxes, wealth taxes. I know a lot of my Silicon Valley friends are going to yell at me for that. But I think that you don't want to have all the wealth and power too concentrated. It's not in anyone's interest, including the billionaires.

34:01People will come after them with pitchforks. And so we want to have a world where everyone can participate. And in the end, people create more value. You know, I've visited some of these, you know, developing countries or parts of Latin America where wealthy people live in gated communities with these walls. And they have like machine guns and, you know, they have their own schools, their own doctors and private police forces. No, it's not fun for anybody. I had a friend. She lived in Brazil and she said she and all of her rich friends were in prison. I said, what do you mean you're not in prison?

34:30She said, no, we're a prison of our own creation. I sit I sit behind these walls and when I go out I have guards on either side of me because it's just like the society is not safe for me and you know I don't think anybody wants to live in a world like that. It's just interesting when we talk about this problem it feels like it's up to those large corporations governments and on the individual level yes you could become an entrepreneur but it's not like everyone is entrepreneurial. Let me push back on that a little bit honestly I think a lot more people could be entrepreneurial than they are right now You know, a few hundred years ago, most people were kind of farmer entrepreneurs.

35:05They ran their own thing. And then we created these societies with big corporations where people became kind of like cogs and create a lot of wealth. But I think we make potentially, I'm not for sure, but I think we could try to go back to a world where a lot of us, our initiative, our agency became more important. And, you know, I really think using these tools like we show in the master class is exactly what you want to do is figure out how to do it. I think almost everybody has some area where they see problems that other people don't see, where they understand some needs and opportunities.

35:35And, you know, you can just take a Saturday afternoon and just brainstorm with a sheet of paper or with one of the LLMs helping you all the types of things you might be able to create and try some of them out. And the neat thing is that it's so low cost to give it a try. If it doesn't work, then you try something else. And for most of it, it's kind of fun. Honestly, I think it's more fun creating new things than it It is just following instructions. So I would encourage probably every one of your listeners to at least give it a try. Yeah, that makes total sense. That's what the purpose of this channel is, honestly, to inspire people to.

36:08Yeah, you are doing it. And we need more people like you. We need more people listening to the show to give it a shot and have it work. And it'll not only be good for them, it'll be good for all the people. If you want more conversations like this with the people who can see where the economy is going before the rest of us and what they'd actually do about it, subscribe to Silicon Valley Girl for more. What about the whole concept? Because I studied economics and, you know, we're all studied market economies. Do you think we're going to switch to this new AI economy where money loses value? When you think about this, like in 10 years, what do you think it's going to be?

36:43It could be. It could be different. You know, we need an economist who can think through what the economics of the future is. I'm trying to help play that role. You know, Adam Smith helped define the market economy, and John Maynard Keynes helped update it in the early 20th century. I think for the 21st century, we're going to need some new economic rules to understand it. AI agents, we're going to have billions or trillions of them. We're going to have a lot of routine work done automatically. The kinds of things that worked in the old market economy won't necessarily work going forward. I mean, one way I think about it, as I learned in my PhD program, is you can think of a market as a big information processor.

37:26It takes all this information about prices and quantities and aggregates it and allocates resources. You can also think of an organization, like a big company, as an information processor. Both of them are information processors based on 20th century technology. Now we're going to have a million-fold more powerful information processors in AI. it would be a miracle if those two institutions just stayed the way they are. I'm pretty sure they're going to change exactly how. I'm not sure. You asked about money particularly. I think it's very likely that we will have a world where our basic needs, you know, the base of Maslow's hierarchy will be taken care of and we'll be able to, just like you gave me some water here for free, you didn't charge it for me.

38:08Thank you. You know, it'll be like that for most goods and services. It'll be just like, why would you charge something for something that can just be made by robots for free. Now, there will still be things that are scarce. One obvious thing is status, because it's kind of zero sum. It's like a hierarchy. Or there'll be a few physical things, like I want to go to the far side of Pluto or something. That would still be expensive. But a lot of basic needs would be taken care of. And then we'll have to figure out what the economy is, what our new status hierarchies are. Some people will get status from being great entrepreneurs.

38:44Some will be from getting lots of citations in academic literature. Some will be great snowboarders or video gamers or, you know, movie stars. There'll be lots of different ways you can get status. And I think for better or worse, we humans are kind of wired for that. And the real job of the future economy is to steer all that status competition into something productive, you know, be like Einstein or be like Pasteur and cure some diseases rather than zero-sum status that doesn't really help anybody. Totally. Do you think GDP is going to explode in five years? Depends how you measure it. So traditional GDP is getting to be a worse and worse measure of what's really happening.

39:25I do think welfare and productivity is going to explode and probably conventional GDP will capture a big part of it. But the thing is that GDP measured all things that are bought and sold in the economy. So when something has zero price, with few exceptions, it has zero weight in GDP. And think of all the free goods we have, like Wikipedia, YouTube, you know, most users of ChatGPT are free. That doesn't show up in GDP. But it shows in valuations of those companies. Well, a little bit. That's not really GDP either. It goes somewhere. It's not like... No. It goes to well-being, but it doesn't necessarily show up in any measure of GDP.

40:06A little bit of it is in electricity. I wonder if those people who own those stocks spend money. Let's set aside the ones that, we can do those separately, but let's just look at like a Wikipedia, something that's totally free. Like that doesn't show up in any stock value, but the average person, we've measured this, values Wikipedia, you know, way more than Encyclopedia Britannica. They value it at like$10 a month if I have to go back and check the numbers. So there's, you know, billions of dollars being created and there's lots of other free things like that. And some of it does show up in advertising stock and elsewhere.

40:38But I've studied this and most of it is just invisible in GDP. So we need a new measure. Happiness, like Nordic countries where they have free education, free health care. They measure happiness. It would measure. So some of it shows up in happiness and that really is the ultimate measure. And so there's one measure, these happiness measures where they ask people on a scale of one to 10 how happy you are. And, you know, my country, Denmark, usually does pretty well. So that's part of it. You know, that's pretty coarse, like one to 10. Like, are you a 6.2 or 6.3? I mean, it's kind of. So we've developed a new measure.

41:11We call it GDP B. And the B stands for benefits. And what we do is for every good, we ask, you know, even if you're getting it for free, how much would I have to pay you to stop using it? If I paid you$50, would you stop using Wikipedia for the next month? Some people say yes. Some people say no. What if I paid you$2? How about ChatGPT? How about Google Search? How about email? And so we've done this for 600 goods. and services. And we now have kind of a ranking of how much consumer surplus, how much value people are getting from all these goods. And it's staggering. There's trillions of dollars from free goods that are not otherwise being measured in our economy.

41:50I think for the 21st century, we need to lean more on tools like GDPB and be able to understand where the real value is. So we're in the process of rolling this out in such a way that we'll still have traditional GDP, which is where you spend the money. But increasingly, we want to start paying attention to GDPB, which is where you're getting the value. And those are two different things. There may be things you spend zero on and you get a lot of value. There may be things you spend a lot of money on and you're not getting a lot of value. They're two different things. Roughly, how much value is created by Wikipedia versus ChatGPT versus bacon and eggs?

42:26We're doing all those things. Just like for LLMs, we did this and we just published this. So for LLMs like chatbots, the amount of value just in the past nine months has gone up by like 70%. And that's partly because people value each LLM more than they did nine months ago. It's also partly because more and more people are using it. And so we're just getting, these are creating a huge increase in welfare in the economy. Is it 125 a month, I think, the number that people? It varies. So here's the thing. It's like different people have different values. So our approach allows it to be heterogeneous.

43:01So there's some people who value at$125 a month or even$1 ,000 a month. There's other people who value it at$10 or zero. So you get a whole demand curve of them. And the total area under that is the value created. A few people who value it a lot add some of it. And then a lot of people who value it a little bit add some. And you get the total value is the sum of all those. What's the number for you? How much would you pay to not touch AI this month? Oh my God, it almost, I mean, for me, it's tens of thousands, you know, because it's my life. Like, I use it every day. I use it every night until too late at night.

43:39You know, I'm working with Claude Cowork and testing out different research ideas. I use it for fun when I plan things. Anytime I land in a new city, I have it give me advice on which restaurants to go to. It's just so integrated into my life. It would be like tearing off my left arm. Is there a use case that can be very inspiring for people who haven't tried using AI deeply enough if they only use it like search? Here's a kind of meta way of doing it. Sit down with it and ask it how I can use it in my life. But if they haven't used it enough, I don't think there's like enough data. No, no, no, no.

44:13You have the conversation. So what you do is you ask ChatGPT or Claude, say, hey, tell me how you can be useful to me and ask me questions. You can literally say, keep asking me questions. Interview me. and it'll say, okay, what's your job? Do you have kids? Whatever. What are some of the problems you worried on last week? And it'll have a conversation with you. And then, I've done this, by the way, it'll come up with like 10 recommended things that you can be using it for. What would you never delegate to AI? What would I never delegate to AI? There's nothing like that anymore. I know, something pops in my head.

44:51I say, no, I could see doing that. Delegate entirely. you know there are some really like life or death decisions i i use it before i go to the doctor and it gives me some um thing questions to ask but at the end of the day i still want to have a real human make the call and you know they're just not good enough that they have the issues um and um i think it's it's usually a partnership like so i almost never 100 delegate something to ai it for me it's always co-working and collaboration where i'll interact with the ai and it will give me some ideas and then I'll overrule some and I'll agree with some and it's kind of a partner.

45:29How much more productive have you become in the past few years? I think I've become a lot more productive. I'm not sure it would show up in official GDP statistics but I feel like the... The amount of papers maybe you can... Can you track that? A little bit. I think it's also like the quality... I'm working on some more interesting problems that I probably wouldn't have. Yeah and my citations have gone up but that's just because I think... I just say the word AI and people cite me. From my daily work, I feel like I'm being much more productive. I'll give you a little more concrete example. As a professor, a pretty common routine is I'll meet with grad students.

46:06We'll talk about a research project. I'll say, hey, why don't you do this? Look at this data and see what the answer is. And then they come back. We meet like once a week. And they show me what they found. And I'm like, oh, that's interesting. Well, this part doesn't make sense. Why don't you go back and double check that? Or let's explore this. and we kind of had this weekly cycle. And we move forward and after like 10 weeks or 20 weeks, we figure out what the answer is or we think we do and we write a paper. Now that cycle is like almost instant. I will sit with Claude co-work and I'll ask him and say, well, what do the data show?

46:39And five or 10 minutes later, it'll pull up the data and I'll say, oh wait, that doesn't seem right. You should double check this part. And then we'll go back and I have a similar kind of conversation. In some ways it's worse than grad students, but no offense to my wonderful grad students, in some ways it's better. Like it's much faster and it's sometimes can track down different kinds of data. You have to know about strengths and weaknesses, but that cycle time is just so much faster. Yeah, it's fascinating with the speed, but also something that I'm noticing myself. Yes, I'm becoming more productive.

47:08Yes, the speed is faster, but there hasn't been this change that's, I don't know, almost dramatic for a while. Like I was just talking about this with my peers, like, for example, like COVID happened, right? that dramatically changed our lives. With AI, we're talking about this dramatic change. For some people, yes, it's right, because they've been laid off, but we will never know if that's AI or not because a lot of companies just use AI as a word. But we haven't cured cancer yet. Self-driving is, yes, it's cool, but it's in San Francisco, and it's still like it's rolling out, but it's regulation.

47:39When do you think we're going to see something that's going to be mind-blowing for all of us, and we're going to say, oh, wow, this is where I see the impact? I think over the next three to five years, people are going to see more and more mind-blowing things. There's little ones already happening. There are some breakthroughs in medicine, and there are some, you know, you mentioned like cars, and companies are beginning to use it. I agree 100%, though, that it hasn't nearly had the economic impact or the impact on work that you might expect given the magnitude of the technology. And that's back to the J-curve idea.

48:13It just everything takes longer than the technologists think, but it is happening. It is coming. And by 2030, I don't think there'll be any question that this is transformative of the economy. But these things happen step by step. So we're somewhere. Do you think we're down here in the J curve? I think we're turning the corner. You know, that's why we created the takeoff tracker. If you go to the AI economic indicators at Stanford, you know, we have these metrics and every month we're updating them. and there's a few of them, like we have these different categories, no evidence, mild evidence, strong evidence.

48:48And, you know, there's one or two that show strong evidence. There's three or four that show mild evidence and all the rest show no evidence yet. But I'm pretty confident, what we'll see is every month we're going to sort of be moving more and more into the mild or the strong evidence category. And then it might start happening really suddenly. You know, there's this thing that we say in the second machine age, my book, is the thing about exponentials is that things happen slowly and then suddenly. And we're just entering the suddenly part. We aren't in the suddenly part yet, but we're getting there.

49:22Erik Brynjolfsson:Wow. Okay. This makes me very excited, a little bit scared, because we never know how fast it is. That's the right thing. I'm excited and scared, too. No, look, if you're not both excited and scared, you're missing at least half the story. Yeah. Okay, my last question. If my daughter, she's five years old, just turned five, asks me tomorrow, what is my life going to look like in 30 years? Yeah. What would you? Nobody knows 30 years. No, I think it's going to be hard enough either even five or 10 years. Look, I think the next decade, if we play our cards right, will be the best decade in human history by far.

49:54There'll be more wealth creation than ever before. We're going to have noticeable improvements in longevity. I mentioned I was over at, you know, Google and I was talking to, I'm sorry, at DeepMind. I was talking to Demis Hassabis. He thinks that they'll start curing a majority of diseases within 10 years. I hope it's right. That sounds ambitious, but your daughter will see that. So that's the good news. I also think there's a future that could, this could be like one of the worst 10 years ever. I have to be honest that like there's the potential for catastrophic risk. you know, viruses being created in the lab and released, AIs taking over social media and manipulating people, from vast centralization of power.

50:34We already see AI powered drones, like hunting down people. These are like so tragic, the dystopians, you know, these drones like chasing a soldier. It's like, oh my God, you know, it doesn't matter which side of the war I'm on. I kind of sympathize with the human being chased by the drone. So all those things are also possible. The thing I would say is that we have a tremendous amount of agency. And so we should think less about what will happen to us and what AI will do, and more about what we want to use AI for. AI is a tool. And a message I keep hammering over and over is that when tools become more powerful, that means by definition, we have more agency, we have more power to change the world.

51:17So we need to really think, you know, be philosophers and think about our values. What kind of world do we want to shape? And don't take it for granted that AI is just going to steer us one way or the other. We still have the agency right now, and we should be steering that technology towards one of those more beneficial futures and being damn careful to avoid those catastrophic futures. I totally think they're possible. The doomers are not wrong, that there's a real risk there. They are wrong if they think those are inevitable because we'll have choices. And so I've been working with the labs and with politicians to do what we can to shape us towards that future of shared prosperity.

51:59Fingers crossed. We're going to land on the positive scenario. I keep telling my daughters that they won't have as many problems as I have. I mean, like household. They will have different ones. But the ones that I'm having, they're probably not going to have them. That's probably true. Thank you so much, Eric. This was so insightful. Oh, my God. It was such fun talking to you. Thank you for having me on. Amazing. Thank you so much.