The Rundown - The Fragile State of the AI Economy | Kyla Scanlon

Episode Date: September 21, 2025

Is America running on three economies at once? Zaid Admani sits down with Kyla Scanlon (economist, creator, and New York Times bestselling author) to break down the speculative economy, the real economy, and the meme economy.We dive into whether AI is a bubble and why its trillion-dollar data center buildout makes the system more fragile than past tech manias. Kyla also explains why Gen Z faces record unemployment, how “casino culture” — from fartcoin to Labubus — has replaced homeownership for a generation, and why the Fed’s obsession with 2% inflation might be outdated.Check out Kyla's substack:https://kyla.substack.com/

Welcome back to the rundown. Today, we are talking to Kyla Scanlan. Kyla is one of my favorite content creators in the finance space. She does such an amazing job, breaking down what's happening in the economy and tying in different subjects to the overall big picture. Today, we talked about a bunch of subjects, including the impact of AI right now, the Fed's decision to cut interest rates, and the emergence of the casino economy. It was an awesome conversation. I really liked Kyla's rant about the importance of accurate data and her explanation of why the Fed it targets a 2% inflation rate. All right. Hope you guys,

I hope you guys enjoy this one. All right, guys, today we are talking to Kyla Scanlan. Kyla makes some of the best content on the internet, talking about economics and explaining the impact of economic policy. She's also a New York Times bestselling author as well. And someone that I've known for almost four years now, Kyla, thank you so much for hopping on the show today. Yeah, thank you.

It feels like we've known each other a whole lifetime, to be honest. I know. It's crazy to think about where we started. We were making content on TikTok so long ago. And now you're New York Times bestselling author. You were on the daily show earlier this year. And now you get to hop on and talk to us. So thank you again.

Of course. Yeah. Thanks for having me. So we wouldn't be a finance podcast if we didn't talk about AI, right? So I wanted the first talk about AI. And, you know, I see these weekly headlines. every other week from Oracle buying $300 billion deal with Open AI and these big tech companies spending so much money on AI infrastructure.

And I wanted to point to something that you wrote about recently where you talk about how these massive AI data center projects are a monumental project of hope, which I think is spot on. I think you wrote that wrote that in one of your substack posts. Can you talk more about that and how fragile do you think all of that? this is. Yeah, I think AI is really based on hope. Like if you look at that magnificent seven, a lot of those companies are essentially bets on AI succeeding in a way that, you know, maybe it does take all our jobs or something far worse. And so I think that's what I meant when I

wrote that. But I also think it's a bet on physical infrastructure too, so that AI companies are building out massive data centers, you know, meta is spending billions and billions of dollars. is Amazon. So I think everybody is investing in the physical and the digital reality of AI, which makes it a little bit different than other technological advances that we've seen, just because of the immense amount of pressure it puts on national resources. So I think it's like an idea that hopefully it does work in the way that these companies intend. Like, that's what they're hoping. I think the hope of the general public might be a bit different, but that's what I meant, yeah.

Do you think that investors, the market is just kind of a little too hopeful about all of this? Or in other words, do you think that AI might be a bubble situation right now? That's the question, right? I think that people have invested a lot of money in hoping that AI works. I mean, I think Sam Altman, who is the CEO of Open AI, has himself said that AI has bubbly tendencies right now, that some people are going to lose a lot of money, I think my opinion is perhaps less important than his. So if he's saying things like that,

I think there's something to consider there. Yeah, but do you see, okay, so let's just say if AI is a bubble, do you think the fallout will be as severe as we saw with the dot-com bubble back in the late 90s, early 2000s? I think it would be worse because of the data centers, yeah. See, I, I, that's what I, that's what I'm trying to understand here is because on one end, I hear that like, even if AI is a bubble, it might not be as bad if it pops because all these companies that are investing hundreds of billions of dollars are using cash flow. They're not like taking out debt yet. They're not using debt. Yet. Yeah. Yeah. That's the key term. But as long as they're using cash flow, like they're using like their existing business, Google makes $100 billion from their search business and they spend 80 billion of that building these data centers and buying Invitry. at chips or whatever they're doing, that even if this whole thing blows up, well, at least they're

not heavily leveraged. What is your take on all that? Yeah, I mean, sure. I mean, I think like, you know, meta is committed to spending like $600 billion or something. At least that's what Mark Zuckerberg said. And that's like many times larger than what they're able to spend according to the cash that they have on hand. So I think that is a good point. Like, will it, when they start taking out debt, like that does create even more concerns. I think there's a lot of like, I don't know, funny money is the right word, but a lot of like venture capital dollars are going into AI. I think elements of the private market are a little bit bubbly. I think the public market looks a little bit bubbly. And then I think the data centers are a point

of concern too. Like if none of this works out, it's not like pets.com where it just sort of disappears overnight. Like you have this like trillions of dollars and infrastructure that is going to have to be reallocated. And that's like worst case scenario that AI doesn't work at all. I think it'll work a little bit. In my opinion, I think it's just going to be a different internet. That's kind of what we've seen and the outcomes. Like I don't think it's going to totally take over all of our jobs. So I don't think it'll be a bubble bubble, but I think it's a bit overvalued. Yeah. A lot of these numbers just sound so fake. Like that $600 billion number from meta, the $300 billion number from Open AI. It is fake. Oracle. Yeah, it's all fake. But you said something important that

I want to touch on where AI isn't going to take over all of our jobs, which is what I'm hoping for as well, right? But then you see the new data coming out about how these young people are having the highest rate of unemployment, right? And I think you've written a lot about how, like, the youth of America are experiencing the economy in such a different way compared to other generations. So how do you explain that? Because I initially thought that, oh, well, the reason they're having a higher unemployment is because companies are replacing entry-level jobs with AI. But do you think there's something bigger going on here? Yeah, there's a paper called Canaries and the coal mine out of Stanford that talks about the impact

that AI is having on the entry-level labor force. There is an impact. Economists have been trying to figure out what the impact is for the past couple of months. All this technology has ramped up pretty quickly, so the impacts are happening pretty quickly. So I think, yeah, like entry-level labor force. is suffering right now. And what's concerning about that is the future implications. Like if we're like, oh, we don't need young people in the labor force, you know, we'll just automate them. It's like, okay, so what happens in 50 years? Like when these young people are not prepared for work

and they don't have jobs. And again, like we're talking and, you know, we're foregoing nuance for the sake of clarity. But I think, yeah, like companies have made their intentions really clear with AI that they wanted to replace their entry-level workforce. Companies like Klarna and Duolingo have had to roll back their AI implementation because it's not so easy to implement it. But I think if companies can figure it out, like they're companies. You know this. We both know this.

Like they're going to try and make money. That's their job. You know, it will come at the cost potentially of young people, which is extremely sad. I think, like, there's companies are under a lot of pressure right now. Like, you have the tariffs, are causing all sorts of price pressures, and I think people are having to shrink the labor force a little bit because of that, or shrink their workforce because of that. So I think there's economic conditions that are making it more complicated for people. Like the labor market is not in a

good spot. We both, I'm sure, listen to Jerome Powell talk on Wednesday, where he was like, yice, the labor market is not looking so good. The only jobs that are being added are in health care. And so part of this is a technological story where you have this technology that the CEOs are like, listen, guys, if you implement this thing, it's going to make you trillions, if not billions of dollars. And CEOs are like, sure, we'll try it out. But you're right. Like the implementation process takes a long time. But then you also have material circumstances where fiscal policy has created some pressures for companies in terms of building out their businesses. and you're starting to see the impact on that

with jobs created across the board, not just for young people. Local news is in decline across Canada, and this is bad news for all of us. With less local news, noise, rumors, and misinformation fill the void, and it gets harder to separate truth from fiction. That's why CBC News is putting more journalists in more places across Canada,

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I wonder if my out of office has a forever setting. An IG private wealth advisor creates the clarity you need with plans that harmonize your business. your family and your dreams. Get financial advice that puts you at the center. Find your advisor at IDPrivatewealth.com. Yeah. You mentioned Jerome Powell. That was the big story this week, the Fed meeting,

where he cut interest rates, the Fed cut interest rates by 25 basis points, despite, you know, obviously they're concerned about the labor market, but on the flip side, stock markets at all time highs, crypto is at all the time highs, you know, gold is at all time highs, inflation is still sticky at 3%, which is above their target.

Do you think the Fed should have cut interest rates, or do you think that we're inviting a situation where the economy overheats and potentially leads to stackflation? Yeah, I interviewed Cleveland Fed President Beth Hammock a few weeks ago, who has been very outspoken in not wanting the Federal Reserve to cut interest rates because she is more concerned about the inflation story. We got some labor market prints that I think might have shifted her mind a bit since that interview happened. But for her, she was like, listen, inflation is not going the direction that we want it to. I think that's more of a concern than, you know, what we're seeing in the labor force.

So I think that is a very valid argument to make. You know, the American consumer has been totally pummeled by inflation for the past couple of years since COVID began. Like, it's, you know, supply chains went out of control. The prices skyrocketed. And once prices go up, they don't go back down. And so I think people are really starting to feel the pinch and the pain of that. But then you also do have a weakening labor force. You know, the only jobs that are being added are in health care and in social assistance.

That's not a healthy economy. So I think the Fed is in a really tough spot because you do have a dual mandate of price stability and maximum employment. They're looking at price stability inflation, even in their summary of economic projections. So what they expect to happen over the next couple of years, they see inflation, remaining above 2%, remaining above their goal, and they're still expecting to cut rates into that. They're expecting the economy to grow, unemployment to go down, and still cutting rates. So I think it's just a very confusing time for monetary policy where signals are pulling in the opposite direction.

You have some political influence going on. Stephen Moran, Moran, was just appointed to the Fed and is keeping his job at the White House at the same time, which is unprecedented. did. So it's just, you know, they're an independent institution that is now facing some pressure from the administration to cut rates, which I feel like is also probably weighing on them. Yeah. That's true. Do you, I'm curious to get your take on this, because I actually don't know the answer to this. Why is the Fed's inflation target 2%? And I think in their most recent meeting, they said that it's not going to get down below 2% until 2028. what's wrong? Why is it 2%? Why isn't it 2.5%? Why isn't it 2%?5%? Why isn't it 3%?

Do you know the answer to that question? Because I legitimately don't know. Yes. So this is something I actually read about in my book in this economy. Because it is a question that people are like, where did this come from? And it seems like the most coherent answer that we have is that somebody in New Zealand in the 1980s went on TV and said that inflation target should be around 2%. And then everybody kind of fell in line with that. Gianna Simulik, who used to work at the New York, or she still works at the New York Times, used to cover the Fed, now she covers Europe, wrote a good article talking about like why the inflation target is at 2%. And it's all sorts of like monetary frameworks. There's something

about the cost of goods, like, going up a certain amount of year to keep money stable. So, like, you do need a little bit of inflation and healthy economy, and that is, you know, why is that 2%. So it's a funny story. Like, monetary policy is interesting. Like, the way that they figured out that interest rate should be a tool is they kind of just, like, moved things around. And this was back in, I think, the 1930s.

And they were like, oh, this actually is having an impact on the economy and having an impact on spending. Like, we're going to use this as a tool. So monetary policy is an experiment at the end of the day. And so a lot of people will say that 2% is arbitrary. Some are arguing that they should raise it to 3% because it doesn't seem like we're going to get down to 2% anytime soon. And that perhaps 2% fighting for that is creating more pressure on them than is necessary.

But yeah, it's sort of arbitrary because of that. Yeah, that's what I was kind of going back to is like, okay, well, we're trying so hard to get down to the 2% range. but if that comes at the cost of a weakening labor market, well, then why, why be so stuck at that 2% number? And yeah, I mean, it's just so interesting. And I think they've kind of given up on that at this point. They're kind of like, all right, you know what? Forget the 2% thing.

Sure, it's at 3. That's probably we're okay with that. Well, no. So they had flexible average inflation targeting, F-A-I-T, and they got rid of that. So they were for a while, like, during the pandemic. Like, it can be around 2% and that's okay. And then they actually got rid of that recently and are like, no, it has to be like super near 2% or else. And so that's also, you know, creating some complications is used to be kind of flexible.

And now not so much. Do you think they should go back to the flexible kind of like based on the vibes? Like maybe we should be okay with two and a half percent? I mean, everybody on the Fed, I think is a lot smarter than me and probably has good reasons for thinking like why it's a good time. go back to 2%. I think I'm really watching forward as sort of the push and the poll of inflation and the labor market. We've been relatively lucky the past couple of years that the two of, you know, that we had a pretty stable labor market. We had really low unemployment. We had a growing number of jobs. And then now it's not the case. And we still have inflation going up.

And to your point earlier about stagflation, I think that's a pretty valid concern. It's like that we do have slowing economic growth. We do have a slowing labor market and we still have higher prices. And so I think, like, in my mind, 2% makes sense as like a goal. I think it can be a little flexible, but the Fed has a reason to do what they do. Speaking of, you mentioned about the Fed's independence, and also tying that into like the data that we're getting from, you know, like the BLS, how concerned are you about all of that, right? Because we're getting this data. It's getting, the revisions are larger than ever before. And that has to do with, you know, a lot of factors, but also like, you know, data collection

isn't the same as it was back in the day that, that, that, that, that we used to have. So how are you, how concerned are you about, like, all of that, like the trust that we have? I think you talk a lot about that, like, the trust that we have and, like, the data that we're getting and, and even, like, the Fed's independence. Yeah. To your point about data collection, like survey response rates, which is one of the main ways that we collect labor market data. They've like fallen off a cliff. People aren't responding to surveys anymore. And so that makes the data a bit fuzzy,

which is why we have these revisions that look so monstrous is because the BLS is, you know, getting more data that enables them to have a clearer picture beyond just surveys, right? And in terms of the trust behind the data itself, I get I get asked this question, I think, every day. somebody asked me this ever since the firing of the BLS Commissioner because Trump did not like a jobs report that was produced. I think, you know, the BLS is meant to be apolitical. They're meant to be not political.

They are a bunch of people who are collecting numbers and trying to deliver a good picture of what the labor market looks like, good or bad. And I think it's very important that we have quality data. It's one of the reasons that people trust the U.S. dollar. It's one of the reason that people buy treasuries is because they believe in the statistics and the numbers that the United States produces. If people stop believing in those numbers, then we're going to face a pretty big problem because they're not going to want to buy the treasuries. They're not going to want to trust the dollar.

And that has obvious implications, right? And so I think, like, we're going down an extremely slippery path where the administration has made it very clear that they want every, to be essentially regime aligned and that has big consequences for the economy like you know Russia's economy Hungary's economy Argentina's economy back when they were under this type of control it's not a good economy it's just not like it's just not a healthy place to be and so I think everybody's watching with concern right now on the data collection yeah yeah that's gonna be interesting to see how what happens moving

forward with the data and how the market reacts to it because, you know, we, everyone assumes that it's all accurate, but now go ahead, go ahead. Sorry. I just want to say one more thing because this often, like, what's important to understand is that this is an objective analysis, right? Like, I think a lot of people will be like, oh, you're just being a liberal. But I think it's important to understand, like, this is data-backed stuff that, like,

when you control and when you construe what your labor market looks like, when you politicize, your central bank, it just creates massive economic consequences. Like this is not a right versus left thing. If the left was doing it, it would have the same sort of consequences. And so I think that's also important to say is that this needs to supersede the conversation of politics and supersede political parties because this is like, you know, this entire fate of the United States rests in the hand of not politicizing the Fed, of keeping statistics independent. And yeah, I think it can often fall down into culture war stuff.

And it's like, that's not what this is about. This is about our collective future as a country, right? Like, not to be dramatic, but sorry, that's dramatic. No, no, I'm happy that you made that clarification. Yeah, I mean, to me, I think of it simply as like, if the data is not accurate, like, no one, no matter what side of the aisle you're on, like, no one can make accurate decisions. The market can't make accurate decisions. Like, the data needs to be accurate and trustworthy for people to make decisions for, companies to make decisions, for people to make investments.

To me, it's a black and white issue. And I also think that, like, yeah, the data collection stuff is, it needs to be figured out as well. Like, these surveys going out, we're not getting responses for months and months. You know, it's funny you bring up the survey stuff when I was working in the engineering field back in the day. I used to have to fill out these surveys. I forget which department was.

It was a government survey, and my boss would give it to me. It was supposed to be him that fills it out, but he was like, hey, just can you fill this out, whatever? And there was no sense of urgency. I was like, yeah, I'll get to it whenever. It's like, oh, I was supposed to turn this in last month. Here it is. And so, you know, that's all, that's impacting the data, the accuracy of the data

because they don't have all this data from all these different surveys they sent out. So that's also a part of the problem. Yeah, totally. I mean, there's no secret that the government desperately needs some sort of technological upgrade. Like that would have been a great application of Doge is to really like make the government efficient because there are so many things that desperately need some sort of help. Like if you've ever tried to use, even like Treasury Direct, have you ever used that to buy bonds? Oh my God.

Hey, that's why we go to public.com. Sorry, I have to plug them. No, I didn't. I teach you up perfect. But yeah, I totally, totally agree with you there. Yeah, absolutely. Treasure Direct. It looks like a website from like 1999 or it's just a disaster.

It's terrible. So you wrote a great piece on your substance. stack recently about how there's three different American economies, the speculative class, the real economy, and the meme economy. And so can you tell me more about that? Like, how did you come up with that? And can you kind of tell the listeners on what each economy, each American economy means? Yeah, the speculative economy is what we talked about a bit earlier with AI. You know, like, is all of this a bubble? Is all of this a bed on hope? The real economy is like healthcare. That being the only jobs.

that are being created. And then the meme economy is something that both you and I have covered, I think, pretty extensively over the past couple of years, where you have things like FartCoyne, where you have things like Labibu, just really taking hold of the American psyche. Like FartCoin, I think at one point was like one of the best performing crypto assets of the year.

And it's not backed by any asset as far as I'm more. My favorite line from that piece is you write that FartCoin and Labuibu have become substitute to home. ownership, which is like a depressing but also factual line, it seems. Like, what do you make of all this? Yeah, I mean, that's something called aspirational displacement. And Conerson has written about this. Well, Connorson and I have talked about this. He works at Bloomberg opinion. I don't think he's written about it yet. But it's this idea that like, you know, it's impossible to buy a house right now. Like if you're trying to buy one, interest rates are through the roof. Home prices are

extremely high houses are both a speculative investment and a place to live it just doesn't work and so if you're a young person and you can't afford a house like you're going to say okay well i have this extra money like wages have gone up over the past couple of years for young people uh i have this money and i'm going to maybe just buy some fard coin or like these little boo-boos everybody's wearing one on their purses like i'm going to buy one too they're expensive but i what else am i going to spend money on i can't afford a house And so it's that aspirational displacement idea where people have these ideas about like what their American dream could look like. And it's very far away. And so they find replacements. Yeah, it kind of feeds into the whole like rise of these sports gambling parlays where like you see these posts of like 12 team parleyes where you turn 50 bucks into $70,000 or the rise of zero day options where you can turn $100 into $100,000 making these ridiculous bets. and I think it kind of feeds into all of that

because everyone's like, well, if I'm going to be able to buy a house and afford child care, like I gotta do something. I gotta take a moonshot in order to make it happen. I think, and then the Labibu thing is the same thing

where it's like, oh, I might pull the most rare Labibu from this box and then I'm set. Totally. 100%. Yeah, it's everybody's gambling. We have a casino economy. It sucks.

And that's, so that's the meme economy, but there's still like an 80, the 80% is still. still like the real economy where like people go to work every day. My wife's a nurse. She goes to, she goes to the hospital to like care for people, people doing construction. So there's like a real economy. But like on the edges, you got like the AI aspirations of these companies just spending hundreds of billions of dollars. And then on the other end you got like people just buying fart coins and Lububu's. Yeah, I call it the barbell economy. I wrote about this barbell.

But yeah, yeah. When I was writing about Gen Z and the sort of their path, you know, you have some people that go into trades, right? And they're like, that's more stable. I've been on book tour for the past year. And I met a student who was leaving university to go work at a factory because he's like, I don't know if I'm going to get a job after I graduate. So people go into trades, the more stable, safer out. And then you have people like risking it all on fart coin and risking it all in crypto and risking it all on sports betting. And so those are the extremists of the distribution, but they're growing. And I think that's like, it's all okay, right? Like I'm not saying either one is But I think that that's something that you just it's just different.

It's a change. No, you're absolutely right there. And I wonder how far it gets with all of this stuff. But I highly recommend everyone. Check out your piece. Your substack, you write almost, I mean, but weekly. I mean, it's really good writing. And but definitely follow you on Instagram because your daily, almost daily market recap videos,

daily reaction videos of what's going on in the economy is so good. And I highly recommend everyone. Oh, boy. there you go we're going to keep that we might keep that in there i highly blooper real um and i highly recommend everyone

a lot of shirt no you have microphone lots in shirt not you and i highly recommend everyone check out your book in this economy um are we going to have a future kaila scandin book yeah yeah working on a second one um more around maybe search around the attention economy around some of the economic factors that we're seeing.

So not a, not a, not it's fun. Perhaps it's the first one. Well, I hopefully you have doodles because I love the doodles that you have across your books. I hope you have doodles in the second one. And thank you again for, for hopping on today. Thank you. Well, all right, guys, hope you enjoyed that conversation with Kyla Scanlan.

I highly recommend you guys follow Kyla's substack and her Instagram account. I think she posts videos on there almost every day. Whenever I see your videos pop across my feed, I always want. watch them. Hope you guys have been enjoying these interviews so far. We got some great guests coming up as well. And let us know in the comments if there's a specific person you would like to see come on the show and producer Mike will try to work as magic. Thank you guys again for listening, watching and commenting. Shout out to Mike and Connor. For all the work behind the scenes, I'll see you guys back here on Monday. Rosen lasagna, medium power, 15 minutes.

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