# Krugman & Azhar: The World in 2025

An episode of [Paul Krugman Podcast](https://invisiblenetwork.ai/podcast/1877144831), 31 Jan 2025, 1 h 01 min.

Audio: https://api.substack.com/feed/podcast/156175978/b76283c36a2c2f752e8b5426806e982c.mp3

Thank you Paul Krugman, Ken Opalo, Andy @Revkin, Taegan Goddard, Ward Hayes Wilson, and many others for tuning into my live video with Azeem Azhar! Join me for my next live video in the app. Get full access to Paul Krugman at paulkrugman.substack.com/subscribe

## Transcript

[0:00] SPEAKER_00: Not enough of my face.
[0:01] SPEAKER_01: So,
[0:02] SPEAKER_01: all right,
[0:02] SPEAKER_01: let's hope that this is...
[0:03] SPEAKER_00: I mean,
[0:03] SPEAKER_00: you and I have both traded on our faces for years,
[0:05] SPEAKER_00: so I think you can understand their concern.
[0:08] SPEAKER_00: Yeah.
[0:09] SPEAKER_02: All right.
[0:11] SPEAKER_00: So I'm just connecting.
[0:14] SPEAKER_00: Does yours say connecting as well?
[0:17] SPEAKER_01: No.
[0:20] SPEAKER_00: It's... Yes, we've got some people joining.
[0:24] SPEAKER_00: We are live.
[0:26] SPEAKER_00: Well, welcome.
[0:28] SPEAKER_00: everybody.
[0:28] We will give people 30 seconds to join before we really jump
[0:34] into the first session
[0:36] SPEAKER_00: of the Substack Market Forecast Summit.
[0:39] So for those of you who have been very prompt,
[0:42] I apologize,
[0:42] you're going to hear this twice.
[0:44] SPEAKER_00: Because, you know, Paul, you and I have to just fill the air for
[0:48] SPEAKER_00: 10 or 15 seconds while I'm a college professor.
[0:50] SPEAKER_01: Uh, classes always start five minutes after the official start time.
[0:54] SPEAKER_01: So,
[0:55] SPEAKER_01: uh,
[0:56] SPEAKER_01: uh,
[0:56] SPEAKER_01: this is normal,
[0:57] SPEAKER_01: you know,
[0:57] SPEAKER_01: give,
[0:58] SPEAKER_01: give,
[0:58] SPEAKER_01: uh,
[0:58] SPEAKER_01: we'll,
[0:59] SPEAKER_01: we'll,
[0:59] SPEAKER_01: we're giving people some chance to,
[1:02] SPEAKER_01: uh,
[1:02] SPEAKER_01: to,
[1:02] SPEAKER_01: to get in.
[1:03] SPEAKER_01: And, uh, uh, that's how, uh, yeah.
[1:08] SPEAKER_01: Well, that's how life is.
[1:10] SPEAKER_01: Yeah.
[1:11] SPEAKER_01: Look, uh, a little bit of slack is, uh,
[1:15] SPEAKER_01: is actually more productive than, than not.
[1:19] SPEAKER_01: So that's fine.
[1:20] SPEAKER_00: A little bit of slack.
[1:22] SPEAKER_00: I love that.
[1:23] SPEAKER_00: I normally give myself a little internal,
[1:25] SPEAKER_00: uh,
[1:26] SPEAKER_00: number,
[1:26] SPEAKER_00: which is if we,
[1:27] SPEAKER_00: when we get,
[1:28] SPEAKER_00: uh,
[1:29] SPEAKER_00: 100 people in the room,
[1:30] I feel there are enough people filling the seats that we should
[1:34] get started with
[1:35] SPEAKER_00: the discussion.
[1:36] SPEAKER_00: And then in the next minute or two people will, will turn up.
[1:39] SPEAKER_01: Okay.
[1:39] SPEAKER_01: We can go ahead and we will do that.
[1:41] SPEAKER_01: And when we, uh, uh,
[1:44] SPEAKER_00: People can probably guess what we already said.
[1:48] SPEAKER_00: Exactly.
[1:48] SPEAKER_00: We just passed 100 and we're at one minute past.
[1:51] SPEAKER_00: So why don't I kick us off?
[1:53] SPEAKER_00: Welcome, everybody who has joined us today.
[1:56] SPEAKER_00: This is the Substack Market Forecast Summit.
[2:01] SPEAKER_00: It is a day of discussions that Substack has organized on markets and the
[2:08] economy and they've left it up to people like myself and my
[2:12] co-conspirator today,
[2:13] SPEAKER_00: Paul Krugman,
[2:15] to host you and to have conversations between ourselves and
[2:18] hopefully take some questions.
[2:20] SPEAKER_00: We are the kickoff.
[2:21] SPEAKER_00: There's a whole day of this going on, so please do tune in later.
[2:25] SPEAKER_00: So by way of introduction, I'm Azim Azhar.
[2:28] SPEAKER_00: I am the founder of Exponential View.
[2:30] SPEAKER_00: We are one of the
[2:33] SPEAKER_00: OGs on Substack.
[2:34] Exponential View appeared on the platform back in 2018 so I'm
[2:39] delighted to be one
[2:40] of the collaborators in this session and I will just hand over
[2:44] to my co-conspirator
[2:46] SPEAKER_00: and he can introduce himself but of course many of us know who he is.
[2:50] SPEAKER_01: Yeah so I'm Paul Krugman, I'm a professor at City University of New York
[2:57] I've been a college professor who spent 25 years moonlighting
[2:59] at the New York Times,
[3:01] SPEAKER_01: which is probably where more people know me.
[3:04] I have recently retired from the Times,
[3:07] but I'm now working harder than I ever did on Substack.
[3:11] And I'm an economist by training and try to speak English when
[3:17] I can by may lapse
[3:18] SPEAKER_01: at some point during our discussion.
[3:20] SPEAKER_01: And that's about it.
[3:22] SPEAKER_00: Well, you know, I love The Economist by training.
[3:25] I was thinking to myself,
[3:26] it's not every day I get to speak to a Nobel laureate.
[3:29] SPEAKER_00: And I was thinking,
[3:29] SPEAKER_00: well,
[3:30] SPEAKER_00: Paul,
[3:30] you probably do that every single day when you think about what
[3:33] you're going to set
[3:34] SPEAKER_00: out to do for the day.
[3:35] SPEAKER_00: So it's a huge pleasure for me.
[3:36] SPEAKER_00: I wanted to just think about how we orient ourselves.
[3:39] SPEAKER_00: You're new to Substack.
[3:40] SPEAKER_00: I've been here for a while.
[3:42] SPEAKER_00: And
[3:43] I have felt a tremendous degree of freedom over the last six or
[3:48] seven years while
[3:49] SPEAKER_00: I've been writing,
[3:50] SPEAKER_00: just being able to explore ideas,
[3:53] SPEAKER_00: play with the medium a little bit.
[3:56] SPEAKER_00: What's your experience been like?
[3:58] SPEAKER_01: Oh, it's been great.
[3:58] SPEAKER_01: The thing is,
[4:01] we had a kind of flowering of economics blogs in the aftermath
[4:06] of the financial crisis,
[4:07] SPEAKER_01: and I was very much part of that.
[4:11] SPEAKER_01: uh,
[4:11] SPEAKER_01: but also writing for the times and the times,
[4:14] SPEAKER_01: uh,
[4:15] SPEAKER_01: uh,
[4:15] among the things that led me to leave the times was that the
[4:18] times cancel the
[4:19] SPEAKER_01: independent blog.
[4:21] SPEAKER_01: And,
[4:21] SPEAKER_01: um,
[4:22] SPEAKER_01: I just,
[4:22] SPEAKER_01: it's,
[4:23] SPEAKER_01: you know,
[4:23] SPEAKER_01: it's partly editorial intervention,
[4:24] SPEAKER_01: but a lot of it is just the ability to,
[4:27] SPEAKER_01: uh,
[4:29] SPEAKER_01: mixed media to have charts and, you know, I'm an economist.
[4:32] I have charts and,
[4:33] and,
[4:33] and tables and,
[4:35] uh,
[4:35] and just the freedom of to write as you want.
[4:38] SPEAKER_01: Um,
[4:38] SPEAKER_01: and so the Substack experience has been,
[4:41] SPEAKER_01: uh,
[4:42] SPEAKER_01: reclaiming the,
[4:43] SPEAKER_01: the,
[4:44] SPEAKER_01: the best days of the e-com blogs,
[4:46] SPEAKER_01: but I think with,
[4:46] SPEAKER_01: uh,
[4:47] SPEAKER_01: with a bigger audience and it's just,
[4:49] SPEAKER_01: uh,
[4:49] SPEAKER_01: this is,
[4:50] SPEAKER_01: I mean,
[4:51] SPEAKER_01: this has been,
[4:51] SPEAKER_01: has really revived,
[4:53] SPEAKER_01: um,
[4:54] SPEAKER_01: It's a very exciting time.
[4:56] SPEAKER_01: It's a little horrifying,
[4:58] SPEAKER_01: but big things are happening,
[5:00] and people who actually know something are having debates in
[5:05] real time that once
[5:06] SPEAKER_01: upon a time would have played out over months or years,
[5:08] SPEAKER_01: and now they play out over days.
[5:11] SPEAKER_00: It feels it's more consequential.
[5:13] SPEAKER_00: I started blogging a really long time ago.
[5:16] SPEAKER_00: In fact, the first blogging tool that I used was called...
[5:20] userland frontier by dave weiner back in 1997 uh and the beauty
[5:26] of the blog was
[5:27] exactly what you've described we could mix media we could write
[5:30] long posts short
[5:30] posts we could put charts if we wanted to but but back then the
[5:35] audience was i'd
[5:36] SPEAKER_00: say small but perfectly formed right it was all
[5:39] internet culture nerds and and we cared a great deal but you
[5:43] didn't have quite have
[5:44] the reach and of course you know today we we do have that reach
[5:48] and I think one of
[5:48] the things Substack has done is it has made it very easy for
[5:51] people like us to you
[5:53] know put our best efforts in and start to start to shape the
[5:58] the debate and I'm but
[6:00] SPEAKER_00: I'm quite curious about
[6:04] what actually happens in that transition period where we move
[6:08] from traditional
[6:09] SPEAKER_00: sources of authority to this much more,
[6:11] SPEAKER_00: you know,
[6:12] SPEAKER_00: vociferous,
[6:13] SPEAKER_00: decentralized way of structuring information?
[6:16] SPEAKER_00: Because information flow is really critical to our economies.
[6:20] SPEAKER_00: And we seem to be in a, you know, a phase change right now.
[6:23] SPEAKER_01: Yeah, it's...
[6:25] SPEAKER_01: I mean, different stages along the way.
[6:28] SPEAKER_01: I mean, professional, academic.
[6:33] SPEAKER_01: Economics journals stopped mattering a long, long time ago.
[6:38] SPEAKER_01: They became tombstones.
[6:39] SPEAKER_01: You have to get something published in a journal to get tenure,
[6:43] SPEAKER_01: but working papers,
[6:45] SPEAKER_01: first actual physical working papers,
[6:47] SPEAKER_01: then online working papers,
[6:49] SPEAKER_01: took over,
[6:50] SPEAKER_01: and that's decades ago.
[6:51] SPEAKER_01: But it's steadily moving along, and now we have this
[6:55] A situation where the great thing about and Substack is now the
[7:00] center of this.
[7:01] But the great thing about this kind of blog and newsletter
[7:03] universe is that it is accessible,
[7:08] SPEAKER_01: accessible to anyone to read.
[7:11] So you no longer have to be on the faculty at Harvard to hear
[7:16] people in seminars to
[7:18] SPEAKER_01: get the latest stuff.
[7:19] SPEAKER_01: It's right out there.
[7:20] SPEAKER_01: And it's accessible for anyone to publish,
[7:23] SPEAKER_01: although naturally it's a very – some people get much,
[7:30] SPEAKER_01: much bigger audiences than others.
[7:32] SPEAKER_01: Yeah.
[7:34] But so it's not exactly democratic,
[7:37] but it's but it's open and credentials don't matter much.
[7:41] SPEAKER_01: That's also important.
[7:42] I think some some of the people who do the best work in areas
[7:45] where I know
[7:46] SPEAKER_01: something about actually don't have a PhD,
[7:48] SPEAKER_01: don't have a don't have an appointment at a fancy institution.
[7:51] SPEAKER_01: They're just really interesting and smart.
[7:54] SPEAKER_01: And of course, I can read other fields, too, which is important.
[7:57] SPEAKER_00: Absolutely.
[7:58] SPEAKER_00: I mean,
[7:58] SPEAKER_00: it's really interesting,
[7:59] SPEAKER_00: though,
[7:59] you make this point about it's democratizing and some people
[8:03] have more more access.
[8:05] SPEAKER_00: I mean, I feel the same way because anyone can publish.
[8:10] SPEAKER_00: And in a way,
[8:10] there's a there's an ideas marketplace or a marketplace of
[8:13] ideas that should allow
[8:14] SPEAKER_00: things to to surface.
[8:16] But there is still the dynamics of the network and the complex
[8:21] effects that emerge
[8:22] SPEAKER_00: on networks phenomena like rich get richer,
[8:25] which essentially means if you get on the network early or if
[8:28] you can bring an
[8:29] SPEAKER_00: audience with you,
[8:30] SPEAKER_00: you end up being more more discoverable.
[8:34] SPEAKER_00: And in a way,
[8:34] you you don't have quite the same gatekeepers in the sense that
[8:39] the gatekeepers
[8:40] SPEAKER_00: aren't the Times or the Wall Street Journal.
[8:43] SPEAKER_00: But there's not quite the same access.
[8:45] And I think that's a really hard problem for a platform like
[8:49] Substack to solve.
[8:50] SPEAKER_00: I think they're doing a really good job,
[8:52] SPEAKER_00: by the way,
[8:52] of discovery and democratization and surfacing views that
[8:57] aren't just from the
[8:58] SPEAKER_00: people with the biggest audiences.
[9:00] SPEAKER_00: But it's not quite a sort of an egalitarian panacea, is it?
[9:05] SPEAKER_01: Oh, no, it's not remotely egalitarian.
[9:07] SPEAKER_01: But in some ways, it's unavoidable.
[9:12] SPEAKER_01: People have limited time, limited attention.
[9:14] They are going to gravitate towards people that they've heard
[9:21] of or people that
[9:22] SPEAKER_01: they've found useful in the past.
[9:26] SPEAKER_01: And it is possible to break in.
[9:27] SPEAKER_01: I mean, that's one of the things that happens.
[9:31] SPEAKER_01: One thing I want to do,
[9:33] SPEAKER_01: and I don't know how many people I'm about to lose,
[9:35] SPEAKER_01: but I actually want to get the
[9:38] SPEAKER_01: subscriber numbers,
[9:40] SPEAKER_01: because I would bet quite strongly that the subscriber,
[9:46] SPEAKER_01: if you plot rank against number of subscribers,
[9:49] SPEAKER_01: that it obeys a power law.
[9:52] SPEAKER_00: It does.
[9:52] SPEAKER_00: Yeah, we've tracked it.
[9:53] SPEAKER_00: It is a power law.
[9:54] SPEAKER_00: It's a zip distribution.
[9:56] SPEAKER_00: And it tails off very, very, very quickly.
[9:58] SPEAKER_00: Now, we've just hit 1776 live viewers.
[10:02] SPEAKER_00: It's a very significant number.
[10:04] SPEAKER_00: It's a significant year, 1776.
[10:06] SPEAKER_00: So let's just take stock of where we are.
[10:08] SPEAKER_00: This is the Substack Market Forecast.
[10:10] SPEAKER_00: I'm Azimazar from Exponential View.
[10:13] SPEAKER_00: You can find me on Substack with Paul Krugman.
[10:15] SPEAKER_00: Now, Substack and the contrarian, I think, is your... No, no, Kirk...
[10:20] SPEAKER_01: I'm just Paul Krugman on Substech.
[10:22] SPEAKER_01: I'm occasionally contributing to The Contrarian.
[10:24] SPEAKER_01: Pardon me.
[10:25] SPEAKER_01: Yeah, you're just Paul Krugman.
[10:27] SPEAKER_01: Yeah, my blog is named after me.
[10:31] SPEAKER_00: So we'll find you there.
[10:33] We've just got to 1812,
[10:34] which is another significant year in the American calendar.
[10:38] I feel the audience is telling us that we need to talk about
[10:42] the economy in 2025
[10:43] SPEAKER_00: and what's going on.
[10:48] SPEAKER_00: I know you've got opinions.
[10:49] SPEAKER_00: So why don't you start with your view of where we are in 2025,
[10:54] SPEAKER_00: a sort of short-term horizon,
[10:57] SPEAKER_00: headwinds or tailwinds,
[10:58] SPEAKER_00: and then I'll respond to that.
[11:00] SPEAKER_01: Okay.
[11:01] So,
[11:02] I mean,
[11:02] we are very close to a Goldilocks economy in the United States.
[11:07] SPEAKER_01: Unemployment is low historically.
[11:11] SPEAKER_01: Inflation is low historically.
[11:13] SPEAKER_01: It's a little bit above the...
[11:15] SPEAKER_01: Yeah, we have an official target of two percent inflation.
[11:18] And it's if you look at probably the better measures,
[11:21] it's more like two point five.
[11:24] SPEAKER_01: And if you think that's really important,
[11:27] SPEAKER_01: maybe you should have a have a drink or two and calm down.
[11:30] SPEAKER_01: It's really we're really we're really in good shape.
[11:33] SPEAKER_01: You know, it's starting point.
[11:35] This is about as as as good a moment as we've seen for a very,
[11:40] very long time now.
[11:44] SPEAKER_01: And the question is, there's always going to be something.
[11:49] SPEAKER_01: Stuff happens, as the bumper stickers don't quite say.
[11:52] SPEAKER_01: And there's really two kinds of stuff that can happen.
[11:58] SPEAKER_01: One of them is politics.
[12:01] SPEAKER_01: And, you know, I'm reading whether there's now – it's possible that –
[12:10] my president,
[12:12] uh,
[12:12] is about to impose 25% tariffs on Canada and Mexico tonight.
[12:17] SPEAKER_01: Uh, or then again, maybe not.
[12:20] SPEAKER_01: Uh, and that's a, that's a, that's a big deal.
[12:24] SPEAKER_01: And we have a bunch of potential political shops, uh, to the system.
[12:29] SPEAKER_01: And then there's also, um, uh, you know, um,
[12:34] SPEAKER_01: I've just been doing some work.
[12:35] And if you look at tech stock valuations,
[12:41] it really has that sort of end of 1999 feeling.
[12:45] SPEAKER_01: And are we going to be facing a sort of financial bubble burst?
[12:53] SPEAKER_01: It's, you know, and so the really calm good times never last.
[13:01] SPEAKER_01: And in this case, I think it's unusual that we have at least two
[13:04] SPEAKER_01: obvious threats to the times we're in.
[13:07] SPEAKER_01: But all of this would take time to unwind.
[13:09] So the numbers will continue to look good for the next few months,
[13:13] at least.
[13:15] SPEAKER_00: Yeah, I mean, it's interesting that we head into this with such a strong
[13:19] american economy i i'm sitting here in north london uh and
[13:23] there's a particularly
[13:25] depressing series of charts uh which show uh oecd growth rate
[13:30] these are the club of
[13:31] rich countries and you have the us as part of it and the us is
[13:35] just motoring away
[13:35] right it's the biggest economy there it's growing much faster
[13:39] far faster than the
[13:40] uk where essentially the economy is roughly the same has been
[13:43] the same size for you
[13:44] SPEAKER_00: know a decade or more and and and you know europe uh
[13:49] At some cases,
[13:50] up until about a week ago,
[13:51] it almost,
[13:52] the mood felt funereal.
[13:55] SPEAKER_00: But I think that there has been a change in the last few days.
[14:00] The bit that I query,
[14:02] wonder about,
[14:03] is this issue of the tech stock valuations.
[14:07] SPEAKER_00: I mean,
[14:07] SPEAKER_00: we're definitely at a point where this magnificent seven,
[14:12] I love the way how the investment bank has always come up with
[14:14] these wonderful terms.
[14:15] SPEAKER_00: So the mag seven are...
[14:18] SPEAKER_00: highly concentrated.
[14:19] SPEAKER_00: In fact,
[14:19] this is the highest level of stock market concentration since
[14:22] before the Great Depression.
[14:25] SPEAKER_00: And of course,
[14:26] stock analysts love to look at things like this because history
[14:29] rhymes in a sense.
[14:31] SPEAKER_00: But it does feel that there is
[14:35] something that is is different this time around i mean for one
[14:38] thing um there is
[14:40] revenue momentum in in a lot of these companies compared to the
[14:43] dot-com bubble
[14:44] where companies had valuations without revenue the second is
[14:48] the world economy is
[14:50] much richer and much more complex than it was in 99 or in 1929
[14:54] and and so when i
[14:56] SPEAKER_00: look at that i i wonder
[14:59] SPEAKER_00: Of course,
[14:59] animal spirits can upset stock market valuations as they did on
[15:04] Monday with DeepSeek.
[15:05] SPEAKER_00: And if stock market valuations drop,
[15:08] they can spill into the real world through wealth effects or
[15:12] other dynamics.
[15:15] But it doesn't quite feel as overinflated as 99 because we can
[15:22] see the revenue flow
[15:24] SPEAKER_00: into these businesses.
[15:26] SPEAKER_01: Okay.
[15:27] SPEAKER_01: I would actually mildly disagree with you on that because,
[15:30] SPEAKER_01: uh,
[15:32] SPEAKER_01: 1999,
[15:32] SPEAKER_01: we think about the conspicuously silly stuff.
[15:35] SPEAKER_01: We think about pets.com and so on,
[15:37] SPEAKER_01: but you know,
[15:38] SPEAKER_01: that bubble was in large part telecoms companies rather than.coms and,
[15:43] SPEAKER_01: um,
[15:43] SPEAKER_01: and the telecoms companies had real revenue,
[15:46] SPEAKER_01: um,
[15:47] SPEAKER_01: and,
[15:47] SPEAKER_01: uh,
[15:48] SPEAKER_01: just not enough to justify the valuations.
[15:50] SPEAKER_01: And the, um, the, uh, uh,
[15:56] SPEAKER_01: And the technological, the technology actually did deliver.
[16:01] SPEAKER_01: Maybe not on quite the ethical scale that people had hoped for,
[16:06] but we really did get a decade of substantially accelerated
[16:11] productivity growth out
[16:12] SPEAKER_01: of the technology.
[16:13] SPEAKER_01: So it was real stuff.
[16:16] SPEAKER_01: What happened was that the idea...
[16:18] SPEAKER_01: that early movers were going to be able to,
[16:24] SPEAKER_01: as we now say,
[16:24] SPEAKER_01: build a moat around their position,
[16:26] SPEAKER_01: that they were going to be able to earn sustained high profits,
[16:30] SPEAKER_01: turned out to be wrong.
[16:32] SPEAKER_01: And in many ways, we look similar now.
[16:34] I think we're past the point of wondering whether AI is
[16:38] actually going to do anything useful.
[16:40] We still don't know how much useful it's going to do,
[16:43] but it's clearly something real.
[16:45] SPEAKER_01: And there's real revenues coming in.
[16:47] SPEAKER_01: But on the other hand,
[16:51] SPEAKER_01: the valuations are far,
[16:53] SPEAKER_01: far above anything that you would normally expect from those revenues.
[16:58] So the valuations depend on the belief that these are going to
[17:01] lead to entrenched
[17:02] SPEAKER_01: positions for the existing companies.
[17:06] SPEAKER_00: Yeah, well, I think that's really true.
[17:08] SPEAKER_00: And in fact, that is probably what we saw on Monday, right?
[17:11] SPEAKER_00: When this Chinese model DeepSeek, it wasn't released.
[17:15] SPEAKER_00: I mean, DeepSeek R1 had been around for a while.
[17:18] SPEAKER_00: They declared they were doing it weeks, if not months ago.
[17:22] SPEAKER_00: I had written about DeepSeek back in December 23.
[17:27] And in December 2024,
[17:29] I said DeepSeek is a Chinese Sputnik moment for the US.
[17:33] SPEAKER_00: So that was before DeepSeek.
[17:35] SPEAKER_00: before the new year.
[17:37] Because I thought that a lot of these stock market valuations
[17:44] have embedded within
[17:45] SPEAKER_00: them the idea that the US will have a sustained AI dominance.
[17:49] And sustained AI dominance will mean the best technology
[17:53] turning into the best products,
[17:54] SPEAKER_00: turning into the fastest revenue growth,
[17:57] SPEAKER_00: dragging forward with them the supply chain.
[18:00] SPEAKER_00: So effectively the NVIDIA,
[18:02] SPEAKER_00: the demand for NVIDIA chips,
[18:03] SPEAKER_00: ultimately AMD chips,
[18:05] SPEAKER_00: and the manufacturing.
[18:07] SPEAKER_00: And that that bet was so concentrated that,
[18:12] SPEAKER_00: of course,
[18:12] any little wobble will have animal spirits running through that
[18:16] China shop.
[18:18] SPEAKER_01: Yeah.
[18:19] SPEAKER_01: And not just that the US will continue to dominate, but that the MAG-7
[18:24] SPEAKER_01: will continue to dominate and that there won't be some contender,
[18:29] SPEAKER_01: US contender,
[18:29] SPEAKER_01: European contender.
[18:31] SPEAKER_01: You know,
[18:31] it's worth remembering that although European macroeconomics
[18:34] doesn't look too good,
[18:35] SPEAKER_01: there's a whole lot of,
[18:37] it's not as if the technological sophistication is restricted
[18:42] to the United States.
[18:43] SPEAKER_01: And so, and it's really hard.
[18:45] SPEAKER_01: And some of it is,
[18:47] SPEAKER_01: some of it is just,
[18:48] SPEAKER_01: I mean,
[18:49] SPEAKER_01: I suppose we need to talk about Tesla at some point and they're,
[18:53] uh uh that that is really bizarre i mean their actual business
[18:57] doesn't seem to be
[18:58] doing too well but uh but people have decided that uh that
[19:02] somehow or other there's
[19:03] magic uh associated maybe with the political partnership so um
[19:09] but i you know i
[19:09] take the lesson of the of the dot-com telecom bubble of the 90s
[19:14] to be that even a
[19:16] really great technology does not necessarily justify really
[19:20] high valuations
[19:23] SPEAKER_00: Right.
[19:23] SPEAKER_00: Okay.
[19:24] SPEAKER_00: Okay.
[19:24] SPEAKER_00: I hear that.
[19:25] SPEAKER_00: I'm going to stick on with this point because...
[19:31] Here's where I think today is different to the dot-com and I'll
[19:35] stop by telling you a story.
[19:37] SPEAKER_00: So back in 97,
[19:39] SPEAKER_00: 98,
[19:39] I was building internet companies and one of the companies that
[19:44] I invested in was a realtor,
[19:46] SPEAKER_00: online realtor in France.
[19:49] SPEAKER_00: Of course, online real estate is a huge business now, right?
[19:52] SPEAKER_00: You have Zillow and Redfin and a whole bunch of others.
[19:57] SPEAKER_00: When we got into that market,
[20:00] SPEAKER_00: not only did only 4% or 5% of French people have internet access,
[20:04] SPEAKER_00: they were still largely on the Minitel system,
[20:06] SPEAKER_00: but that 5% wasn't far advanced in other parts of Western Europe.
[20:11] none of the realtors had pcs and so when we went off to to or
[20:16] that the founders
[20:17] went off to to win business they had to buy pcs for the
[20:22] realtors train them on how
[20:23] to get onto the internet and how to upload their images and and
[20:26] their inventory i
[20:27] mean it was it was a complete nightmare the difference today is
[20:31] that every company
[20:33] SPEAKER_00: or the large proportion of companies particularly big ones
[20:36] are sitting on a digital stack which they've built over 20
[20:39] years and all those
[20:41] SPEAKER_00: billions of fees they paid to Accenture and PwC and SAP to do digital
[20:46] transformations means they've got a digital infrastructure and
[20:50] today it takes
[20:52] a single decision in Microsoft headquarters to put an AI tool
[20:57] into every copy of
[20:58] SPEAKER_00: Microsoft Excel because it's all run on the cloud.
[21:01] SPEAKER_00: And that feels really different to 99.
[21:03] It feels like there's a whole set of hurdles that now don't
[21:07] exist that would allow
[21:09] SPEAKER_00: a much more rapid deployment.
[21:11] SPEAKER_00: And with rapid deployment should come much faster increase in revenues.
[21:17] SPEAKER_01: Well, this does...
[21:18] SPEAKER_01: Yes, it does mean much faster increase in revenues.
[21:21] SPEAKER_01: I think it's very clear that the whole AI thing is moving much faster.
[21:26] I mean,
[21:27] we thought things were moving fast in the 90s,
[21:31] but they're much faster.
[21:33] The adoption rates have just been,
[21:35] you know,
[21:35] the S curve of adoption is just far steeper.
[21:41] SPEAKER_01: The question is going to be revenue for whom.
[21:43] SPEAKER_01: Right.
[21:45] SPEAKER_01: Now, what is true?
[21:47] SPEAKER_01: And I think,
[21:47] SPEAKER_01: which I'm learning to some extent from you right now,
[21:50] is that the fact that this stuff in some ways sits on top of
[21:56] existing technologies
[21:58] and existing networks may actually be a reason to think that
[22:05] the incumbents can
[22:07] SPEAKER_01: actually continue to capture a lot of this.
[22:09] SPEAKER_01: I mean, when we say something like Microsoft, it's all about
[22:15] SPEAKER_01: network externalities.
[22:16] Everybody uses Microsoft products because everybody uses
[22:19] Microsoft products.
[22:21] SPEAKER_01: And,
[22:22] SPEAKER_01: um,
[22:23] the interesting thing about AI is in a way how undisruptive it
[22:27] is that it goes,
[22:30] SPEAKER_01: you know,
[22:30] SPEAKER_01: it can be just put on top.
[22:32] SPEAKER_01: Um,
[22:33] SPEAKER_01: I spend a lot of time turning these things off cause I don't want it,
[22:37] SPEAKER_01: but,
[22:37] SPEAKER_01: um,
[22:38] SPEAKER_01: but,
[22:38] SPEAKER_01: but,
[22:39] SPEAKER_01: you know,
[22:39] SPEAKER_01: co-pilot is,
[22:40] SPEAKER_01: is right there and you know,
[22:42] SPEAKER_01: you're,
[22:42] SPEAKER_01: you're,
[22:42] SPEAKER_01: uh,
[22:43] SPEAKER_01: You're still,
[22:44] SPEAKER_01: after all these years,
[22:45] SPEAKER_01: using Word and Excel,
[22:47] SPEAKER_01: which is the network externalities and the moat,
[22:51] but it's not some upstart competitor bringing AI to word
[22:57] processing or number crunching.
[23:00] It's quite straightforward for Microsoft to actually go right
[23:03] in there and do it itself.
[23:04] SPEAKER_01: So that might be a difference.
[23:07] SPEAKER_01: Now,
[23:08] it may be that we're just not thinking big enough and that
[23:10] there's something just
[23:11] SPEAKER_01: radically different we'll break through.
[23:13] SPEAKER_01: But it is true that right now it's looking as if this is,
[23:17] SPEAKER_01: in terms of market share,
[23:19] SPEAKER_01: kind of less disruptive than some past technologies.
[23:24] SPEAKER_00: Yeah, I feel this.
[23:25] SPEAKER_00: I mean, I feel that that's right.
[23:26] SPEAKER_00: You know, Gemini from Google and Microsoft are all doing reasonable well.
[23:32] SPEAKER_00: I mean, we do have the new players.
[23:35] But what's interesting about the configuration of the market is
[23:38] that each of the
[23:38] new players like OpenAI and Anthropic and others are really
[23:42] closely embedded with
[23:43] SPEAKER_00: the last generation's giants.
[23:47] SPEAKER_00: And it's not as if
[23:49] the Ford Motor Company or AT&T was closely allied so
[23:55] strategically with the firms
[23:57] SPEAKER_00: that went before.
[23:58] So it feels like this industrial transition has different characteristics.
[24:03] SPEAKER_00: And perhaps it is just that bits are bits and you're building on bits.
[24:07] SPEAKER_00: And so what else can we expect at this time?
[24:11] SPEAKER_00: I just wanted to mention we're about 25 minutes into this, Paul.
[24:14] SPEAKER_00: When do you think we should start to take questions?
[24:17] I mean,
[24:17] I'm happy to do that maybe in 20 minutes,
[24:19] leaving 15,
[24:20] 20 minutes at the end for that.
[24:21] SPEAKER_01: Would you be comfortable with that?
[24:22] SPEAKER_01: For sure.
[24:23] SPEAKER_01: I would actually maybe even say let's let's.
[24:26] take them about 15 minutes because the Q&A is almost always
[24:30] more interesting than
[24:31] just our heads talking so wonderful okay that's great so so
[24:35] please do start to pop
[24:36] questions in Paul and I will try to capture them as they come
[24:40] through and in about
[24:40] 15 minutes we'll get there I would love to talk also about you
[24:46] know something that
[24:47] I think is is quite close to to your heart that is I think
[24:52] quite difficult to
[24:53] SPEAKER_00: navigate right now which is
[24:55] what happened what what should we think about what happens to
[24:59] the workforce under
[25:00] the speed of this kind of ai transformation and and i will
[25:04] start with a little sort
[25:06] of pitch of how i see the state of the nation which is that no
[25:10] companies are really
[25:12] SPEAKER_00: really eager to uh
[25:15] make productivity improvements and these tools can automate
[25:20] large parts of roles
[25:21] right they can automate many many tasks and so the natural
[25:26] outcome for for workers
[25:28] will be either suppression of wages or it will be you know
[25:32] it'll be loss of jobs on
[25:33] SPEAKER_00: the flip side of that productivity gain and that
[25:37] SPEAKER_00: The question is not whether new jobs will get created,
[25:40] SPEAKER_00: because historically we've always created new jobs.
[25:43] SPEAKER_00: And,
[25:44] SPEAKER_00: you know,
[25:44] we've seen work from some of your colleagues in the field of
[25:47] academic economics to
[25:48] SPEAKER_00: show that,
[25:49] SPEAKER_00: you know,
[25:49] most jobs in the US are in categories that didn't exist 60 or
[25:53] 70 years ago.
[25:54] SPEAKER_00: But I suppose the question that I have is that I wonder about is what.
[26:00] is the likelihood that the economy will create enough new jobs
[26:05] in those categories
[26:07] for there not to be some kind of schismatic dislocation as this
[26:12] technology rolls out.
[26:14] SPEAKER_00: How have you thought about that?
[26:16] I think there's quite a lot of dislocation coming,
[26:19] although that's not new.
[26:20] I mean,
[26:21] that has been the case for with every major change in every
[26:28] major crisis.
[26:29] technological revolution,
[26:31] that a lot of jobs are destroyed and a lot of jobs are created.
[26:34] SPEAKER_01: And in the end,
[26:38] SPEAKER_01: one way or another,
[26:39] SPEAKER_01: there ends up being full employment because that's more or less.
[26:43] SPEAKER_01: Mass unemployment due to automation has been,
[26:46] SPEAKER_01: people have been predicting that for a very,
[26:49] SPEAKER_01: very long time and it never happens.
[26:53] SPEAKER_01: But the transition, the
[26:57] SPEAKER_01: A lot of people can find themselves in the wrong job,
[27:02] SPEAKER_01: in the wrong place,
[27:03] SPEAKER_01: sometimes geographically.
[27:05] SPEAKER_01: I mean,
[27:05] SPEAKER_01: it just,
[27:06] SPEAKER_01: it feels to me like it was just a year or two ago that it was,
[27:10] SPEAKER_01: you know,
[27:10] SPEAKER_01: we were telling people learn to code.
[27:12] And now it turns out that coding is one of those things that AI does,
[27:16] apparently.
[27:16] SPEAKER_01: I have no personal experience of it, but apparently does pretty well.
[27:20] SPEAKER_01: It does pretty well.
[27:21] SPEAKER_01: And, you know, the way I've been thinking about it, so one of the sort of
[27:28] put down remarks that people made about large language models
[27:31] and not quite sure if
[27:32] SPEAKER_01: it applies fully to everything else,
[27:34] SPEAKER_01: but that it was just souped up autocorrect.
[27:41] SPEAKER_01: But the thing is,
[27:42] SPEAKER_01: there were,
[27:43] SPEAKER_01: first of all,
[27:44] you could say that something like agricultural machinery is
[27:49] just souped up guy with
[27:50] SPEAKER_01: a scythe cutting down wheat,
[27:54] SPEAKER_01: which didn't stop it from being hugely disruptive.
[27:57] SPEAKER_01: Meaning that we basically have, you know, we have fewer resources.
[28:01] SPEAKER_01: The United States is a major agricultural exporter,
[28:04] SPEAKER_01: and we have fewer farmers than we have people playing World of Warcraft.
[28:07] So a technology can be sort of not all that magical and still
[28:14] have enormous impacts
[28:15] SPEAKER_01: and destroy a lot of traditional jobs.
[28:18] SPEAKER_01: And in this case,
[28:20] SPEAKER_01: souped up autocorrect,
[28:21] SPEAKER_01: well,
[28:22] SPEAKER_01: even if that's all it is,
[28:24] SPEAKER_01: but very souped up,
[28:26] SPEAKER_01: a lot of people's jobs are basically souped up autocorrect.
[28:30] SPEAKER_01: And those are, in many cases, jobs that we considered highly skilled.
[28:34] SPEAKER_01: So a lot of things in middle management,
[28:36] SPEAKER_01: a lot of,
[28:38] SPEAKER_01: I mean,
[28:39] SPEAKER_01: I don't know if there's a way to get this,
[28:41] SPEAKER_01: but things that I've noticed is that translation,
[28:48] SPEAKER_01: Translation software is not perfect, but damn good.
[28:53] And how many people were displaced by the fact that you don't
[28:57] actually need
[28:58] SPEAKER_01: somebody who speaks Mandarin?
[29:01] SPEAKER_01: How many, just a lot of the jobs that we think,
[29:12] SPEAKER_01: We like to imagine,
[29:13] SPEAKER_01: and maybe we can talk about this,
[29:14] we like to imagine that the very highest creativity level stuff
[29:19] can't be automated,
[29:20] SPEAKER_01: although that may come as a rude shock at some point.
[29:24] SPEAKER_01: But a lot of stuff that's just a few rungs below that can go away.
[29:31] I think in some ways the safest jobs are the ones that involve
[29:35] manual labor and
[29:36] SPEAKER_01: dealing with the material world.
[29:38] SPEAKER_00: Right.
[29:39] SPEAKER_00: Well,
[29:39] it's fascinating because 15 years ago that the story was AI was
[29:43] going to come off
[29:44] SPEAKER_00: the routine jobs in offices.
[29:47] SPEAKER_00: And what we have seen is the souped up autocorrect.
[29:52] SPEAKER_00: It doesn't really matter how it works in theory.
[29:54] SPEAKER_00: If it's working in practice and doing much more than that,
[29:56] SPEAKER_00: it will have an impact is taking action.
[30:01] enabling lawyers and software developers and creatives in all
[30:06] sorts of areas.
[30:07] SPEAKER_00: And I think that that has become quite a surprise.
[30:11] SPEAKER_00: I think Goldman Sachs did some work last year and they were showing that
[30:17] The sort of the pinpoint where jobs really started to be
[30:21] impacted by effective LLMs
[30:23] SPEAKER_00: was about $100,000 a year salary,
[30:25] SPEAKER_00: which is,
[30:26] SPEAKER_00: you know,
[30:26] SPEAKER_00: well above the average.
[30:27] SPEAKER_00: So we end up in this quite interesting world.
[30:31] And I agree with you that we may feel that there are certain
[30:37] jobs that are very
[30:38] SPEAKER_00: highfalutin and creative,
[30:39] SPEAKER_00: and the machines won't be able to at least support or augment them.
[30:43] SPEAKER_00: But with every...
[30:45] SPEAKER_00: release of an AI system, those systems get better and better.
[30:50] SPEAKER_00: And I think that that does create a real pressure and attention.
[30:54] I mean,
[30:54] later today,
[30:55] OpenAI will release their next model,
[30:57] which is called O3.
[30:58] SPEAKER_00: And I think quite a lot about what
[31:04] Policy responses to this ought to be given that there is so
[31:09] much uncertainty and
[31:11] SPEAKER_00: given that it's really expensive to run a safety net.
[31:13] SPEAKER_00: We know that in Europe our tax levels are much higher.
[31:16] SPEAKER_00: We have a much deeper safety net.
[31:20] And that to me feels like a kind of politically quite a
[31:23] difficult situation.
[31:24] SPEAKER_00: problem to close down, right?
[31:27] SPEAKER_00: Nobody really wants higher taxes,
[31:30] SPEAKER_00: whether it's here or in Europe or in the US,
[31:33] and certainly the politics in the US for the next three or four
[31:36] years won't support it.
[31:38] SPEAKER_00: So that,
[31:38] SPEAKER_00: I think,
[31:39] SPEAKER_00: is going to be a really key point of tension,
[31:42] SPEAKER_00: which is what happens if we do start to see really mass job displacement?
[31:46] SPEAKER_00: Well, I mean, my point of view is that since we don't know
[31:51] which jobs will be lost,
[31:52] and we don't really know how to devise policies.
[31:56] SPEAKER_01: Honestly,
[31:56] SPEAKER_01: we can do some things here and there,
[31:58] SPEAKER_01: but efforts to deliberately promote the jobs of the future have
[32:05] SPEAKER_01: gone rather spectacularly wrong in many cases.
[32:08] SPEAKER_01: So safety-ness is mostly what you have.
[32:11] SPEAKER_01: Now,
[32:11] I have an American perspective where our safety net is
[32:13] extremely threadbare
[32:15] SPEAKER_01: compared with Europe,
[32:16] SPEAKER_01: and our taxes are quite low,
[32:18] SPEAKER_01: and we could certainly do more of that.
[32:20] SPEAKER_01: Now,
[32:20] SPEAKER_01: what it doesn't do,
[32:23] even if you can have a safety net which protects people from
[32:26] real immiseration from
[32:28] SPEAKER_01: the technology,
[32:30] SPEAKER_01: You can't restore, you can't, it doesn't restore communities.
[32:36] SPEAKER_01: You know,
[32:37] if you have a community that is based around an industry that
[32:43] ceases to exist
[32:44] SPEAKER_01: because it's either because of globalization,
[32:46] SPEAKER_01: which is what mostly gets the focus,
[32:48] SPEAKER_01: but also just technology or even changes in tastes.
[32:51] I mean,
[32:52] I like to talk about the detachable collar and cuffed industry
[32:55] of Troy,
[32:55] New York,
[32:56] right?
[32:57] SPEAKER_01: That just went away.
[32:57] SPEAKER_01: Right.
[33:00] SPEAKER_01: And when it does,
[33:02] you can have a safety net that ensures that nobody starves or
[33:05] goes without health care.
[33:08] SPEAKER_01: Maybe not in America.
[33:09] SPEAKER_01: You can't.
[33:09] But anyway,
[33:11] but you can't restore the community and you can't restore
[33:14] necessarily the dignity.
[33:16] SPEAKER_01: And that's I don't I don't have an answer for that.
[33:20] SPEAKER_01: I mean, you do what you can.
[33:21] SPEAKER_01: But we are going to be seeing a lot.
[33:24] SPEAKER_01: I just want to key on one point you said.
[33:26] SPEAKER_01: The technology may not.
[33:29] SPEAKER_01: we may not be at a point where it replaces people of,
[33:34] SPEAKER_01: you know,
[33:34] SPEAKER_01: exceptional creativity or whatever,
[33:37] SPEAKER_01: but it does enhance their reach.
[33:41] SPEAKER_01: Yeah, absolutely.
[33:42] SPEAKER_01: And we've been seeing that for quite a while.
[33:44] SPEAKER_01: I mean,
[33:45] SPEAKER_01: you know,
[33:45] SPEAKER_01: I still have some ties in academia and which is a poor model,
[33:50] SPEAKER_01: but I think it may have something to do with,
[33:52] SPEAKER_01: I think it's also true in things like the legal profession,
[33:55] SPEAKER_01: which is that the very top people can actually do
[33:59] a lot can basically cover a lot more bases because of
[34:03] technology and which actually
[34:05] SPEAKER_01: makes things more hierarchical.
[34:08] SPEAKER_01: I mean,
[34:08] I used to joke about a couple of fields that I follow that we
[34:11] were now at a stage
[34:12] SPEAKER_01: where there were only three people in the top 10.
[34:15] And that's a,
[34:17] again,
[34:18] it's an unequalizing effect of the technology to which I have
[34:22] no answer.
[34:23] SPEAKER_00: No, I think we're also going to see that.
[34:25] SPEAKER_00: There is,
[34:26] SPEAKER_00: in my other hat,
[34:28] SPEAKER_00: which is to invest in startups,
[34:30] SPEAKER_00: in particular deep technology and AI startups,
[34:33] there is a mood towards a belief that you could build the
[34:40] billion dollar single
[34:41] SPEAKER_00: person company,
[34:42] SPEAKER_00: like the one man unicorn,
[34:44] SPEAKER_00: as they call it.
[34:45] SPEAKER_00: And the idea is that there's a whole array of opportunities
[34:49] ordinary and increasingly complex tasks that can be delegated
[34:53] to tens of thousands
[34:55] SPEAKER_00: of AI agents.
[34:56] And you've swapped labour for capital and you're just paying a
[34:59] rental to a cloud
[35:01] SPEAKER_00: service for that.
[35:03] SPEAKER_00: And I think that that is a direction of travel that we've seen.
[35:07] The number of people employed even by a huge company like
[35:10] Facebook is far smaller
[35:12] SPEAKER_00: than was ever employed by General Motors and so on and so forth.
[35:17] SPEAKER_00: I know that we're going to go to questions in a few minutes.
[35:20] One thing I would love to also for us to talk about is trade
[35:24] and tariffs.
[35:26] SPEAKER_00: You know,
[35:26] we've got a man in the White House who loves tariffs and
[35:31] certainly loves the threat
[35:33] SPEAKER_00: of tariffs.
[35:33] SPEAKER_00: And we also have this geopolitical fragmentation.
[35:36] SPEAKER_00: Now,
[35:36] SPEAKER_00: as a technologist,
[35:38] what I see happening is a number of different things we've seen
[35:42] from the political side.
[35:44] SPEAKER_00: the building up of more and more walls around the internet.
[35:48] SPEAKER_00: So it's not just China's great firewall.
[35:50] SPEAKER_00: It's also Russia being able to seal off its internet.
[35:55] SPEAKER_00: There is now this political pressure, which is
[35:59] SPEAKER_00: around free speech in the US and a departure from European standards.
[36:04] SPEAKER_00: And of course,
[36:05] SPEAKER_00: in technologies with the export controls,
[36:08] SPEAKER_00: most importantly,
[36:11] SPEAKER_00: in a way,
[36:11] forcing China to start to do its own development in really hard
[36:15] technologies and
[36:16] SPEAKER_00: advanced semiconductors.
[36:18] SPEAKER_00: So I see a world where...
[36:20] SPEAKER_00: There will be increasingly a couple of lanes of technology.
[36:25] SPEAKER_00: And that,
[36:26] SPEAKER_00: of course,
[36:26] reduces the size of markets and adds quite a lot of friction to
[36:30] all of it,
[36:31] SPEAKER_00: to all of it.
[36:32] SPEAKER_00: It feels like that's a general drag on growth.
[36:35] SPEAKER_01: Yeah, it is a general drag on growth.
[36:38] SPEAKER_01: Now, a little bit funny, the whole tariffs on everything.
[36:45] That is,
[36:46] if you want to understand that,
[36:48] I think you need a model of the mind of Donald Trump.
[36:50] There really isn't very much of a constituency behind that,
[36:53] except that he wants it.
[36:56] SPEAKER_01: I really see business kind of hates it.
[36:59] But economic nationalism,
[37:02] more sophisticated economic nationalism,
[37:04] is definitely on the rise.
[37:05] SPEAKER_01: I mean, the Biden administration was far more
[37:09] economically nationalist than any American administration we've
[37:13] seen for decades.
[37:16] SPEAKER_01: Europe is clearly moving somewhat in that direction.
[37:19] And the reason is mainly,
[37:22] I think at some level,
[37:26] the world is a scarier place.
[37:30] Who thought that large-scale conventional warfare was going to
[37:34] make a comeback in
[37:35] SPEAKER_01: the 21st century?
[37:37] SPEAKER_01: And now it has.
[37:37] SPEAKER_01: And now you think that, well,
[37:39] SPEAKER_01: We need to have capabilities,
[37:41] SPEAKER_01: either domestically or in our close allies,
[37:44] SPEAKER_01: that mean that we can't be shut out,
[37:48] SPEAKER_01: that we have the ability,
[37:49] SPEAKER_01: and if possible,
[37:50] SPEAKER_01: we're going to try and deny this stuff to
[37:52] SPEAKER_01: People that we don't consider our friends.
[37:55] SPEAKER_01: And that is going to fragment the world.
[37:58] SPEAKER_01: And also, by the way, worth saying, and I know we need to get questions.
[38:01] SPEAKER_01: I'm the one who said that.
[38:04] SPEAKER_01: The one of the things that is also true is that to an important extent,
[38:09] SPEAKER_01: technology can actually substitute for globalization.
[38:14] SPEAKER_01: If you need customer service,
[38:16] SPEAKER_01: instead of getting somebody in Bangalore on the line,
[38:19] SPEAKER_01: you instead are talking to a chatbot.
[38:21] SPEAKER_01: And that's a real change in dimension.
[38:25] SPEAKER_01: So we may be in it for a much more fragmented world,
[38:28] both because it's less necessary to have global trade and
[38:31] because we're much more afraid,
[38:34] SPEAKER_01: with good reason,
[38:35] SPEAKER_01: of being too dependent upon other countries.
[38:38] SPEAKER_01: And what I worry about is the small countries.
[38:40] countries uh right and who may be left out in the cold and uh
[38:45] so you know the eu is
[38:47] going to be fine i think britain will reach some kind of
[38:50] accommodation with the eu
[38:52] if britain will be fine america will be fine um bangladesh uh
[38:59] vietnam yeah not so
[39:00] SPEAKER_01: clear
[39:01] SPEAKER_00: Well, I love this line, technology is a substitute for globalization.
[39:06] SPEAKER_00: I'm going to come back to you after we finish this live on that.
[39:10] SPEAKER_00: In my first book,
[39:12] I talk about the coming fragmentation that was going to be
[39:16] driven by changing technology.
[39:18] SPEAKER_00: And I identified this idea,
[39:20] SPEAKER_00: although I didn't have quite the pithy communication that you have,
[39:24] SPEAKER_00: technology is a substitute for globalization,
[39:26] but there are technologies that will do the job that
[39:29] globalization used to do.
[39:31] SPEAKER_00: And that would be things like...
[39:34] 3D printing or vertical farming that allow localised production,
[39:38] particularly of food.
[39:41] SPEAKER_00: But also, I think critically, the change in the energy system.
[39:45] SPEAKER_00: So you buy solar panels once,
[39:47] SPEAKER_00: they last for 25 years,
[39:48] SPEAKER_00: you buy batteries,
[39:49] SPEAKER_00: they last for much longer than we ever thought.
[39:51] SPEAKER_00: and you don't need to be, you know, a vassal to a sort of a petro state.
[39:57] SPEAKER_00: And that,
[39:58] SPEAKER_00: I think,
[39:58] does create an interesting path for countries like Bangladesh
[40:03] or Pakistan or Vietnam,
[40:04] where a lot of their sense of sovereignty and ability to
[40:08] develop is about their
[40:10] SPEAKER_00: access to energy,
[40:10] SPEAKER_00: right?
[40:10] SPEAKER_00: How much energy capture do they have as an economy?
[40:13] SPEAKER_00: How many energy services can they actually use?
[40:17] SPEAKER_00: And in the last
[40:18] SPEAKER_00: Two years in Pakistan,
[40:19] there's been this remarkable change driven by the falling cost
[40:24] of solar panels,
[40:25] which has meant Pakistan has become one of the largest importer
[40:28] of solar panels and
[40:29] broke the link between measured grid delivered electricity and
[40:34] GDP growth.
[40:36] Because businesses could not be bothered to sit behind
[40:39] brownouts and blackouts and
[40:40] SPEAKER_00: went off and bought solar panels to keep their businesses running.
[40:43] And I think that there is this possibility where the declining
[40:47] cost of this
[40:48] SPEAKER_00: technology can provide...
[40:51] a much more affordable energy sovereignty for the long tail of
[40:54] the world that is
[40:55] SPEAKER_00: not energy sovereign,
[40:57] SPEAKER_00: especially smaller and poorer countries.
[41:00] And the first kilowatt hour of consumption a family has in a
[41:04] day from zero is the
[41:05] SPEAKER_00: one that delivers the water pump,
[41:07] SPEAKER_00: the refrigeration,
[41:08] SPEAKER_00: the lights,
[41:09] SPEAKER_00: the charging of the smartphones and makes a, could make a big deal.
[41:12] SPEAKER_00: Now,
[41:13] SPEAKER_00: of course,
[41:13] SPEAKER_00: that is me,
[41:14] SPEAKER_00: Paul,
[41:14] SPEAKER_00: as an absolute relentless optimist about the human condition and where,
[41:19] SPEAKER_00: where we can go,
[41:19] SPEAKER_00: but it is sort of one bright spark that I look at.
[41:22] SPEAKER_01: Oh, the whole thing.
[41:23] SPEAKER_01: Yes.
[41:23] SPEAKER_01: Just to say that,
[41:24] SPEAKER_01: um,
[41:25] the renewable energy revolution is the most hopeful thing that
[41:31] of today's world.
[41:32] SPEAKER_01: And it's funny how people get all,
[41:34] SPEAKER_01: you know,
[41:35] SPEAKER_01: people get excited about it,
[41:36] SPEAKER_01: which I understand,
[41:37] SPEAKER_01: but,
[41:38] SPEAKER_01: um,
[41:38] SPEAKER_01: In terms of actually really changing people's,
[41:43] SPEAKER_01: changing the prospects for development,
[41:45] SPEAKER_01: changing the prospects for the planet,
[41:48] SPEAKER_01: solar,
[41:48] SPEAKER_01: wind,
[41:50] SPEAKER_01: batteries are probably the most important thing.
[41:53] SPEAKER_01: And they've really had Moore's law type productivity improvements.
[41:57] SPEAKER_01: So it's awesome.
[41:59] SPEAKER_00: Well, we are now at 20 minutes from the end.
[42:02] SPEAKER_00: We said we'd go to questions, Paul.
[42:03] SPEAKER_00: Have you seen any questions that you want to pick up?
[42:06] SPEAKER_00: Otherwise, I could look at one that we could tackle.
[42:09] SPEAKER_00: They're running up my screen too fast.
[42:12] SPEAKER_00: So go ahead.
[42:14] SPEAKER_00: So I've got this one that's
[42:16] SPEAKER_00: coming out here.
[42:19] SPEAKER_00: Maybe you take this first and I'll join in after.
[42:21] SPEAKER_00: The 2025 Edelman Trust Barometer,
[42:24] SPEAKER_00: a trust barometer run by a big public relations firm,
[42:27] SPEAKER_00: shows a high level of grievance worldwide,
[42:30] SPEAKER_00: particularly against the wealthy and governments.
[42:32] How can markets traditionally quite poor at addressing
[42:35] inequality tackle this
[42:37] SPEAKER_00: grievance given the potential negative consequences?
[42:40] SPEAKER_00: Well, that's a doozy over to you, Paul.
[42:42] SPEAKER_01: Oh, but this is not markets are not going to solve this.
[42:46] SPEAKER_01: This is let me just say the you know, we had I grew up.
[42:51] SPEAKER_01: I'm somewhat older here.
[42:53] SPEAKER_01: I grew up in what was really a middle class society.
[42:56] at least it felt like a middle class society there was poverty
[42:59] there were some
[43:00] people wealthy people though not the way there are now but it
[43:03] was mostly middle
[43:04] class and i had assumed that that was a society that sort of
[43:08] evolved naturally
[43:09] actually we kind of thought that was an end state of of
[43:12] economic development um but
[43:14] it turns out it wasn't obviously inequality soared again back
[43:17] to gilded age levels
[43:18] but it also turns out to be that um that society both in the
[43:23] u.s and in uk and and
[43:26] SPEAKER_01: Europe more generally.
[43:28] SPEAKER_01: That didn't just happen.
[43:29] SPEAKER_01: That was created.
[43:30] SPEAKER_01: The U.S.
[43:31] was a highly unequal society in 1938,
[43:35] and it was a pretty much middle-class society by 1946.
[43:38] SPEAKER_01: And it was all deliberate government action,
[43:43] SPEAKER_01: strengthening of unions,
[43:46] SPEAKER_01: new wage norms enforced by wartime controls.
[43:49] SPEAKER_01: So look, inequality, and I think this is an issue.
[43:52] SPEAKER_01: I think people are
[43:54] SPEAKER_01: Whether or not they frame it that way,
[43:56] the fact that there's so much spectacular inequality and
[44:01] perceived and I think true
[44:03] SPEAKER_01: unfairness out there,
[44:05] SPEAKER_01: this is one of those things that governments need to do.
[44:08] SPEAKER_01: Now,
[44:08] SPEAKER_01: whether we are able to get our act together,
[44:11] I think it was kind of a miracle that we dealt with those
[44:14] tensions so well in my
[44:16] SPEAKER_01: grandfather's generation.
[44:18] SPEAKER_01: But maybe we can do it again.
[44:21] Yeah,
[44:21] I guess the question is,
[44:23] what is the external impetus that drives that?
[44:26] And I think there is a sense amongst perhaps technologists that
[44:31] that impetus will
[44:34] SPEAKER_00: come because technology will solve every problem.
[44:39] SPEAKER_00: But of course,
[44:39] we do find ourselves with a situation where dynastic
[44:43] persistence of ultra high
[44:45] SPEAKER_00: wealth in the US is pretty substantial.
[44:50] SPEAKER_00: If I could say something grim,
[44:52] major movements towards equality historically have always
[44:57] basically been associated
[44:59] SPEAKER_01: with wars.
[45:00] SPEAKER_01: Absolutely, yeah.
[45:02] SPEAKER_01: And there's the old joke,
[45:04] SPEAKER_01: sorry,
[45:04] SPEAKER_01: European,
[45:06] people who work at the European Commission say that they should
[45:09] have a statue in
[45:10] SPEAKER_01: front of the Berlaymont headquarters,
[45:12] SPEAKER_01: a statue of Joseph Stalin,
[45:14] SPEAKER_01: without whom none of this would have been possible.
[45:16] SPEAKER_01: Yeah.
[45:17] SPEAKER_00: That's grim humor.
[45:18] There have been a load of questions about debt,
[45:20] so I think we should turn to those.
[45:22] SPEAKER_00: I'm just trying to read my notes.
[45:26] SPEAKER_00: Alan Greenspan used to say,
[45:27] SPEAKER_00: we don't know the level of maximum federal debt,
[45:30] SPEAKER_00: and I hope we never find out,
[45:31] SPEAKER_00: because when we do,
[45:32] SPEAKER_00: it will be too late.
[45:34] SPEAKER_00: And I guess this is directly to you,
[45:37] SPEAKER_00: which is what is the max according to Paul,
[45:38] SPEAKER_00: or what is the ideal level of debt?
[45:42] SPEAKER_01: Okay.
[45:43] SPEAKER_01: I mean, it's a pretty good...
[45:47] SPEAKER_01: analytical doctrine called functional finance,
[45:51] SPEAKER_01: which is not MMT,
[45:52] SPEAKER_01: although there is a whole other thing,
[45:54] SPEAKER_01: which says that the number doesn't matter.
[45:57] SPEAKER_01: Just think about the macroeconomics.
[45:59] SPEAKER_01: And I don't think that's entirely true, but it's largely true.
[46:03] SPEAKER_01: As long as you're not having uncontrollable inflation,
[46:09] particularly countries that issue debt in their own currency
[46:11] have a lot of running room.
[46:13] SPEAKER_01: And
[46:14] SPEAKER_01: Um,
[46:14] SPEAKER_01: examples,
[46:15] SPEAKER_01: I mean,
[46:15] SPEAKER_01: the,
[46:15] SPEAKER_01: the max,
[46:16] I think the max debt number we've ever seen as a share of GDP
[46:20] would be the UK,
[46:21] SPEAKER_01: which came out of world war II with debt at 250% of GDP.
[46:25] So,
[46:26] you know,
[46:26] more than double the current us level and there was no debt crisis.
[46:30] SPEAKER_01: Now,
[46:31] SPEAKER_00: uh,
[46:32] SPEAKER_01: uh,
[46:32] you can argue that there was a fair bit of financial repression
[46:35] and controls and,
[46:36] SPEAKER_01: but you know,
[46:37] SPEAKER_01: we,
[46:38] SPEAKER_01: we haven't lost the ability to do that if necessary.
[46:40] SPEAKER_01: But in any case, I don't think that was the issue.
[46:42] SPEAKER_01: Um,
[46:43] SPEAKER_01: And I think that we're,
[46:44] SPEAKER_01: you know,
[46:46] SPEAKER_01: it's imprudent to just keep on running up that debt to GDP ratio.
[46:51] But there is not a hint in anything I can see that we're
[46:55] hitting any kind of limit.
[46:56] SPEAKER_01: You know,
[46:57] SPEAKER_01: people who bet against JGBs,
[47:00] SPEAKER_01: against Japanese debt because of their debt levels,
[47:04] SPEAKER_01: have just lost money and lost money and lost money over the years.
[47:07] SPEAKER_01: It's...
[47:08] Advanced countries with stable governments that borrow on their
[47:12] own currency just
[47:13] SPEAKER_01: have far more fiscal space than most people tend to imagine.
[47:19] SPEAKER_00: Although,
[47:19] SPEAKER_00: I mean,
[47:19] SPEAKER_00: in the UK,
[47:20] SPEAKER_00: of course,
[47:20] we got heavily punished a couple of years ago when two prime
[47:25] ministers back,
[47:26] SPEAKER_00: it's hard to keep track,
[47:28] SPEAKER_00: really spooked our debt markets.
[47:29] SPEAKER_00: And in a sense, we've got the hangover today.
[47:34] And I guess the Chinese are contending with a whole slew of
[47:37] other debt problems themselves,
[47:40] SPEAKER_00: which actually may advantage the US over the next few years.
[47:45] SPEAKER_01: Yeah,
[47:45] SPEAKER_01: well,
[47:46] although I have to say that the reason that Liz Truss lost the
[47:50] race with a head of
[47:51] SPEAKER_01: lettuce as to who would survive longer,
[47:55] SPEAKER_01: there was,
[47:55] SPEAKER_01: I think the UK Congress is calling it the moron premium.
[48:02] SPEAKER_01: I mean, it wasn't simply that
[48:04] SPEAKER_01: Her plans look fiscally irresponsible.
[48:06] SPEAKER_01: They look stupid.
[48:08] SPEAKER_01: And now, of course, stupidity always comes along.
[48:11] But I don't think that was a fair test,
[48:13] really,
[48:14] of the sustainable level of debt.
[48:18] SPEAKER_00: Yeah, well, fair enough.
[48:19] SPEAKER_00: I mean, we're going to we're going to figure it out.
[48:20] SPEAKER_00: And I think the one thing I would say in the UK now is in the last week,
[48:25] SPEAKER_00: the government has has really come out fighting.
[48:29] They've come out fighting for investments in infrastructure,
[48:32] for public,
[48:32] private investments.
[48:33] uh partnerships it's a sort of i suppose quite a healthy neo
[48:36] keynesianism in a way
[48:37] SPEAKER_00: right let's let's build a lot of stuff uh let's make it make sure it's
[48:41] infrastructural make sure you can build on top of it rather
[48:44] than uh you know
[48:45] spinning up debt for for consumption this year or or the next
[48:50] we had another
[48:51] question um that i'll just uh uh come in here i don't know who
[48:55] this is from um
[48:58] SPEAKER_00: When does it make sense for the Fed to raise interest rates?
[49:01] Is it possible that high interest rates might help with labor disruptions?
[49:07] SPEAKER_01: I'm not quite sure I understand the second part of that.
[49:11] SPEAKER_01: I mean, the Fed is, look, they have, as they should, a dual mandate.
[49:17] They're supposed to achieve full employment or sustainably full employment,
[49:22] SPEAKER_01: and they're supposed to have low inflation.
[49:26] SPEAKER_01: And there's a target of 2%, which is rather arbitrary.
[49:33] It's one of the few things in the world that you can really
[49:35] blame on New Zealand,
[49:36] SPEAKER_01: which is a whole story.
[49:38] SPEAKER_01: But something like that.
[49:42] Basically,
[49:43] keep inflation low enough that people are not constantly
[49:46] thinking about it.
[49:47] The right level of inflation is low enough so that it does not
[49:51] become a major use
[49:53] SPEAKER_01: of cognitive energy.
[49:56] SPEAKER_01: and as full employment as you can manage.
[49:58] And that's where they will set...
[50:00] That's what will determine where they set interest rates.
[50:02] SPEAKER_01: They will judge it wrong sometimes because they are...
[50:06] SPEAKER_01: Actually,
[50:06] the dirty little secret of all this stuff is that Jerome Powell
[50:11] has essentially no
[50:13] SPEAKER_01: information that anybody who knows how to use FRED,
[50:17] SPEAKER_01: the Federal Reserve database,
[50:20] SPEAKER_01: doesn't have.
[50:21] SPEAKER_01: And so they'll get wrong, but I don't think... Now, the...
[50:26] I don't think that the,
[50:28] the labor market disruption issue,
[50:29] um,
[50:31] not,
[50:32] not really.
[50:32] SPEAKER_01: I mean,
[50:32] we did have a big labor market disruption as we came out of
[50:36] COVID because,
[50:38] SPEAKER_01: uh,
[50:38] SPEAKER_01: the mix of stuff that people want to buy was very different.
[50:41] And we had a period when we had a really high ratio of unfilled
[50:47] job openings to
[50:48] SPEAKER_01: people looking for jobs,
[50:50] SPEAKER_01: which was transitional and probably,
[50:52] SPEAKER_01: you know,
[50:53] SPEAKER_01: um,
[50:54] And the Fed raised interest rates in part because that seemed
[50:57] to be kind of inflationary.
[51:02] SPEAKER_01: But that problem has kind of solved itself for the time being.
[51:04] SPEAKER_01: Now, if AI could produce another
[51:07] SPEAKER_01: Similar disruption, although unlikely to go as quickly.
[51:10] But I don't think,
[51:12] you know,
[51:13] the fact of the Fed has got one dial to turn central banks.
[51:17] SPEAKER_01: They have, you know, the overnight interest rate.
[51:21] SPEAKER_01: And there's only so many problems you can solve with only one dial.
[51:25] SPEAKER_00: Yeah.
[51:25] And I also wonder about when we think about how this intersects
[51:29] with the labor market,
[51:31] SPEAKER_00: what is happening from a geographical structure perspective?
[51:35] You know,
[51:35] as we move into these advanced economies,
[51:37] you get this effect of agglomeration.
[51:40] SPEAKER_00: You know, people want to get to where the other countries,
[51:45] SPEAKER_00: strong growing companies are.
[51:46] SPEAKER_00: And so you get these clusters building,
[51:48] SPEAKER_00: San Francisco Bay Area being the most powerful in the world.
[51:52] And it strikes me as quite a challenging public policy problem
[51:59] to figure out how to
[52:01] SPEAKER_00: turn a 21st century economy into one that grows globally.
[52:06] SPEAKER_00: across a broad geographic spread.
[52:09] I remember talking to somebody very senior at one of the
[52:11] foundation AI labs a
[52:13] SPEAKER_00: couple of months ago,
[52:14] SPEAKER_00: and they said to me,
[52:15] SPEAKER_00: you know,
[52:16] what we can't figure out is how this technology doesn't become
[52:20] a giant vacuum
[52:21] SPEAKER_00: cleaner sucking all of the wealth to San Francisco.
[52:25] And this is obviously not an interest rates question,
[52:28] but it is a challenge,
[52:30] I think,
[52:31] about
[52:32] how you revitalize local economies because local economies are
[52:37] fundamentally where
[52:38] people live it's you know where they have their roots well this
[52:41] is this is right up
[52:42] my alley i mean uh uh so half the swedish thingy was for work
[52:46] on exactly this kind
[52:47] of issue um and the um uh and but to a first approximation the
[52:53] answer is we can't
[52:55] SPEAKER_01: do that i mean we uh there have been uh uh
[53:01] SPEAKER_01: major efforts in some places to really support lagging regions.
[53:08] When technological change is wanting to pull stuff into the
[53:12] already rich parts,
[53:15] SPEAKER_01: what can you do to promote development in the lagging parts?
[53:19] SPEAKER_01: And so Italy has poured vast sums into the messagiorno,
[53:24] SPEAKER_01: which may mean that people have enough to eat,
[53:29] SPEAKER_01: people have health care,
[53:30] SPEAKER_01: but has never really
[53:31] SPEAKER_01: cotton business to go back there.
[53:34] SPEAKER_01: Germany,
[53:35] SPEAKER_01: the former East Germany,
[53:36] SPEAKER_01: you know,
[53:38] SPEAKER_01: Germany has pretty generous benefits and all of that,
[53:40] SPEAKER_01: and nobody is suffering materially very much in former East Germany,
[53:44] SPEAKER_01: but they also haven't
[53:48] SPEAKER_01: but the industry hasn't come back and it's a lot of money.
[53:52] SPEAKER_01: So basically you have policy failures.
[53:54] SPEAKER_01: And even in the United States,
[53:55] SPEAKER_01: although we don't do very much of that explicitly,
[53:57] SPEAKER_01: although Biden tried to some,
[53:59] SPEAKER_01: but we have because of the way our benefits and tax system is structured,
[54:03] SPEAKER_01: We, in effect, give enormous aid to lagging regions.
[54:06] SPEAKER_01: If you look at West Virginia or Kentucky,
[54:09] SPEAKER_01: in fact,
[54:09] SPEAKER_01: though,
[54:09] SPEAKER_01: we see foreign aid that's about 20 percent of their GDP through the U.S.
[54:13] SPEAKER_01: tax and transfer system, which means that industrial jobs.
[54:17] SPEAKER_01: There's a lot of jobs in health care in West Virginia.
[54:20] SPEAKER_01: What there aren't are coal mining jobs.
[54:22] What there isn't is industry and what there isn't is any of the
[54:25] cutting edge technology,
[54:26] SPEAKER_01: because why?
[54:28] SPEAKER_01: would a technology company want to be in West Virginia?
[54:31] SPEAKER_01: And so, and no one has ever cracked that one.
[54:35] SPEAKER_01: It's,
[54:36] SPEAKER_01: I'm sorry,
[54:39] SPEAKER_01: I mean,
[54:39] SPEAKER_01: I wish that there were brilliant solutions,
[54:41] SPEAKER_01: but the fact of the matter is that kind of a,
[54:45] SPEAKER_01: Uh,
[54:46] SPEAKER_01: you know,
[54:46] SPEAKER_01: this,
[54:47] SPEAKER_01: we have an economy where to the extent that where people,
[54:49] SPEAKER_01: uh,
[54:50] people doing sophisticated stuff want to be near other people
[54:54] doing sophisticated stuff.
[54:55] SPEAKER_01: And,
[54:56] SPEAKER_01: uh,
[54:57] SPEAKER_01: and that's been with a huge reversal,
[55:00] SPEAKER_01: by the way,
[55:00] SPEAKER_01: up to about 1980 stuff was spreading out.
[55:03] Um,
[55:04] and then,
[55:05] but there's a real reversal,
[55:07] uh,
[55:07] since then,
[55:08] which is everywhere.
[55:09] SPEAKER_00: Uh,
[55:10] SPEAKER_00: when I got involved in the tech industry,
[55:11] SPEAKER_00: uh,
[55:12] SPEAKER_00: you know,
[55:12] SPEAKER_00: the ratio of San Francisco to Boston was about two to one.
[55:15] SPEAKER_00: Uh, and now it's whatever, 50 to one or 30 to one.
[55:18] SPEAKER_00: I mean, it's really, it's really changed.
[55:20] SPEAKER_00: And I agree.
[55:20] SPEAKER_00: It's a really,
[55:21] SPEAKER_00: this agglomeration problem that you know so well,
[55:23] SPEAKER_00: uh,
[55:24] SPEAKER_00: is very,
[55:25] SPEAKER_00: very hard to find,
[55:26] SPEAKER_00: um,
[55:28] SPEAKER_00: great policy solutions towards.
[55:33] SPEAKER_00: I suppose
[55:36] SPEAKER_00: the only things that start to perhaps be a little bit rosier.
[55:41] SPEAKER_00: I mean,
[55:41] SPEAKER_00: I wonder the extent to which the IRA,
[55:43] SPEAKER_00: which was one of Biden's flagship policies,
[55:46] has been able to revitalise manufacturing in places that are
[55:50] not San Francisco or
[55:51] SPEAKER_00: New York.
[55:52] And with that,
[55:53] you can start to see local ecosystems and expertise in those areas.
[55:58] SPEAKER_00: And further down the track,
[56:00] SPEAKER_00: ultimately local economies can function because there are people there
[56:06] But it doesn't feel like you're going to have the anchor
[56:08] tenancy of the big 10 or 20 companies.
[56:10] I mean,
[56:10] of the big 10 companies in the US,
[56:12] I think every single one is on the West Coast.
[56:14] SPEAKER_01: Yeah.
[56:15] And and then if you take the the other great source of of high
[56:20] value added per
[56:21] SPEAKER_01: worker is Greater New York.
[56:23] SPEAKER_01: which is mostly the international industry.
[56:25] SPEAKER_01: And isolated places in the hinterland can thrive.
[56:33] SPEAKER_01: University towns,
[56:35] SPEAKER_01: places that have spectacular natural beauty can,
[56:41] SPEAKER_01: and those can become not just,
[56:44] SPEAKER_01: they can become places where remote work becomes possible.
[56:47] SPEAKER_01: And so maybe like one in 10 small towns in the hinterland
[56:53] SPEAKER_01: can actually thrive.
[56:56] SPEAKER_01: But the trouble is highly selective.
[56:58] SPEAKER_01: And so if you travel around,
[57:00] SPEAKER_01: you will find,
[57:00] SPEAKER_01: I found this in multiple countries,
[57:03] SPEAKER_01: but certainly in the United States,
[57:05] SPEAKER_01: you travel through central Pennsylvania,
[57:09] SPEAKER_01: which is already far enough away that it's kind of beyond the,
[57:12] SPEAKER_01: the Metro New York orbit,
[57:14] and you'll see this thriving town with a lot of boutiques and
[57:20] coffee shops and
[57:22] SPEAKER_01: actually a very internationalized workforce.
[57:25] SPEAKER_01: And then 10 miles down the road is desolation.
[57:29] SPEAKER_01: And that's, and don't have an answer for that.
[57:33] SPEAKER_01: I mean, it's, and to just say, well, people should move.
[57:36] SPEAKER_01: Well, people don't want to move.
[57:39] SPEAKER_01: They live where they live.
[57:41] SPEAKER_01: Yeah, and even if they do move, something is lost.
[57:45] SPEAKER_01: You have a community.
[57:46] SPEAKER_01: Yeah, it's gone.
[57:47] And that's,
[57:47] again,
[57:48] the kinds of things that you can't,
[57:49] that are really,
[57:50] really hard to fix.
[57:52] SPEAKER_00: Paul,
[57:52] SPEAKER_00: we're coming,
[57:53] SPEAKER_00: the two of us,
[57:54] SPEAKER_00: to the top of our allotted hour,
[57:57] SPEAKER_00: and there'll be another live kicking off on this Substack Market Day.
[58:01] Maybe we should sum up with each of us giving a little view of
[58:06] where we think 2025 will head.
[58:11] SPEAKER_00: Would you like to go first or would you like me to go first?
[58:13] SPEAKER_00: Why'd you go first?
[58:14] SPEAKER_00: Well, I think about this because...
[58:16] SPEAKER_00: Fair enough.
[58:17] SPEAKER_00: OK, so so, you know, there are things I can't predict.
[58:20] SPEAKER_00: You can't predict events.
[58:21] SPEAKER_00: I can't predict the breakout of a war and I can't predict,
[58:24] SPEAKER_00: you know,
[58:25] SPEAKER_00: a crazy,
[58:26] SPEAKER_00: extreme diplomatic position that might emerge.
[58:30] SPEAKER_00: But I think the US is.
[58:31] SPEAKER_00: just really, really well positioned.
[58:33] I wrote an essay six months ago saying the US is well
[58:36] positioned to lead the 21st
[58:39] SPEAKER_00: century subject to the politics holding together.
[58:42] And I do think that the degree of dynamism that exists will
[58:48] help it at the top line.
[58:50] I don't think there's much attention being paid to all of the
[58:55] points of tension
[58:56] SPEAKER_00: that we discuss about inequality and access and distribution.
[59:00] SPEAKER_00: But compared to the UK and Europe,
[59:03] SPEAKER_00: I think it could be in for quite a healthy top line year,
[59:09] SPEAKER_00: buoyed by a sense among CEOs that can just get on and do things.
[59:13] SPEAKER_01: OK, so I'm if
[59:17] If somebody would just make our current administration just
[59:21] shut up and not do very much,
[59:25] SPEAKER_01: then I think 2025 is going to be a very good year.
[59:28] SPEAKER_01: And that may be how it plays out.
[59:30] It's kind of looking like a lot of stuff is going to be blocked
[59:33] or backed off.
[59:34] SPEAKER_01: But I don't know that.
[59:35] SPEAKER_01: In fact, I might be able to give you a better answer tomorrow.
[59:39] when we find out whether Trump actually does those tariffs on
[59:41] Canada and Mexico.
[59:43] SPEAKER_01: Right.
[59:43] SPEAKER_01: Um,
[59:43] SPEAKER_01: but so the,
[59:44] SPEAKER_01: the,
[59:45] SPEAKER_01: the big risk points,
[59:45] SPEAKER_01: I am worried about overvaluation in tech,
[59:48] SPEAKER_01: but the big risk points for the U S are,
[59:50] SPEAKER_01: um,
[59:50] SPEAKER_01: uh,
[59:52] SPEAKER_01: Trade wars and deportation.
[59:56] SPEAKER_01: And deportation,
[59:58] SPEAKER_01: we haven't talked about at all,
[59:59] but that is something that I really worry can spin out of
[1:00:02] control and become
[1:00:04] SPEAKER_01: enormously disruptive.
[1:00:05] SPEAKER_01: But, you know, we start off, this is amazingly good.
[1:00:09] SPEAKER_01: I mean,
[1:00:11] all of us who do these macroeconomic stuff are just sort of
[1:00:15] rubbing our eyes at how
[1:00:16] SPEAKER_01: good the situation looks right now.
[1:00:18] SPEAKER_00: Right.
[1:00:19] SPEAKER_00: Of course.
[1:00:19] SPEAKER_00: But we can never tell.
[1:00:21] SPEAKER_00: You've ended that perfectly.
[1:00:23] SPEAKER_00: I remember we were joking about college lecturers and their timekeeping.
[1:00:26] SPEAKER_00: But boy, you've brought this right to the 30 minutes past the hour.
[1:00:32] SPEAKER_00: I think I love this conversation.
[1:00:34] SPEAKER_00: I hope we can do this again in the next six months or so and check in.
[1:00:38] SPEAKER_01: I think this is fine.
[1:00:41] SPEAKER_00: Anything that doesn't involve jet lag, I'm always willing to do.
[1:00:44] Yeah,
[1:00:45] we'll do that again and we'll make sure you're caffeinated and
[1:00:47] I'll be caffeinated.
[1:00:48] SPEAKER_00: Thanks to the 4,829 people who tuned into all of this.
[1:00:52] SPEAKER_00: You can find Paul's Substack on Substack.
[1:00:55] Just search for Paul Krugman and you can find mine on Substack
[1:00:58] by searching for my
[1:00:59] SPEAKER_00: name or Exponential View.
[1:01:01] SPEAKER_00: Paul, thanks so much.
[1:01:02] SPEAKER_00: I really enjoyed this.
[1:01:03] SPEAKER_00: I hope you did.
[1:01:04] SPEAKER_00: I did indeed.
[1:01:06] SPEAKER_00: Good to talk to you.
[1:01:08] SPEAKER_00: Cheers.
[1:01:08] SPEAKER_00: Bye bye, everyone.
[1:01:09] SPEAKER_02: Cheers.

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