EVERY SPOKEN WORD
125 min read · 24,901 words- 0:00 – 0:20
Intro
- CWCaleb Watney
(instrumental music) Okay. Today, I have the pleasure of speaking with Caleb Watney who is a Director of Innovation Policy at the Progressive Policy Institute, and he's written, recently written a piece at The Atlantic arguing that America's innovation engine is slowing. So, before we get into the weeds, Caleb, do you want to describe the main reasons why you think, uh,
- 0:20 – 1:02
America's innovation engine is slowing
- CWCaleb Watney
America's innovation engine is slowing? Sure. Um, yeah, America's innovation engine is of course a very broad and multivariate, (laughs) you know, uh, thing, but I was trying to focus on, uh, three particular trends that I thought were, were troubling, um, make up major impacts on America's ability to innovate. Uh, and just briefly, those are basically high skill immigration international talent flows. Uh, number two, our cutting edge university system that's really the best of the world, and three, the, uh, industrial clusters, the agglomerations that we have that, um, are sort of the geographical regions where a lot of this innovation comes from. And each of those we're sort of seeing, uh, maybe negative trends before the pandemic, but the pandemic might serve as kind of a breaking point
- 1:02 – 8:45
Remote work/ agglomeration effects
- CWCaleb Watney
in each of them. Hmm. Okay. So let's start out with remote work first, um, or at least the agglomeration effects first. Uh, now what is so important about the physical agglomeration effects of being in these high productivity cities? Why can't remote work make up for that? Sure. Um, yeah. So I mean, economists have, uh, you know, for, uh, hundreds of years basically been studying the effect of these close geographically, um, connected, uh, networks of entrepreneurs, innovators, um, scientists, academics, um, you know, supply chain managers. When you have all of those, uh, people in a geographical region where they're, you know, running into each other spontaneously, and they're sharing ideas, and they're having, uh, long conversations, you know, in the hallway or in their offices that they wouldn't otherwise be able to replicate, um, you know, simply online, it ends up, uh, leading to a more creativity, um, more ideas, more patents, um, and, you know, we have a lot of, uh, evidence, um, for that in the real world. Um, as you mentioned, some people are starting to counter and say, "Oh, well, you know, in the last 20 years, we've seen this huge, um, array of online communication platforms kind of pop up, and can't those replicate, um, a lot of the agglomeration effects, um, that we're, we're getting in physical environment?" And I think that's certainly true to some extent, um, but I guess the, the right comparison here isn't even necessarily, um, physical agglomeration versus digital agglomeration. Mm-hmm. Um, but right now, if you're in one of these geographical clusters, you're getting the best of both worlds. You're getting the, the best that physical agglomeration effects have to offer, plus, you know, I, I, I have tons of great conversations on Twitter. Um, and so it's really- (laughs) ... digital and physical agglomeration effects versus just digital, uh, and I think the, the difference there is still pretty large and it would be a shame to, to, to lose a lot of the high productivity, um, clusters that we currently have. Okay. Let me make the case that, uh, remote work is actually going to increase some sort of agglomeration benefit and you, you convince me that it's wrong. Okay. So, uh, first of all, it's just going to connect the entire world into this high, hyper productive, uh, city that, uh, w- we can't have in the real world not just because of the limitations of how big cities can be and who can move in there, but just because of, uh, the inevitable zoning laws that cities like San Francisco passed that artificially limit how many people can join into the innovation circus there. And, you know, now we're going to have developing countries and the talent there joining into these agglomeration benefits as well as people in rurer- rural areas in America. Why won't this massively outweigh the p- loss of physical agglomeration? Yeah. No. I think digital, you know, agglomeration, these digital networks can have huge benefits and you're exactly right that there are a lot of ways you can arbitrage both bad regulations, you know, like zoning laws, um, but also, you know, just physical distances. But again, I think, you know, the, the relevant alternative here is, is not where you're just getting physical agglomeration or just digital. You know, right now, uh, living in Washington, DC or Silicon Valley or New York, um, you can have those conversations, uh, with people from all over the world. You can even hire remotely, um, but you do also get... There's a certain kind of like cultural context that you only get by like being in person and sharing conversations. I mean, I certainly experience this in my own life. I get a lot of ideas, you know, from having conversations on Twitter, um, but it's still very different to, uh, you know, have a extended two-hour-long conversation with a friend in their office, um, you know, like making eye contact, having these sort of spontaneous ideas that it's hard to replicate even over Zoom, um, partially because I think Zoom meetings tend to be a little bit more scheduled. It's hard to have, uh, flexible time. You know, frequently, the, the best conversations that happen in the real world are ones that, uh, you know, aren't intended as right off as conversations. They just kind of spontaneously arise, you know. You start off with just sharing one thing and then it extends into a whole conversation. But, uh, there's also kind of a Zoom fatigue that you see. You know, people, especially right now in this, uh, era of remote work are having so many Zoom calls. They're, um, they don't want to stay on longer, you know, just to maybe have a conversation with, with somebody extra. Mm-hmm. And so again, I, I think, uh, yeah, it's good to recognize that these aren't completely, um, you know, contradictory or we can have both, and that's really what we're getting in the big physical agglomeration effects of today, um, which kind of gets to the point I think we need maybe a better taxonomy of what we're talking about in terms of the kinds of interactions that we think lead to innovation, um, 'cause there's kind of a spontaneity and really in-depth conversation that you can, I think, only get in physical, um, spaces. But there is a, obviously, a huge effect from having just way more people you can have access to in sort of these digital spaces. Um, so that, that's one thing I, I would like to see this conversation get into is, is rather than like, "Oh, which is better? Which is more important?" um, let's break down what are the, the kind, the specific attributes of these kinds of, um, interactions that are happening in the physical or the digital space. Hmm. That's very interesting. Yeah. You talk in The Atlantic piece about how, uh, there might be, uh, uh, aspects of remote work that advantage the businesses that are using it, but for the net, net, uh, rate of innovation is actually quite bad. I'm wondering if c- can we understand this in the context of like, um, you, you can't explicitly say that, "Listen, I just want to hang out at this coffee, uh, place or wherever in my office just in case somebody wants to help me leave this company and start another company, or maybe s- I'll find a mate or something here"? Uh, but g- getting on Zoom requires some sort of explicit, um, uh, you know, explicit c- communication of your motives that is, you, you can get away with w- without not doing in the real world. Yeah. I think that's exactly right. There's sort of, um...You know, I, I think you've seen some workplaces try to experiment this. Like what if you just left your, your camera on and it was as if you were like working next to somebody in an office? But people seem to be really uncomfortable with that. They don't seem to like it. It, yeah, it doesn't seem to just like have the same sort of easy spontaneous conversation that, that you can mimic in the real world and I'm not sure exactly why. And, and I also don't want to necessarily rule out the case it could be, you know, 30 years from now or, or maybe sooner, uh, you know, we have some sort of virtual reality technology that's really blossomed and now everybody regardless of where you're living is kind of working in these, these virtual workspaces. And if that's the case, uh, then maybe, you know, physical agglomeration effects, uh, really start to diminish in importance. Um, but I certainly don't think we're there yet. Uh, and regardless, it seems like we're kind of, uh, or there's a big experiment being taken so I'll be very curious to see kind of what are the effects of all of these, you know, big tech companies, uh, Facebook, Twitter, um, others, you know, that are- are moving to all remote work for the foreseeable future. And they- and again, I think you- you kind of pinpointed something in your earlier comment. Uh, there's both productivity within the firm that I'm sort of concerned about but in some ways you could say that that's internalized, you know, if the companies themselves are seeing lower productivity measures, lower idea generation then they should be able to internalize that themselves. Um, but the thing I'm particularly concerned about from a public policy perspective is the- the public spillovers. You know, the fact that you have fewer new firms being, uh, formed and of course, you know, Facebook doesn't internalize that cost and so they have no reason to- to consider that. Um, but as a matter of public policy, you know, we do care about new firm generation and the kind of idea spillovers that are better generated in these public externalities.
- DPDwarkesh Patel
Hmm. Is there a reason why, um, agglomeration effects are, uh, so salient even today when we have online courses or open source code? I would- I would expect these sorts of more public and transparent, um, displays would like reduce the effect of having to be in the right cluster at the right time.
- CWCaleb Watney
Yeah, I mean, I think they have reduced it to some extent, but at base I think humans are extremely pro-social animals. Uh, we just do all of our thinking and, um, yeah, idea generation sort of in groups. Um, I mean of course you have, you have some, you know, lone geniuses that are, uh, you know, introverts or something but I, I think that's a pretty small, uh, minority of the population. Uh, it, another way to maybe think about this is, uh, how long Silicon Valley has lasted already and how high the- the rent costs have gotten. The fact that everybody, you know, continues to- to live in Silicon Valley and pay these exorbitant rent fees despite the fact that all of this online technology has, uh, you know, gotten so good is perhaps evidence, um, that the- the benefits, the productivity benefits of being in those clusters is actually really quite high.
- DPDwarkesh Patel
Hmm. Although we're seeing the rent prices crater out recently so w- we'll see what happens in the future.
- 8:45 – 16:23
Chinese vs American innovation
- CWCaleb Watney
Yeah, we'll see.
- DPDwarkesh Patel
Um, oh, so let's talk about the big picture before we get into th- these different points about why it even matters if America's innovation engine slows and somebody else takes over. So w- w- w- why can't I make the case that listen, whatever country in the future is the innovation hub will be the one that is, you know, free, prosperous as it adopted the policies you're advocating, otherwise they wouldn't be the innovation hub, so why does it matter if somebody else takes the mantle of the innovation hub?
- CWCaleb Watney
Great question. I think one thing you've seen, um, and, you know, this last generation of communications technologies is- is actually an interesting example here, uh, that there are a lot of cultural values that are conveyed in the building of especially technology platforms that end up becoming the underlying infrastructure that are used in the rest of the world. Um, and the technology has a great degree of path dependence. Um, you know, sometimes it's easy to be a technological determinist and say like, "Oh, whatever is the best technology will always win out." Um, and that's true, you know, obviously within some bounds, um, but it's also the case that sometimes we can get really, um, you know, caught in a particular infrastructure and that can be either like a physical or digital infrastructure or even like a cultural infrastructure. And, um, so if you look at a lot of the social media platforms, you know, the biggest ones internationally are primarily American firms, and they've built into those platforms certain kinds of, um, cultural mores around, uh, say free speech or the separation between the private and the government sector, about intellectual property law, uh, you know, about a huge number of- of different sort of choices that you end up baking into your platforms. And so, uh, I think if we were in an alternative universe where all of the main social media companies, uh, being used globally were, you know, uh, Chinese or- or run by the Chinese Communist Party especially, um, there would be very different values embedded in those platforms and that would end up really shaping the direction the technology plays. And so especially as we're starting to look, um, into the future of, uh, technologies that might even be more monumental like artificial intelligence, um, I think it is... we're thinking very carefully about, um, where the leading firms are geographically and what kind of, um, you know, cultural attitudes or- or- or, um, you know, social infrastructures you- you end up building in. And- and I for one would- (laughs) would much prefer that the United States and their sort of, you know, broadly liberal democratic values are the ones en- ending up building into the- the emerging technologies of tomorrow, um, than the Chinese Communist Party.
- DPDwarkesh Patel
Hmm. Okay. But then what about the claim that, um, that's kind of turned into a truism at this point which is that liberal democratic countries are just necessarily going to have higher rates of innovation. The, so... as long as the Chinese Communist Party stays, uh, authoritarian, they're not going to be the next innovation hub for the things we care about.
- CWCaleb Watney
Um, I don't... I mean, I- I hope that's true, um, but we certainly can't have, um, you know, complete confidence in that. I- I think if you were comparing a lot of, um, predictions of, you know, liberal democratic economists from, you know, 20 years ago about what China's expected development path is, they've certainly, you know, uh, outplayed I think the vast majority of predictions. Um, and some of that might be catch-up growth but they've had much higher rates of catch-up growth than, you know, almost any other country. Um, they've much, they've been much bigger and they've maybe had other issues that they've been able to overcome, uh, kind of surprisingly. The other thing is I- I wouldn't underestimate our ability to kind of shoot ourselves in- in the foot. Um, so I would say that, um, absent, uh...... actively bad policy. This sort of free liberal democratic model should work, um, or should out-compete, I think especially because the nature of innovation kind of, uh, relies on free thinking and iterative thought that's different from the consensus that, that tends to, I think, work better with these sorts of cultural values. Um, but that doesn't, you know, that only works so long as, as a policy is equally conducive in, in both kind of cultural environments. Um, and I would say that right now the United States is certainly not playing into its role as, uh, you know, the global R&D hub of the world. Um, and we're shooting ourselves in the foot in many ways that end up undermining our own ability to play that role.
- DPDwarkesh Patel
Hmm. But there, there's some questions raised about the effectiveness of Chinese R&D. Uh, Patrick Collison has a question up on his website about like, "Why, why aren't the leading..." Given how much China spends on R&D, why, why is, why aren't there any influential papers in the fields he cares about, uh, that come from China? So, uh, uh, is there something about the way they're doing science there that's not that productive?
- CWCaleb Watney
Yeah. No, I share some of those same concerns. Again, I, I would kind of look at this in like an expected value model, right? So there's like some probability that, um, China, you know, kind of stagnates or can't really... You know, maybe they're really good at catching up to the technological frontier, but it's just an entirely different kind of question, um, than actively pushing out the technological frontier. That's actually where I'd say like maybe the, the, the majority likelihood is. Um, but we can't completely rule out the chance that they're gonna continue, you know, making progress in the way they have. Um, but to that point, I, I do think that there are a number of, um... I think it's called Goodhart's Law, you know, the idea that when a metric becomes a target, it ceases to be a useful metric.
- DPDwarkesh Patel
Mm-hmm.
- CWCaleb Watney
Um, and, uh, you do see, I think, lots of examples of that in China. (laughs) Uh, one of my favorite examples is, um, you know, they made a, a big push recently for AI and they were saying, uh, you know, "We're gonna have 50 world-class leading AI textbooks and 50 world-class leading, uh, AI online classes," which kind of seems to, like, miss the point of, like, what a good textbook-
- DPDwarkesh Patel
(laughs)
- CWCaleb Watney
... or what a good online class is supposed to do. I mean, after you have the first, you know, five really good ones, I don't know what the other 45 are really getting you. Um, and so I, I... Yeah, I do think you see sort of, um, issues like that. Uh, but I, I think the other point here is that regardless of whether or not China stagnates, it, it's good on the merits by itself for the United States to try to play this role. Um, and so it's sort of like a... It, it's good if China does end up playing the threat that we fear, but it's also good even if they end up stagnating and don't. Uh, you know, it, it's kind of a win-win either way.
- DPDwarkesh Patel
Okay, so let me give you my optimistic scenario-
- CWCaleb Watney
Yeah.
- DPDwarkesh Patel
... which is that maybe the US shoots itself in the foo- foot, uh, but like China takes over or starts to take over as the innovation hub and the US... Innovation is the sort of thing that you only recognize its importance when you can see, uh, the saliently its lack, right? So you see like China's making innovations, we're not, and then we reverse the mistakes that we made that led us to less innovation. And we also already have, like go to universities, we have a history of innovation. So then, you know, we'll become the innovation hub if, uh, you know, we start to lose our edge. We'll, we'll correct course and we'll become the innovation hub in the future. Uh, is this a persuasive model?
- CWCaleb Watney
Uh, yeah, I think it's... Again, certainly within the, the range of, of possibilities. It is... It sort does ring true that, uh, the United States, um, (laughs) seems to, uh, sort of coast for long periods of time, and then when they feel particularly threatened by another great power, they kind of kick into a whole nother gear that a lot of the world kind of forgets that we have. Uh, you know, you look at, um, how galvanizing it was for the US, you know, when the USSR was able to, to launch Sputnik, uh, and, and get into orbit before, um, the US was. Um, that kind of was a great political like awakening. And there is something to, um... I don't know, you could use the term techno hegemony, um, the idea that, you know, the United States is traditionally, or at least, you know, maybe since the, the 1940s or so, um, the sort of clear unrivaled leader in science and technological development. Um, and that when we have the chance, we'll kind of coast in that role, but as soon as somebody like explicitly takes up the mantle as a challenger in that, um, that, that does kind of kick us into another gear. So we'll see if that can happen. Um, but I think the counter con- or the, the case for concern would be that American, um, you know, go- governance institutions are much more sclerotic than they used to be.
- DPDwarkesh Patel
Mm-hmm.
- CWCaleb Watney
Um, if you look at, uh, you know, would the Vannevar Bushes of today, you know, be willing to work in the NSF? Uh, and I, I think you could have a pretty compelling case that they wouldn't. You know, there's just so many more roadblocks to wanting to be an inventive, you know, interesting person who, uh, is, is trying to push out the, the, the frontier in useful ways and, and also working in government. Um, that I think means that even if maybe we get our cultural attitudes right, it... Maybe our institutions are just too sclerotic to really be able to, to kick into high gear in the way that they, they once
- 16:23 – 19:00
Reforming institutions
- CWCaleb Watney
were.
- DPDwarkesh Patel
Mm-hmm. Okay, and as far as these institutions go, there's, um... I know there's always been a debate about like whether you reform these institutions or you try to create new institutions that are, uh, better. Uh, when it comes to institutions that are funding science, um, political institutions, whatever else, do you think the best course to increase innovation is just to make them less bureaucratic and have r- less red tape? Or is it just to start, uh, alternative institutions?
- CWCaleb Watney
Yeah, I mean, I don't know that I have strong priors on that. I think it's gonna be... For, for some of these questions, it's really a matter of like political opportunism. Um, you kind of have to like play with the cards you're dealt. And so, uh, I would certainly guess that reform, um, seems much more likely, um, than, you know, outright, um, abolishing these institutions or creating new ones. Um, but if the chance presents itself to, you know, create new ones, then, uh, then that might certainly be worthwhile. Part of it, I think is, uh, we're almost trying to create like a, a governance infrastructure that can easily scale to the kinds of problems that we, we, we see ourselves facing or to the kinds of, you know, new roadblocks that existing institutions are, are, are running into. So for example, with science funding, I think one of the easiest, you know, lowest cost things we could start doing is sort- to introduce more like almost randomized control trials within science funding. So you saw-
- DPDwarkesh Patel
Mm-hmm.
- CWCaleb Watney
... um, you know, I think it was New Zealand, uh, did an, an interesting experiment recently where instead of going through this lengthy science funding application process, they just randomly distributed funds to, um, you know, uh, projects that met some, you know, qualified, uh, metric. And I think so far they, they found it to be pretty successful and, uh, you know, they were trying to, to randomly distribute it so it would have some sort of external validity. Um, but you can imagine, you know, running 10 different versions of that experiment in the United States where you're tweaking little variables within the current science funding apparatus and seeing how each of those, um, you know, randomizations end up making the, the results better or worse. Um, and then you can then take those results and depending on how, you know, willing the, the current bureaucracy is to incorporate those results, then decide whether you want to reform or tear it down.
- DPDwarkesh Patel
Yeah, the concern there is that the people who would be running the experiments are the ones that have a vested interest in preserving the current structure.
- CWCaleb Watney
(laughs)
- DPDwarkesh Patel
It, it reminds me of like a story that Thomas Sowell always tells where it was just like, but, bef- he used to be Marxist and then he worked at the Labor Department for a summer, and he had this idea of studying whether, uh, the minimum wage actually increased employment. And he, he was just completely, um, reputed by th- this department because it was like, they were saying, "This guy is just gonna get, make us all lose our jobs." Um, so, yeah, i- it's interesting how you go about like instituting those kinds of studies.
- CWCaleb Watney
For sure, yeah. There's, I mean, yeah. There's the, the whole meta problem here of can you even, you know, break through the current sclerosis enough to be able to, to do things that would test the level of sclerosis, and it becomes almost circular inside, in some sense.
- DPDwarkesh Patel
Yeah,
- 19:00 – 22:26
Tom Cotton's critique of high skilled Immigration
- DPDwarkesh Patel
yeah. Okay, so let's talk about immigration now. Um-
- CWCaleb Watney
Yeah.
- DPDwarkesh Patel
I, I, I just want to bounce some anti-high-skilled immigration arguments off of you and see how you respond. Okay, so Senator Tom Cotton has proposed limiting, uh, Chinese students from coming to US and studying in STEM fields. Um, he, he, this is his dir-direct quote, "If Chinese students want to come here and study Shakespeare and the Federalist Papers, that's what they need to learn from America. They don't need to learn quantum computing and artificial intelligence from America." And the case here is, you know, is it just some sort of arbitrage where they'll learn the information that taxpayers have subsidized in the US and get that innovation and just move it to China? Why is that a bad argument?
- CWCaleb Watney
Yeah, I think it's a, it's a pretty foolish, uh, argument and it would be even worse if we ended up, uh, you know, (laughs) actually running some version of that. I, I think that there's a number of, of factors here. Um, one, it's good to recognize, uh, what does the CCP themselves recognize as their biggest barriers to actually achieving some sort of, you know, technological leadership role? And they've consistently pointed to their lack of talent acquisition. Uh, you know, th- they've said multiple times that their, their really innovation, um, strategy is a talent first strategy because their, their, one of their single biggest problems as a regime is that all of their best and brightest don't want to stay in China, uh, and instead, you know, go to US, go to Australia, go to other foreign universities and then want to stay and work there. Um, so if you look at something, say, uh, AI PhD students from China that study in the United States, um, when given the opportunity, you know, 90 plus percent of them end up staying in the United States. Um, and that's a, that's a really big problem for China if you're then trying to, you know, develop the cutting edge AI, um, companies of the future. Um, so they've been pretty explicit in, in the fact that, yeah, talent retention is their biggest issue. Um, they're, you know, undertaking a, a bunch of programs to try to fix that. They have the Thousand Talents program and the Thousand Foreign Talents program, um, that are, uh, both aimed at trying to recruit both, you know, Chinese nationals that are brought back home and even just, you know, generally talented scientists from abroad and recruit them back home. Uh, and so in some sense, if we took extremely broad measures to just, you know, shut down all Chinese students from coming here to, to learn STEM, we'd be really doing them a huge favor because that's exactly what they're, in a sense, hoping for. You know, like, great, now we can keep all of these, you know, smart Chinese STEM students, uh, here in China rather than in the United States. Um, so I think one, that, yeah, it would sort of play into the CCP's hands there. Um, two, I don't want to downplay it and say that, um, you know, Chinese industrial espionage isn't a problem 'cause yeah, there are certainly, um, many examples of it. One problem is we don't have a good, uh, sense of like how big or small the problem actually is. You hear tons of, you know, anecdotes or, or tangential stories, um, but, but it's hard to know systematically kind of by the nature of espionage, you know, how widespread this is. Um, and so I would certainly be supportive of, you know, more narrowly targeted, um, ways of trying to say, you know, do more background checks before, um, Chinese nationals are working on sensitive government projects or receiving, you know, government funds or for, for research or whatnot. I think there, there's a number of, you know, more carefully targeted, or we can run counter-espionage networks. Um, or additionally, sometimes it's the uncertainty about Chinese students' ability to stay in the United States that ends up giving the CCP leverage, and so if you give them a clear path to, you know, uh, say permanent worker status in the United States upon completion of their degree, I think that reduces a lot of the leverage that the CCP has. Um, so broad story, I would say, yeah, we could certainly take many more targeted actions and we should to reduce, you know, the threat of espionage. But to, um, take overly broad actions that end up, you know, playing into the CCP's hands would actually be a mistake.
- DPDwarkesh Patel
Yeah. The, the fact that their top talent wants to come here and stay here is such a good card to be having. It's a- it's amazing that people just want to burn it
- 22:26 – 26:02
Eric Weinstein's critique of high skilled Immigration
- DPDwarkesh Patel
down. Um-
- CWCaleb Watney
Absolutely. (sighs)
- DPDwarkesh Patel
Yeah. Um, okay, so here's another argument. Eric Weinstein argues that in the long term, uh, in a free market, uh, wages and demand, uh, equilibrate, so there's no such thing as labor market shortage. So the, this, this entire business about having, uh, uh, shortages in STEM fields is a conspiracy from the NSF to reduce, uh, reduce wages for, uh, STEM f- field, uh, graduates to help employers.
- CWCaleb Watney
Yeah. I think, again, that's pretty silly. Uh, I think it really misses the like positive sum nature of, uh, especially, you know, fields in technology. The fact is we don't have some set number of, you know, top end machine learning jobs that are just waiting to be filled by American nationals and if you keep, you know, foreign nationals out, then that means more jobs and higher wages for Americans. Um, like that may be true in individual cases, but I think in an, a dynamic equilibrium, it's totally not true. You see that, um, you know, foreign, uh, immigrants that come here have much higher rates of patenting and that they actually, um, they're sort of, again, going back to the agglomeration effects, they make their American counterparts more productive and they patent at higher rates when they've had exposure to these international entrepreneurs. Um, they also start businesses at higher rates, which again, if you're like explicitly starting a business, that's kind of by definition-
- DPDwarkesh Patel
Yeah.
- CWCaleb Watney
... net positive in terms of, um, the number of jobs. Um, yeah, so, so I think, yeah, he's completely missing the, the, um, the positive sum element of this, and I think in some ways like the, the, there's sort of a word game about, oh, is there a STEM shortage or not? Um, but I think is again, like not particularly relevant, um, because-It, it is true that to make progress on the cutting edge of emerging technologies you just need more really smart people working in a conducive environment, and the more really smart conducive, or people you have working in a conducive environment, the faster your progress will go. Um, and so again, I would prefer the United States to have that progress since I, I want all of the, the best and brightest world, uh, talent to be coalesced in the United States. And I'd say, as one additional point, there's also some interesting ... I mean, there's, there's a long line of, uh, academic research, I think, backing up th- th- there's a very strong case for high skill immigration. Um, but there's a, a new paper, uh, recently that came out in NBR that specifically showed, um, when you cut down programs like the H-1B program, it actually increases offshoring because when companies don't have the option of bringing their talented people that they would like to hire here into the United States, it's sometimes easier to just move your headquarters somewhere else where you can hire them. Um, so I think that's a whole nother, uh, dynamic that he's not considering.
- DPDwarkesh Patel
Oh, that's a very interesting, uh, piece of evidence, and it's probably gonna be exasperated by remote work, so it's gonna be much easier to just offer-
- CWCaleb Watney
Exactly.
- DPDwarkesh Patel
... labor. Um, and, uh, yeah, i- it seems our intuition h- works here when we're just talking about native born talent. It's like there's more CS graduates now than there were 20 years ago, but there's more IT jobs because every new CS grad is a probability that y- the new business is gonna be created and more jobs will be created. Um-
- CWCaleb Watney
Sure.
- DPDwarkesh Patel
Is, is it-
- CWCaleb Watney
No.
- DPDwarkesh Patel
Go ahead.
- CWCaleb Watney
Sorry, I, I would say though that, um, I think there's, there's a lot of complaints against the H-1B program that are, are completely valid and I have, you know, a, a long list of reforms that I would like to see the H-1B, um, you know, undertake. Um, but just taking it as it is and sort of like cutting in half or slashing it I think would be very, uh, counterproductive.
- DPDwarkesh Patel
Yeah. I, I know those pains personally. Um, my, my dad is a doctor and so when I was eight, we moved to the US, and I'm 20 now. Uh, but we're still waiting in the queue to, uh, get, uh, y- b- b- you know, get the ... 'cause there's per co- country caps to get green cards, so we're still
- CWCaleb Watney
Yeah. Yeah.
- DPDwarkesh Patel
.... waiting in the queue to get green cards. And I'll probably get kicked off unless Congress passes a bill to, um, let kids stay on. I'll probably get kicked off and I'll have to start the process again to get my own H-1B off my CS degree, and at that point it might be easier to like leave the country and go to another where there's more lax immigration laws. Um-
- CWCaleb Watney
Uh, yeah, that's such a mess. Uh.
- DPDwarkesh Patel
Okay,
- 26:02 – 30:30
Reforming H1-B
- DPDwarkesh Patel
so how, how, how would you go about reforming the H-1B visa?
- CWCaleb Watney
Yeah. Um, so I, I would say I, I have a number of specific reforms for the H-1B, but then almost as a meta thing, I think in some sense the H-1B is like an overrated visa program, and I would like us to almost move our focus more broadly, but I'll, I'll start with the specific reforms to H-1B. Um, so there, there's a couple problems here you could try to addre- address. Uh, one is the fact that the, the current lottery system, um, that's used is ... it adds a lot of unnecessary uncertainty and also doesn't prioritize the, the most highly skilled candidates that we care about. Uh, you know, because it, it's just a lottery if you've met certain qualifications, uh, it gives kind of equal weight to the, uh, you know, top end machine learning engineer who has a, you know, salary offer of $400,000 from, you know, some top firm with the, um, you know, IT specialist that is still important but would be making $60,000 or $70,000. You know? And I just think, um, if this is a high skill immigration, you know, program, we should be giving priority to those that have like the higher salary, um, uh, offers. And so some suggestions have said, oh, maybe we should do a salary ranking where basically like the higher up you have as a salary offer, then, you know, the higher priority you should have in the queue. Um, I would be open to something like that, but I, I would also want to modify it to include equity, um, because there's a lot of times small startups can't compete on, you know, uh, just a salary wage, um, but they can offer pretty, you know, uh, lucrative equity, um, packages. And so I think so long as you have some sort of equity adjusted salary ranking, I think that would be, you know, one easy way of, uh, making the H-1B much better targeted. Um, another issue with the H-1B is that it's tied categorically to like a very specific employer and then it's kind of hard to transfer. Uh, and this is, you know, leads to some of the complaints people have that, oh, well, maybe you can be underpaying workers because they really have no other option. But again, that's not like a problem with the workers or, or them being in the United States and bringing their talents here, it's a problem with the structure of th- the visa that doesn't let them switch. Um, you know, and so you could either try to, uh, make it easier for, uh, you know, H-1B workers to switch between, um, uh, between employers or to even start their own business, 'cause oftentimes you have people that, you know, come here, want to live and work in the United States, and maybe they even have an interesting startup idea, but they end up having to work at a big company, you know, for, for six years while they're in line for a green card, and then finally once they get permanent residence, then they can start-
- DPDwarkesh Patel
Six would be great.
- CWCaleb Watney
Yeah, that would be ideal. Yeah. (laughs) Um, which kind of gets to I think the larger meta problem that the H-1B is just pretty poorly structured to actually like, uh, both attract and integrate the kind of talent that, that we want. Um, and so I've been looking at alternative, um, programs. One that I'm particularly excited about is the O-1 visa for immigrants of extraordinary ability. Um, it's a pretty under leveraged, um, visa right now, um, but in principle it's very flexible because congressionally it has no cap. Um, it's just supposed to be, you know, for immigrants of extraordinary ability and then USCIS has, uh, like sort of an eight factor test, uh, evidentiary criteria, um, for, for choosing who then fits into that. Um, and so you could conceivably have a new USCIS director come in and either issue new regulations to change those eight criteria or even just rewrite the internal guidance documents, um, that they use to, you know, make these decisions and end up letting in dramatically, you know, more really talented, really exceptionally, uh, you know, individuals through that program. Um, and the nice thing is unlike the H-1B, that's not categorically tied with one employer, so you could use an, an O-1 to then start a business or work for a startup or, you know, any number of things. So, um, that's just, you know, a, a few examples.
- DPDwarkesh Patel
Yeah. Isn't that called like the Einstein visa because of how hard it is to get it and how rare it is?
- CWCaleb Watney
It is, yeah. Um, it, yeah, so i- it's very hard right now. You know, you really have to be like a top, top end and you know, even then it's like a 500 length, you know, uh, or 500 page length petition process, which is awful. But again, because it's so subjective and because the congressional mandate is so broad, I think that means that the, the scope for possible reform without even necessarily needing to go through Congress is also very broad.
- DPDwarkesh Patel
Ah, okay. Um, uh, uh, has Joe Biden, uh, spelled out how he would ... if he would liberalize high skill immigration and how he would do it if he became president?
- CWCaleb Watney
He has not given a lot of details. You know, he's certainly spoken very positively about, you know, trying to undo some of the damage over the last four years and make it clear that the United States wants to be, uh, you know, the- the destination for a lot of these, uh, high-skill immigrants. But I think understandably, uh, voters have not shown a strong preference for really detailed policy plans, and so I don't think that's his highest priority right now. Um, but I think in the- the months after the election, um, if he wins, then, uh, there will be a lot of attention to actually getting the details on board.
- DPDwarkesh Patel
I hope so. Um, oh,
- 30:30 – 32:55
Immigration during recession
- DPDwarkesh Patel
so speaking of, uh, uh, what's going on at this time. Um, so the- another argument that I forgot to bounce off of you is, well, listen, high-skilled immigration is usually good and we should usually have more of it, but right now, given the high unemployment rate, given the economic catastrophe, we need to be emphasizing, uh, our own laborers. And so for- for a little while, let's just pause the H-1B while our- uh, while our economy adjusts.
- CWCaleb Watney
Yeah, I mean, again, I think you can see that, uh, we have lots of economic evidence about, you know, the regions that have higher rates of H-1B historically have higher rates of job growth. Um, you know, for native workers, they have higher wages. Um, so, uh, again, I think if you're looking at in a positive sum sense, even like a pause doesn't necessarily make sense. Um, one, because also the- the kinds of, uh, you know, job categories that have been the hardest hit by the pandemic are not the ones where H-1B employers are typically going to be hiring from. And so, uh, I think it's mostly, like service sector jobs or jobs that require a lot of in-person, um, you know, interaction with customers and whatnot. So I- I think it's pretty unconnected from the- the specific, uh, job market issues of this pandemic.
- DPDwarkesh Patel
To the extent it is connected, it's through medicine, which is in increased demand now, if anything.
- CWCaleb Watney
Exactly. Yeah, yeah, yeah.
- DPDwarkesh Patel
Yeah. Um, okay, so, uh, you- I think you said somewhere or wrote somewhere that i- immigration is the one lever you'd change first to increase levels of innovation. Why is it so much more important than other factors?
- CWCaleb Watney
Yeah, I mean, it's- I would consider it my number one, uh, lever right now simply because, um, it- it- I guess it's so far away from optimal. So, um, if we look at maybe say trade policy as- as an analog, right? You could talk about the free flows of people and the free flows of goods. Um, right now, the, um, the- the free flow of goods is like pretty close to optimal, right? We have- we still have tariffs and we still have, um, you know, uh, dumb regulations and- and various things that prevent us from, you know, getting to some hypothetical free trade optimal. Um, but you know, moving another five percentage points, um, in favor of free trade on the margin just matters not that much. But we're so far away from the global optimum, um, on immigration policy that, you know, a 5% change in how many really smart, skilled, um, talented people, uh, could come to the United States could make a very large difference.
- DPDwarkesh Patel
Mm-hmm.
- CWCaleb Watney
Um, and I think also if you kind of follow the idea that, uh, people are in some sense the ultimate resource, right? You know, they are, uh, sources of creativity, of innovation. Then of course if you're trying to affect innovation, you want the thing that, you know, (laughs) can most, uh, directly come up with new ideas, um, which are people.
- DPDwarkesh Patel
Yeah, yeah.
- 32:55 – 38:20
Big tech / AI
- DPDwarkesh Patel
Uh, th- that's definitely all very persuasive. Um, okay, so let's talk about big tech. Um, we were talking, uh, I think a month after Congress held hearings considering antitrust legislation against, uh, big tech companies. Um, and here are the concerns, and I want you- I want to bounce these off of you as well. Okay, uh, they're too big, they're- small startups can't compete with them, um, and they limit innovation, they buy up new startups. These are a lot of concerns, so I'll-
- CWCaleb Watney
Yeah, yeah, yeah.
- DPDwarkesh Patel
There's a lot to unpack here. But, um, and then you've also written a paper about, uh, decreasing the barriers to entering the AI market and the concern is they have too much data, and how are you supposed to compete with the petabytes of user data that Google has, and they need to be broken up so there could be more competition and innovation? Will breaking up these big tech companies increase innovation?
- CWCaleb Watney
Yeah, so there's a lot there. (laughs) Um, obviously. Uh, we can try to break it down into chunks.
- DPDwarkesh Patel
Yeah.
- CWCaleb Watney
Um, I think in- in broad strokes I would say that, um, again, if we're looking at this in like expected value terms, there is some probability that if you broke up these big tech companies, you know, maybe you get lots of innovation. Um, personally, I would assign a pretty small value there. I just think it's unlikely given, um, you know, many arguments that we can talk about in- in just a little bit. But in broad strokes, I think it's pretty unlikely. And the- the other factor is that it's a very high risk strategy. So if you break them up and you're wrong about the effect of innovation, then you've just destroyed like, you know, the few golden geese actually producing productivity gains in our economy.
- DPDwarkesh Patel
Yeah.
- CWCaleb Watney
Uh, and that's extremely bad and you've given it up to China and da, da, da. Um, so I think a much lower risk strategy that maybe gets at some of these same concerns would be, um, sort of like a big national push to tear down entry barriers, make it much easier to compete against these companies in a variety of ways and- and sort of, you know, reduce the- the maybe moats they have around them in some sense. Uh, increase, you know, the- the gale of creative destruction, to use a Trumpetarian term. Um, and then if they can survive that, you know, level of increased competition, then that further increases the evidence we have that maybe they are efficient, they are competitive. Um, and if they end up, you know, falling because now some new startup has- has out-competed them, then congrats, you've gotten the outcome that you wanted. Um, so I think as- as a meta strategy, I- I would prefer to at- at least at first try the strategy of really, you know, um, increasing the- the level of competition they're faced with, not by artificially tearing them down, but by making it much easier to compete with them. Um, and so that's, uh, sort of the- the broad strategy I was- I was trying to lay out in that- that AI paper. Um, one thing kind of briefly connecting this to the immigration discussion is the fact that I think a lot of these big tech companies have a huge advantage in the immigration market, um, because they actually have, you know, large HR departments that are capable of- of braving the immigration bureaucracy. Um, if you look at the career preferences of a lot of these, you know, top end talented immigrants, um, a lot of them say they would prefer to work at startups or start their own company at a much higher rate than American native born, uh, workers in these same, you know, graduate programs. But then in actuality, um, the immigrants are way more likely to work at the big firms because that's the only place that they can actually end up getting, you know, an immigration visa. Um, and so if you could find ways to make it, you know, just as easy for startups to have access to this, you know, high-skilled talent, I think you- you would sort of unlock a whole pool of entrepreneurial talent that right now is currently stuck at big tech firms. Um, so that's just one example of a policy lever I think you could pull.That wouldn't be artificially tearing down, um, you know, these big tech companies, but would be making it easier to compete against them. Um, and I, I think you could try to do similar things for, um, you know, data. I, I think on the data side, we sometimes get confused, um, if we think of data as this like homogenous thing that like, oh, just the more data you have always the better it is. Data's not context dependent, it's just, you know, reams and reams of data and the more you have, the better it is. Um, in reality, data, uh, is very context dependent. It almost has no value outside of, um, you know, almost the, the original circumstances that created it. And, and trying to almost utilize data is itself, it requires like a massive infrastructure internal operation to be able to utilize the data. Um, you know, if someone gave you all of the, the, you know, the data from Amazon Web Services or from, you know, Google Search result, it's like pretty unclear how you could use that even if you're trying to, to build, um, you know, competition or, or a competitor. And even then, even if you have this one-time static flow of data, that totally misses the dynamic flow of data that actually matters 'cause it's what happens when you make a change in your platform and then you can see where the results are. Um, and so I think, yeah, there, there might be like one-off isolated cases where I'd be in favor of like interoperability, but I, I think we want to be pretty careful about that because also trying to make data useful in the first place is a very expensive operation. You know, it requires building a massive internal infrastructure where you have, you know, data engineers that can, uh, collect the data in the first place or think carefully about what kind of data you're trying to collect. How can you process it, actually turn it into useful insights and then how can you apply it? And so you actually need lots of talent, again, at each step of that phase to be able to turn raw data into something useful. Um, which is, I think, actually in some sense wh- where the barrier is. Um, and I think there might also be some interesting things you could do with, um, government sector data. Uh, you know, the government like has lots of data, um, about, you know, the business sector and, uh, you know, geographical regions. And, and there's been plenty of examples of times in which the government has made, uh, you know, information that they only have and then made it public and then that's ended up, you know, leading to, to pretty large gains. You know, probably one of the best examples is a lot of, um, geolocation data from, uh, you know, uh, GPS satellites and how that's created, you know, an entire industry. Um, so I, I would be interested in also looking at, um, you know, maybe various, um, open source data sets or s- sort of data sets you could make open source.
- DPDwarkesh Patel
Mm.
- 38:20 – 40:07
EU regulation
- DPDwarkesh Patel
Um, yeah. You, you've been writing about, um, uh, how this attention the news media gives to, uh, glowing attention the news media gives to EU's regulation of tech companies is so misplaced because if the claim is that they're really going after the big guys, um, uh, you have to explain why only one of the top 30 big tech startups came from, uh, came from Europe. And these new startups are the ones that would be competing against Google and Facebook and Amazon. They're, they're the ones that these companies are afraid of, and they put up such barriers against starting such things that, that it, it benefits the very, um, the very big companies that they're presumably trying to target.
- CWCaleb Watney
That's exactly right. If you look at, you know, something like the GDPR, uh, which, you know, Europe was, was touting and still you see tons of conversations in the United States about, "Oh, well, really we should just adopt the EU approach and have our own version of GDPR." Um, but after the GDPR has gone into effect, it's, it's only increased the market share of Facebook and Google. Um, because, you know, again, sort of similar to the immigration discussion, um, the, the more you have, you know, these large bureaucratic, uh, burdens that you need to meet, the easier it is for large companies to be able to handle that 'cause they actually have the, the, the staffing resources to be able to have these huge teams of lawyers to make sure that they're compatible. Um, and so yeah, the United States is the one that's actually producing a lot of these top-end, um, companies that are, that are competing internationally. Uh, they're by far, you know, uh, the most innovative in terms of like patents and where interesting startups are coming from. Um, and then the EU, you know, talks a big game, but, uh, their regulations and practice just make it even easier for, for the big companies to succeed there.
- DPDwarkesh Patel
Yeah. I, I, I like a thing Jonah Goldberg says, which is that complexity is a subsidy. That if you have more cognitive or, um, legal or whatever other resource, labor resources, the more resource you, resources you have, the easier you can navigate the complexity. Um, it's-
- CWCaleb Watney
That's a great framing. Yeah.
- DPDwarkesh Patel
Yeah.
- 40:07 – 42:30
Biden vs Trump
- DPDwarkesh Patel
Um, okay. So, uh, let's get a little bit into the politics here. Um, this might be a meaningless question, but, uh, given that there's an election coming up, which party cares more about innovation or would have a better pro-innovation strategy? Because you can look at Trump and say, um, there's, he might be good on regulation taxes, he's bad on immigration and the Congress or the Democrats, on balance, which one is better for innovation?
- CWCaleb Watney
Yeah. I mean, (laughs) I, I think try... So almost talking about parties is in some sense, uh, I don't know if it's the best framing partially because, um, the parties are so broad. I mean, uh, if, if, if on the one hand you ha- you have one party that incorporates everyone from AOC to Joe Biden and on the other hand you have everyone that incorporates someone from, uh, Donald Trump to J- Jeb Bush, you know, really I, I think a better way of almost thinking about it is that there's sub-parties within the existing national parties and they're, you know, competing and, um, then whoever, you know, wins the primary ends up getting, um, sort of the national thing. But, uh, I would say certainly I think a, a Joe-Biden agenda would be better for innovation in the United States I think than, than a Donald Trump agenda. Um, especially when you consider what I would, what I would see as like the biggest drivers of innovation right now that we're missing which are things like, uh, high skill immigration reform, um, I think, uh, federal R&D reform. Uh, you know, a lot more housing in, uh, these big, um, you know, conglomerations and these industrial clusters. Those would probably be my top three and on each of those I think, you know, Joe Biden is, is, uh, expressed more interest in those than Donald Trump has.
- DPDwarkesh Patel
Oh, I didn't know that he was proposing zoning reforms in the big cities. That's cool.
- CWCaleb Watney
Well, I, again, he's not really talking about many of these things, but in terms of like where's the energy within the, the, the people that would likely be end up, you know, put into the, the various cabinet positions.
- DPDwarkesh Patel
Good. Good. Okay. That's, I'm happy to hear that. But what about the fact that he wants to raise the corporate income tax rate or probably increase the regulations that Trump cut down?
- CWCaleb Watney
Yeah. I mean, that would be, you know, bad in, in some ways. Um, everything is like a series of trade-offs. Um, I would say at this point, like I, I would take a, a trade-off where we get more high skill immigration and more say, you know, federal R&D or experimentation there in exchange for, you know, slightly higher taxes or slightly higher regulations in some ways. Um, but again, I, I think, you know...The- the better way to try to look at these things is on a case-by-case basis. I mean, of course, at- at some level, practically, you have to choose which of those packages do you prefer. Um, and yeah, that- that's kind of, uh, what I would prefer at this point. But, uh, that doesn't mean you have to, you know... Strategically, I, you know, I'm gonna be, um, also trying to, to push the Biden administration in a better direction in some of these things.
- DPDwarkesh Patel
I'm happy to hear that. Okay. Um, all right. So l- I'm, I want to ask you, uh,
- 42:30 – 47:20
Federal R & D
- DPDwarkesh Patel
with these three areas, what is the most undervalued, um, phenomenon relative to its impact? Okay. So, uh, relative to its impact, what is the most understudied public policy issue? Stuff like immigration, taxes, regulation, healthcare.
- CWCaleb Watney
Ooh, that's a good question. Um, I think we still have a pretty poor understanding of, um, why some of these industrial clusters form in the first place. Um, it seems like sometimes it's like accidents of history, you know, that it just so happened that such and such a company was here and then, you know, there was, uh, a number of competitors that kind of formed around them. Um, but then how you get from sort of like a- a fledgling industrial cluster to something that becomes, you know, full scale like Silicon Valley, I think it's pretty mysterious. Um, and, uh, certainly we've had lots of artificial experiments, um, to try to, you know, seed new industrial clusters and other places that have, have failed pretty miserably. Um, but, you know, sometimes they work. So I- I- I think a much better understanding of how and why these agglomerations form is, is one of the things that I, I would love to see.
- DPDwarkesh Patel
Mm-hmm.
- CWCaleb Watney
Um, I think also the- the structure of federal R&D support is, is pretty understudied. Um, you know, it- it seems like both as like a percentage of GDP we've seen, you know, uh, basic R&D support from the federal government just keeps on declining, uh, as a percentage of G- of GDP. Um, but then also we're just not seeing like a lot of experimentation in the structure of these grants. And so I'd love to see almost like a science of science, like, uh, how do we know that actually the, you know, these structures we- we're using are- are the best versions of them, because I- I think we're probably pretty far away from the optimal. But, um, given the huge public spillovers of, you know, really well-structured, well-targeted, um, you know, public subsidies for R&D, uh, it matters a lot. So I- I'd love to see a lot more attention on that too.
- DPDwarkesh Patel
Okay. So I have like a sort of like naive ... Uh, I know that like the ... I know like the first few arguments against more government spending in- in, uh, R&D and I want you to just see what you, uh, respond with here.
- CWCaleb Watney
Yeah.
- DPDwarkesh Patel
So, uh, uh, Matt Ridley's new book on innovation talked about this. Um, the problem with government spending more on innovation is that they don't know where the next big areas of innovation are, and so they might be misspending their money, and worse yet, they might be crowding out the priorities of the actual businesses that have a hands-on practical understanding of what the interesting problem areas are. And so the researchers-
- CWCaleb Watney
Mm-hmm.
- DPDwarkesh Patel
... are working on the problems the government wants them to work on instead of the problems that, uh, businesses would have a better understanding of.
- CWCaleb Watney
Yeah. I mean, I ... Again, uh, a lot of these arguments could be true like in the abstract, but not necessarily true on current margins, and I think that's probably an example. Um, so if you look at something like the R&D tax credit, uh, which is probably like the biggest in terms of spending that the federal government does. Um, the nice thing about that is that it's not directed towards a particular thing. It's basically saying, "Hey, you know, companies, you invest in the R&D that you think is most valuable and we'll reduce the amount of, you know, taxes you need to pay on that," basically. Uh, and you've seen that a lot of, you know, um, the- the biggest tech companies today, um, are by far the biggest R&D spenders. You know, if- if you look at like the top five, it's like Amazon, Google, uh, Apple, Qualcomm, you know, in some order. I can't remember exactly. But, um, it certainly, uh, it seems to be successful in- in prompting our big tech companies to be able to- to spend on R&D, which is good. Um, I think the other thing is it ... we maybe need a better structure or a better theory of, um, what are the kinds of science that we want the federal government to be investing in. So- so for- for- from my perspective, I think private companies will invest in R- R&D so long as it is sufficiently predictable in sort of what kind of outcomes you're going to get, um, sufficiently timely in terms of like is it going to be, you know, on- on a profitable timeline in the next, you know, five to 10 years. Um, and, uh, I guess, uh, sufficiently, um, you know, cost-effective. Um, you know, has to be like profitable in some sense. Um, but there's a lot of ways in which, um, valuable questions don't fall into one of those three categories and in which previous scientific advancements have not met one of those criterias. I mean, especially in terms of the predictiveness. We're constantly getting scientific advancements in fields completely unconnected from what we think we're going to be studying. Um, partially because, you know, scientific advancements, especially breakthroughs, um, kind of in some sense has to be unpredictable, otherwise it would have already been, you know, discovered. Um, that means that, uh, there's not really an incentive for, uh, you know, Google's driverless car division to be pouring a lot of money into something that, you know, might suddenly have an advancement, uh, for me- molecular biology.
- DPDwarkesh Patel
Mm-hmm.
- CWCaleb Watney
You know, um, because, uh, why- why would they- they do that?
- DPDwarkesh Patel
Yeah.
- CWCaleb Watney
So the more unpredictable in- in terms of what- how is this going to pay off, the less likely companies are to do it. And so I think when you start focusing on what are the kinds of scientific questions that fall into those three buckets, um, the less relevant the crowd-out question is. Um, because again, if private companies are not going to be spending on these areas anyways because it's sufficiently untimely, sufficiently unconnected, and not sufficiently profitable, um, then yeah, you- you have way less concern about, uh, crowd-out.
- DPDwarkesh Patel
Yeah. And there's also the question of w- w- there's a lot of science that's, uh, inexcludable and inexhaustible, and maybe it's not worth it for companies individually to invest in that R&D, but for the economy as a whole, the tech is more than worth it.
- 47:20 – 49:35
Climate megaprojects
- DPDwarkesh Patel
Um-
- CWCaleb Watney
For sure.
- DPDwarkesh Patel
Yeah. Yeah. Uh, okay, so, uh, the next question is, what is relative to its impact, what is the most undervalued future technology? This is like stuff like crypto or AGI, biotech, VR.
- CWCaleb Watney
Yeah. Uh, (laughs) I mean, it's a hard question. Um, I mean, I would say, uh, sort of it depends on- on, um, if AGI does end up being feasible, then probably it's AGI, just, you know, given, uh, how wide ranging its effects would be across the economy. Um, but of course, you know, that- that's in some sense begging the question. We don't know if- if AGI is going to be, you know, completely, um, possible to create. There might be, you know, difficulties, um, that w- w- we're not running into yet that we don't know about. Um-So, I- I- I think one thing I would like to see a lot more emphasis and research on is, um, sort of big climate mega projects, um, that I- I think are being very under-hyped. Um, we're getting to a point where ch- to really avoid, um, some of the, you know, worst outcomes of climate change, we're gonna start needing pretty dramatic action now. Um, but I think any sort of political approach that basically just asks consumers to take massive welfare hits themselves is gonna be completely untenable. It's not gonna get anywhere. Um, but there's lots of, you know, big environmental mega projects that we could do. Um, Eli Dourado, uh, has been paying a lot of attention to this. Um, he's talked about, um ... Uh, Olivine is this kind of, um, m- mineral that I- I think you can put on a lot of beaches, um, that ends up absorbing a lot more carbon than traditional sand does, but has a very similar texture. The main difference from sand is that it's green, so it kind of even looks cooler. Um, uh, or, you know, you could do something like, uh, Yellowstone produces just an absolutely massive amount of geothermal energy, partially because there's a massive super volcano underneath it. Um, and so you could tap Yellowstone for geothermal energy, um, supply, uh, a very high percentage of US national energy needs, um, just via that. Uh, and you would also be reducing the risk of that super volcano erupting, so it seems like a win-win. Um, so, uh, yeah, th- those are, I- I think, uh, just a few examples. But I- I think as an area, it's- it's really under-leveraged.
- DPDwarkesh Patel
Oh, yeah. It- it's super fascinating. I actually had no idea about, uh, the specific things you talked about. Uh, and- and also if you think, uh, that climate change is a serious threat to hu- uh, human civilization, it- it makes perfect sense to take a few risks, uh, just to see what happens if you throw some stuff in the oceans, if it's gonna, you know, save the-
- CWCaleb Watney
For sure. Yeah, yeah, yeah.
- DPDwarkesh Patel
... as we know it.
- 49:35 – 52:20
Falling fertility rates
- DPDwarkesh Patel
- CWCaleb Watney
Yeah.
- DPDwarkesh Patel
Um ... Okay, so relative to its- to its impact, what is the most undervalued, uh, social or geopolitical threat? And this is- this is stuff like falling fertility rates, the rise of Asia, stuff like that.
- CWCaleb Watney
Yeah, I mean, I think earlier I would have said maybe falling fertility rates, just because, um, you know, it's only really in the last couple years, especially in- in the US that I feel like that's become, like, a- a major political phenomenon. But you are starting to see a- a couple of books now that are starting to discuss that more explicitly. Um, Ross Douthat's, um, uh, Decadent Society makes that a big, um, central focus. Um, Matt Yglesias's upcoming One Billion Americans talks about that. So, I'm glad to see that, um, you know, start becoming a major focus. But it does seem like demographics are just so connected with- with a wide range of outcomes. Um, you know, culturally, I think it makes, like, a society more, um, conservative and less risk-taking. Um, you know, when you have an older demographic. Uh, you know, Megan McArdle had- had an interesting example, I think a couple years ago, when she was writing about this, uh, where she talks about, you know, think about an average town that has, uh, you know, median age of 27 versus, um, a town that has, like, an average age of 57. Um, and just, you know, when you're that much older, like, yeah, you are more experienced and maybe you have more, uh, you know, human capital or technical skills, but partially because you have less time, uh, and you're, you know, more, uh, embedded in like a family. You're less willing to work the 18-hour days and to, you know, leave your job to go, you know, create the new startup. Um, and so that- that ends up having sort of cultural effects, um, both in terms of company formation and idea generation, innovation, um, that I- I think end up, uh, resounding. And of course, even young people that are traditionally surrounded by an older society I think will themselves be less risk-taking too. So, um, yeah, maybe I- I would still say, um, you know, demographic aging, just given the fact that it's starting to get a bit more attention now, but it has such wide-ranging consequences that, um, uh, and it- it's not really talked about, uh, in- in the, you know, national discourse in a major way yet.
- DPDwarkesh Patel
Oh, yeah. That was, like, the scariest chapter in The Decadent Society for me. And there was a chapter on, uh, uh, authoritarianism g- coming to l- liberal democracies and the one on falling fertility rates was scary.
- CWCaleb Watney
(laughs) Yeah.
- DPDwarkesh Patel
Um, okay. So, uh, by the way, does that mean that you expect Sub-Saharan Africa, um, and parts of Asia to be a much bigger deal given that they have rising populations?
- CWCaleb Watney
Oh, totally. Yeah, no, I- I totally buy, um, you know ... I- I think at the end of The Decadent Society, Ross says, you know, one of the- the more optimistic, um, versions is some sort of, like, uh, Afro, uh, Eurasian, um, futurism. You know, where sort of if you imagine, um, you know, classically, uh, European, uh, cathedrals being filled, um, you know, by Sub-Saharan Africa, like, that- that's a great vision and- and something that could end up, uh, you know, providing both a sort of, like, multi- multicultural society that we wanna see, um, while also, uh, trying to help solve some of these, you know, uh, birth rate problems.
- DPDwarkesh Patel
Wakanda forever.
- CWCaleb Watney
Yeah.
- DPDwarkesh Patel
Uh, so that- that's the future. Okay. Um, all right, so c- to close
- 52:20 – 55:05
Advice to 20 yr old
- DPDwarkesh Patel
it out, uh, what kind of advice would you give to a 20-year-old? Maybe when you were 20 or just to a generic 20-year-old?
- CWCaleb Watney
Yeah. Um, I think I would say think hard about, like, the kinds of questions that you think matter for society, um, and where you might be most effective. So, one of the things that I was trying to think about in my own career is, um, I think problems that, uh, like, the profit motive can kind of be brought to bear on, I just have a higher, um, certainty in my own head that those will eventually get solved. Like, if there's money out there, someone's gonna solve it. Um, but where there's not, um, that's maybe where there's more attention worth throwing at it, um, be- because in some sense it runs, like, counter to- to self-interest. Um, so I think something like, uh, quality analysis, like, the reason I'm in there, is because it does kind of seem like the missing element in like the American growth engine. If you think about like an O-ring theory of growth where you need all of the components to really be working well for, like, the rocket ship to take off. It seems like bad policy is really the thing that's, like, um, strangling, you know, the American growth engine. Um, and so trying to- to fix that bad policy is not something that right now is gonna be economically, you know, profitable, um, but could end up having, like, a really big impact. Um, and it just so happened that I- I think, you know, my comparative advantage was in writing and communicating and whatnot, so that- that's why I went into that. But yeah, if you think about, yeah, sort of you could use a traditional, you know, effective altruism framework, you know, what's the highest impacts combined by, uh, you know, what are your efforts on the margin gonna have the highest impact on? Uh, and I think that'll- that'll get you pretty close to what you should do.
- DPDwarkesh Patel
Yeah, I'm glad you're doing the work you're doing because, um, in- innovation is like the most salient fact about our civilization. If we just look at what makes our life, uh, better over time, it's- it's clearly innovation. But our capa- our incapacity to see future innovation and how much better our lives could be, it just makes us undervalue it so much. I'm glad you're doing the work you're doing.
- CWCaleb Watney
Thanks. Yeah, no, uh, I'm hoping to, yeah, get other people excited about this too, so ...
- DPDwarkesh Patel
Okay. Well, thank you so much for talking to me. This is a lot of fun. I learned a lot.
- CWCaleb Watney
Definitely, yeah. Great conversation.
- DPDwarkesh Patel
(outro music)
Episode duration: 55:06
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