Prof G Markets - Tyler Cowen: The AI Bears Are Asking The Wrong Questions

Episode Date: September 4, 2026

Ed Elson and Scott Galloway are joined by Tyler Cowen to discuss why he’s not concerned about a potential AI bubble, how AI is reshaping the labor market, and why he thinks the data center buildout is ultimately a good thing. They also discuss who stands to benefit most from AI, why cybersecurity is a growing concern, how he would grade the U.S. economy today, and what he sees as the biggest obstacle to AI’s continued growth. Tyler Cowen is an economist, author, podcaster and chair of the Mercatus Center at George Mason University. Subscribe to the Prof G Markets Youtube Channel  Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [e-mail] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Download today. Two and five Canadians will hear the words, you have cancer. That's why every step and dollar raised matters. On September 19th, join thousands in Toronto for the Princess Margaret Cancer Foundation Walk. Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research. Together, we can carry the fire and help create a world free from the fear of cancer. Register today at pmcfwalk.ca.ca. Don't you wish you could just hit skip on the worst parts of your life?

You know the same way you can skip an ad? I get it. I'm Siaia and I live in Ice Cove. I've made some questionable decisions that didn't end up the way I planned. And today I'm still figuring it out. Somehow things usually get worse before they get better. Apparently, that's how I roll. So bundle up and come along for the bumpy ride.

Stream a new episode of North of North Tuesdays on CBC Gem. Today is number 40. That's the percentage of Americans who think listening to audiobooks does not count as reading. Ed Schuessorre, I recently had a book fall on my head, but you know, I have no one to blame but my shelf. We're back. We're back, baby.

Tell me everything about your vacation. It was, I think. I'm not interested. I was lying. I was lying. To the punchline too quickly, you got to give it a second, let me get going. Go ahead. you do? I am sort of interested. What did you do? Where'd you go? I was in Munich, or actually just

outside of Munich, in Amadingen, for a friend's wedding, which was incredible in Bavaria. Then I drove, I rented a car with my girlfriend, drove down the Autobahn into Kitsbule in Austria, spent a week in Kitsbule, hiking, chilling, going to the spa. It was probably, I think it was the best vacation of my life. I've been sort of pondering on it, but I think it's my number one. Wow. And then I spent the weekend in London and I decided, you know what, I need to see the opening match of the Premier League. So I went to the Chelsea game and sat in the front row and watched Chelsea beat Fullum. So I'm feeling very good. I miss it. I mean, I love this podcast. I love doing this with you, but I could have maybe taken a few more weeks off, but I'm feeling very good. I feel

ready. Ready for the year. Oh, that's great. Yeah, you sound energized. How about you? Yeah, August was good. I dropped my kid off at school. Nothing screams confident masculinity like crying in a your car when your son walks out a Best Buy with his own mini fridge. But yeah, it's, yeah, that was the big deal, was dropping my kid off at school. What are your takeaways having dropped your first son off at college. Well, the way you summarize it is your life gets smaller, so theirs can get bigger. And it's just you're a tide pull of emotions,

because everything just sort of hits you all at once, and there was all these things you were gonna do that you didn't get a chance to do. I had all these, you know, we did a lot. I think it was more present than most dads, but I had thought, oh, we gotta take my son to Alaska. I wanna buy a car and restore with him, and I wanna take him to, you know, Latin America,

and I wanted him to come on top. tour with me on one of my speaking gig things. And all you think about is all the shit, maybe is because I'm kind of a glass half-empty kind of guy, but all you think about is the shit you are supposed to be that you didn't. But he makes it a little bit easier not to be sad because I think of myself as this spiritual loving guy, and he's literally like, I got this dad and shoving me out of the room

after about seven minutes. And also, I mean, quite frankly, I didn't want to make it about me, so I thought, all right, keep it together. Like, your 18-year-old does not need the emotional baggage of his father, like, singing cats in the cradle over and over in his head. So, yeah, I tried to – I held it together. You'd be proud of me. I didn't cry. And we just fixed up his dorm room, and we thread the needle between a comfortable nice dorm room and one of these ridiculous real housewives of Palm Beach things where they turn it into the Brett's Carlton, Charlottesville.

So we went to Target. I'm like, I'm not going to buy anything nice. You can get anything you want, but it's coming from Target. And then the moment I lost it was actually after we dropped him, and I was back at the hotel, and I was sitting there. And I noticed this car stop at the dorm or the business school, the law school is next to where we were staying. And this mom got out on the driver's side, and then a kid got out of the back seat, and then the dad got out of the passenger seat. And then they hug, they embraced. and the dad immediately had to walk away,

and he started crying, and I realized it was their own drop-off, and then I just lost my shit. So whoever that dad was losing it on the sidewalk, kind of did my, like, express my emotions for me. Are you surprised by the significance of dropping the kid off at college? Like, I know people talk about it, and I know it's like, you know, empty nest, what is it, syndrome?

Yeah. Pente nest, whatever the feeling is called. I know it's a thing. thing, but I wonder if it's more of a thing than you expected. First of all, I think it's difficult in a big moment for a lot of people, and it's just so different now. My drop-off was my mom gave me, like, my mom gave me an iron, or used iron, and said, here, you're going to need this. That was my big drop-off, was she left an iron on the kitchen table for me to take to college. That was the emotional drop-off that was my drop-off in

1992, 82, this is a much bigger deal, you know, drop off is a much bigger deal now. For me, I think, well, it just marks a different point in your life where your kids are no longer at home. And the thing I'm wrestling with a little bit on an existential level is I've always described my purpose is raising, you know, preparing my sons for others. And it's been a nice source of purpose for me. And now you kind of worry like, okay, am I going to have a purpose moving forward? So it is, it marks time. It's like basically now, really all I have to look forward to is the ass cancer, Ed. Don't like, you've been looking forward to that for years. Yeah, I've been talking about it a long. Look, it's a, it's a, you'll see. It's, it's, it's impossible to explain until it

actually happens to you. But I tried to hold it together such that, again, as I, as I, I didn't want to do what I always do, and that's turn it, turn it to me, and he seems happy. I speak to my boys every day, which makes things easier for me. So I talk to him about his classes and what's going on. Oh, that's good. And also, it's just, it's a great, everything that I'd hope for in terms of UVA is what, it's out of central casting. You know, the, this campus is great. The kids seem really smart and nice, and, you know, he's having a great time. And so that makes it easier. So we'll see. We'll same. Sounds like you're not sure what you're making it yet.

I'm an emotional tidal. I don't know how to process it at all is the bottom line. I'm like, what are your takeaways? Yeah, I know. Process things now. Yeah. No, I don't. I don't.

All right. Well, we'll check in on it for sure. I appreciate that. Thanks. Yeah. It's an interesting time. Well, now that we've got the life advice or life reflections out of the way, we have a very, very interesting discussion with someone who we want to have on

the show for a while now, so don't miss it. We've been away on break for the past two weeks, and in that time there have been a ton of developments in the world of AI. One of the biggest was the hacking of Hugging Face by rogue agents from OpenAI. But beyond that breaking news, there are still some lingering questions about AI that are keeping the market on edge. For example, are we in a bubble? How will AI reshape the job market? And is the massive spending that we're seeing from these companies actually sustainable. So to help us make sense of it all, we are turning to someone who a lot of the other experts we've had on this show often listened to. He has consistently been named one of the most influential economists and

thinkers in the world, and he's been described as, quote, the man who wants to know everything. So here's our conversation with Tyler Cowan, economist, author, podcaster, and chair of the McCartist Centre at George Mason University. Tyler, great to be joined by you today. Very excited to get into this conversation. I'd love to start with some questions about the AI bubble, whether or not we are in one. And I would especially love to start with a clip from an interview that went viral recently. This was from the Diary of a CEO's interview with Ed Zittran, who has become famously one of AI's biggest critics.

I'm going to play you what he said about AI, and I want to get your reactions to start this off. I think generative AI is at its heart con. I don't think it is sold as honest software. I think that they overstay both what it can do, what it will do, and the underlying financials to the point that they are misleading the entire world, and they're actively exploiting the weaknesses in journalism, in our economies, and indeed within the responsible parties with cell side analysts, governments, and all other. over the shop. The word con is a strong word. Yeah, I mean, what do you call something where from the very beginning they've sold it in the terms of magic as this thing that will replace all jobs, that will cure cancer as all of these things? And when you look at it, it's boring cloud software

that's extremely expensive and unprofitable and also unreliable at its core. You are a world-renowned economist. You have written a lot about AI. You also serve on Anthropics, Economic Advisory Council, So you think about this stuff a lot. What do you make of those comments? Do you agree with them? AI is like magic in many ways. There are many, many tasks where it does better than humans. It doesn't mean it will take away your job

because your job involves the physical world as well in dealing with people. But for intellectual tasks, it's a truly remarkable achievement, one of the top in the history of mankind. There's a tweet circulating on Twitter about all of Ed Citron's wrong predictions so far. Open AI just hit a billion dollars of revenue from ads. The revenue to date for Anthropic and Open AI has been incredible.

There's also GROC, META, other companies, the Chinese, waiting in the wings. I'm not saying every company will make it. There were plenty of car companies in the 1920s. They're not mostly around today, but cars are a big, big thing, and AI is too. When you think about this idea of the circularity of the AI ecosystem, this idea, and this is something that Zodon, has talked about, that you have a lot of these companies, these big tech companies that are investing in Anthropic and Open AI, and then Open AI and Anthropic are then turning around

and spending those dollars on compute that is sold to them by, basically, they're investors. And the fact that OpenAI. Anthropic have made up such a significant portion of these big tech companies' AI revenue, for example, Microsoft, 70% of their AI revenue, last year came from Open AI. Does that element of it concern you? Not the technology, but the way that the technology is being sold right now. New things bootstrap themselves all the time. You can think of NVIDIA as a kind of lender or buyer of last resort for the sector. You could say the same about

Microsoft, arguably Google, maybe meta as well. There's a lot of capital in the sector. That increases its long-run chances of making it. Again, the point is not that every single company will prosper, but the stuff works. There's no reason to be skeptical per se about the economic future of AI. If one of those companies were to fail, because you're saying, you know, maybe these companies won't all make it out alive, is that not quite a significant statement? If it's not a certainty that some of these AI labs wouldn't make it out of this or that they wouldn't prosper or succeed, at the valuations that we're seeing,

looking at how systemic they have become to our economy, is that not something that worries you? It's a super competitive sector. You could say in a way we should hope they don't all make it, that some of them have much better products than the others. Are there economic costs to companies going out of business, of course? The companies themselves are not very heavily financed by debt. You could say there's other parts of the supply chain, data centers and the like,

or people investing in those that are financed by debt that could have some bad macro consequences. But again, every new technology we've had, including the internet, including cars, including railroads, there are ups and downs to the cycle. Not every company makes it. The really good stuff basically works, and it sticks around with us forever, like the railroads, too. Do I worry about data day volatility, of course? But keep it in perspective, right? every sector has had this.

You have to ask yourself, does the product work? And the answer here is a very clear yes. Say we saw the dot-com implosion again, going with your analogy, like, you know, there's value here and there will be ups and downs. Do you think that that is a scenario

that is probable, possible? Do you think that that is something that should be talked about? It's possible. but there are big differences. So revenue growth for the current AI companies looks much better than what we saw before the dot-com bubble burst, right?

The degree of capitalization in the sector is much better and much stronger. Just our confidence in the technology. So a lot of things are possible. Again, volatility would not, in the slightest, surprise me. It's been a historical regularity. Pets.com went under, but you can buy pet food online all day long if you want,

And that's the world we're headed for with AI. Do you think that discussion of a bubble or the possibility of there being a bubble is the wrong discussion? Do you think that maybe there is something more important, more significant that you think that people should be talking about instead? I think it's the wrong discussion. I don't like the word bubble. You know, were automobiles a bubble in the 1920s? Again, a lot of the companies failed. They were not the best companies.

Could you imagine companies, whether AI or not, today failing because of Middle Eastern War, war with Russia, mistakes from the Fed, half dozen other reasons, of course you can. So things can fail. It doesn't mean they were bubbles to begin with. A bubble to begin with is something like the South Sea bubble or the Dutch tulip bulbs that just made no sense. This is not that. I think the key question is just, how much will society accept the changes coming from

AI? That is indeed a very open question. we might decide to stop or halt or slow down those changes. And there, I think we should be very agnostic. I'll put forward a thesis, and you tell me where you think we have a right or wrong. You mentioned the automobile market. It feels to me that an apt analogy would be that the frontier models are German automobile manufacturers, higher price, prestige, better technology, larger margins,

and that the open-weight Chinese models are more like the Korean or the Japanese out of market that end up putting more cars or AI in the hands of users around the world. Would you, do you feel that's an accurate description? Do you feel that the market is kind of bifurcating? Open source models make frontier models easier to use. You use frontier models for the frontier tasks, and you use open source models for simpler tasks. So it doesn't have to be either or.

Right now, the best proprietary models are better for tough tasks. that makes a big difference. Using Fable 5, you can do many things that you cannot do with the Chinese open source models. I think China also is more likely to get scared of its own AI than America is, so there's no guarantee progress

on the Chinese front will continue. So again, there's a lot of competition, but the idea that American business is just going to whole-scale rush to Chinese models and abandon the best American models, I don't expect that. So looking at the market dynamics or I've read that $2.5 trillion in CAPEX so far about revenues of $150 billion.

And in all the technologies we've talked about, railroads, the internet, the grid, highways, the technology oftentimes survives evaluations. It just feels eerily reminiscent of all these other innovations where you get above a certain level of GDP spend on CAPEX. And you have a pretty serious correction regardless of the viability. or the importance of the technology. I mean, you're an economist. Do you look at economic cycles? This feels eerily reminiscent of those different innovations

where the technology survive the valuations. Again, a correction wouldn't surprise me. But keep in mind, this technology has advanced much more quickly than the others. We're in a much wealthier world. Debt plays a much less significant role in this sector. There's massive capitalization in the sector due to the major tech companies

who would love to be able to buy up a great proprietary model if it came to that. So in all those ways, this is not like, for instance, the railroads. But again, I absolutely expect big ups and downs. No one should be surprised by that. As you point out, that's the norm in history. We'll be right back after the break.

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VcX, by Fundrise, gives everyone the opportunity to invest in the next generation of innovation, including the companies leading the AI revolution, space exploration, defense tech, and more. and more. Visit getvcx.com for more info. That's getvcx.com. Carefully consider the investment material before investing, including objectives, risk, charges, and expenses. This and other information can be found in the fund's prospectus at getvcx.com. This is a paid sponsorship. We're back with Profi markets. We'll talk a little bit about the labor markets, and that is the kind of idiocracy scenario where these tools result in such an incredible increase in productivity that we can afford to just pay everyone to stay home and their jobs go away. When I look at the labor market,

what I see as a market where you wouldn't know AI existed if you didn't know it existed. I don't, I challenge anyone to discern where this chaos in the labor market is supposedly manifesting. Curious to get your predictions or sense for the intersection between AI and the labor market and where the market appears to be getting it right or wrong about this, somewhat of a catastrophizing around the labor markets. I agree with what you just said. I think in programming, it's quite noticeable, but there's some very recent papers, one by John Hartley, and you just don't see it in the numbers. Some modest amount of jobs might be going away because of AI. Some modest amount of jobs might be created because of

AI. Those two numbers appear to roughly balance. AI will spread over time a lot more slowly than AI advocates often seem to think. And I think labor markets will be pretty stable. The only thing you said that seemed unusual to me or I would maybe, I wonder, everyone's talking about kind of a supply crisis or that we don't have the infrastructure or the supply chain to support the increase in demand. And it looks to me as if on the front end, several players that were anticipating more demand, whether it's meta or X, have immediately pivoted their infrastructure where they're now leasing out their supply because they haven't been able to create the demand date initially. anticipated. Do you think there's a chance that we might go from what is anticipated being a supply crisis to a front-end demand crisis, where there are just a small number of players creating front-end demand? There's some data that have come out from the two main companies on how many tokens people are using per month, and that number has just been going crazy

through the roof. So I don't think there'll be a demand crisis. At some point, there may be an energy sector crisis. Right now, the U.S. has a huge share of all the world's compute. There's no guarantee we keep that position. So to build out compute, secure the supply of chips largely through Taiwan, make sure that over time we increase our own energy and number of data centers against strong political opposition. Those are big challenges. I think we'll squeak by on all those fronts. But again, you could definitely see things going wrong. All you would need is one decision from the Chinese Communist Party. And to invade Taiwan, we'd be living in a very different world, right? on the demand for tokens, which is true, I mean, the demand is going up significantly.

One of the criticisms, or at least the concerns, though, is that that token usage or that token demand is currently being subsidized by the AI labs. I mean, Anthropic, Open AI, they are losing money on every prompt that a user puts in to the system. And so I think there is a concern that if we were to not subsidize, this. If Silicon Valley, if VCs, if big tech were not to basically support the business models of Open AI and Anthropic, then maybe it would be different. Maybe the cost of tokens of token usage would be higher and people would be less inclined to use as many tokens as they're using today. What do you make of those concerns? Do you think that they're valid?

In the short run, the price may well need to go up for the reasons you mentioned, and we already see what is possibly some rationing of compute. But that said, if you look at data, how much has the price of tokens fallen since, say, GBT4? I forget the number, but it's more than 100x. So we're doing very well on making the systems more efficient, and we'll see which curve outraces, which other curve. But it's not that there's no progress in making the systems more efficient. There's been incredible progress.

but in the short run, should the price go up, probably. But aren't costs going higher for these companies? I mean, my understanding is that it's, I mean, it's hard to know because they're not public companies. We can't look at their audited financials. But my understanding is that anthropic and open AI are spending more each year. Better model costs more, yeah. Right.

Which would assume, I mean, to me, that means that we're not necessarily going in the right direction in terms of making this a profitable business that is necessarily sustainable. To me, it seems like we're technically going in the wrong direction if we're talking about profitability, which is we're losing more money. Well, I'm not advising anyone to buy any particular asset, but the worst case scenario is that capital gives a massive subsidy to consumers, and we end up still having the model and someone else buys it. That's a great outcome for an egalitarian, say, I don't think that will happen. I think the companies will do fine. There's a why people talk about Anthropic at 2 trillion. I'm not sure what the current number is for

OpenAI, but I think it's over a trillion. Those are guesses, but those are smart people with real money on the line, and they're saying the companies are worth trillions. On average, we should believe them. Why should we believe them in your view? Because it's their own money on the line. Once things go public, you'll have the chance to short them, right? You're free to do that, I'm free to do that. I have no plan to do that whatsoever. The way you really make money in markets to go long. I believe in America. I believe in tech. I think artificial intelligence works. Again, I have no favorite horse in terms of which particular company, and I definitely think they're not all going to make it. But again, some of the big ones really will.

I guess just from the economics perspective, regardless of whether someone wants to go long or short, because of how dependent the U.S. economy seems to have become on AI, or at least the AI build out, the amount that AI is, that S&P earnings growth is dependent on AI, the amount that the entire stock market is increasingly dependent on AI. And the extent to which the ecosystem itself does depend on those two companies, does that not make it bigger than, you know, some will win, some will lose? Isn't it, I mean, aren't we all implicated whether we're long or short or not? Well, for one thing, I don't think the U.S. economy is as dependent on AI, as those numbers indicate. As you said yourself, it hasn't affected that many jobs. So there's a lot of money flows.

But if somehow AI did not magically exist, the Transformers paper had never been written, that money would flow somewhere else. And you would still have a lot of GDP from some other set of activities. So we're investing more in AI and less than other places. That's a gamble, of course. But it's wrong to think that AI is currently this massive net contribution to US GDP and that we would have nothing else if it weren't there. So in that sense, we're pretty robust. Now, there's a transition issue. People are expecting AI to do well. If that all turned out to be horribly wrong, there'd be a lot of disappointment, big capital losses.

Some of those losers have taken out a lot of debt. There'd be solvency issues. That'd be a big mess, right? But as messes go, I don't even think it would be close to the worst. we've seen, a lot close say to 2008. What is your biggest concern with AI then? I mean, I'd be interested to hear what you're optimistic about, but also, you know, if it's not a market event, some sort of crash, some sort of correction, that seems to be

what a lot of people are concerned about with AI right now. What is it for you? What do you worry about? What should people be talking about more? I think we see this already, and it's how disoriented people feel. the notion that you cannot say to your kid or grandkid, here's what you should do for a living, here's how you prepare for it,

here's a more or less guaranteed path to success if you're smart and you work hard. I've grown up with that my whole life. People like those assurances. I don't think they exist in the same way they used to. There could be someone else equipped with AI or an AI-equipped firm that could out-compete you and who really can be a consulting partner or a lawyer

or do the right thing in medicine. and excel at an Ivy League school and walk into a job where they end up earning $2 million a year and living in Manhattan in a nice apartment. I think those paths are now up for grabs. I think there's a lot more opportunity for the world as a whole, but there's a big status and somewhat income disruption for what is a favored class of people, and they don't know how to deal with it. What they do is they keep on running up edge in the New York Times about how terrible this is,

but they're not going to stop it. At the very least, there's Chinese open source. And I think so many parts of human life, whether it's entertainment or religion or just your own conception of your intelligence, it's going to change. And how we deal with that, it's up to us. But historically, we're not always good at dealing with radical change. Do you think that that could be potentially a good thing to have a shake-up in the way that you're describing? Yes, but again, people don't like it. And the mere fact that people don't like it is discomfort, and that's a bad thing.

Then you have to ask, what will the politics of this be? I don't have any specific predictions. I just could see it getting ugly and restrictionist and polarizing. That would hardly be a big surprise. So, again, you already see this with the data centers. So I have big concerns. Yeah, Trump recently put out a tweet on data centers. I don't have the quote right here in front of me,

but he basically said that if you try to stop data centers, talking about this data center backlash that we're seeing, it's becoming very, very politically popular in America right now, then you're getting in your own way. That's a recipe to become poorer, that we should be pro-data-centers. What do you make of his comments and what do you make of the politicization of AI and data centers in America right now? Well, it's one of these small number of issues where I completely agree with Trump.

So while I'm glad he's saying it, I worry that Trump embracing the cause does not in every way help it. Fortunately, America has 50 states. States, and I think you'll always find at least five governors willing to cut a deal. And a lot of these governors seem to say very anti-Data Center things, and then they go ahead and they still want the deals. What they're saying or announcing is not really binding, like Josh Shapiro and Pennsylvania. West Virginia's welcoming data centers. There's a place in Southern Ohio.

I think it was written up in the New York Times today. So I think it will happen, but it will be very costly, and there'll be lots of bargaining and lots of politics. But again, that's part of the beauty of federalism. There are indeed 50 states. And other countries that are federalistic, you know, Germany, Brazil, they don't have close to 50 states. It's a big advantage for America right now.

Do you think that it's unreasonable to be anti-Data Center? Do you think there are merits to the arguments that building data centers is a bad thing or not at all? I live in northern Virginia right next to Loudoun County, which is ground zero for data centers for the entire world. It's the wealthiest county per capita in the whole United States. The data centers pay, I think, half of the property taxes. There's no actual problem. The cost of power or electricity there. It's about it. National averages. It's actually slightly better. So I'm reluctant to say there are no valid concerns. Oh, maybe you think they're ugly or there's

some slight humming noise. But man, they don't create a lot of traffic. They pay the bills. They make your place wealthy, we've been wanting re-industrialization for a long time. Labor unions typically support them. I say, let's go ahead and do this. What would the message, do you think the message should be to Americans? What should, if you were trying to make an argument and trying to convince people as to why data centers are ultimately a good thing, how would you change the messaging right now? because clearly it's not working for most people. I don't think any messaging is working. I think people don't trust their own elites

for reasons like COVID in 2008. That's understandable. You can't overturn those perceptions. Maybe just talking about it less and having it happen in a few places and stop trying to persuade everyone. Some issues, the more you talk about it, the deeper in, you dig yourself.

So you could try bribing citizens. Again, with 50 states, let's try that in one or two places. but sometimes that makes it worse. The people say, hey, if this is so great, why do you need to bribe me? But you can try it. I think some states are trying that. I think Met is trying it. I think they're paying out local communities to get them on board.

Reminds me of my favorite movie, There Will Be Blood. I'll pause it back to Scott. There's two trends of thought. And one is that a small number of people and investors who either own these assets or have the ability to leverage AI to the advantage of their enterprise are going to aggregate a disproportionate amount of the spoils

resulting in greater income inequality. And then another line of thinking, which it feels like is incumbent in some of your comments, that this will attack the incumbents and be good or actually be a bit of an equalizer for other less qualified

or less traditionally certified professions. Do you come out on either side of the spectrum there about what you anticipate happening? I think the biggest losers will be parts of the upper, upper, upper middle class, as I call them. Now, I love the upper upper upper middle class. I'm a part of it. So it's the professionals who do intellectual work, and those people are not going to starve. They may have much lower status. They may earn much less. Maybe they can't haul cluster in Manhattan or San Francisco. By their own standards, their lives might be worse. I think big winners will be teenagers, very small companies, people who master AI, a lot of immigrants, people from unusual

places like Eastern Europe or Turkey, who were never so bought into the old ways of doing things and decide, hey, I can get ahead by starting a company, two or three humans and a bunch of AI agents, and they make it work. Those people will be very wealthy. They'll have to work incredibly hard, but they're going to challenge people across the board. So there's pluses and minuses to all of that, but there will be amazing opportunities. But the people who now have influenced in America, I could call them your listeners, will hate it on that. Incumbents. You said something I want to double click on. Teenagers? I direct a philanthropic fund, and I've seen many applications from teenagers, often as young as 15, who are starting

companies with AI agents. Whether those companies, seed this time around, I'm not sure, but they are learning incredible amounts. They are learning things you cannot learn at Harvard or Princeton. And I think they'll be the wealthy people and the successful people of the future. Teenagers, yes, they have no stake in the established order, and they're learning these things from scratch, and they just do it by experimentation. Again, there's no one to teach them. To some extent, they teach each other. I think we take for granted that every technological innovation or disruption results in a small number of companies that are able to capture trillions of dollars in shareholder value. But there's also been industries where the technological

or the technical results have been extraordinary. I think of jet transportation, vaccines, the PC, where I don't think you could argue that they weren't able, whatever it was, distribution or capital, weren't able to sequester shareholder value to a small number of companies, that the big winner was us, if you will. I'm sitting here in L.A., I think the biggest, the biggest, the most accretive technology in my life is jet transportation, and yet I think on average, in aggregate, airlines and jet manufacturers are just barely a break-even to date. Do you think it's possible that the winners might be all of us, but we, in fact, overstate the industry's ability to capture shareholder value for a small number of companies?

I think it's likely. I mean, It's funny to me, the same people who say it's all a bubble, turn around and five minutes later, you know, want to say, oh, income inequality will go up massively because the companies will learn so much. Truly fundamental technologies like the printing press, fire, language, they tend to be enjoyed by everyone, at least over time. So there's a lot of medications. They're expensive at first. Then they become cheaper. I think that's what we'll see with AI that eventually through energy innovation will get token costs down. And it will be pretty cheap. And the people who benefit the most might be people in Africa who right now don't have access to quality services of legal advice, health care diagnosis, and so on.

And they'll be getting it very soon or some are starting to get it already. They could be the very biggest winners. You mentioned education. I think a lot about higher ed. And I would argue that higher ed has never been more important. And at the same time, I agree with you that there's an opportunity for younger people to sort of skip the certification line and start. a company on little or no capital that would have previously just been not possible. When you look at higher education, I see applications going up.

I see, in my view, college and critical thinking becoming more important. And then a lot of people think that higher education is going to be massively disrupted by AI. What do your thoughts on AI as relates to higher education? I'm in higher education. I see schools and universities that are doing. doing very little or nothing to adjust to the new reality. They just complain about students cheating. They don't rethink that they need to be teaching very different things. On average, the students often know more about AI agents than their professors do. So what are the professors supposed to

teach? I think it's a huge mess. I agree with your view that education has never been more important, but the role of actually existing institutions in that is highly uncertain. In the short run, they'll become more and more about networking or golf courses or marriage markets or dating. That's fine, in fact, but radical changes are needed, and so far I really do not see those coming. We'll be right back. And for even more markets content, sign up for our newsletter at profgmarkets.com. Two and five Canadians will hear the words you have cancer. That's why every step and dollar raised matters. On September 19th, joined thousands in Toronto. for the Princess Margaret Cancer Foundation Walk.

Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research. Together, we can carry the fire and help create a world free from the fear of cancer. Register today at pmcfwalk.ca.ca. New from Nespresso. Blend wellness into your coffee routine with a coffee plus range,

infused with functional benefits. Choose the coffee you love with added B vitamins, like coffee, plus B12 to help support immune function and coffee plus B6 to keep your day moving. Or go with the flow and choose ginseng delight. Our new double espresso with ginseng

extract. Whatever lies ahead, don't change your morning. Let your morning change you. Discover coffee plus on espresso.com. So like any good millennial, I have a love-hate relationship with Gen Z. It's the phenomenon rattling millennials.

They just look at you. They want something bigger themselves, lifestyle is a priority, motivation is being inspired. But regardless of how you feel about Gen Z, it's undeniable that they're changing national politics. Generation Z is increasingly showing less loyalty to traditional political parties, many now more likely to identify as independent. So what is going on with the kids? I think the biggest misconception about Gen Z's politics right now is that all of a sudden

they're all socialist. That is just not the case. They are embracing candidates who are offering new bold, ideas in the absence of those ideas from establishment Democrats. This week on America, actually, Gen Z researcher Rachel Jamfaza joins us to separate Gen Z fact versus fiction. It's not rocket science. And this is, you know, I keep saying like, young voters aren't that complicated.

After all, it's pretty simple. Catch us every Saturday on YouTube or wherever you get your podcast. We're back with Profji markets. What one or two industries do you think will undergo the greatest shift both to the upside and the downside from the penetration of AI? Well, programming clearly has been accelerated the most, right? There's a lot of evidence for that. It's not a hypothetical. And I don't think humans will disappear from programming, but they've already taken on a fundamentally different role. They're more like impresarios, and they're consulted in the meantime, like, oh, is this going in the proper loop? Is the

work actually being done? Is this the thing I asked it to do? Over time, more and more of that will be AIs themselves monitoring. But that's the clearest example of a very positive change. The biggest negative, I just think, will be cybersecurity. There'll be a lot more hacks. There's plenty of evidence for this already. Those costs the world a lot. We'll spend more on cybersecurity.

It won't be fixed quickly. And I think it's a very real concern. We need a national, international effort to really firm up all of our major institutions as quickly as possible. But there's so many institutions, and relatively speaking, so little expertise, it's going to be a very tough slog. It feels like we've always been on the precipice of this huge era of innovation in health care, that we keep getting seduced by this age of discovery where we're going to see an acceleration in pharmaceutical innovation treatments. Have you thought about AI's improvement of health care outcomes?

Do you think it's overhyped, underhyped? What are your thoughts? I think about this a lot. In my view, it's under-hyped. I would make the point, you know, the phrase AI, we think we know what we mean, but in a number of contexts, it's not that well-defined. If we just call it computational biology, it already gave us the MR-N-A vaccine against COVID in two days. That was an amazing breakthrough that probably saved millions of lives. So AI broadly construed, I think over the next 40 years,

we'll beat back many of the things that kill people, and at least I think we'll live to 100. Scott, whether you and I do, I'm less certain. This anthropic notion that it will all come in a few years' time, I think, is badly off. There's just a lot of testing. And also regulation and trials and procedures that we both need to go through, but at the very least we have to go through. So for me, it's more like a 20 to 40-year project.

But there's already significant progress against, say, pancreatic cancer. That too came from computational biology. It's not from Claude or Open AI, but it's happening. People don't really fully grasp this. So, Ed, please save accordingly. You may lift you 100 and don't buy a motorcycle. I want to talk about what I'm worried is one of the really big downsides. It doesn't get much attention.

And that is loneliness. And that is some of the deepest, pocketed, most talented companies are using AI to further sequester people, especially young men, from the relationships and their kind of offline lives and that we're going to end up with perfect gaming, perfect entertainment, perfect facsimile of some sort of sexual experience with porn, and that the real downside or the danger of AI

is going to be loneliness. And I read that 20 to 30-year-old males are spending less time outdoors and prison inmates. Do you worry that we're evolving a new, potentially a new species of asocial, asexual youth? I think we already had a loneliness problem. We already had what you could call a sex problem, a sex draw it. I think our culture will adjust.

People don't want to be lonely. If you go to Mexico where I just was, the amount of time people spend outside with each other, it's much higher than in the United States. We need to be more like Mexico. Eventually we'll get there. The AI economic dividend will help pay for that. But man, we actually have to do it, right?

It doesn't happen automatically. So do more things with people. Coach Little League or have groups of people, you know, go on picnics, whatever it has to be, date more, ask women out more, whatever it takes. We need a significant cultural change very soon. Tyler, if you were president or emperor of America, if you had all the power, what are some economic policies that you would want to get done in America? What are some of the problems that you would want to address and how would you

like to address them? Well, our current administration is doing many things to make high-skilled immigration much harder. I would do many things to make it easier. That is by far the number one change I would make. I think economists agree about that on more or less a bipartisan basis. We have potentially a fiscal crisis in this country. My hope is that AI spurred economic growth will get us out of it. But the The problem is, assuming AI does very well, take the most positive scenario. As it throws off these economic dividends, politicians will spend those also. They're just not responsible. So I don't know how to get our government on a responsible fiscal path. And even me as dictator, maybe as dictator I could do it, but I don't see a feasible path from here to there, you know,

with either party or a third party or anyway, the voters love debt and deficits because it means they consume a lot and pay lower taxes. It's a big problem. Do you think there's any way to solve it? Is there any way that we would ever get spending under control, or is it just pretty much a lost cause at this point? Well, we'll inflate away some of the debt. I don't like that solution, but it is partially effective in a funny, counterproductive sort of way. And then my hope is politicians are asleep on the AI dividend that it comes, pulls us out of our debt and deficits, as it did in the mid-1990s, by the way, and politicians just aren't efficient enough

to be merrily spending it along the way, that it's a surprise to them. I think it's quite possible that happens. Certainly nothing close to guarantees, but that's the most optimistic scenario. Where does the U.S. debt and U.S. deficit sit in terms of your concerns about the U.S. economy and America's future?

Like how far up the list does it rank for you? in terms of your largest concerns? Well, it's in the top tier. So our debt is now about $40 trillion. I understand our productive capacity is very, very high. We can carry that amount. But at some point, you have to start paying parts of it back. And we just keep on increasing the percentage of our GDP

or government spending that goes to interest payments. Real interest rates are much higher now across the world. Our Fed is screwing up somewhat. We're in a very bad state. We've made major mistakes. They were all own goals, not caused by, say, another major war for the most part. And we're going to suffer for that. I sometimes say, you know, our plan A is AI, and we have no plan B.

Yeah, it often feels as though the AI thing is sort of what a lot of our leaders lean on as their, I don't know, their bailout option. It's okay, we can keep spending. We can keep continuing down this seemingly very unsustainable fiscal path because AI is going to help us grow. out of it. But to your point, I mean, it doesn't seem that anyone is really taking this seriously in Washington right now. What do you make of the fact that Trump said as one of his big policies, as part of his platform, that he would balance the budget? He said it over and over again. He seemed to convince a lot of people that that was actually what he was going to try to do. it was one of his biggest points in his address to Congress, Congress stands up and gives him a round of applause, and then suddenly, yeah, we do get this news that we've hit $40 trillion. What do you make of that?

Well, it was all lies to begin with, anyone who believed it was a fool. For one thing, we had a first term of Trump, right? Now, I don't blame him for COVID. That was unfortunate. But still, there was no effort made even before COVID to address fiscal stability. And then Trump had an earlier career. as a businessman where he was rampantly in debt and went under a few times. So I expect fiscal sanity from Trump, or for that matter, from the Republicans or even the Democrats today. The real issue is the voters want what we have, and they don't see there's a long-run cost. How would you grade the U.S. economy right now, given inflation, given debt, but also given the fact that, you know, GDP is growing, earnings are up, AI is rolling on. Could you give it a letter grid? Overall, it's still pretty awesome, I have to say.

I know it sounds a little crazy. Can I give it a B-plus? We're close to full employment. We used to think China would catch us in terms of aggregate GDP. China's actually falling behind. We've decisively pulled ahead of Europe. We have problems. We're the world leader in AI.

We have by far the best tech sector. we're shooting ourselves in the foot 30 different ways. Corporate earnings are great. Like you said, stock market is more than fine. No recession so far, and it's full steam ahead. That makes me nervous itself, because there are inevitably recessions and corrections. But if you want a grade, the grade is not a bad one. Are you surprised by how long this things have appeared to be, I mean, at least from a market perspective, how long the market has been rallying, how long it's been since we've had a serious recession? Yes, I'm surprised.

I've lost a lot of money. I should have been way more heavily into equities. I was a fool. Exante, I don't feel it was a mistake, but ex post, I was way too worried. What do you think was the cause of that? Some of it is the prospects of AI, but I just think there have been fundamental transformations that favor countries with skin. scale, and the only countries with real scale are the U.S. and China, maybe someday India.

And that's kept us going and been an extra kick in the pants in a positive way. And our tech sector has done great. And this is still the number one place to go for talented people. And there's this other fundamental change in the global economy that I had underestimated. And that is how quickly the notion of, I want to move to the U.S. and start a business spread. It's always been a thing, but it just came to more parts of the world more quickly than I would have thought. I mean, look at the number of people from India who are either CEOs or done startups that have just done great. How quickly that spread, again, surprised me in a very positive way. The high-skilled immigration debate that you talk about and Trump's, it appeared that he was interested in it and then kind of went back on that and you said that you would be a lot more welcoming.

What are the dynamics you think are driving that? I think a lot of people believe that it's largely racism. I think a lot of people think that. But perhaps also this idea that we don't want to be recruiting people from other nations to come in and take jobs that should be for Americans. What do you make of sort of the political dynamics at play there? I believe Trump outsourced that policy to Stephen Miller, and that Stephen Miller genuinely believes that if you push out, all these foreigners, what you might call native-born white Americans will rise to the occasion

and do all the kinds of great things like they did in the 1950s and 60s. And it will be good for this country to go back somewhat to how we were, culturally, ethnically, linguistically, in terms of religion, Christianity. I don't think you can get back to that earlier world. I think the idea of attracting more and more of the best foreigners and that they in many ways embody American values in the true sense, at least as well as our native borns do, is a more promising path forward. But look, it's a disagreement. And I just think the Trumpers have very strange cultural views without really much evidence behind them. And they've ended up being very nasty to a lot of foreigners. And we're just, we're really not getting anything for it.

Do you think would it be a fair characterization to say that you believe that at least a significant portion of our economic policy has been driven by nativism bordering on racism? Our immigration policy, yes. Does that concern you? Well, it's my number one worry. It's the number one thing I would change. So I think it's very bad. My fear is the Democrats won't reverse it.

I know they say they will, but I'm not sure they mean it. and immigration is often an issue they would just rather not talk about. So lurking in the background is this risk that it may be somewhat permanent. If you imagine a world where AI looking back in retrospect is increasing productivity does not create the types of, the upside, the upside is much greater than the downside. What do you think are the biggest sources of friction from here to there? Is it too much regulation, too little? Is it insufficient power grid? Is it cybersecurity threats?

You know, lack of cooperation. What do you see is the biggest obstacles to this kind of brave new world of AI? I think the biggest obstacle is just at the institutional level, people really don't know how to use it. We all freelance with AI. We ask good questions. It can write things for you.

It can solve problems for you. So you have a company or a nonprofit, whatever, where each individual uses fraud or chat GPP, they become more productive. But the idea that you have business flows at the institutional level where AI contributes significantly to productivity. We're way behind on that, except again for programming. And I think that will take a long time.

There's no one really who can teach it to you. It may happen by having startups slowly replace incumbent firms. the startups are more likely to be A.I. Native and start with small numbers of people and do things with AI from the beginning. But try going into some big company and telling people they need to change everything they do. You know, good luck with that. I think that's by far the biggest barrier. I don't doubt we'll overregulate it at some point, but we overregulate everything.

Like, America actually can deal with that within reason. Just like, hey, what do we do next is the biggest problem. And when you think about when you try to, do you have kids, Tyler? Yes, one daughter, she's 36, two grandkids are third on the way. Okay, so imagine, and you referenced this earlier, imagine your grandkids are going into junior high and high school and you're trying to prepare them given what I thought what you said was really powerful about the traditional paths are no longer guaranteed or they just look more curved and less, you know, quite frankly, more opaque. what skills would you emphasize that young people develop, and there's no way to future-proof yourself, but make it most likely that you in fact have or can register prosperity?

How would you coach young people thinking about the skills they need to acquire? I get this question multiple times every day. I never feel I have great answers, but one thing many people can do is just keep current on AI. It's no guarantee of anything, but it's better than falling behind. It does take a lot of involvement because it changes all the time. But being curious, learning initiative, and learning how to retrain yourself, and learning how to network. This have always been important, but I think they're truly the skills of the future.

So I would encourage anyone, whether my grandkids or not, to invest in those. Like right now, everyone has the perfect cover letter, right? So you apply, it means nothing, like the system's broken. Who is it who can vouch for you? So networks and connections are far more important. Learn how to do that. Learn charisma. Learn how to command a room.

Learn how to give a talk. Tyler Cowan is an economist, author, and podcaster at the MacArthur Center at George Mason University as the faculty director of the MacArthur Center. Tyler co-created Marginal Revolution University, a free online economics education platform that has reached millions. He's also founded Emergent Ventures, a multi-million dollar fund to support underrated people and projects. Tyler has blogged every day at Marjoral Revolution since 2003, helping to make it one of the most widely read economics blogs in the world. He is the best-selling author of nearly 20 books and has been a regular columnist at the New York Times, Bloomberg, and now the free press.

Tyler, we really appreciate your time. Thank you. Thanks, Tyler. My pleasure. Thank you. This episode was produced by a class. Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carty. Our research team is Dan Chalon, Chris Nodonahue, and Mia Silverio. Jake McPherson is our social producer.

Drew Burroughs is our technical director, and Catherine Dillon is our executive producer. Thank you for listening to Profi Markets from Profi Media. If you liked what you heard, give us a follow. We'll be off for Labor Day, but join us for a fresh take on markets on Tuesday. will hear the words you have cancer. That's why every step and dollar raised matters. On September 19th, join thousands in Toronto for the Princess Margaret Cancer Foundation Walk.

Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research. Together, we can carry the fire and help create a world free from the fear of cancer. Register today at pmcfwalk.ca.ca. Don't you wish you could just hit skip on the worst parts of your life? You know, the same way you can skip an ad? I get it.

I'm Siyaya and I live in Ice Cove. I've made some questionable decisions that didn't end up the way I planned. And today, I'm still figuring it out. Somehow things usually get worse before they get better. Apparently, that's how I roll. So bundle up and come along for the bumpy ride. Stream a new episode of North of North Tuesdays on CBC Gem. Thank you.