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Tyler Cowen: Economic Growth and the Fight Against Conformity | Lex Fridman Podcast

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Key Takeaways

  • Wisdom is in the coming together of different ideas
    • No one individual or idea holds all the wisdom
    • The greatest philosophy works are interactions among thinkers
  • Weird people are those who push science forward
    • Academia tends to encourage conformism and mediocrity
    • The internet allows us and encourages us to embrace our weirdness
    • The US is one of the best countries to be a weirdo
  • Tyler doesn’t think that cryptocurrencies will replace fiat for transactions
  • Competition is not good or bad per se
    • It can be highly destructive or fruitful
    • “What really matters is how good your legal framework is” Tyler Cowen
  • Large businesses were crucial in helping us deal with COVID-19
  • Given enough time, even a low probability event, like a nuclear war, is going to happen
    • The probability increases as weapons of mass destruction become cheaper
      • The Osama Bin Laden of tomorrow may have access to those weapons
    • Tyler thinks that at best we have 700 to 800 years
  • Advice for young people
    • Get as many mentors as you can for the things you want to learn about
    • Build small groups of peers with common interests
  • Love is the highest form of human connection
    • It is part of the highest realization of who you can be

Key Books Mentioned

Intro

  • Host: Lex Fridman (@lexfridman)
  • In this chat, Tyler Cowen discusses economics, risks of mass destruction events, crypto, weirdness, and much more

Economics, Game Theory and Nuclear War

  • Economics is a bit like Art, Science and even Magic
    • Magic: sometimes it allows us to make everyone better off
    • Art: its models are not very exact
    • Science: occasionally propositions are falsified
  • Economics doesn’t have strong predictive power
    • Its usefulness is in helping us ask better questions
  • For example, Game theory never predicted if the US would have a war with USSR
    • Nevertheless, it is a useful lens to think about strategic conflict
    • Game theory can help us understand why nuclear war is a low probability event
  • Given enough time, even a low probability event, like a nuclear war, is going to happen
    • The probability increases as weapons of mass destruction become cheaper
      • The Osama Bin Laden of tomorrow may have access to those weapons
    • Tyler thinks that at best we have 700 to 800 years
  • Tyler sees humans mostly as collaborative and good
    • But the presence of outliers like Hitler makes mass-destruction events possible

The American Dream, and Influence on the World

  • The idea of the American Dream is mostly still there, but it was never perfect
    • The highest immigrant earners are from India and Iran
      • Despite possible discriminations they may face, these groups managed to be successful
    • Among US nationals, intergenerational mobility has stalled in the past 40 years
      • New generations are not richer than the previous ones
  • There is still strong inequality of opportunities
    • There are too few opportunities for the bottom half of Americans
    • But it has been getting better as women and people of color are getting access to more opportunities
      • Over time, injustices get smaller and smaller
  • Why does the US have so much influence over the World (movies, podcasts, music, etc..)?
    • In the US entertainment and humor really matter, even in science
    • There’s a tendency to be direct, getting to the point, and connecting to the audience
    • US culture and tax structure also attracts lots of top-talent

Pros and Cons of Capitalism in America

  • Capitalism takes a different form in each country
  • Pros of Capitalism
    • Businesses drive most of the innovation and get things done
    • Companies tend to serve consumers’ needs
    • Larger businesses tend to pay the higher wages
    • The US is a better country to be a weirdo
      • This encourages creativity
  • Problems with Capitalism in the US
    • Racial discrimination
    • Land-grabbing and oppression of Native Americans
    • Life is more precarious than in other countries
      • Less social security
      • Weaker communities

Competition, Law, and Anarchy

  • Competition is not good or bad per se
    • It can be highly destructive or fruitful
  • “What really matters is how good your legal framework is” Tyler Cowen
    • In nature, competition for food leads to constant conflict
    • If you have laws defining property rights and preventing violence, competition can work well
      • More competition in healthcare would improve the quality of service people receive
  • The term free market is not well defined
    • We need a legal order to interfere with the market and preventing it from turning into a “mafia-run system”
  • Some people in tech today are taking free markets to an extreme and embracing anarchy
    • They hold we should get rid of centralized governments
      • People can agree in a decentralized way on financial transactions, healthcare, security, etc…
    • Tyler doesn’t share these ideas but he’s eager to learn from them how we can improve our current society
      • Every society has some form of anarchy
      • The goal is pushing that anarchy in the right corners, where it can be most productive

Do Large Businesses Benefit Society?

  • Large businesses are usually seen negatively in society
    • The internet exposes us to more information
    • We’re able to find more things to complain about
      • Our negativity bias makes us pay more attention to negative information
  • Tyler’s book, Big Business: A Love Letter to an American Anti-Hero argues that many positive aspects of large businesses go unnoticed
  • Large businesses were crucial in helping us deal with COVID-19
    • Amazon, Doordash, Ubereats all helped us get stuff delivered to our homes
    • Zoom allowed us to switch our whole education system online

Thoughts on Universal Basic Income (UBI) 

  • Tyler likes Mitt Romney’s idea of UBI, UBI for kids
    • Kids are vulnerable
    • Parents’ mistakes should not affect kids
  • He doesn’t see automation as a threat to employment today
    • Before Covid, both Japan and the US (the more industrialized economies) were at full employment
      • We might revisit the question if things change
  • New jobs will likely require higher levels of education
    • He doesn’t think UBI solves this problem
  • “Cushions get in the way of progress” Lex Fridman
    • The greatest creators in history had to work really hard
    • UBI may decrease our ability to innovate

Can Crypto Replace Fiat Currency?

  • Bitcoin has taken over much of the role of gold
  • We don’t have a clear theory of the value of Bitcoin
    • It is hard to figure out what its value will be
    • It depends on how valuable people think it to be
      • Similar to art
  • Tyler doesn’t think that cryptocurrencies will be widely used for transactions
    • Once crypto is regulated, Tyler is not sure if there will be strong demand for it to be used to transact
      • Many of crypto’s current advantages are due to regulatory arbitrage
    • Ether has a better chance than Bitcoin to become a currency used for transactions
  • Fiat currencies work really well, and people in crypto underestimate that
    • It is not easy to outcompete fiat

Embracing Weirdness, The Internet and Academia

  • Weird people are the ones who push science forward
    • Academia tends to encourage conformism and mediocrity
    • Young faculty members are particularly pressured to conform
  • The internet allows us to embrace our weirdness
    • You can get exposed to a much wider variety of people and ideas
  • Academia is lagging behind the internet, but also seems to be moving forward

Can Economic Growth Continue Indefinitely?

  • In The Great Stagnation, Tyler talks about the recent decline in economic growth
  • Recently he became optimistic about future growth
    • Breakthroughs in green energy, batteries, medicine, CRISPR may spur future growth

On Communism, Russia, and China

  • Like Capitalism, the word Communism can mean very different things
  • In the Soviet Union, it created destructive incentives which hindered progress and innovation
    • Price incentives were removed
      • Led to shortages, and corruption
    • It alienated people and created an elite that didn’t believe in the system
  • Russia Today
    • The economy is way too dependent on fossil fuels
    • Putin’s incentive is to steer economic power in a small number of hands
      • In the long term, will negatively affect the economy
      • In recent years, Russia already experienced negative economic growth
    • Putin’s high approval rating is likely due to the lack of press freedom
    • Culturally and historically there’s no entrepreneurial spirit
      • This makes ambitious people leave to the US
  • On China
    • China seems to encourage entrepreneurship a lot better than Russia
      • Compared to Japan, Taiwan, and Singapore, it is still doing much worse
    • The CCP made a lot of good decisions
      • Created infrastructure to attract people to cities
      • Instilled a genuine meritocracy (reward and elevate talented people)
    • Tyler doesn’t see it supplanting the US as the Global Power
      • One person holding so much authority will create tensions picking successors
      • Tyler expects serious problems to emerge in China in the future

Advice for Young People

  • Get as many mentors as you can for the things you want to learn about
    • You can try mentors and maybe they’re not good for you, but you’ll surely learn something
      • Tyler learned a lot from having a mentor who was a Stalinist
  • Build small groups of peers with common interests
    • Consistently interact, talk about what you care about, and try to solve problems
    • Many great achievements were made in small groups
    • Over time, small groups may split up and that’s fine

Additional Notes

  • Ayn Rand was a big influence on Tyler growing up
    • He agrees with her view on wealth
      • We should valorize wealth as it creates opportunities and good lives
    • He disagrees with most of her philosophical points
    • She had excessive certainty about her ideas
    • Wisdom is in the coming together of different ideas
      • No one individual or idea holds all the wisdom
      • The greatest philosophy works are interactions among thinkers
  • Tyler doesn’t think Wallstreetbets has the potential to shift financial power
    • It’s a way for people to have fun, make the headlines, and screw with some billionaires
    • In the medium term, the price of those stocks will come back to where it ought to be
  • Tyler takes data on UFO sightings from the Navy very seriously
    • An issue is that the people with good equipment to collect data don’t want to get involved
    • The Government’s secrecy around the issue creates distrust and prevents more research to be done
  • Love is the highest form of human connection
    • It is part of the highest realization of who you can be
Lex Fridman Podcast : , ,
Notes By Giorgio Parlato

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