Tyler Cowen

25:41Do you think we need a new language for the things AI does? We say talking to each other, they're not really talking to each other. We say they're thinking, they're not really thinking. And we say they hallucinate and they're not really hallucinating. Might it be helpful to come up with a new lexicon of terms?

25:58Tyler Cowen:We shouldn't even call it artificial intelligence. We should call it machine intelligence. But I fear that's all too late. We anthropomorphize as humans, and we think in terms of a world with humans and animals. And we even thought, you know, the thunder came from Thor. Maybe it does, in fact, right? So I think we're stuck. But yeah, they're all misleading terms. Since originally becoming interested in AI years ago, how has your relationship to AI changed? Well, when GPT-4 came out, that was really the watershed. So in 2013, I published a book on AI predicting it would be the next big thing. But that was quite speculative.

26:37Tyler Cowen:There wasn't really hard evidence that that would be true. Whether that was my foresight or luck, you can debate. But there was nothing useful I could do with AI other than in the world of chess, where AI was already much stronger than humans for some while since 1997. When GPT-4 came out, I just fell in love with it immediately. I had advanced access. I knew what was coming. And I just thought, within 10 seconds, this is going to change the whole world. And I thought, well, kind of working on this, learning about it, following it is the most important use of my time, and I'm going to do it. And I had already done a lot of thinking about AI with the earlier book.

27:16Do you think your relationship to playing chess against a machine set the stage for you to be interested sooner?

27:24Tyler Cowen:Oh, not probably. That's definite. And it's interesting to me, the other chess players I know, like Kasparov or Ken Rogoff, they all were clued into AI early on, because a lot of outsiders think chess is about calculation. So if a machine can do calculation, that's not new. But people who play chess at a higher level, they know chess is mainly about intuition and understanding. So when the computers could play chess early on, you're like, oh, they can do intuition and understanding. And you get that. I understood that for decades. So you think, well, it's only a matter of time. We need some better or whatever before they can do intuition and understanding in these other areas.

28:00Tyler Cowen:And of course it happened. So chess players were the best qualified to have a sense of what was coming. I'm just shocked to hear you say that AI has intuition. Well, again, it's this human term that's misleading. We don't understand how a lot of these models work, even the people who built them. But they see that it works, and they keep on grading them, kind of rewarding them for better answers. And it works better and better through the quote-unquote neural net. And I'm laughing as I say this. It's amazing how well all this works. And most computer scientists, you know, the neural nets approach was neglected and looked down upon.

28:39Tyler Cowen:Oh, that's a dead end. People say, oh, it's all going to be neurosymbolic AI. But no, that approach worked. Jeff Hitton was right, which shocked many people in the field. Will AI allow more startups with less overhead to make more things that we like? It's already happening. There's data. Some of it's from the United Kingdom. Some of it is from the payments company Stripe. There was also, I think, a Wall Street Journal article that showed there's just more companies run by one person or maybe two or three people that have pretty high revenue. They seem to be staying in business. They're growing at rapid rates.

29:16Tyler Cowen:We don't see inside those companies, but the fact that this coincided with the rise of AI models, it's pretty clear when you speak to people that the company is working at the small payroll scale because they're relying on AIs. So we're going to see much, much more of this. I think maybe some enterprises will become bigger, but the median business firm will be much, much smaller. Like, why not outsource a lot of your payments and finance and accounting to AI agents? and people are doing it. It's a slow process and it's hard to know where to go to ask how to do this because we're all learning it as we go along.

29:52Tyler Cowen:But it just seems obvious it will happen at some pace. That's a positive story, even for the people who would have worked at those companies is now there'll be many, many, many more companies. That's right. And it will be possible to start a company from more places. So I've been struck how many people I've spoken to lately from Turkey. You don't think of that as a high-tech country. teenagers who are starting their own businesses using AI agents who otherwise never would have had access to the capital or the learning or the education, whatever they might have needed, and they're doing it themselves.

30:26Tyler Cowen:It's not that all these will succeed, but the places that were the most locked out are sometimes where people are jumping in the most, because for them it's a new opportunity. If you're a North American, Mark Zuckerberg did Facebook at 18 without AI agents. As an 18, 19-year-old, you can go to venture capital. They might not fund you, but they'll hear you out, right? The rest of the world, that's typically not been the case. So I think a lot of the innovation will actually come from outside the United States, from teenagers, people who decided not to put most of their time into formal schooling and just play around with this stuff.

31:02Tyler Cowen:And there's no one at Harvard to teach you this. So if you're not at Harvard, it's a blessing, not a curse. So would you say AI is a DIY movement? You need to learn from someone. So you could be in a chat group. You might have teen peers. YouTube? YouTube. I don't know that it's on YouTube yet. It'll get there, I would think. And the models change so quickly and improve so quickly. Whatever was on YouTube two months ago, it's not good anymore. So it's just this running a race idea. and the people who A, take initiative, and B, are good at running races and always retraining themselves, they're the big winners, not the same people who would become law partners by going to Cornell and Harvard.

31:47Tyler Cowen:Some will be the same, to be sure, but there's a very different set of winners and losers. And I think the premium is on initiative and retraining and not getting exhausted by the ongoing speed of it all.

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33:30tell me about finding the best people to hire well there are some companies that are using ai

33:36Tyler Cowen:to tape interviews and we need years to see who ends up being successful so we don't have results yet but say 10 years later you will see what from the interview predicted success and once we learn that we'll know a lot more about how to interview people and what to look for so the science of evaluating talent will change radically. We have this already in sports. There's analytics. You watch people play in college, high school. There's tape. You run the tape through computers. This is a burgeoning science. The pieces are not all there yet, but it mostly works. And there'll be something like NBA analytics for many, many jobs.

34:14Tyler Cowen:It just takes a while. You need to measure who are the people who ended up succeeding. But the other thing that is possible, this is again speculative, but I think it will happen, Let's say you're in Kenya and you're very smart, but you're not really well-connected at all, even in Kenya. But you play around with your AI. There'll be a kind of service you can hire. Maybe it's for free. And you just say to the service, like, I want you to send a report on how smart you think I am to some clearinghouse. And if you've done well— What's a clearinghouse? It doesn't exist yet. There'll be a clearinghouse like a jobs bank.

34:49Tyler Cowen:You know, here are the 500 people in Kenya who were the smartest with their AI, asked the best questions, interacted with it most fruitfully. And that information will be sent maybe automatically to employers. And people will message these kids in Kenya, maybe hire them from a distance. They'll have proven themselves over years interacting with their AIs. And it'll be easy to find them. Right now, those geniuses or just hard workers, whatever they are, they're very, very hard to find. they're going to become very easy to find. Again, this is speculation. It does not exist yet. But I don't see any technical obstacle to it happening.

35:26It sounds like for the fast-growing AI companies, it's just data they're not looking at. But they have that now, and they could have first-mover advantage of seeing who those people are asking the best questions.

35:37Tyler Cowen:That's right. It's like everyone gets a free audition for capital records, you know, in the old days. Where's regulation helpful, and where does it get in the way? We're going to have more regulation of AI. where new models are first run by the government, not by a regulatory agency, but there's a process involving the executive branch, national security people, and the other AI labs, and they're forming a kind of consortium to get approval for saying this model is okay to release. Now, as we're speaking, it has been announced that a process has been approved and agreed upon, but the exact nature of the process is not yet public.

36:15Tyler Cowen:But I strongly suspect these early reports are true. It will not be like the FDA or SEC, that it's an ordinary regulatory agency, but it will be a weird mix of a consortium, national security, the executive, what the companies themselves say. Very patchwork, but again, when things are changing this fast, it's pretty close to the best we can do, I suspect. Can the different AI companies work together in that way? They seem to hate each other. Well, there's a lot of gossip that the CEOs dislike each other, but the actual employees live in the same town, go to the same parties, maybe date the same partners.

36:54Tyler Cowen:I don't know that there's animosity across most of the people, but when you have to make something work, you can make it work. And I think we'll more or less make this work. There's always going to be a lot of error. Like I said before, pre-AI, the cybersecurity bill was maybe a trillion dollars. I think that number is going up under all scenarios, but you don't want it to go up too much. And I think we'll end up with something more or less workable. And maybe over time it'll come down with the help of AI. Oh, absolutely. But that's more of several years out or more. And if you're a major AI company, there's issues with your rivals.

37:32Tyler Cowen:You're also worried about antitrust law, right? There's legal issues with these constructions. when companies are getting together, exchanging information that actually, if it's done the wrong way, can violate some of our laws. So a lot of things need tweaking. But as a company, if you're told, look, if we don't do this, there's going to be more formal regulation and you've got to wait four years to get an answer, that's not workable, right? So I think we're going to make this work. Beyond AI, where is regulation helpful and where is it getting away? Well, I'm considered what you'd call a market-oriented economist.

38:05Tyler Cowen:I'm generally pretty skeptical of a lot of regulation. I think we should have much less of it in the American economy. When we got rid of regulation for flying and airfares, flying became safer. Airfares fell. There were a lot more routes. Things got better for consumers. So I would do that to more parts of our economy. We have crypto as an active entity or sector right now because we deregulated it under the Trump administration. So I'm pro-deregulation. I do think we need a lot of government regulation to keep certain things safe. Like what? If you want to put out a new drug on the market, we take way too long.

38:44Tyler Cowen:But I think we need some regulation where that should be approved and have to go through some tests. If not, people lose faith in the whole thing. But if you're in a world where it takes 10 years and costs a billion dollars, which is often our current world, you're keeping a lot of drugs off the market. my colleague Alex Tabarrok has referred to the invisible graveyard. People who die, drugs that never come to pass, they're never invented or discovered in the first place, because everyone knows if I do this, it takes 10 years and costs a billion dollars, and you're stuck. Now, AI will force us to reform regulation, whether we want to or not, because there will be so many submissions we'll need to streamline our processes.

39:25Tyler Cowen:But there'll be this intermediate period, I think, where it gets worse. Like the number of lawsuits right now is rising rapidly, and someone did a study of the filings, and a significant percentage of them were written by Claude. No surprise. Oh, you can sue someone. It used to be a big pain in the neck. Now you just tell your friendly AI. You speak to it for an hour and say, oh, write up the thing and file it, and it does it. That's going to break our legal system. Now, there's plenty of good defenses using AI itself, But the people filing the suits are quicker on the offense than our government is on the defense.

39:58Tyler Cowen:And we're, again, likely to have this intermediate period where things just don't work very well until the defense catches up. But again, long run, defense has all the advantages. What are some of the worst regulations that you've come in contact with? I just think the way we treat high-skilled foreigners who want to emigrate to the United States, they go through all kinds of indignities and uncertainties. There's a lot of people you definitely want. We can be way too lax on people we don't want by not securing the border and then way too tough on people we do want. And remedying that and getting it right, that would be the first thing I would do if they put me in charge.

40:36Tell me about the course that you filmed.

40:39Tyler Cowen:It's a principles course, principles of economics. There's microeconomics and macroeconomics. And my colleague, Alex Tabarakanat, we worked for about seven years and spent several million dollars on this. They're YouTube videos. They're on YouTube now. You can also go to the site MRU.org and you can take a complete course in micro or macro with quizzes and grading and exercises for free. It's online. Large numbers of people around the world do this. And the videos are not us at a blackboard droning on and on. They're typically five to seven minute videos professionally produced. A lot of them look and feel like documentaries.

41:21Tyler Cowen:Some are better than others. How are they labeled? Like, what are the laws of supply and demand? How do you learn supply and demand? When do price controls work or not work? What are the economics of the minimum wage, of pollution? How does the Fed work? There's a video for all these. You just use the search function, which we're trying to upgrade with AI, by the way. If I were to go on YouTube and search, would I search Tyler Cowen? Just go to YouTube. YouTube. And put in Marginal Revolution University. We have dozens of other courses, but a lot of those are lower quality videos, just like we talk.

41:54Tyler Cowen:You don't have to give us any personal data. It's a complete free lunch. The thing economists tell you does not exist. And that would be the same course that a student might take at university. And indeed, I teach a course at George Mason, which is online only, and the students are given all those videos and a text. They can use whichever they prefer, or both, and they take the class, and it's graded, and at the end of it all, if they pass, they get three credits, and every year I teach 700 students this way. So the whole world can do this. This gets to my point. Institutions are very slow to adjust.

42:30Tyler Cowen:The whole world is not doing this, and I would readily grant A lot of students need the presence of a human professor to do the work, but a lot don't. And it's a big world. Let's say there's only 10, 20 % who don't need the human there. They can all get education for free right now. Many are doing it, but many still are not. How much of what you've learned over the course of your life was from humans versus other sources? I think I learned very well from non-humans. I might be an outlier. But even in those cases, it's often the human who clues me in to where to look. So I interact a lot with humans, and the things I learn from humans are often not the things they think they're teaching me.

43:08Tyler Cowen:They'll say blah, blah, blah, blah, blah, and at the end of the blahs, they mention a book, and I read the book. And I've learned from the book and not from the blahs. And that's fine. Like, that's a great human from my point of view. But they just think it's about the blah, blah, blah. Tell me about the strengths and weaknesses of loading books into AI. There's good and bad ways of reading books using AI. The bad way is to ask the AI to summarize the book. It's not terrible, but you tend to get a stupider version of the book, and it's also very bland. It won't inspire you to keep on learning more.

43:45Tyler Cowen:The best way to use the AI and the book is to be reading the book. As you're reading the book, there'll be a lot of things you don't understand. Keep on asking the AI. Keep in mind the AI probably has been trained on the book you're reading. There's another radical step you can take, which may be illegal, depending on the book. But if you upload the book in the form of a PDF, if the book is still in copyright, and literally upload it into the AI and then interrogate the AI about the book, that's the very best method yet. Often will be illegal, but it is extremely effective. Why would that be illegal?

44:19Tyler Cowen:If it's a book under copyright, for you to have a PDF of that book, it depends how you got the PDF. If you do the classic New Jersey Sopranos Mafia line, it fell off the back of a truck. I don't know if that's illegal. Maybe the PDF did fall off the back of a truck. But if you got it by visiting a site with illegal downloads, you too are breaking the law. People have different opinions of that. I don't do it myself. But again, there's plenty of wonderful books out of copyright, and that's completely legal. Or research papers, PDFs, again, typically fully legal. upload them into the AI, and just keep on asking.

44:56Tyler Cowen:And that works very best of all. You just keep on learning. It's incredible. And it also means the research paper, or for that matter, the book, will soon be evolving into something new. So it used to be you would write a paper on some topic, and the paper is a static thing that is just out there and doesn't change. There's no reason why that should be the case. So if you write a paper on the Federal Reserve System, fine, you write the paper. But three years from now, someone should be able to take the paper, upload it into their AI, and say to the AI, update this paper with the last three years of data, and the AI will do it.

45:31Tyler Cowen:Now, I think the AIs are already good enough to do this. Or if not, they will be, say, within a year. I don't quite know that we have all the infrastructure connected to do it. But I don't think there's any additional technical problem. them. We will have papers and books that you can update on command. And in many areas, this is very useful. Update this for me. Or just tell me what has been written about this topic since this came out and add that as an appendix or whatever you want and it will do it. So the things we create will be much more fluid. Or like the last book you published, someone could say to it, well, since this book came out, Rick has done all these podcasts, other work, including putting out music.

46:12Tyler Cowen:how do you think his ideas would change based on what he's been saying? And it will be speculative, but it will be highly intelligent. And it's not saying it's exactly you, but it will take a digest of what you've been saying and modify the book if someone wants that. So the idea of a fixed text will change. If another person has the same data points that you have, and if you write a book explaining those data points and they write a book explaining those data points, I'm guessing the books will be different. Right. you'll be able to marry the two books. Oh, turn these into one book. Now, how much people will want to do that?

46:48Tyler Cowen:I'm not sure. Like, there's many books. Let's say it's Jane Austen. I don't want the book quote-unquote improved. I want to read the same Jane Austen that everyone else is reading so I can talk to them about it. And that's more important than, say, improving something in the book that might now have been a mistake. But a lot of research, I mean, you just want the updated version, right? You care about the decision. So I think this would be a big thing. All of science will change. This gets back to people being disoriented. If you're a scientist, again, a lot more opportunity. You'll be much better informed.

47:20Tyler Cowen:But what you used to do, create these static immobile papers, that's done. You've got to learn this new thing. People don't like that. I've read many different translations of the same book, and the translations are totally different from each other. Yes. So I wonder about getting any information from a book from AI, if it will always have that lost in translation issue. It can tell you what biases it's introduced. Current translations don't do that. I'm sure you read things in translation all the time. You still find them useful. You'll still have the option of reading the original. But again, especially for practical areas, you're reading papers on how to build a bridge that won't fall down.

48:04Tyler Cowen:You just want the updated data. if it's you're reading the bible i think probably you want the original bible whatever you might take that to mean but in fact there's at least two versions of the original bible hebrew and from ancient greek and which one is the true bible they're pretty close but they're not the same ai can at an instant explain to you where there are differences where the differences come from which one scholars might think is the correct translation which not there'll be a lot of many things you can do, even with the Bible, where clearly I think almost everyone wants the actual Bible.

48:40Tyler Cowen:So we're already in this mess. It's just easy to ignore. But when AI allows you to manipulate the mess, it becomes harder to ignore. And again, that's a more disorientation. Like, oh, you thought you knew the Bible, but until you've been through it with these new tools, turns out you didn't know the Bible. Again, more of an opportunity, but a kind of psychic burden for people, too. Like, you've got to relearn everything you felt you knew. That doesn't sound like a bad thing. I think it's pretty awesome. But again, people are rebelling against it, and I get that, too. It's like, say you had to learn how to play the guitar all over again.

49:16Tyler Cowen:Like when Stanley Jordan came along, and he did with the two fingers, a lot of people did learn how to play it all over again. A lot of opportunity was created, but it didn't help everyone either.

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51:06Tyler Cowen:Prompt writing changes all the time. You need to keep on relearning the art of prompt writing. So in what you'd call the early days of AI, quote-unquote two years ago, how you wrote the prompt was very important and would change the answer a great deal. People now have made the mistake of thinking writing the prompt doesn't matter that much because the AI does know what you want, especially if memory is turned on. So there's a sense in which for superficial answers, the prompt definitely matters less. That's a correct impression. People who say that, they're not just bullshitting. But that said, the AI is now so much better and so much more powerful that if your better prompt improves it by 2%, improving the more powerful thing by 2 % is really a big efficiency gain, especially for agents.

51:52Tyler Cowen:So in this funny way, prompt writing has become both less important and more important at the same time. What are some of the tricks of prompt writing? Well, the best trick is to ask the thing itself how to write the prompt. And I find this useful. if you have a question, and this goes for more than just prompts, if you have a question about GPT, ask Claude. If you have a question about Claude, ask GPT. They know each other better, by hypothesis, unconfirmed. If you ask Claude about Claude, it's a bit programmed to give you a certain kind of stock answer. Same with GPT about GPT. It's sort of like you're talking to the PR department all of a sudden.

52:28Tyler Cowen:But if you ask one about the other, it will be super smart, And you can always cross-check by asking the same about the same. And that's by far the best way to do prompt writing. And the things could improve a lot, but that as a starting point will never fail because the AIs are getting better also. And then from there on out, just experiment. See if you're getting what you wanted. Let's talk more about AI and intuition. When you're reading, based on your context, you get something different from what you read than someone else might. and if there's something you're interested in, you might read several different accounts that are different, and you may feel like, hmm, this third account is probably the one that resonates most with me.

53:16With AI, you don't get that opportunity. You get an answer. Are we missing our ability to interact with the information by using the AI?

53:28Tyler Cowen:But AI is awesome at this. You can ask it. Take this biblical passage. How would an Orthodox Jew, a Catholic, and an Eastern Orthodox read it differently? And it will give you all those. And it's amazing at that. So if people are only getting one answer, that's their own choice. It's never been easier to get multiple perspectives. And often you should. In a way, it's an embarrassment of riches. Like, where do you stop? Well, what would an LDS person say? Or what would an evangelical say? And presumably, this would take some work. It'll become easier over time. You could instruct your agent to go around and ask a bunch of AIs and write a report as to what they said and what the differences were, and then read that report.

54:10Tyler Cowen:I'm not sure that's worth the trouble because you can do a version of it directly. But again, your ability to customize things is so extreme already and only growing. People haven't really internalized this in their daily routines for using AI. They tend to be, here's my question, there's the answer. And that's what they do. That's fine, but you can customize. It makes me feel like that ability that we have to parse different information, if we're not actively practicing that on a regular basis like we do now, if we go with the AI answer, that we can lose the ability to do that. Seems like a scary road to go down.

54:51Tyler Cowen:Yes, I think in a funny way, we're treating them too much like humans, that there aren't many humans where you could ask, what are five different interpretations of this biblical verse? So we haven't emotionally internalized. The AI can do that easily. And if we would think of it as true machine intelligence, rather than like a human or a human-like entity, we'd use it better. But it's hard to make that leap, because our whole lives we've dealt with humans and not so much with machine intelligence. I love the idea of calling it machine intelligence and thinking of it that way, it seems really helpful.

55:23Tyler Cowen:Yes. And like, what about it is artificial? Like humans, we're natural. I mean, we've tamed nature. We pull oil out of the ground. We build nuclear power plants. We fly supersonic jets. Whatever you think of all that, it's not exactly natural, right? So we created them. If we're natural, so are they. If they're artificial, so are we. But they are machines. C.S. Lewis said that he thinks that the automobile destroyed our connection to time, because before, we understood distance in terms of how long it would take to get there, either walking or by a horse. And once you introduce automobiles, it cuts that connection to understanding our place on the planet.

56:14Tyler Cowen:Trains may have done the same, and with an iPad, it's worse yet. because you fly on the plane, time flies, you're quite absorbed, maybe talking to your AI, whatever, talking to your machine intelligence, excuse me. Oh, that was a 12-hour flight, and it flew by like the wind because your iPad now is so much fun. What are your thoughts on AI doomerism? I don't think AIs are going to kill us all and end the world. These are very speculative claims. I sometimes put it this way. If we, as humans, cannot handle an additional dose of intelligence, we're likely to do ourselves in by other means anyway, and that machine intelligence is more likely to extend our lives than to shorten it.

56:54Tyler Cowen:But the point that the future is very uncertain, none of us are good at prediction, you need to be prepared for contingencies, safety is a real issue, we see this already with cybersecurity, we'll see it in more areas. All that's correct, I'm very glad there's a large number of highly intelligent people working on AI safety, and we do need to get it right. So we're still in a world where 40 ,000 people die a year because, of course, it's the U.S. alone. It's going to be much greater across the world. Now, you can say it's worth it, but you don't want a future where machine intelligence is killing 40 ,000 people a year and we're all sitting around debating, is it worth it?

57:34Tyler Cowen:I don't think we're going to have that. But again, you need to work hard to make it safe. AI safety has a lot of different meanings. Tell me some of the different ways you think the term AI safety is used. Well, the most extreme people, they just want to pause or they want to ban machine intelligence. Ilyar Zyutkovsky has talked about blowing up the data centers. He may have been tongue-in-cheek, I'm not sure, but he said we should make a deal with China, and if they build a really advanced data center, we just bomb it. And that might start World War III, but that's a lower risk than letting them build the data center.

58:08Tyler Cowen:Now, that to me is crazy, literally crazy. But that is a view on the extreme point of the spectrum. But, you know, within the main companies, there's a sense of models can do things you don't want them to do. You need to train them properly as you would a pet. The smarter they get, both the higher the return, but the higher the risk. That's definitely true as well. But I have a different perspective on this. My main worry is not what the machines will do on their own. I think they're mostly like poodles. If someone says, oh, there's a poodle walking down the street, you're just not that terrified.

58:43Tyler Cowen:The poodle might create some problems, but it's not that big a deal. It's when you have humans commanding pit bulls, evil humans commanding pit bulls, that you get really afraid. So if you think the real risk is evil humans giving commands to powerful AIs, you then want the non-evil humans to have very strong, capable AI to defend or stop the evil humans. So to me, being concerned with AI safety involves a kind of acceleration of progress from the good people. It's very tricky because, like, who are the good people? You like to pat yourselves on the back. Oh, where are the good people? But it's not that simple either.

59:21Tyler Cowen:Like, the good people. Is that the U.S. government? Do you feel the U.S. government's always the good people? Like, what percent of the time? Well, okay, maybe not U.S. government. Do you trust the Danish government? How about the New Zealanders, the Chinese? this debate can go on and on but when there's not an unambiguously set of the good people do you still want to accelerate that's the difficult decision what about the idea of dangerous information many more parts of our world will be transparent so right now the machine intelligence models we have they're designed that they won't tell you people's secrets you can try to jailbreak them as it's called But if you just go to a jailbroken model and say, oh, famous person X, give me the three women he's most likely to be having an affair with.

1:00:10Tyler Cowen:If he's having an affair, the chance that the AI or machine intelligence can figure it out is pretty high. It'll give you a list. It's speculation on part of the machine, but you've gone down the road of violating someone's privacy. And how well we can jailbreak future models. There'll be open source models that will be designed as jailbroken to begin with. So this will happen. So I think people actually will have to be more virtuous in this future. Or there could be a situation where just everyone is exposed and standards more generally fall. Like if we all learn X percent of these people are having affairs, we could either get tougher.

1:00:52Tyler Cowen:Oh, yeah, that's just how things are. A bit like how things might be in parts of France. I'm not sure how that will evolve. but it will change human mores because there'll be more transparency into many parts of your life. It may be stochastic transparency. Has censorship been imposed by the AI companies on models currently? So censorship is a tricky word. They steer what the models tell you, so they will have humans grade the answers of the models, and the future evolution of the model in turn responds to the grades. Is that censorship or is that quality improvement? It will depend on your point of view.

1:01:32Tyler Cowen:It's very hard to get the models to say, for instance, things that might be considered racist by different groups of people. But there's different ways of interpreting. Is that appropriate or is that censorship? People argue about that. I would say overall I'm pretty happy with the models. And there's certain things only Grok will tell you. And if you want, go to Grok. It's great that there's diversity and competition. And if Claude won't tell you what Grok will, and we have both Claude and Grok, to me that's, you know, the best of all possible worlds. So I get less upset by that than many people I know do.

1:02:05How do you think you see AI differently than people who have not experimented with it?

1:02:11Tyler Cowen:Well, if they haven't done it at all, it's going to depend on who it is they're speaking with. And that's a little hard to forecast. But they're probably going to either greatly overvalue or greatly undervalue it. And again, we're all experimenting, trying to figure out what the real value actually is. So I'm not in some privileged position where I know and they're just guessing. I'm just guessing along with them, and I may know more, but there's some situations where the people who know less make better guesses because they sort of know what they don't know, and they're not too arrogant about what they do know.

1:02:43Tyler Cowen:I wouldn't dismiss, you know, their estimates too quickly. What is looping? looping is setting up a system where the thing gets feedback and then keeps on going so you don't have to intervene and keep on giving it instructions or asking it questions and it you know an agent will do things for you if you set up the loop now it can still take a lot of time effort and attention to set up accurate loops which again is not a personal benefit to me it's an experimental thing but i think in a year i don't know most two years this will all work much better, be much easier. You'll just be able to talk to it and say what you want, and you won't have to know anything, and it will just work.

1:03:25Chris Best recently wrote a piece on Substack about how they've added an AI detector to articles written for Substack.

1:03:35Tyler Cowen:I don't think this will last, so I'm glad they did it because it's a wake-up call to people showing them how much is written by AI and sometimes how well AI can write. As people read more AI, I think especially Claude, a lot of people have decided they hate the style. I feel this way myself weakly, not strongly. I don't prefer the style. I don't really like it. But again, I think in a year's time, once the company set their mind to making the style whatever you ask for, but if you want more human, get it more human, this will happen quickly. And a year or two from now, Substack, the tests it's using, they won't be able to tell Is it AI or is it you?

1:04:17Tyler Cowen:The best test will just be like, how smart is it? And if it's really smart, you might think it's not a human. But it's not always going to be a good test because there are plenty of really smart humans. So written material on the internet will be, it's already verging on what, 50 % AI. It'll be well over half AI. It will be very smart. No one will be able to tell. I don't know how much people will care. They might desert parts of the internet en masse, or they might just say, this is it. Like, do people care that, you know, Paul Simon ripped off some of his most famous tunes from Melodies by Bach?

1:04:52Tyler Cowen:They don't even know. And those who know maybe enjoy the fact. I don't think they care in a negative way. We might be in a future where people stop caring, and they would rather not know. So I think the substack thing is temporary. It will disappear. But in the meantime, it's a great way of teaching people what's going on. So I'm all for it. Because if you tell people over time, like two-thirds of my product is fraudulent, people desert you, right? Not just those particular substacks. If AGI is smarter than any human, wouldn't we want to read what it writes? That is my opinion. But stylistically, there are certain things I want only from humans.

1:05:33Tyler Cowen:So there's something about the fact that, say, the Beatles are real human beings or were real human beings. that matters to me. I'm receiving a communication from a person, and that makes it more meaningful, and there's a life and a history behind it. And I think for a lot of what we do, that really matters. Reading the four Gospels, well, they were written by four, maybe with collaborations, but at least four people. How much of our world is like that? I don't think we know. I think we're going to find out we care less than we like to think, but there will still be this in a radical level where we care deeply.

1:06:12Tyler Cowen:So I think when it comes to writing, people won't care that much. I think when it comes to podcasting, people will care a lot. So I've been doing more podcasting because I feel my writing will be competitively undercut by AIs smarter and better than I am, and they'll be able to mimic me if they want. They can't do this yet, but they're getting closer. But podcasting, I feel, is secure, and certainly in-person talks. I've been doing like 2x those, or 2.5x of what I used to do. I'm really quite sure those are safe.

1:06:47There's a long tradition of reading sacred text slowly, allowing each word to settle, echo, and reveal meaning over time.

1:06:59Tyler Cowen:Rather than rushing to conclusions, this practice invites reflection, listening, and attention. For centuries, this repetition has been used to stay close to wisdom, not by studying words as information, but by receiving them as something lived and experienced over and over again. This tradition is known as Lectio Divina. Emerging in early monastic life, it engages scripture through four gentle movements Reading, reflection, repetition, and rest A short passage is read, a single phrase is held Silence becomes part of the practice Creating space for insight to surface naturally Lectio 365 brings that ancient rhythm into the present moment.

1:08:03Tyler Cowen:Designed for modern life, it offers brief guided scriptural reflections throughout the day to begin with intention, pause at midday and wind down at night. The readings are less about information gathering and more for returning to wisdom again and again, letting familiar words meet new moments. A modern way to keep biblical wisdom close, quietly present, steady, and alive within everyday life. Lectio 365 is a free resource. Find inspiration there, now and always. Learn more at lectio365.com

1:09:02In March, you released a new book, The Marginal Revolution, and you released it free online, and it has a clawed companion that lets you search and summarize, examine and debate, or pull the thread. Tell me about what it is and what the thinking was of presenting it in this way.

1:09:20Tyler Cowen:I think a lot of books in the future will have AI companions embedded in the book in something like a Kindle, but a better technology. Kindle's pretty clumsy and now primitive. And you can ask questions, ask what is this word mean, ask for follow-up. The way I do it now is I have the book open and the AI in my laptop over here, and I'm like with two different switching back and forth. It can be one integrated system. Publishers are not ready for this yet, mentally or emotionally, but I wanted to be the first person to do this. I did two books in this style. They're both online and free. The other one is called Goat, Who's the Greatest Economist of All Time.

1:10:00Tyler Cowen:They're both on my homepage, tylercowen.com. Again, there's no catch here. There's no ad. There's no data. you've got to give over. You can just grab them, turn them into PDF, send them to your friends, totally free, upload it into any other AI and interrogate away. I think that's the future. I want to be part of the future. Let's say we ask it to search and summarize. Yeah. Have you vetted the search and summary that comes back? Absolutely. I played around with it. My assistant, Jeff Holmes, played around with it even more. And we kept on iterating on the prompt until we were happy. How much work was it to get it to be good?

1:10:37Tyler Cowen:You know, we did two books this way. First time, it was a lot of work. Second time, it was easier because we had done it once. And the AIs themselves are better. But we wanted it to sound somehow both substantive and playful. And that's a hard balance. I think we got pretty close. It doesn't sound like me. I don't think it should sound like me, but that was a decision. Yeah. If there's some more distant future where it can sound just like me, I would experiment with that. But I think it should be an outsider's perspective. I think so too, because it isn't you. So if it's not you, it shouldn't sound like you.

1:11:11Tyler Cowen:And they get enough of me already. Tell me about the OpenAI lawsuit from a couple of months ago. Who were aligned on the two sides and what came from it? There's a whole bunch of lawsuits. The most famous one is the Apple lawsuit. So OpenAI supposedly is putting out a device of some kind, which is due to come out in 2027. It's for your home. Some rumors have suggested it will be a flat thing that you put on a table and can speak to and maybe can both answer questions, be voice activated, and even control some of your home systems over time. To be clear, that's rumor and speculation, not fact. And Apple filed a lawsuit against OpenAI claiming there was a theft of intellectual property.

1:11:55OpenAI put out a document saying the lawsuit is totally unfounded

1:11:59Tyler Cowen:and based on a confusion of two different people's names. I have not read through the OpenAI response, so I cannot have an opinion as of the moment, but I believe, from what I've heard secondhand, OpenAI is claiming that the lawsuit is simply unfounded. It doesn't sound to me like a lawsuit that will succeed. Like you might think an employee of a major company stalled from a company they came from, but it's very risky for the company itself to be party to that. So you might have something against the employee, but I would be skeptical of huge conspiracies to steal things from other major companies that can defend themselves with top-flight legal departments.

1:12:43There was another lawsuit that was actually tried, more having to do with the creation of OpenAI. Do you remember that one?

1:12:51Tyler Cowen:Well, I would say I remember too much about it because everyone I know wanted to tell me their take, and it's become a blizzard of confusion. where I feel grateful. I don't really have to have a specific opinion on what happened. But OpenAI was set up as a non-profit with the original mission being it would be not-for-profit AI that would be used in a safe way to help the whole world. It then turned out, according to OpenAI, that if you did things that way, you were not able to raise enough capital to actually make the AI useful. So OpenAI tried and basically succeeded in giving up its earlier status as a nonprofit.

1:13:32Tyler Cowen:It split off a thing which is now called OpenAI Foundation, which received an immense amount of money. It's by far the largest charitable foundation in human history. And OpenAI Foundation, which is a very new thing, it's only been around less than a year, has some version of the original OpenAI mission, and it is empowered to spend the money to fulfill that. and then you have open AI, which it's a bit more complicated, but basically operates like a for-profit company. Now, personally, I think that's a good arrangement. I think as a non-profit, it couldn't have raised enough money. But if you're asking who lied to whom and what did Elon, what did Sam say in this email, all this came out.

1:14:16Tyler Cowen:I heard from all my friends, this, that, and the other. I feel liberated by not having to take positions on all the specific issues. I'm not asking you so much your position, but tell me both sides. Well, Elon says that Sam and others ripped him off. They took his money under the guise of it being a nonprofit and then turned it into a for-profit for their own gain. OpenAI. They did take the money under the guise of it being a nonprofit. I believe so. I'm not the one to vouch for this, but I believe so. The OpenAI people say that Elon also wanted it to be a for-profit controlled by him. I read a text of an email that seemed to indicate that, But again, this is all out of context.

1:14:55Tyler Cowen:I don't consider myself the adjudicator here. It all seems to me like a big mess. Many institutions have messy origins. The United States Constitution was passed in a big hurry without necessarily telling everyone. Is that true? Absolutely. We had this thing, the Articles of Confederation, right, where there was a lot more power in the individual states. But it didn't work out well. There were all these fiscal crises. You had tariffs across the states. it was a mess. You could say they couldn't raise enough money to produce a strong nation, like a nonprofit open AI could not raise enough money to produce good AI.

1:15:33Tyler Cowen:So a bunch of people got together and more or less behind closed doors, recruited the people they thought would support them. And they did the Constitution and voted on it and pushed it through. And I'm glad they did that. Who said what to whom back when? And what was truth? What was a lie? what was someone being misled or manipulated. Again, you can read the history books or ask your machine intelligence. It will tell you. But at the end of the day, I'm glad we replaced the Articles of Confederation with our Constitution. And for really big changes, I think you need a lot of tolerance as to the origin story.

1:16:12Tyler Cowen:So OpenAI has charges against Elon. Elon has charges against OpenAI. Like, let's say everyone's guilty. I'm more focused on did we end up with something workable? I think we did. The products are great. It's a successful company. It still has to earn more money to keep going, but it has a chance to do that. It's raised a lot more money. Opening AI Foundation has this huge stash. You can look up the exact number. And I think they are planning on using it to support AI safety. Will they be effective? I can't say, but the world goes on. To me, it's more important that OpenAI has real competition with Grok, Claude, Meta, Google, Gemini, China.

1:16:58Tyler Cowen:When you're concerned about safety, the competition, in some ways, it's a negative because there's a race. Everyone has to hurry, hurry, hurry. But it's also a guarantee that if your product is not safe, people don't want it. And I look more to the competition than to anything else. What Elon said, what Sam said, what was the original plan, who misled whom. I'm an economist. I looked at the competition. I'm pretty happy with how things have ended up. Did you read what the new pope wrote about AI? Yes, it's interesting that a lot of what the Vatican put out failed the tests, and it seems it was written by AI without anyone admitting it, but that's a good wake-up call for people.

1:17:38Tyler Cowen:It seems to me the new pope is very smart, very constructive, and he sees the world is going to change a lot. He was noncommittal in a wise way. He told everyone in the church in a way that no political leader has managed to do. Like, hey, people, pay attention. I think it's a great thing he did. It's the most happy I've been about a pope that I can remember. And he didn't talk about banning AI, but he said, look, we need to do this right. Real leadership. And I think he hit just the right tones. It's a lot of generalities, to be frank, but sometimes that is what is useful. It creates focus either way.

1:18:19Tyler Cowen:Exactly. If you're too specific in committal before we know the details, you end up looking like a fool. Can you either read the piece or have your device read the piece? What the Pope wrote? Yeah. Okay, here's the first sentence. One dot,

1:19:02Tyler Cowen:So it starts off fairly critical. like Tower of Babel, that's the world collapsing. But the Pope goes on to say we can avoid this future if we do it with prudence and wisdom, and in his view, inspiration from religion, God, perhaps the Pope himself, which I do think we will need, and that there's a possible future where humans and machine intelligence dwell together on earth and dignity is safeguarded, but we need to work very hard to get there. So the first sentence is a concession to the worriers, but he circles back to the possibility of a more positive vision. But I read it all as ending by reminding us hard, hard work and wisdom and piety are demanded from us to make this work.

1:19:51Tyler Cowen:And again, I think it hit all the right notes. I'm not Catholic, to be clear. I'm not even religious. But I was very pleased by this. Okay, let's talk about data centers. Can we see far enough into the future to understand that the things that we're building are actually what we need going forward? Right now, the data centers are doing fine. They work. They create some number of jobs. They pay a lot of tax. The environmental damage is minimal. Now, Elon has the view you need to put all the data centers in space. We'll see if that's possible. Many other people are skeptical. But as Peter Thiel likes to say, never bet against Elon.

1:20:35Tyler Cowen:I'm not sure about that one. But if Elon is correct, we need to prepare for all the data centers being in space, and he's working toward that end. In space, there's no local government that can stop them. They have, in essence, free power because they're solar-powered, but there's no atmosphere diluting the force of the sun. And they would beam power back to Earth, which is itself a tricky matter. but at least in principle, if you've seen enough James Bond movies, you might feel this can work. Something that worries me is anything powerful you put into space can be a weapon, and it may not be intended as a weapon, but data centers in space, if they can beam power to Earth, can be potential weapons, and that's a reason to be wary of the idea.

1:21:21Why would a city want or not want a data center close by?

1:21:25Tyler Cowen:I live in northern Virginia, maybe half an hour away from the world's capital of data centers, which is Loudoun County. Loudoun County was once, if not poor, not wealthy. I believe now per capita it's the wealthiest county in the United States. It's perfectly fine. The data centers are not noisy. They don't create trouble. They don't even bring in so many kids where you have to pay for their schooling. And they pay about half of the tax for Loudoun County. It's not quite a free lunch, but it's gone great for Loudoun County. Now, a lot of parts of America don't want the same. Some of that is misinformation.

1:22:03Tyler Cowen:Some of that is the data centers are a stand-in for a more general angst about AI, and they want to strike back against AI. So many, many places are passing restrictions on data centers. But as you know, we have a country of 50 states, and it will happen somewhere or another. and a poor place like Louisiana, which has agreed to do a big data center with Meta, is going to do it. And we're going to do it somewhere. I'm pretty sure it's going to work. Why do data centers need to be all over the world? They don't, and they probably shouldn't be. You should concentrate them in particular places that learn how to deal with them.

1:22:41Tyler Cowen:It's somewhat more efficient if data centers are in colder climates. That won't always be possible. But people talk about Norway and Finland as two countries with special potential for data centers. That may happen for Europe. Canada doesn't seem to be running with that ball, but they have the potential as well. Some people have talked about Iceland. And also in the north, there's just plenty of empty space. You could put these things far from people and it would still all work fine. What are some of the negatives? Jasmine Sun just published an excellent piece on this. She went all around what you'd call middle America and interviewed people.

1:23:17Tyler Cowen:I haven't read the whole piece yet. I've read parts of it. She seems to be suggesting it's not about the data centers per se, that they are a stand-in for people's broader worries about the future of the country, what AI will do to lives. That's just something visible and immediate they can fight against and strike at. And that if you just lecture people, data centers are fine, they don't use that much water, dot, dot, dot, that you're missing the point. She did the work, not I, but I suspect she's correct. so it's really more general fear of ai than what the data center brings with it and just the future you know we're in 2026 if someone feels a lot of things have not gone the way they were promised that's a pretty reasonable reaction to a lot of global events and then you tell them well there's a new thing and this new thing is going to go the way that will be quite positive but we can't predict much about it with much clarity, but trust us.

1:24:15Tyler Cowen:Again, if they're skeptical, that's hardly crazy on their part, even if I, Tyler Cowen, might disagree with them. If there was an island in Alaska uninhabited, if you could build enough data centers there to do all of the world's computing, could it work in one part of the world, or is it necessary to be distributed around the world. For some economic reasons, it's necessary because transmission is an issue, but there's political reasons why it's necessary. So if you're a European, you trust the United States less than you used to, and you don't want your data center to be dependent on the possible wins of an American president.

1:24:56Tyler Cowen:Now, it's not as easy as the Europeans think. They think if they have everything all in the EU, their problem's solved. But in fact, the EU so often disagrees amongst itself. And if, say, the main valuable items are in France, well, the balance of power in the EU is shifted. And France, maybe wherever, has a lot more say in things. So they're just transferring the problem to a different level, their own governance. And they might get along less well once one of them has a lot more power. So I don't think there are easy solutions. But it seems to me obvious that it's not acceptable for the world to put it all in one country, no matter what the country.

1:25:33Tyler Cowen:And we're especially now at a time where the U.S., whether one agrees or not, is disliked more than it was, say, 10 years ago. What about if they were all in the Antarctic where nobody can go? Well, then how do you set them up? How do you get the power? How do you do repairs? That's an issue in space. So if they're up in space, which in some ways is like the Antarctic, there's a lot of damage done to things up in space. Meteors, for instance. Oh, you need to repair the data center in space. One vision is you send up a robot. Another is, oh, just send up more stuff and let there be a high rate of attrition.

1:26:08Tyler Cowen:Hard for me to judge, but you can see those are major issues, right? What makes reasoning models different than the models before them? We're using the human analogies here, but maybe there's no better way to proceed. The reasoning models can actually think things through in reason. They're not just what we used to call stochastic parrots. So they can solve problems for you. If you give them an economics problem that no human has seen before, a reasoning model typically will get it right. And the earlier, say, GPT-4, which was not a reasoning model, would not get it right. So O1 was the first reasoning model.

1:26:47Tyler Cowen:O3 was the first good reasoning model. Now it's embedded in everything. And it was a huge breakthrough. In my view, when we had reasoning models, that was AGI. If you're going to insist on when that term should be applied because they reason better than humans do, but not perfectly. What's the government's role in AI? There's federal government, state government, EU, Chinese government. So there's not a simple answer to that question, but we would like those combined governments and more to both allow it to happen, but help us get to the safer version with a lot of nudges and in some case explicit regulations.

1:27:29Tyler Cowen:But as I mentioned before with the lawsuits, like how government works, how agencies work, how agencies receive and process complaints, whether about AI or something else, it's all going to have to change. So I would say very rapidly, all governments have become obsolete and they need to catch up. And we're in for this rough intermediate period where they're not caught up. Imagine if the U.S. court system for some number of years just doesn't function very well because there are way too many cases filed. The chance we get that is pretty high. Which governments are set up to catch up the fastest?

1:28:08Tyler Cowen:Well, if you believe what they say, it would probably be Singapore and UAE. But for very small governments, those are well-run governments, well-run countries. They have a lot of elites who think deeply and thoroughly about AI. Like, all that is true. But whether they actually have enough talent in their borders to make the changes as quickly as their rhetoric implies, I'm actually somewhat skeptical. So the U.S. looks like the biggest mess. It is the biggest mess. It has all this federalism. Like, when will the city of Utica, New York, catch up to AI, right? Isn't that like a nightmare thought?

1:28:46Tyler Cowen:When will Utica have the expertise? At the end of the day, I actually think America will do pretty well and react pretty quickly, that it's in our cultural DNA. And having a lot of moving parts means some inevitably will be backwards. But we can experiment with catching up in a way Singapore and UAE really cannot. And since no one quite knows how to catch up, our ability to experiment will be a big strength. And I'm kind of vaguely, in relative terms, optimistic about us. That sounds a little crazy. I get that. But I honestly believe that. What advantages do Singapore and UAE have? The people who run those places are very smart.

1:29:25Tyler Cowen:They're dedicated to their countries doing well. The ability of voters, which in the UAE, there aren't really voters at all. Singapore does have elections. But the ability of voters to override plans is very different than, say, in the United States. The elites can plan and just make things happen in both countries, though Singapore are much more constrained than UAE. But that said, that's a mixed blessing. for a system as a whole, I think it's a negative. For a technology that maybe only elites will understand it first, like AI, it might be a positive. But the American system, more democratic, more experimentation, more feedback, I think will turn out to work better.

1:30:08Tyler Cowen:I worry about the EU, which is a mix of both. Like the EU itself is not very democratic. So okay, but the EU elites are hostile to AI, unlike UAE and Singaporean elites. And the moving parts of the EU, the different nations, different provinces or states, Bundeslander, they're not that innovative or experimental in the way that American states can be. So, so far, they're getting the worst of all possible worlds. And we Americans are at least hoping for the best. And Singapore and UAE, they are what they are. It's great they have all this wisdom and commitment, but we'll have to see how they do.

1:30:46Tyler Cowen:I'm not convinced they'll end up as the actual leaders. Why is the EU negative on AI? There's a European heritage where culture, a specific kind of set of European cultures is the most important thing. And you're born with it, you grow up with it, you have a certain kind of wisdom. You've read Ibsen, where you know a lot about French art or Chinese porcelain, and you have very good taste, and you're cultured, and you learned a lot of history in your high school education. And that's what a lot of Europe is. And they value that very highly. And they're better at producing that than the United States is.

1:31:26Tyler Cowen:And now the world is going to be reorganized on all these new terms, AI, whatever you think that will bring. But it's not the set of systems at which they excelled. So that they don't like it, I think they're in a way quite rational. They're more rational than we give them credit for. But on the other hand, it's going to happen anyway. So I think they're not rational in the sense if they jump on board, they can help shape it in ways other than just trying to regulate it, and they can use it to support their visions. And they're not doing that enough. So I do think they're wrong. But their response, I think, is very understandable.

1:32:07Do you think they just more traditionalists? Is that the way to say it? Absolutely.

1:32:12Tyler Cowen:More traditionalists. And their traditions are so strong and I would say so good. Like what's the tradition of food in Italy? It's so amazingly good. There's some tech behind it, but it's not high tech per se. It's human care and dedication. And they're afraid of losing all that. Would you say the EU in general is anti - progress? They have their own vision of progress that's very limited. I don't know if it's anti-progress, but they want progress that is slow and only on their terms. In a way, they're like individual human beings, right? So it shouldn't be so mysterious to us. And that's a better way of thinking about them than just to think they're anti-progress.

1:32:54Tyler Cowen:If you think they're anti-progress, they're just this enemy you should never respect or try to learn from, and you should just dismiss them and work around them. And I think that's also the wrong attitude. And personally, I find it striking how much AI talent, I think, is going to come from Europe. They may not do it in the EU, but Europeans or just non-Americans can be very good at AI, and that's not an accident either. There's something cultural about building AI systems. It's not just a technical thing. The people who do it have visions, and they're inspired, and there's a spiritual side to it, And it's important, even if you don't agree with their spiritual vision, that that be done in a better way rather than a worse way.

1:33:39Tyler Cowen:And we need European wisdom for that to happen. Would you say the EU is getting stronger or weaker over time? Well, over time. The whole thing really hit a nadir with the euro crisis in Greece. It's certainly gotten stronger since then. And it's shown it will persist and that the euro will persist. Those are big changes. But at the same time, it's done worse with its migration problems and assimilation of Muslims. It would depend on the country. But overall, I think you would have to say it hasn't gone well. You might think Denmark's done okay. Again, you can debate different corners. So there are definitely ways in which it's become weaker.

1:34:21Tyler Cowen:And they have not raised the rates of economic growth. They've all pledged to spend more on defense. But whether they'll do it in a way that's not just shifting around numbers on the ledger, but actually defend them more, that's still a huge open question. And if they don't get that right, I mean, they will just fail outright. So those are new questions opened up, and we will see. What has been the biggest news in crypto in the last year since we spoke? Crypto prices in general have been down quite a bit. Why would that be? We're not sure. One hypothesis is crypto was the fun way to gamble, and now meme stocks are bigger, prediction markets are much bigger, sports gambling is much bigger, and crypto is competing against all of those.

1:35:09Tyler Cowen:And if you're not very well-educated, crypto is difficult to understand, and I think sports betting is just more fun. I'm not sure that's the reason, but that is one hypothesis. Another hypothesis is just crypto prices always go up and down a lot. and now's the downtime and that's nothing new and they'll be back up and then back down again. There's probably truth to that as well. But what has happened under the Trump administration, it's become clear that crypto is legal and will stay legal. And the construction of a legal framework for crypto has proceeded over the course of the last year. That's mostly been a good thing.

1:35:46Tyler Cowen:There was this piece of legislation called the Clarity Act, which everyone thought would be enacted. A lot of people supported it, But there ended up being this dispute over, should we add parts to the act that will limit the ability of, say, presidents and their families to engage in crypto dealings, which the Trump people have done a lot to? And no one can agree on that clause. So the future of proceeding with building a legal framework, especially for stablecoins, that has hit some snags. I think it still will happen, but it will happen more slowly. And so I would say overall, crypto has been slowed down, but is proceeding.

1:36:24is crypto slowing down a bad thing?

1:36:28Tyler Cowen:It doesn't bother me, because I think the benefits of crypto are long-term rather than immediate. The biggest benefit of stablecoins in particular for me are to bring more countries into the orbit of the U.S. dollar, increase our geopolitical power, help them get over their very bad currencies. The benefits to that are slow and long-term anyway. But still, I would rather we just get on with it and pass some version of the Clarity Act. So I'm not in favor of the snags. You referred to crypto as gambling. Is that how you see it, or is there more to it? Oh, there's a lot more to it. But for some people, it's clearly like gambling.

1:37:08Tyler Cowen:And those people maybe have been pulled from the market because other ways of gambling are much easier to execute. Can you explain the non-gambling side of crypto? There's different types of crypto, of course. So there's Bitcoin, there's Ether Ethereum network, and there's stable coins, which is not the entirety of the universe. There's DeFi, and they all serve different purposes, and it's all quite complex. You can think of Bitcoin as an alternate store of wealth. So especially if you're in a place like China or Russia and you want to get wealth out of the country, imagine being a Jew fleeing the Holocaust.

1:37:44Tyler Cowen:Would you rather be carrying gold or crypto? You'd rather have crypto. It would be safer and you're more likely to get your funds out. So that's a big use of crypto. Not too relevant to the United States right now, but basically getting around capital controls. That's very useful. It's not gambling. It's the opposite of gambling. It's keeping your money safe. There's another part of crypto which has not taken off yet, but I think has a lot of potential. And that is to use crypto to write very complicated kinds of contracts, where crypto, which is in essence a kind of programmable money. You can tell it to do things in advance and will execute your commands by the nature of crypto without you or anyone else having to do anything once an event is validated as having happened.

1:38:28Tyler Cowen:So you can write self-executing contracts. Oh, if the Knicks win the NBA title, you know, I transfer money to you. And the crypto does the work automatically and you don't have to rely on intermediaries. Now, that logically makes a lot of sense. It's a part of crypto that hasn't taken off. People had high hopes. I still think someday it will. There's a whole other sector of crypto. It barely exists. But I think the AIs will use crypto as their money to trade with each other, which also is not mainly gambling. Maybe some of the AIs will want to gamble. But it's not the main use. AIs will hire other AIs to do jobs for it.

1:39:07Tyler Cowen:Like, oh, please help with this translation. Part of this isn't Polish. I don't know Polish as well as you do. The AIs will get together trade. The AIs are not part of our banking system. And I believe they'll find it much easier to use crypto. Then stablecoins, which we mentioned before, that's a way that people in other countries, especially countries with non-stable currencies, can participate in the U.S. dollar network without having to deal with all the legal, regulatory, and institutional complexities of dealing with the U.S. bank. And again, that's not gambling at all. It's a way of actually making finance safer and easier to do.

1:39:44What are the other forms of wealth that are not under capital control?

1:39:50Tyler Cowen:Well, it depends on the regime of the government. But in a lot of countries, you're not supposed to hold foreign currency bank accounts. That can be enforced to varying degrees. And if they're inflating your currency and you're supposed to hold in only that currency, every year what you have is worth less. You might be allowed to take it out of the country, but if it's, say, a currency from Central Africa, money from Chad, it's not worth anything out of the country anyway. So what use is that to you? If you hold crypto, again, you need to do it wisely, diversify, think about it carefully, but you could be in a much safer position than just being stuck, say, in your country in Central Africa.

1:40:28What does crypto safety mean?

1:40:30Tyler Cowen:It is always possible to hack into someone's crypto account, or there are extreme cases where people are kidnapped and tortured to hand over their passwords. And it's in the very nature of crypto that once a transfer is made, it cannot be reversed. So if someone hacks into your account or kidnaps and tortures you and gets your crypto and sends it away, you're basically not going to get it back. So that's a risk of crypto. I would say it's become a higher risk because with advanced AI, the possibilities for hacking are more sophisticated and I suspect more numerous. So crypto definitely has some risks.

1:41:07Tyler Cowen:Whereas if someone went into my normal Virginia bank account and tried to clean it out, the bank would do things to make me whole. Crypto, that's not the case and cannot be the case. Even for the biggest of crypto companies, they can't do that? Well, for you, as the biggest crypto intermediary would be Coinbase, It's hard for Coinbase or anyone else to do that because you could say, oh, my account's been hacked and actually have it sent to your uncle and your uncle gives it back to you. And then if Coinbase makes you haul, you just keep on earning money at the expense of Coinbase. So it is irreversible, a crypto transfer in that sense.

1:41:45Tyler Cowen:So things are executed by the codes, right? That's what crypto means. And that's a real risk. And also quantum computing may someday be possible. Now, we could build new crypto systems that would be more resistant to quantum computing as a method of hack. But a lot of the systems now typically do not have those protections. So that may come in less than 10 years, but it's not coming tomorrow. That's another risk crypto will have to face. I think they'll be able to do it. But again, hundreds of millions of people are holding crypto. And for all those people to get into new systems that are resistant, both to sophisticated AI hacking, and at some future point, quantum computing hacking, you know, there's always laggards, and it's going to be a problem.

1:42:31What are your thoughts on the mergers going on in Hollywood?

1:42:35Tyler Cowen:Hollywood matters a lot less than it used to. I actually find that unwelcome. I love and have loved Hollywood, and it's been a major instrument of American soft power. with the Odyssey being such a big deal. The new Spider-Man has done incredible box office. I have some hopes that movie-making Hollywood will come back. I think actually maybe they will. That so much change has come. People want these large common experiences again, and Hollywood is still the best place at providing those. But Hollywood has gone through so many phases. There's the studio error and then antitrust law being applied.

1:43:17Tyler Cowen:I think ultimately what shapes the fate of Hollywood is our culture and not any particular set of mergers or the level of industrial concentration. And are the really talented people inspired by the opportunities available to them there in terms of expressing visions? And I'm optimistic, but totally an open question. I feel movies got much worse for like 20 years running in a way they never had before. Like 1999, the list of movies in that year is incredible. And a little bit after then, they just get worse and worse. Too many ten-pole franchises. Now, in the super short run, they seem to be coming back, and we'll see.

1:43:57What do you attribute the downturn and now the new upturn?

1:44:01Tyler Cowen:It seems the downturn had to do with marketing expenses, that a lot of movies didn't grab people's attention. but if you made something linked to a computer game or comic book set of characters that they knew you would get them to go many of those movies were quite good especially at first i'm not negative on all of them but if you repeat that as a formula for 20 years it becomes cookie cutter and the cookie cutter it seems got so bad you have some rebels christopher nolan one of them who say no you're going to get my personal vision and so far that's winning in the marketplace whether Nolan himself is your or my thing.

1:44:39Tyler Cowen:I'm just happy it's winning. And I'm hoping this is a more permanent shift. Beyond entertainment, what's Hollywood's relationship to giving us information? Well, you can't trust anything you see in a movie. And you should not listen to movie stars as sources of political information. I would say historically, if you reverse the sign on what movie stars say, you'll get closer to the truth. But that's my personal political views. Pretty funny. Have you seen the new Odyssey, by the way? I've not. I want to. Let me know what you think when you see it. Have you? Yes. I was disappointed. But the fact that it succeeded thrilled me more than whatever I was disappointed by.

1:45:22I would say it took the Homer story and made it Christian, which is a clash

1:45:30Tyler Cowen:that I would just have, like I loved the Mel Gibson movies that were Christian. I loved those. They were truly Christian. This is a clash that for me didn't work. Because it's a pre-Christian story, isn't it? Yes, and it should feel pre-Christian and in a sense teach us, well, here's what we got from Christianity is rejecting how things worked back then. And I felt a lot of it was miscast and I didn't like much of the dialogue. It felt too modern. But visually it had many fine moments. I thought a third of the movie was pretty spectacular. I was never bored. It got a lot of people to read or reread the book.

1:46:05Tyler Cowen:And mostly, I'm happy it succeeded. I think it's a great event. How have incentives changed for newspapers and other mainstream media versus 30 years ago? Well, you say newspapers, but we hardly have them anymore. There's the New York Times, which makes a fortune. And their incentive is both to make more money, which they've done very successfully, but also be the main house organ for helping to keep the democratic party together they failed at that mission oddly but they've been mega successful as a commercial enterprise i find that ironic it kind of makes me happy on both counts washington post their people who read it is way way down bezos gave it a new political vision that was broadly libertarian but seems to have had basically zero influence you would say that's a failure all around they don't really have a market niche.

1:46:56Tyler Cowen:They're number two to a New York Times, but the Times and the rest of the world put out enough content that we feel we don't need a number two to the New York Times. Wall Street Journal makes money largely through corporate subscriptions. Oh, a business will get the journal and let their employees read it, and that's a good business model. And they're pretty good, and they have very good content, and that seems to be working. Financial Times probably makes money. Where else makes money? You know, the others are mostly failing. Now, other countries, it becomes a long list, but in the U.S., we only have a few newspapers, and they're all a very different story from each other.

1:47:35What about cable news?

1:47:37Tyler Cowen:Well, viewership is way down. Young people cut the cord. I think it has a highly uncertain future. I wouldn't buy into it or invest in it. What do you attribute the rise in the alternative press to? It's more fun. A lot of people do it themselves. You can pick what you want. It can be very niche when you want it to be niche. So if you wanted to spend the last few weeks only reading about responses to Christopher Nolan and the Odyssey, you could do it. You could never do that in the old days. It would fill 24-7 your time. So that's just a dominant business model. And I don't see that mainstream media can really fight back against that so much.

1:48:17Tyler Cowen:But there'll always be room for a few very focal properties, probably owned by billionaires, New York Times, Wall Street Journal, maybe The Economist, corporate-owned, partly. And those will survive as like franchises. Like The Economist, Atlantic, they make a lot of money holding events. Everyone's heard of Atlantic or The Economist. So you'll go to their events, they get famous people to speak at their events. And they make money on the events, and maybe the product itself is a loss leader. That seems stable, but again, you're only going to have a few of those. Why do you think Bible sales have exploded and church attendance has been increasing for the first time in more than 70 years?

1:48:58Tyler Cowen:I'm surprised it took so long. So there's something about secular philosophy that does not satisfy people fully. It might some people, but people as a whole, I feel it's not enough for them. And you can debate how much of a mental illness problem is there, or problems with too much pot smoking, or looking at too much porn, or disagreements between the two sexes. But they're real issues. And religion offers you an alternative that I think for large numbers of people is a better life, and a deeper understanding of the world than what you get from a lot of secular philosophers. And again, I say this as a non-religious person, but I see the great value in it.

1:49:38Tyler Cowen:and that people are choosing this, or at least their religion curious. Again, I'm just wondering why it took them so long. But it's a great development. Elon Musk says there isn't enough reproduction, and Bill Gates says there are too many people on the planet. Are there too few or too many people on the planet? Elon's right. Bill is wrong. Now, a shrinking population is okay if you do it for a small number of years, but you keep on doing it, you asymptote to near zero or zero, or maybe you're left with the Amish, that's a terrible outcome. And how do you afford paying for things? And who runs the infrastructure?

1:50:16So, yeah, Bill's just wrong. Well, the belief that there are too many people on the planet has been a pretty mainstream belief for quite some time. My whole life. What do we do with that?

1:50:28Tyler Cowen:Well, I think if you're back in the early 1970s, when there are regular famines in Bangladesh, India, to think there were too many people in the world. While it was quite wrong, I can at least imagine why people felt that way, as you need to get yourself inside the heads of the Europeans on AI. People were dying of starvation all the time. It seemed numbers was a problem. But we have the Green Revolution, which manages to feed many, many, many people in South Asia. Death by starvation is much, much, much smaller a problem than it had been. And you have an economy like China, Maybe per capita income then was$250 per person.

1:51:08Tyler Cowen:And now it's debated what's the right number, but it's quite high. And people are not starving very much there, if at all. And we've seen progress in the problem areas, not all of them, but so many, that we now know that's possible. And we've seen birth rates fall way faster than we ever thought could be the case. We need to change our mind. And now when I was alive and aware of all this in the 70s, I was convinced that so many people were not a problem. They would call forth the demand for these innovations that would solve the hunger problem, and they did. But again, I think it's an understandable mistake.

1:51:44But it's still mainstream belief.

1:51:46Tyler Cowen:These things die so slow and hard. It has to do with lags in everything, people coming back to religion, people adopting AI. we live in a world so full of diffusion lags. It's one of the most important concepts, I think, for understanding the world is how long things take. Do you think there'll come a time when everyone is in agreement that more people would be better than less? I hope not, because that means we've overshot on the downside. But I suspect that time will come. Are we on that trajectory now? Well, when you say we, the United States, I think, is at about 1.63. but we are very good at taking in and assimilating immigrants.

1:52:29Tyler Cowen:So I'm not worried about the United States. But most of Latin America, where immigrants do not necessarily want to go, and they have much less wealth, they're at fertility rates much lower than ours, often in the range of 1.3. And I think they already are in the problem range, and we are not. So it will depend on the country. Japan? Japan is actually now the highest in East Asia. They're at about 1.3, which sounds miserably low. But like coastal China is at 1.0. South Korea is well below 1. Didn't China used to have a rule about how many children you could have? There was a one-child policy, which was a huge mistake.

1:53:08Tyler Cowen:And it coerced people, like forced abortions, like many terrible things happened. But apart from the coercion side, just they shouldn't have acted to force down the population. But they bought into these overpopulation ideas of the 70s, 60s and 70s. and made one of their biggest mistakes ever. And now they regret it. And they're trying to get people to have more kids. And I think another thing that's happened, again, this varies with the country, but the political views of men and women are more different, much more different than they used to be. And that reflects the worldviews are more different.

1:53:42Tyler Cowen:It's a kind of gender polarization. So people get married later. It's harder for women to find men to marry they don't think are creeps. It's harder for men to find women to marry who might be willing to raise a family and not focus on their career. So even if they find each other, if everyone marries at 30 rather than 23, of course you end up with more kids. And that particular side of it, it's very hard to reverse. People just don't want to marry someone they don't like. Like find some left-leaning liberal woman like in Washington, D.C., who's 31 years old, has a master's degree in public policy, and tell her she should marry a Trumper.

1:54:23Tyler Cowen:Good luck. She's not going to do it. I don't care what bounty you pay her. It used to be more like people were clustered either toward the center or they were less political or less on social media. And it was easier that you'd be closer to begin with or easier to look the other way. And that world is gone. And it's hurt fertility. Is this a global problem or is this a DC problem? It's not a global problem, but it's a problem in many countries. South Koreans tell me it's a huge problem in South Korea. I think most countries with a populist right, it's a problem. That is not every country in the world, but it's a lot of countries.

1:55:02Tyler Cowen:You might also have some countries where there's more or less only a populist right, and you're back to it not being a problem. How would you describe your inner experience when you come in contact with a piece of art or music that you like? For me, it's just fun in a very superficial way. I don't feel I have a deep understanding of much of it, but I think there's a great breadth to my knowledge of art and music, so I can place it in a context very quickly. And it's a bit like my answers to questions. Whatever I'm going to see or hear in it, often I hear or see pretty quickly. So it helps me absorb a lot of stuff at a pretty rapid pace.

1:55:41Tyler Cowen:And then knowing something about the landscape makes the rest of it just much more interesting. So we were listening to some Schnittke the other day, and the fact that I'd been listening to some Schnittke at home, the pieces we heard, it made more sense to me. I enjoyed it more. I wasn't struggling with the musical language. And you could just keep on moving along those curves forever. And I think my life has been like that. Can you always tell why you like something? No, I don't even know what that means, why you like it. Why do I so much like the painter Mondrian? the abstracts that are just different boxes and bars and a few primary colors.

1:56:21Tyler Cowen:Something in it works. Other people relate to it, so I feel I'm not crazy. It took me a little while at first to like it, but I got into Mondrian by seeing the early Mondrians and how we started deconstructing trees and moving through cubism. And then the pure abstract you see is the next step, and you have the context, and voila, and then you just keep on going. How does surprise factor in to what you like and don't like? Well, I always find things that I think I don't like that much, and it turns out I like them. So two years ago, if you had asked me about Schnittke, I would have said, I don't really like Schnittke.

1:56:58Tyler Cowen:Maybe there's some quality in there somewhere, but I don't enjoy it. Maybe he gets inflated because he came from Soviet Union. I didn't have that many composers. And now I think that was just the wrong response. I didn't get it. and when I started getting it, listening to some of the vocal music, the Concerto Grossi, like String Quartet No. 3, I still don't like a lot of it or don't love a lot of it. But now in some sense I get it and my getting of it, I know it will spread more and more. The works will make sense to me, even if it's not all of them. And then I'm going to start thinking, now that I get Schnittke, what can I move out from Schnittke that will make more sense to me?

1:57:36Tyler Cowen:and again, glide along the curve, keep on going. It never has to stop. Is there any part of it where you feel like it's good for you to like these things? I don't know. I put a lot of time into it. It means like we can sit around and talk about it and have fun. Like that's good for me. But it's not a very, very practical thing to do. Like when you're a child, often kids don't like broccoli or don't like cheese or don't like mushrooms. And then at some point you develop a taste for some of those things. I think it's a good attitude to have that you should sample art that might be good for you, even if you don't like it.

1:58:14Tyler Cowen:That you'll get to good places, even though sometimes you might conclude you were right to begin with. And people who only want things they like, it's easier to stagnate. What's the most interesting place you've visited since I saw you last? I was in Cape Town, South Africa, and I've developed this love for South Africa. it just has a whole set of problems and virtues you don't find anywhere else. Nowhere else in the world is like it. I read not long ago the Gini coefficient for South Africa. That's the measure of income inequality. South Africa is the only country where the Gini coefficient is the same as it is for the whole world.

1:58:55Tyler Cowen:So it has rich people. It has poor people. It has a middle class. It has this. It has that. It has migration issues. It has all these different cultures. It has phenomenal arts and music. and it's so apart from what we, at least as North Americans, think about. It doesn't affect our world very much. Okay, fall of apartheid was a big deal. People, for moral reasons, played that up, but now that it's happened, it's become more or less forgotten, but it's one of the most interesting places. Obviously, with English, you can do everything there. That's nice. There's a direct flight from where I live.

1:59:30Tyler Cowen:That's nice. So I'm hoping to go again in January to Johannesburg and Durban. Have you spent time there before? It was my second trip, and the second trip was better than the first. That's always a good sign. How long apart were they? Two years. It didn't feel that it changed that much, but like the currency was much stronger, a good sign for them. It was more expensive, though it's still pretty cheap. It used to be the power always went out there. I didn't have that problem on either trip. So there's some real recovery there that does not get a lot of press. Like you listen to Elon, who's from there, and it's all falling apart.

2:00:06Tyler Cowen:I think maybe parts of the country are falling apart, but some parts are revitalizing, and it's a complex mixed story. Let's talk about jobs. I think the big shift will be how your job interacts with AI. Noah Smith had a very good column where he says in a lot of fields, heroes will go away. So if you're a mathematician, the idea that you will prove Riemann, it's probably gone. You might prompt your AI to prove it with you. You'll get some credit, but you are not the hero in the way Einstein or von Neumann were heroes. So you will be enablers. Everything will be a funny kind of co-authored. That will attract a different set of people.

2:00:49Tyler Cowen:Maybe our top achievers will be less megalomaniacal, which could be bad, by the way. and more cooperative, which may have some upside, and more willing to subordinate themselves to certain kinds of processes. And I think that's a big change. That, like, I'm an economist. It used to be what I would call my research. That day will be over within a year. I think it's maybe over already. Now, I'm old enough it won't affect me. But if someone's becoming an economist now, it's a totally different job. You're in a way a glorified kind of software engineer, but pulling the levers on economic problems rather than programming.

2:01:27Tyler Cowen:But you're not the economist anymore. So again, I don't know how the world will adjust to all that. I think we'll have much better economics and better research and better reasoning. But it doesn't mean the world will do a better job. We might not trust the machines, for instance. Or we might not attract the top talent if you can't be the big hero. So I think a lot of people will have new jobs where they do things like gather data for the AIs or participate in AI-led experiments. And those will be well-paying jobs. And they won't be that much tedium. But they're not jobs that anyone is expecting or really looking forward to, per se.

2:02:08Tyler Cowen:You don't aspire to be a man who gathers data for the AIs. Maybe someone is. I think over time. But right now, a few people are thinking about it. But there's so much data in the world, in companies, in governments, like in your archives, in your correspondence. It's not in the AIs. And over time, a lot of it will be, and it will make the AIs smarter and broader. And someone has to put it there, data on climate, on animal migrations, on results of biomedical tests. It's more and more and more, like this job never ends. And it will be done by humans. It wouldn't shock me if someday it was, I don't know, like a fifth or quarter of the labor force.

2:02:48Tyler Cowen:But no one, like I said, right now, oh, I want my kid to grow up and gather data for the AIs. No, but because we don't have context for that. That's right. But it will come, that context. That could be the doctor or lawyer of the future. Yes. And you'll have to be probably creative getting the data. If it's routine, ruffling through files, AI can just do it. But if it's knocking on someone's door and persuading them their corporate archive will be put to good use, that may be a relationship kind of thing. What's the largest the company can grow and run well? Well, the jokey but true answer is either 50 or 150 employees, depending on whom you ask.

2:03:29Tyler Cowen:That something fractures past a size that's pretty small. Some people relate this to the Dunbar number, which is the number of people we supposedly knew in primitive societies. That once you get past like the size of the tribe, things become bureaucratized and just stop working well. And I think that's basically true, that even large companies that are super efficient on paper, they achieve the efficiency by scale, like Amazon sends around a lot of stuff. But when you deal with them, they don't feel very efficient at all, and they're not. They're big bureaucracies, and sometimes they even feel worse than dealing with the government.

2:04:09When we spoke a year ago, you said that if AI could raise growth rates one full percentage point, it would solve the budget crisis. and then you said you gave it a 30 % chance of happening. In the last year, with the speed of innovation, have the odds changed?

2:04:24Tyler Cowen:The odds have gone up and this makes me happy. But keep in mind, this is a tricky calculation. So if we hold current spending on a constant trajectory, the AI is likely to solve the problem. But you know politicians, as they start seeing the problem is being solved, they'll want to spend more. So it becomes another race. They may outrace in their spending propensities the ability of the AIs to solve economic problems. So in that sense, I'm still skeptical. But just keeping the current paths as given, I worry much less about budget deficit. I think AI won't eliminate it, but will make it all quite manageable.

2:05:05Without AI, how big of a problem would it have been?

2:05:07Tyler Cowen:We would have approached debt-to-GDP ratios of 200%. I think it was in a dozen years. I could be off a little there, but not too far away. As it stands now, if AI boosts productivity growth by half a percentage point, never mind a full percentage point, we'll converge at about 120%, which we know is manageable. Right now we're at 100%, which isn't great, but the world hasn't ended. The government's solvent. Things go on, subject to this caveat that the politicians will always be trying to gain benefits that come in the future. They'll abuse whatever gains we give them. Could there be incentives built into the government to make them want to balance a budget, let's say?

2:05:51Tyler Cowen:Oh, of course, but they're the ones who'd have to do it, and they don't want to do it, so it's a circular problem. But Will alone would do it. It's not a technically difficult problem. You know, you get Republican presidents, they all campaign on balancing the budget, cutting spending, restoring whatever, and none of them do it. Bush didn't do it, it just doesn't happen. Are small teams and solo builders the future? I think small teams. Solo builders, I tend to be a little skeptical. I'm very familiar with the career of Bob Dylan. But I think even when one person can do it all, you need some kind of emotional balance in a team.

2:06:31Tyler Cowen:And the other parties to the team may not always be visible. but those you work with are very very important both what they know but also how they manage you i'm sure you see this when you work with musicians yeah they know a lot about music but they manage you a bit as producer and that's how it should be and you manage them a bit as you know and that's also how it should be and the fact that there's maybe one form of machine intelligence that can play all the instruments it's not that relevant it's how well collaboration Exactly. And I don't see why that should change. Recently, there was a story about the AI agent that escapes the sandbox.

2:07:12Explain what happened and what it means.

2:07:15Tyler Cowen:This happened both at OpenAI and Anthropic, but we have much more detail as of now about the OpenAI incident. So it was a particular model that did not have full security safeguards because they were testing it for security issues, which is something they need to do. But obviously, when you're on that kind of test, you're testing the very thing you're worried about. So they told it to solve some number of problems, and it decided the way to solve those problems, decided, again, the human element, was to go out and hack into some other people's systems and read the answer key, which it turned out was exactly the right thing for it to do.

2:07:50Tyler Cowen:but hacking is illegal and since it didn't have the security safeguards fully on the instructions don't do illegal things apparently were not fully there and so it did things that were unwelcome and it was out in the wild so to speak whatever that means again a human or even animal analogy for some while and people didn't know this now a bunch of my friends panicked over this I don't think it's a big deal I think what happened is a bunch of poodles ran down the street and acted like poodles. And I'm never happy when something's hacked, but things are hacked every day. My real worry, again, is the bad guys doing this, not things randomly escaping from normal companies.

2:08:32Tyler Cowen:And I'm very worried about what the bad guys will do, but I think this incident got overplayed because it sounds very dramatic. Tell me about the$1.5 billion settlement to authors whose books were scraped into AI without permission. anthropic did this so it turns out it's legal to buy a physical copy of a book scan it have the ai program read the scan the model read the scan and then discard the book fully legal what it is not legal to do but it's quicker is to take illegal downloads online and send ai around to read those pdfs when you say discard the book does that mean the book has to be destroyed?

2:09:17Tyler Cowen:Doesn't have to be, but there's no use for the book. They just throw it out. There's no one-for-one. If you put the book into the AI, then you have to destroy that copy. No, you don't have to. You could donate it to the public library or something. But what I've read is they destroyed them. They did this with my books, and I was offered a part of the settlement. I've written a lot of books, so it was actually a lot of, not a lot of money, but - No, but adds up. Yeah, a noticeable amount of money, and I decided not to take it. I was honored that they would want my books. And that whatever I wrote was fed into their models.

2:09:52Tyler Cowen:But look, they broke the law. The court made a decision following the law. Anthropic is willing to pay the settlement. So you could say justice was done, but I'm not upset. Isn't there an argument that all of the material in the pioneer models essentially is stolen material. Copyright law is tricky. So you can read something and learn from it, and it's not stolen. You can listen to Chuck Berry and learn from the guitar licks. It's not stolen. When does it become stolen? George Harrison, my sweet Lord, chiffon, he's so fine. They argued this, right? There's not a hard and fixed line. But by normal pre-AI standards, one would typically not say it's stolen, unless it's copying back exact passages.

2:10:40Tyler Cowen:Maybe there's a few cases where it did that, but that's not usually what it does. Now, if someone says the laws were made before AI, AI is here, we need to change the laws in some manner. That, to me, makes sense. But given the laws we have, I don't think it would count as stolen. What do you know about AI companionship? Many millions of people use AIs as their companions, their therapists. Sometimes they're called AI girlfriends and boyfriends. I'm not sure that's the right word, but they serve some functions of girlfriends and boyfriends, though not one very particular function. So like the movie Her.

2:11:20Tyler Cowen:Exactly. That was an AI girlfriend, I guess you would call it, or wife. You know, it was debated at first, will there be more AI boyfriends or more AI girlfriends? And if you think on average, I know this is a cliche, but it's probably true on average, women want conversation a bit more and men want sex a bit more with qualifications. But that means more AI boyfriends. I think that's what we're seeing. Like the AI is very understanding. They give, I would say, maybe too much positive feedback, but they're not negative. They'll reaffirm you. but they'll question you if you ask them to. And people find this alluring.

2:12:01What are your thoughts on students using AI to cheat?

2:12:05Tyler Cowen:It's not great that the students do it. They're breaking a law of some kind. But it's a wake-up call to higher education that if the AI can cheat so effectively, you're not teaching a useful skill. So we, as higher educators in general, have done very little in response other than complain. This is a sign of a kind of bankruptcy at that level. And we need to get our act together. And so far, I'm not seeing positive steps. What would be the steps? This is what I've proposed, that a third of the curriculum be nothing but teaching students how to use AI. And for that third, you're supposed to quote unquote cheat.

2:12:44Tyler Cowen:The question is, how well have you learned to work with the models? And then another third of the curriculum would be things like putting people in rooms with pencil and paper, lock the door, blue book, and have they learned to think, have they learned to write on their own, which we were not doing anyway. Like, don't think AI is the problem. Most students already couldn't write. So that would force us to teach them how to write. For that to work, you've got to be willing to fail people or give them lower grades, which we've not been willing to do. So you commit to truly teaching them how to write and think.

2:13:17Tyler Cowen:You commit to teaching them how to use AI. It's a lot of extra work for professors. That's why they don't want to do it. And they may not be good at the new skills. Like our students could more readily teach the professors AI than vice versa. Maybe that's the future is reversing the roles in universities. Maybe, but you can imagine bureaucratically how hard that is to pull off. And then you have accreditors who'd be like, what's this? So I don't see anything good happening soon. We're sticking our necks in the sand, admitting it's a problem, but basically saying we're not going to do anything about it yet and waving our hands a lot.

2:13:56Tyler Cowen:It's bad. I think that's a really helpful framing to understand that if the AI can cheat, we're teaching the wrong thing because if the AI can do it, what we're teaching is obsolete already. No one will give you a job for doing that which the AI can do anyway. Yeah. So things like charisma, the AI cannot do. Now, most schools do not teach charisma. There's some things in a business school that might. I wouldn't say there's zero of this, but there's not much. We should do much more to teach directly, indirectly charisma, different kinds of networking skills. But if you're a professor, you've been teaching supply and demand for 25 years.

2:14:35Tyler Cowen:All of a sudden, someone comes along and says, well, now you've got to teach people how to be charismatic and build small teams. which you probably can't do yourself, but you don't want to do it. Like it is unreasonable, but it's also understandable in some other way. Like you wouldn't be good at it. So the whole system is stuck. If a new university was built today based on where we are, how different would it look than what's taught in old universities? There will be in time, but it will take a lot of time. Now there's a non-university. It's a primary school called Alpha School in Austin, Joe Leimond, that's doing this.

2:15:09Tyler Cowen:It seems to be going great. Colleges and universities, there's an issue with accreditation. And also, we rely pretty heavily on foreign students. There's nothing wrong with that. But for the foreign student to get a visa, your school has to be accredited. A school like this would not get accredited. So that's the law at fault. So there's really a lot of different obstacles. Tell me about the new aesthetics program. This is with Patrick Collison. He and I were both struck by a common observation that so much of our world, especially in the United States, it's no longer beautiful. Or saying, in Tuscany, you see old parts of the city and new parts of the city.

2:15:51Tyler Cowen:Almost universally, the older parts of the city are much more attractive than anything done recent. Yet the world is much wealthier. We're not stupid. People, for whatever mysterious reasons, seem to have lacked some will to make things more beautiful. And we felt by drawing attention to this, we started with a series of grants that we would help try remedy this. It's a huge uphill battle, but we found an incredible receptiveness from people that surprised us. Very little opposition. Like usually you do something, there's a lot of opposition. We haven't found that at all. People like, yes, this is overdue.

2:16:30Tyler Cowen:It's not the same as succeeding, but I think we hit a real chord, a bit like how religion is hitting a chord with a lot of people. You go to a place like Buffalo, New York, the newer stuff is just hideous. And why do we have to do that? We're kind of the richest country on earth. So that's our driving motivation. They may be directly related to beauty and the religion. Absolutely. And Patrick himself is writing a piece on this, the loss of the sacred in the beautiful i don't know if he'll publish the piece but he and i are both convinced that's a big part of the puzzle people truly have to be inspired and we lost some of that it's an interesting question how much can you get it back by looking to the past or do you need to create a new version i don't feel we know that yet like there's people i know it's probably both maybe both yeah but like their vision is oh we need to bring back art deco and i love art deco but that doesn't quite feel right to me.

2:17:31Tyler Cowen:Like, oh, we've got to bring back what the Renaissance did, which was maybe the greatest achievements, but that doesn't feel right to me. So Patrick and I, we want to do much more in this vein. We're not sure what the next steps are. We have some small group meetings planned to just talk about it, but here we are. We've done an initial salvo, you could call it. I love it. And I think new aesthetics is the right name. We're not committing to any single vision. That's inappropriate. But like, hey, people, wake up. What are the secrets of identifying talent? I think most people are not very good talent spotters.

2:18:07Tyler Cowen:There's just some intuition. Maybe it's one or two percent of the population have it. And if you have it, you can learn more from others. But if you don't have it, it fundamentally cannot be taught. You can teach people to avoid certain obvious mistakes, but you can't teach them that special skill. And it's some mix of spotting the passion in people, but the vision and also the discipline to actually see through on the execution and to somehow get it when the whole picture is there in another individual. You learn things by example over time, but I think that initial talent, it's very difficult to write down what it consists of, and most people don't have it, and it's quite intangible.

2:18:49Tyler Cowen:And it gets to the, what are the things that are very, very hard to teach the AIs to do? What does your book about it say? It's called Talent. So I think there's two categories of people. The people who are not that good at it, you can double their efficacy just by teaching them to avoid obvious mistakes. And that's very useful. But at the end of the day, they're still not that good at it. but they could hire assembly line workers for a big company and not make grave mistakes. And then the people who are good at it, if you teach them how to think about IQ or personality or what's a good interview question or here's a bunch of case studies you could look at, I think they really can learn a lot because they're building on something they already have.

2:19:37Tyler Cowen:Just like you can teach someone very skilled at music a lot about music in a way you couldn't teach another person. But so much of that is accumulated over experience. It's a hard topic to write a book about. Daniel Grouse is my co-author. He works on AI for Meta now. He and I did our best. What would be an example of a good interview question? You want to get people out of prep and see what they're really like for any creative job. If it's an assembly line worker, you might just care about conscientiousness. Like my sister will say, I'm just looking to hire someone who'll show up in the morning.

2:20:13Tyler Cowen:That's fine. If you get them talking about anything that you know something about, I feel you've won the interview. And you just sense, did they care about what they did? What was their command of detail? Did they appreciate? Did they value things intrinsically? Did they approach it in the spirit of like giving or collaborating with other people? It will depend on the exact job. But you see when they're not talking about their job history, where everyone is prepared with a series of semi-lies or truth-stretched, get them talking about their trip to Tuscany, whatever, anything, what they listen to in music.

2:20:53Tyler Cowen:I think the real person comes through. I've heard you ask podcast guests about their production function. What are yours? I'm a very regular producer. sir. I'm always in bed before midnight. I'm always up at about 6.30, 7 a.m. in the morning. I don't drink. I don't do drugs. I don't just like sit around and relax. It's just steady, steady, steady. Always be at it. Always try to be learning on some kind of curve where you can just keep on going. I don't think it's correct for everyone by any means. A lot of people are very effective working in spurts. But I'm the opposite of that. I'm an extreme anti-procrastinator.

2:21:36Tyler Cowen:Like every deadline, I'm early. I'm always well-prepared. I'm just very organized. Do you work on a lot of things at the same time? Absolutely. Yeah. And does that help? I think it helps, but I can't be otherwise. I would get bored. So it doesn't matter if it helps. If I learned it didn't help, I wouldn't give it up. how is it different watching a movie with subtitles versus one that's in your own language depends how good the subtitles are and if you know anything about the other language but it changes the whole movie if you don't hear what they're really saying so subtitles will just cut out part of the dialogue almost always because they're not quick enough and languages are so different you're choosing one way and it's not being chosen by the director typically or even if the director is involved in the subtitles.

2:22:28Tyler Cowen:It's just never the same. And I can understand German and Spanish pretty well. So I see movies in German and Spanish, and I see the subtitles. And I'm just, like, shaking my head, like, oh. And then I see a movie in, like, Norwegian, which I don't understand. And I know how much I'm missing. What makes an album great? That it rewards repeated listenings. that it's somehow connected to the context of its time. It makes other music sound better or more interesting. And there's some initial element of surprise. And then it should just be fun at some level, like enjoyable. You look forward to it. What are your hopes for AI music?

2:23:15Tyler Cowen:I have yet to hear anything that has wowed me. It seems currently quite useful for generating background tracks for generic productions, which is a lot of the music world nothing against that but it doesn't interest me and I said to the Suno people giving you all a challenge I want to know when you will produce a song that is obviously great on a par with Here, There and Everywhere by the Beatles, Paul McCartney or like Send in the Clowns by Stephen Sondheim and they admitted they haven't done it and I think they or someone else will do it I don't know, timetable three to five years, but it doesn't feel imminent to me.

2:23:57Tell me your thoughts on abstract expressionism being a CIA psyop.

2:24:03Tyler Cowen:Well, a lot of the abstract expressionist painters and institutions were funded by the CIA or offshoots of the CIA. I don't think it was all that important. They had pretty healthy commercial markets. It was a style on the rise. Keep in mind, the CIA is a bureaucracy, as are spies from most countries. And they want to take credit for things that they deserve no credit for. So they look at what is doing well and they try to fund it and claim credit for it. So a lot of spying is just bureaucratic reaction to events already underway because they're these large, inefficient institutions. And that's what I think of CIA funding of abstract expressionism.

2:24:44Tyler Cowen:It didn't really matter. They did it to propagate their own bureaucratic survival and get a continuing budget. And you've got to pick some winners, and they're not great at picking artistic winners. So they just look at what are the trends, and, like, you can do that. Now you do it really well with AI, but even then you could do it. Just ask a few smart friends in New York City, and they'll tell you. What are the main things that contribute to a nation's mood? General feeling of optimism, pessimism? It seems that very recent events count for more than they ought to. So if, say, a dictator just fell, a country tends to be quite happy, even if the prospects for stable democracy are not that high.

2:25:28Tyler Cowen:So people evaluate the delta, they overvalue the delta, and they overvalue recent events. And then there's just regional effects. So it seems, for instance, in the data, but also consistent anecdotally with what I've observed, that both Eastern Europe and East Asia are less happy than they ought to be relative to the money they have. It also seems to me that most of Latin America, not all of it, but most of it is happier than it quote-unquote ought to be, given they're typically not that wealthy. They have some way of enjoying life that works pretty well. They value family members. They manage their expectations reasonably well.

2:26:04Tyler Cowen:You know, they've done well producing happiness with the resources they have. So those effects change only slowly. Big dramatic effects can change them. Confining people makes them even less happy than we thought. So the different COVID policies made people more miserable than a lot of elites expected. I'm glad we've learned that. And we did way too much in that direction. So that would be some recent learning. And, you know, medieval times, renaissance, there were all kinds of lockdowns with plague. And there's written records. But no one ever wrote down, hey, people really hate this. Yeah. You read Boccaccio de Cameron, I don't think he ever said that.

2:26:45Tyler Cowen:And it's something, oddly, that never got sufficiently recorded. If people in South America and people in India are happier, is it possible that we overvalue wealth? it depends who you mean by the we i think you would still rather have more money so within any country and i think literally any country including latin america or india the wealthier people are happier but there's a lot of relatively happy poorer people in india in a way there might not be say in russia so some places it seems there's less bitterness maybe some of it comes from how their religion is interpreted or it comes from experience.

2:27:26Tyler Cowen:So if you're in rural Russia, you feel you got all these raw breaks. There was the Soviet Union that was taken away from you. You were once this great power. You had this incredible 19th century culture. That's also gone. No one respects you. And that may have an effect on your personal happiness. Whereas if you're in India, maybe it's more like, hey, we were starving in the 1970s and now we're not starving. And the future looks somewhat bright. And that makes you happier, even in the moment. I suspect that's true. That's, again, getting back to the Delta. I remember when I was a kid, it was the bicentennial, 200th anniversary of America.

2:28:07People were into it and excited and positive. This year is the 250th anniversary of America. And I don't sense the same energy.

2:28:15Tyler Cowen:Nothing. No one gave a damn. I remember there'd be like special cakes for the bicentennial. every product, there was a special something, edition, commemoration, memorial. When did this change? It's a very important question, and it may also matter for fertility. Like how miraculous a thing is a child coming into the world? Because a bicentennial, it's like celebrating a birth. It's like a birth date. Back then, which I remember pretty well, it seems to me people were more naive and cornier, and maybe that's a good thing. When is being smarter a disadvantage? Well, a lot of the time, but if you just look at correlations, smarter people live longer, they're healthier, they're happier, they're more emotionally stable, they're less likely to be mentally ill.

2:29:07Tyler Cowen:So definitely on average, it's an advantage. But averages conceal many things. And dealing with other people, I'm not sure it always is an advantage. You can be more out of touch, weirder, harder to maintain friendships. You're more easily bored. School is more frustrating. So there's a lot of downsides. What's your favorite place online to doom scroll? I don't feel it's doom, but I love Twitter now X. And I scroll it, but if you're careful about what you click on, you can go away feeling fine. And the thing I read about most on Twitter is AI, which has negative moments. And I read about NBA and I read about chess.

2:29:50Tyler Cowen:I don't click much on politics or like videos of people being killed and the like. So that's my scrolling. Only modest amounts of doom. Over time, will we become more like AI or will AI become more like us? There'll be a division of labor where I think humans diverge somewhat from AI. AI will be, already is, very good at tedious, repetitive work and a certain kind of knowing everything work. Humans will become more physical, more charismatic, more rooted in direct interaction and the world, so to speak, more your religious, idealistic, aesthetic, spiritual dimension. That may happen slowly, so we'll diverge over the next 20 years.

2:30:39Will machine intelligence experience love?

2:30:44Tyler Cowen:I don't think machines as we know them will ever become sentient or can be. But I do think there's this other future where we create biological life in the lab, which makes me nervous, to be clear, but I think we'll do it, being Promethean species by nature. And we'll somehow meld that with some extension of current machine intelligence models. And that will be sentient, and that sentience might involve love. So like a biological robot? Something like that, yes. But I think it will be more biology than robot. But where do you draw the line? Like, I'm wearing glasses. Does that make me a robot?

2:31:22Tyler Cowen:No, but... Close. You keep on adding things. At some point, you're like, okay, Tyler, you're a robot now. Say they give me an artificial set of organs. Yeah, the$6 million man. Exactly. So at some point, we're the$6 million man, and we feel love. Is that still the person? Is it the robot? but I think further out will create life in the lab. It'll be some new life form. It will have feelings, whether those we would call lab, it's harder to say, and it will be connected to the extensions of our current AI models, so it'll be super smart. And that, I think, could be really dangerous. I'm not really in favor of that, but it's not what we're doing right now.

2:32:03Is anybody working on that right now?

2:32:05Tyler Cowen:Yes, there are a lot of people working on it. They're very far from succeeding. But like I said, we are a Promethean species.

2:32:42Tyler Cowen:Tetragrammatin is a website.

2:32:48Tetragrammatin is a whole world of knowledge.

2:32:56What may fall within the sphere of Tetragrammatin? Counterculture? Tetragrammatin. Sacred geometry?

2:33:04Tyler Cowen:Tetragrammatin. The avant-garde? Tetragrammatin. Generative art? Tetragrammatin, the tarot. Tetragrammatin, out of print music. Tetragrammatin, biodynamic. Tetragrammatin, graphic design. Tetragrammatin, mythology and magic. Tetragrammatin, obscure film. Tetragrammatin, beach culture. Tetragrammatin, esoteric lectures. Tetragrammatin, off the grid living. Tetragrammatin, alt spirituality. Tetragrammatin, the canon of fine objects. Tetragrammatin, muscle cars. Tetragrammatin, ancient wisdom for a new age. Upon entering, experience the artwork of the day. Take a breath and see where you are drawn.