Tyler Cowen Doesn't Think America Should Ban Chinese AI Models

0:00And without further ado, our first guest of the show is in the waiting room. We have Tyler Cowen, the American economist, to talk to us about all things. How are you doing, Tyler? Good to see you again. Hello, how are you? I don't drink coffee.

0:12Tyler Cowen:I was about to ask. I have to ask every guest of the show. Are you going to start? I've only had coffee twice in my life, both times in rural Ethiopia in a coffee ceremony. And it was amazing. But I thought, this is the peak. I can't beat this. Is that because you'd become too powerful or do you see it as a Faustian bargain? I see people getting addicted to it. And if they can't get their morning coffee, they have headaches. Yeah. I don't want to be there. Yeah. It does become a new supply chain. How often are you somewhere where you can't possibly get a coffee in the morning? I don't know. It can't, but you have to go out and get it or go to some effort or you're in a hotel room and you make a crummy coffee there.

0:54Tyler Cowen:And then you don't really enjoy it. It's just simpler not to have that addiction. I think what's very interesting is that coffee, caffeine pills are incredibly economically efficient. It's like one cent for the equivalent of a cup of coffee if you buy them in bulk and yet absolutely zero adoption. People love a cup of coffee. Even if it's a couple bucks, it's like a simple pleasure. It's a joy. People just can't stop paying for them. Do you do anything in the morning, any type of ritual that you feel like you have to do to be yourself? He's like Celsius. I get high from mineral water, but if I don't have it, I'm fine.

1:31Tyler Cowen:I'm not craving it. Okay. Well, let's talk about artificial intelligence. How are you thinking about the latest debate around Kimi, K3, open source AI? Where should we begin the discussion? And then I'm sure we can narrow down a bunch of different ways. open source and is coming and is here whether we like it or not of course a lot of it will be from china we should allow american competitors to proceed on an even footing but basically the attempt to outlaw it or ban it or use sanctions against it is going to fail miserably like what about multinationals what about companies whose affiliates use open source what about all the major US companies that use open source Chinese products right now.

2:18I hope, I plead that the

2:20Tyler Cowen:Trump administration gives up on this crusade. It cannot work. Okay. So I want to push back on it cannot be banned because I, at first blush, I agree with you. Like it is software. It is something that can just be downloaded. You can download the weights and just have it. Anything that's replicable infinitely should just proliferate across the world very quickly. But the fact that you need an NBL 72, you need a whole server rack, you need equipment and infrastructure, that acts as a point of leverage. I'm not saying that we should ban it. I'm just saying if you put me in charge of banning it, I think I would have an easier time banning open source AI than banning music distribution, for example.

3:05Tyler Cowen:What will you do when it's on device? How long is that from now? That's true. Why go down the path at all? Yeah, yeah, yeah, yeah. That's a good point. Yeah, what lessons are there from the automotive industry for this moment, just given the use of tariffs and how those have worked and haven't worked? And we were talking earlier about how Europe's approached the problem. You see BYDs all over Europe now. But at the same time, many of the manufacturers have been hurt most by just losing the Chinese market, right? Or not losing it, but having declining sales there because of local alternatives. I think if Europe starts a major trade war with China, Europe will lose.

3:55Tyler Cowen:This is a sad reflection on Europe. And it's a sad reflection on Europe that they can't just say, oh, we'll make fewer cars. We'll do five or six other great things that we're readily positioned to shift into. They're not really there. But simply putting up big tariffs isn't going to help them get there. It actually will postpone it. And those tariffs over time end up applying to the inputs for your other sectors, and it makes them less competitive. So Europe's really in a pickle. There's no good way out. But I don't favor the tariffs either. How do you think about the open source models in terms of the broader AI stack?

4:35Is it important that America have some position in energy, data centers, chip manufacturing, networking? There's this whole stack. And I've been surprised that we've been building as many data centers as we have in the United States, It's given all the pushback. That feels like something that could have gone to at least other Western nations, energy-rich countries, but that's been fairly centralized. But there's clearly – it feels like there's a potential slippery slope for, oh, well, if China's handling the open source models, then maybe they should have the data centers. Maybe they should also do the power generation over there.

5:13It's dirty. We don't like having data centers here. Put them over there. And then at some point it feels like you could lose leverage, but I don't know how risky that actually is.

5:21Tyler Cowen:I live right next to all the data centers in northern Virginia. It's great. They pay for half of the taxes of their county. The energy, the IMB, all that, I'm completely for the chips. Bring it on. But at the end of the day, people are afraid that the American models can be yanked from them. Sure. That's partly our fault. Yeah. And if there's open source as something in the background, people are more willing to lock into our systems to a partial extent. So the two are complements, in fact. And again, there's all these major American companies that don't typically advertise it, but they use a lot of Chinese open source right now.

5:57Tyler Cowen:You're just going to pull that out of their guts? Yeah, yeah. I mean, both enterprises actually deploying these models for cost savings. And also, I mean, we saw with thinking machines, they use the Chinese open source model to bootstrap a step in the process of building their latest product. And so it's a whole supply chain. Where do you think the data center pushback comes from? If you are there and have a positive experience, it's polling very poorly. Is it all fear around job displacement? Is it anything particularly on the ground? Where did this come from? I think right now people are just negative about many, many things.

6:35Tyler Cowen:They're negative about their country. They're negative about social institutions except the military. They're very low levels of trust. They were told during COVID times, during the great financial crisis, everything's okay, when it was not. So you can't completely blame them. But look, as you know, this country has 50 states. And if Mark Zuckerberg needs to pick up the phone and call the governor of Louisiana, thank goodness that can work here. And I think we're going to do it. What is it about this? We're in this like counterintuitive vibe session moment. Kyla Scanlon sort of written about it, coined the phrase.

7:12This idea that when you pull people on how are your neighbors doing economically or financially, people say they're doing fine, but I'm doing terribly, or the economy will grow, the job market will be stable, but people will report that consumer confidence is very low. I'm wondering if you've reflected on that more generally, and then I do have a follow-up question, but what is the state of the vibe session? Is it just continual? Is it permanent? Is it getting worse?

7:40Tyler Cowen:I call it negative emotional contagion. And you see it in many other areas of world history. It feeds on itself. I'm not sure we know what starts it. Maybe it is some negative events. But once it gets going, it's hard to reverse. Sometimes you need actually a war or some kind of catastrophe. I hope we do not. But if you look at wealth accumulation, the job market, stock prices, real wages, many other indices, they're doing like okay to find. They're just I completely agree. I had this idea, I don't know if you will agree, but maybe the fact that we are in this vibe session and the vibes are so bad and there is so much negative emotion around the economy that if we actually were to go through a brief recession or a market correction, we might be a more resilient country sort of ironically because of that.

8:37Everyone would look around and say, I already thought it was bad, it got a little worse, but I'm ready to reinvest. Maybe this is what I've been waiting for. Finally, I'm justified in thinking things are bad. And so I can get out of this and do whatever is necessary because there's no longer a cognitive dissonance between what the market is doing and how I feel.

9:01Tyler Cowen:One hopes. Yes, it could be a bullish signal. But then again, if something terrible does happen, And everyone says, I told you so. And maybe we get stuck in the mire. Yeah. About a year ago, you had a blog post, if I remember correctly, one of many, of course, that was something to the effect of like AI is real and it's amazing, but the economy is still going to just sort of generally continue growing as it's grown, maybe a little bit faster, hopefully. Are you seeing anything that could update your worldview on that? because so far I feel like you've been pretty vindicated. Deserve a victory lap.

9:39Tyler Cowen:Well, I'm seeing a lot of confirmation. There's so many people, they will say to me or say in chat groups or on Twitter, my goodness, if we had Fable 5, I would have thought the world would be totally different, and it's not. Yeah. And that's my view. But look, you go back to 1995 through 1998, we got half a percentage point of extra growth out of those advances. They, to me, seem less impressive than AI. So I think over time with some slowness, we'll get that and maybe a bit more, which is great. Interesting. Have you seen The Odyssey? I have seen The Odyssey. Can you give us your review? Well, look, compared to other movies, it's fantastic and it's dreamy and it's impressive.

10:22Tyler Cowen:But mostly I was disappointed. I thought the dialogue was lame. The casting, I don't mind the cross-ethnic casting at all. I just didn't think they were the right people. Matt Damon is not Odysseus. He's just not impressive enough physically. The woman who played Calypso just seemed like a suburban housewife. I love Zendaya, but she didn't have any real role. So they screwed up many things. It didn't quite cohere. I'm very glad I saw it. Everyone should see it. It's worth the three hours, but relative to expectations, I suppose a disappointment. Do you think classicists are satisfied with it? Do you think it's good for the field?

11:04Tyler Cowen:They're delighted to have any attention at all. And the different translations of the Odyssey are now on the bestseller lists. So what's their alternative, right? They shouldn't complain too loudly. Do you think technology is making soccer worse? I don't watch soccer, but I think technology in some ways has made basketball worse. and I wouldn't be surprised if the same were true of soccer, that it homogenizes things and everyone chases after the same targets, the same players, teams have less individual style. But to soccer, I cannot speak. Fair. What about AI maniacs? Take me through what defines an AI maniac, why it's important.

11:51And I have some pushback and follow-up questions.

11:55Tyler Cowen:I spoke to two teenagers this morning. One was 13, one is 17. Abu Dhabi, Finland, they're AI maniacs. They spend their spare time mastering AI. They know way more than their so-called teachers. Their starting companies are building models. They realize this is the future. You're going to have a large number of companies with quite a very small number of employees, but pretty high I think AI maniacs will compete in medicine, law, business, consulting, banking, wherever it is we let them compete. So this to me is the future. Like if you're asking, will the UK recover? I would rephrase it. Is the UK going to encourage its AI maniacs?

12:38How can they encourage these AI maniacs? It feels like AI naturally lowers the barrier to entrepreneurship. And so there's not much encouragement that's necessary. I mean, as long as the models are available and affordable for young people, they will do things with them.

12:55Tyler Cowen:Young people should be allowed to rise to positions of authority. They should be respected. They shouldn't be looked down upon. They should have the chance to buy computer, get grants. It's not automatic. So you look at the United States. We do great on all these metrics. Estonia is a country that does pretty well on these metrics. A lot of parts of the world are too small-c conservative. and we'll see where different countries are going to fall on this spectrum. But they're not all going to do it automatically, just like not all countries have made great rock and roll. Though the technology is pretty straightforward.

13:29Yeah. Yeah, Estonia is famous for major government investing in high-speed bandwidth. Is that correct? Is that the rough story of Estonia?

13:41Tyler Cowen:Yes. But I'm interested in what that would look like for AI in America or the UK. It feels like many of the models or application layer companies, they have sort of a free tier that gets someone potentially from zero to close to AI maniac, and then at some point they can go and find a customer to help pay for their compute bills. But is there more the government should be doing? But as you know, with venture capital, there's a valley of death. I don't know that the government should be making grants to 16-year-olds, but someone should. I'm doing it. Other people should as well. So this is really the province of youth.

14:22Tyler Cowen:There's nowhere you can go to learn this stuff other than, say, some of the major AI centers and companies. So you've got to teach yourself. And is there the support in your environment for that? We will see. Give us an update on how you're thinking about grants. Are you going younger, broader, smaller, different partners? I mean, there's been some folks who have been able to do compute grants and then they sort of cap, the dollars go further because of the implicit margin. With AI Maniacs, I'm going younger and weirder. And I've also noticed Europe is doing pretty well on the AI Maniacs metric.

15:01Tyler Cowen:We will see how it develops as the costs rise. But I have been pleasantly surprised and I am now more optimistic about Europe than I was six months ago. How does that, where did that come from? That feels like a come from behind story for Europe. I feel like for the longest time the brightest technologists in Europe have gone to America to start their companies. The famous example, there are many others with the exception of the Swedes and Spotify. I suppose, but in general, it feels like many people have come. Are they staying more frequently? Like what's happening? Well, these kids may yet go to America.

15:40Tyler Cowen:They're too young to be going now. Maybe it's that, you know, the chatbots didn't interest the Europeans that much. They seem to like compete with culture. Agents are a chance to do something. Now, American kids have had opportunities to do things for a long time, but for the European kids, this is something new. So I think at the margin you will see more extra activity there. And a lot of new companies from quite young people coming out of all of Europe, including Eastern Europe. Do you think young people are better at avoiding the fake work trap that happens with some AI users? You know, the person that just builds an automated workflow to, you know, check, summarize every meeting and then they never look at the notes and it's just endless token consumption in service of creating the ultimate second brain that they never actually refer to.

16:32And it's ultimately a lot of make work, but it feels very productive, sort of the tool shaped objects formulation.

16:40Tyler Cowen:I think the young people are more playful with it. They take more chances. In the aggregate, they might even do worse. But in terms of coming up with the new things that really matter, I think they're gonna win. What do you think about the risk of the one-shotting from AI? People that go so deep in it, they lose their grip on reality. It happens with everything. You know, when I was a kid, people one-shotted on baseball. Can you imagine that? Or like drugs. Yeah. AI is one of the better things to be one-shotted from, I would say. No, I was laughing about it. I know some guys who have been basically one-shotted by golf.

17:19Yeah. How can you do that? Every day. They're like reading about golf, studying golf, trying to improve their golf game. And it's the same thing as AI. If a billionaire came to you and said, Tyler, it seems that my type is very unpopular right now, what should we do to try to shift public opinion? Right now, there's, I think, an$80 million campaign being spent to block the billionaire tax here in California. but it seems like there are other things more broadly that billionaires could do to shift public perception. But what do you think?

18:03Tyler Cowen:I would say don't apologize and keep on going. I hope the billionaire tax fails. It will wreck California. If it passes, it's already harmed California. Even a lot of the Democratic Party politicians don't support it. I think, again, there's just this negative sentiment about many, many things, including billionaires. You might say some of them deserve it. Fine, like with all humans. But at the end of the day, I'm reminded of the old saying from Jonathan Swift, and he said, censure is the tax a man pays to the public for the privilege of being eminent, unquote. If you succeed, people will hate you.

18:44Tyler Cowen:Okay, but, uh, you know, wasn't Malcolm Gladwell, Steve Levitt, Paul Krugman, whoever did well, God hated. Oh yeah, that's right. At the same time would, uh, building some massive, you know, parks and, or, you know, any, any type of, of public work. Yes. I, I be, be worthwhile. The interesting question is, is there, is there some sort of like like a greater leverage from having like the library that you walk by versus like one percent lower levels of malaria that's like this abstract thing that you don't see like there's something about building like a monument as a wealthy person as opposed to having an abstract diffuse impact on humanity even if the reduction maybe the modern version of a park is just like owning an NFL team?

19:37It doesn't really feel the same.

19:39Tyler Cowen:President Obama just built a monument. Does anyone love him for it? Now I'm all for today's billionaires doing more to support art, music, libraries, whatever we all might come up with. But I don't think it's going to make them loved. Yeah. Yeah, maybe not. What about religion and AI? Anthony Lewandowski was working on an AI religion way before it was cool. I think 2017 he was thinking about this. It feels like we're maybe behind the curve on a true AI-based religion. It feels like based on the capabilities of the models, you could have something happening. There's little pockets of people that are obsessed with certain models, but I haven't seen anything formally being built out.

20:26Where do you think that goes?

20:28Tyler Cowen:I think it'll be more like sects than new religions. So you could write your own version of Hindu sacred books or your own version of Shiite Islam with your own, you know, slate of who the true imams are or should be. And we're just going to see proliferation. Like for a while in history, we had a proliferation of different versions of the LDS church, different kinds of Mormons. Some are still around. And using an agent, you'll be able to whip up your own religion, I don't know, in less than a day, with rituals, sacred books, practices. Most won't catch on, but if you will, they'll have a few hundred, a few thousand adherents.

21:06Tyler Cowen:That may sound trivial, but if, you know, half of 1 % of the population does this, and some of these get some number of adherents, over time, the whole religious landscape looks quite different. I think it will be more diverse and feel weirder and be less centralized in religious authorities. Where do you think the Amish will be in 200 years? I saw someone try and use one of these AI models to project out the human population in 2200. And the prediction came back as like America will be 34 % Amish. I think it was just extrapolating linear trends of their birth rates versus everyone else. But it feels like the idea of the Amish lifestyle is actually becoming in vogue in almost popular culture with don't use screens as much.

22:02Try and limit your Instagram usage. You need to log off and touch grass. All of these memes are sort of the potential gateway drug to the Amish lifestyle.