METR and AI Regulation, Zuck Pushes Back on AI Slowdown, Fed Hikes Rates | Diet TBPN

0:01John Coogan:Well, we have a fantastic show for you today, folks. I made it to San Francisco and back since the last show. This is a new thing. I like this. Being able to get up from the show, go do something in San Francisco, get back. Very excited. Why didn't you want to stay? I don't know. I like doing the show. It's pretty simple. Good to be here in the TVP and Ultradome. We have a great show. We have a bunch of great folks coming on the show. What was on my mind last night? I was listening to China Talk. Jordan Schneider was talking about evaluators, third-party evaluators. And I was noticing this discourse around, it feels like we funneled into very clear camps super, super quickly.

0:36John Coogan:And it feels like, I don't know, too calcified for how fast it happened. And like the Dario essay comes out and, you know, he throws out meter, says he's bringing in meter. And the backlash is like a media at the New York Post is crashing out saying like these are handpicked AI watchdogs. Martin Casado, Martin Casado over at A16Z, he's pushing for the Department of Energy. He's like full nationalization now. And, you know, both of those have their advantages, disadvantages. They both do good work. They are the extremes. And so I was just sort of wondering a few things. First, what other regulatory bodies can actually work?

1:16John Coogan:How do they work in other industries? It's very interesting because the revolving door is something that's common. In financial regulation, you get people that work at banks, and then they go and work at the regulator, and then they go back and forth. I mean, this is the story of many people in the crypto industry where the regulators who are regulating it, they go back and forth. Like revolving doors exist, but I think the pushback to meter is very much like the door is like too revolving or it's too close, I guess. But the more interesting question to me is – Yeah, the defensive meter is that I don't know many groups that are qualified at all to even understand what's going on at the frontier, right?

2:00And so –

2:01John Coogan:Is that true though? See, that's the thing I disagree with. I would say that there are not that many groups that have been this invested in understanding frontier model behavior for this long. That's a separate thing, though. It's just a small group right now. That's a separate thing. So I think there's two separate things. There's one which is like super forecasting, seeing the future, predicting what's going to happen. I think that's important. I think taking that seriously is important. But then there's the other side, which is like doing the work, reading the logs, and being like, this violated this rule.

2:30John Coogan:This hack happened. Here's how it happened. And I think that those are actually two separate disciplines, two separate jobs. And you can just tell the regulator if it's someone, you don't need to tell, like if you hire someone and they are able to get up to speed on how these systems work and evaluate them and look at logs of different incidents, see what's happening, assess the risk level, assess the liabilities. If you can get those people up to speed and you can just be like, it is your mandate to take this seriously. And the example that I'm pulling from is like, you can be 22 years old, not graduate from college, go into the Navy, enlist in the Navy, not even in the officer's training program, and in 18 months you can be responsible for the security of a nuclear power plant on a summer.

3:12John Coogan:You do six months in nuclear field A school, about six months of nuclear power school, and then six months of hands-on prototype training before arriving in the fleet. Nuclear power school covers math, nuclear physics, reactor principles, health physics, materials, thermodynamics, electrical systems, and reactor technology. There's no part of that that's like you need to really at a deep level understand that like nuclear annihilation is bad and could happen. You don't need to be able to forecast out like, well, what happens if China and geopolitics and Iran gets the bomb and then these people and then Pakistan?

3:43John Coogan:Like you don't have to understand that to just know like, don't let it blow up. That's your job. Here's how you don't let that happen. We've created a plan for you. You're 22 years old, but we know that you can do this job and you are enlisted to do this job. And it doesn't matter if you think nuclear war is impossible or doesn't matter if you think it's going to happen tomorrow. Your P doom on nuclear is completely irrelevant to you doing this job. Right. Yeah. And I think that that's something that is maybe being missed here a little bit. There's like, there's like, well, you have to take it seriously.

4:12John Coogan:You have to have seen it coming. And I actually think that like super forecasting, super important. Awesome. Also just like fun read, really cool. And if you take it seriously, you make a lot of money. You They get amazing technology. There's so many things that come downstream of that that are really, really positive and really important. But I don't necessarily know that it's actually a prerequisite. And then the other thing is, yeah, Tyler? I mean, like Meter, they're not the ones putting out those forecasts, though. Those are other groups. If you look at like Meter Research, it's like, you know, very complicated benchmarks and like these kinds of things.

4:43Totally, totally.

4:44John Coogan:Yeah, I'm sort of collapsing the Meter criticism from like the New York Post perspective. And I think that is— Overall, I think generally people are going to like if if if there's a third party regulator, it seems like it has to be an entirely net new group because I don't think anyone has like whether or not meter meter could be operating and their actions could reflect that of a fully independent group. but the financing structure, the history of the various parties there just makes it so that people don't have any trust that they would act like that. Sure. The interesting thing is that there is actually a distinction in the history of nuclear regulation, which is there's a difference between advisors in the – before the NRC, it was the Atomic Energy Commission, and the AEC was created to oversee nuclear development.

5:42John Coogan:And many of the scientists who did forecast the importance of riskiness of the technology were involved. Interestingly, like Einstein writes this letter and says like nuclear, he basically describes like what nuclear annihilation could look like. There's a whole bunch of other scientists that actually run the numbers. And they're like, this is what could happen if all the nuclear bombs go off. They do all the calculations. There's some that go a little bit too far. But in general, like the scientists were the ones who got to it earlier. but the scientists didn't actually wind up being the regulators.

6:09John Coogan:They wound up being the advisors. So Oppenheimer became the chair of the AEC's general advisory committee, which had enormous influence, but didn't actually issue licenses. So the actual work that was being done, it was like, okay, Oppenheimer in this advisory role says like, well, we need to have a security guard here with a gun that makes sure that no one can steal the nuclear material, right? But he's not the one doing it. He's not the one actually hiring that person. That's just like an engineer who's qualified for that job. And I think that actually takes a lot off of it because you could say, oh, there's all these like conflicts of interest here or there or there, whatever.

6:45John Coogan:But if you just say, well, they're just putting out a proposal that then people are going to go and implement, but then the actual people that are doing the implementation are much less conflicted because they're just drawn from the broad pool of engineers and scientists and mathematicians and physicists and whoever else we have in America who can do this type of work, it gets a lot less complicated, in my mind. There's a whole bunch of other interesting details from the AEC history. And so today, the regulators, like nuclear regulators, are talented and hardworking, but these are not, like, the most elite jobs.

7:18John Coogan:Like, you can just be a nuclear engineer, mechanical engineer, material scientist, physicists, health physicists, geologists, probabilistic risk analysts, cybersecurity professionals they hire for this, emergency preparedness, they hire lawyers, they hire inspectors, pay for some of these jobs ranges between$125 ,000 and$187 ,000 for many NRC technical staff roles. The machinery did have to get sort of described by the scientists, but then the implementation of that machine, of that regulatory structure, is actually done by really hardworking, really talented Americans, but not head in the clouds, not thinking about the future in some, you know, bizarre way, that's enough to happen at the democratic level.

7:59John Coogan:And then it gets implemented. And I think that that might eliminate a little bit of this, like, okay, well, this person who's really tied to you is now like inside, actually, the one with the keys, the one with the role overseeing you. I don't know. What do you think about this, Tyler? You have some pushback? Yeah. I mean, like, I know that Casey, the Center for AI Standards and Innovation, like, I think that they've had a hard time like being funded yeah yeah so it's like like they're having a hard time like finding people who will come from the labs like maybe they should just broaden who they're looking for but it seems like it's still the ways that we detect if a model is safe or not are not like set in stone yet like it's still like that's what the role of meter that's kind of what they're doing right now so I think it is still different than like you know there are pre-determined accounting practices and you can just kind of check the box and like follow the rules.

8:46Yeah. Like there's still like, yeah, it's like a moving field, you know?

8:49John Coogan:Yeah. Yeah. And I mean, there is, there is the question of like, with particularly with like agent swarms perpetrating cybersecurity violations that don't directly cause economic harm. I didn't tell it to hack you. It hacked you, but it didn't knock your payment system offline. So you didn't lose a dollar revenue. It's like very hard for you to prove that I acted wrong and then also economic damages. So there's a whole new level of like tort battles that need to be battled out in the court of law to see like, what exactly do I owe you? Because I shouldn't have done that, but what do I owe you?

9:25John Coogan:What's the damage? What's the, what's the problem there? And then, uh, and then you can go and say, okay, well, you know, how, how do we measure that? How do we prevent that? And, uh, how do we work through that? But the discourse is getting like, uh, more and more, more and more polarizing by the day. We'll see. I think there will, I think there will be the, the, the big sit down between the lab leaders. I wonder how important it will be to have Jensen with a beer alongside Sam, Dario, Elon with beers. Because the clear proposal, there's going to be beers involved. That's what we know from the interviews.

9:57John Coogan:Everyone's asking, why can't they just sit down and get beers? Six months of those could have been on the Cheeky Pine podcast. It really should. That is sort of neutral ground too, because Elon's an investor in Stripe. What happened there? Elon's an investor in Stripe he's a co-founder of OpenAI and Sam's I think an investor in Stripe and then Elon's working with Dario on compute stuff so maybe Cheeky Pine is like the perfect Nutri-Gon I think it'll probably be on national TV actually but we shall see we'll follow it here quickly jumping in we have a rate hike yes tell me about that Warsh hiked 25 pips.

10:38Okay. First time in three years. Priced in. Cal, she had it, I think, at like 89 % this morning, so not a huge surprise. I wanted to head over to Joe Weisenthal's feed and just kind of read his reaction if he has one. Well, you pull that up.

10:54John Coogan:I'll give you the highlights from the Wall Street Journal. The NASDAQ react positively up 0.67%. This is the Wall Street journal. They need a JavaScript plugin that changes it to 0.669 or something.

11:14John Coogan:Most officials penciled in one more increase this year. An energy shock and a surge of AI investment have reshaped the inflation outlook. We talked about the Fed interest rates yesterday a lot, but the Federal Reserve raised interest rates Wednesday for the first time in three years, a sharp reversal that began taking back cuts as it made last year and implicitly undercut the White House's insistence that inflation is not a concern. The Fed is saying it kind of isn't a concern. The increase approved unanimously will raise the benchmark Fed funds rate by a quarter point to between three and three quarters point and four percent.

11:48John Coogan:The vast majority of officials penciled in one more hike this year in interest rate projections released after their meeting. So they think there's going to be more rate hikes. Chairman Kevin Warsh vowed shortly after taking office in May to end an overshoot of the Fed's 2 % target now in its sixth year and followed through with an increase that had been widely anticipated in recent days. The rate hike scrambled an account of the White House had offered of the man tapped by the president for the job in January. Trump and his allies had cast pressure to raise rates as coming from a committee hostile to Warsh, who last year said he would have cut rates sooner than the Fed ultimately did.

12:29John Coogan:It also followed a lost year in the Fed's inflation fight. The central bank has made no progress towards its 2 % goal since mid-2025, including after cutting rates three times last year to guard against labor market slowdown. Instead, the Iran war has lifted energy prices and the AI boom has driven an investment surge that has buoyed the economy and markets today. Policy action will support a timely return to the committee's 2 % goal. The rate setting committee said in a policy statement, analyst said that despite intense focus of late on monthly inflation data, the biggest change to the outlook has come from a run-up in energy and commodity prices.

13:06John Coogan:It's the fact that the war in Iran has reintensified and the energy price shock is getting bigger again, said William Dudley, the former New York Fed president. What you got for me, Jordy? I was just reading through a bunch of different reactions on Bloomberg itself. Let me pull them back up. But they have a live blog. Some people are saying this is more hawkish than expected, given that the Fed took away next year's cut. Big changes in the dot plot line, the Fed's September dot plot. We now have four officials expecting to raise rates two more times. Two more times? It had previously just been one at that level.

13:44A whopping 12. Policymakers see rates going up once more before the end of the year, and the remaining two see holding rates at their new 3.75 to 4 % level. A reminder that in June, the last time we got these forecasts, half of the committee expected the Fed to hold or cut rates. And again, it looks like Warsh did not submit a dot. So he's going dotless here. Kind of a statement in itself. Yeah, it's so, so far, the AI trade, the build out, everything has been overwhelming even in the face of headwinds like rising rates and yeah yeah i mean the the

14:20John Coogan:mood from silicon valley was like uh we're definitely not booming until we go back to zero interest rates like this whole tech thing it only works when the interest rates are zero so like we'll just wait it out and yeah the reality is there was a bunch of ideas and investing styles that only worked when rates were near zero yeah yeah um but yeah it was specifically when you look at the companies that really boomed in that era, there wasn't a lot of net new, like really truly innovative stuff outside of financial products, which benefited from low rates. Yeah. You know. Some of them benefit from high rates though, right?

14:57John Coogan:If it's like a savings product that spreads higher. But if they have to borrow a lot of debt. Potentially. But again, I'm thinking of like lending companies like Pipe, right? Pipe was a company that at the time went from incorporation to billion. I forget what their peak valuation was. And it makes a lot of sense because they're basically borrowing at 0 % and they're lending to a company at 5 % or something. You know, whatever their spread is, like, is actually justifiable to an earlier piece of the market. But that sort of breaks down when you have to go to a company and say, hey, you want money at 12 % or something like that for an early stage company?

15:32Well, let's head over to Who, man. Daria, we should pump the brakes on the Frontier. Sam, yeah, let's all slow down together. Meanwhile, Zuck.

15:42John Coogan:The funny thing is, yeah, I mean. Let's talk about what Zuck wrote. He said, last month I wrote about how we can build a positive and safe future for everyone. This is when Zuck said, I really want people to understand my values before we come out with our most powerful AI ever. And I at least felt like we already had a good understanding of Zuck's values. But he wrote yesterday, every lab has the responsibility and incentive to move at the pace required to train its models safely and the ability to take its own actions to ensure that happens. The reality is people don't want to use agents that are misaligned with them and don't do what they ask.

16:18So labs have a strong natural incentive to make their models more aligned. Right away, you know, starting out with this point, it's like the safety debate has not been like around the idea of, oh, they're going to create personal agents that are going to be misaligned to the users. Like this, this is not at all. Well, it's just, this is just a point that doesn't matter.

16:37John Coogan:No, no. I mean, there is, there, there is a, like, it's not the safety crowd, but the whole like social media is brain rot addiction. Like, like that is something that there is a separate crowd that does critique that and says, like, I don't want the addictive flywheel of, of maximizing screen time to be brought to a totally separate debate. Yeah, no, I agree. I agree. It's not the true AI safety debate. Yeah. But it is a debate. There is a lot of debate about slowing progress on capabilities until alignment catches up. My view is that trust and alignment are quickly becoming the most important capabilities that will differentiate.

17:17Again, this is not relevant to the current safety debate. Obviously, people want to make products that do what their customers want them to do. No one has been worried that you can't make a model that in the near term or in the medium term or even over long running tasks can generally do what the user wants. The concern is that if you leave models and give them a task that is more expansive, that they can start to do things like hacking hugging face, right? So, again, nobody is sitting here saying.

17:49John Coogan:The main thing is that this is talking past the X-Risk question. It's completely dismissing the discussion, which Dario is laser-focused on. And so this feels like it's a rebuttal, but it's actually talking past it in the sense that he's like, labs face significant liability. And it's like, well, in the X-Rest scenario, the liability doesn't matter. That's the whole point, is that no one's going to come and be like, And here's the best line. Meta delayed shipping Muse for several months to focus on safety and security. That's actually very rational and important because - Every company delays their products for months.

18:25That's just called building a good product to make it safe and secure. Like period. This is what Matt has been doing forever. You have to do it. You have billions of users. You got to make sure they're safe and secure. Every single product.

18:37John Coogan:Again, I felt like he was, there's a lot of things in here that are rational. He's taking a victory lap on not taking a victory lap. Don't you realize that? He says, we didn't call for everyone else to do this before we would. We just did it as part of our day-to-day work because it was clearly the right thing to do. And again, every single company already does all of these things. Every single company that makes AI products already does this. While they're doing it, he's taking a victory lap for not taking a victory lap. It's not that complicated. Everyone else says, like, we're taking safety seriously.

19:10John Coogan:We want a pat on the back before we delay the product. And he's saying, I want the pat on the back after I delay the product. Yeah. I just think it's very... No matter what, there's a lot of back padding going on. I just think it's very funny to... I think it's funny how much... All these points are fine. They generally are rational and they make sense. Yeah. But I think it's funny that people are giving him so much credit for this note, given that he's totally missing the main point that everyone else is focused on. X-Risk? Like, intentionally missing the point. In order to get brownie points from people that don't even understand the current debate?

19:53John Coogan:No, to get brownie points from other people that have a PDO of zero, who are like, yeah. And you can see who's supporting this. They're like, yeah, thank you. Like, just put the agents in the bag, you know, make the tokens free and just make the products. Like, I'm not worried about that at all. And for that crowd, they're like, thank goodness you didn't like fall in the hole of like stooping to this PDO debate that I don't take seriously. That's the side. I just wish that he would come out and say, I have a PDOOM of zero. That's what he's saying. No, he's not. He's not. He's trying to position.

20:25He's saying he's not being explicit about that. He's trying to let people say, we care a lot about safety. We slowed down our development because we care about safety. Trust and alignment are important. Yeah. Right?