Tyler Cowen: The AI Bears Are Asking The Wrong Questions

Prof G Markets

In this episode of Prof G Markets, hosts Ed Elson and Scott Galloway welcome economist Tyler Cowen to discuss the evolving landscape of artificial

Key takeaways

• Tyler Cowen argues that fears of an AI bubble are misplaced because innovation cycles in technology have historically been misjudged by investors.
• AI is reshaping the labor market not through mass job elimination but by shifting skill demands toward adaptability, curiosity, and continuous learning.

Main topics

• AI bubble concerns
• Labor market transformation due to AI

Notable quotes

"We overestimate the short-term impact of new technologies but underestimate their long-term effects."

"The biggest skill for the future is learning how to retrain yourself."

Conclusion

Tyler Cowen offers a contrarian yet grounded perspective on AI's trajectory, urging individuals and policymakers

Transcript preview

Speaker 1 (0:01) I'm Ina Garten. On my new podcast, Happy Hour with Ina, I'm inviting really interesting guests to join me for a drink and a fun conversation at my kitchen table in New York City. I'll be getting personal with chefs, actors, comedians, musicians, and writers I admire. So grab a snack, pull up a chair, and join us. Subscribe to Happy Hour with Ina on YouTube or wherever you get your podcasts. New episodes will be available every Wednesday starting September 16th. Speaker 1 (0:38) Megan Rapinoe here. This week on Why Are You Like This, I am talking with Roxane Gay. That's right, Roxane Gay. Roxane is a fearless writer and cultural critic whose impact goes way beyond her New York Times bestselling books. We dig into all the big moments of her life. And of course, she shares if she's more mommy, daddy, or baby. Check out the latest episode of Why Are You Like This wherever you get your podcasts and on YouTube. Say you're an aspiring pop star. How do you know if your song's a hit? It's getting harder to tell. I think that something is going on where the machinery of popularity has changed under our feet, and we don't really know why or what it means. This week on Explain It To Me, how to avoid being a flop. Find new episodes Sundays wherever you get your podcasts. Speaker 1 (1:34) Today is number 40. That's the percentage of Americans who think listening to audiobooks does not count as reading. Ed Shustory, 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. I'm not interested. Speaker 1 (2:11) I was lying. I was lying. You jumped to the punchline too quickly. You got to give it a second. Let me get going. Go ahead. What'd 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 Ammerdingen 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 Kitzbühel in Austria. spent a week in Kitzbühel 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. 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 Fulham. Speaker 1 (3:08) 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 your car when your son walks out of Best Buy with his own mini fridge. But 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... Speaker 1 (3:55) you're a tide pool of emotions because everything just sort of hits you all at once. And there was all these things you were going to 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, you know, I had thought, oh, I got to take my son to Alaska. I want to buy a car and restore with him. And I want to take him to, you know, Latin America. And I wanted him to come on tour with me on one of my... speaking gig things and all you think about is all the shit maybe it's because I'm kind of a glass half empty kind of guy but all you think about is the shit you were supposed to do 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 Speaker 1 (4:42) 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 Ritz 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. Speaker 1 (5:25) 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 hugged, 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, expressed 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? Empty nest, whatever the feeling is called. I know it's a thing, but... Speaker 1 (6:15) I wonder if it's more of a thing than you expected. First off, I think it's difficult and a big moment for a lot of people. And it's just so different now. My drop-off was my mom gave me an iron. I 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. Speaker 1 (6:46) 82. This is a much bigger deal, you know, drop off is a much bigger deal now. For me, I think I've... 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 as raising, you know, preparing my sons for others. And that'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 lie. You've been looking forward to that for years. Yeah, I haven't talked about it in a while. Look, you'll see. It's impossible to explain until it actually happens to you, but I tried to hold it together such that. Speaker 1 (7:38) Again, as I didn't want to do what I always do, and that's 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 a great—everything that I'd hoped for in terms of UVA is what—it's out of central casting. This campus is great. The kids seem really smart and nice. And he's having a great time. So that makes it easier. So we'll see. We'll see. Sounds like you're not sure what you're making of it yet. I'm an emotional tidepole. I don't know how to process it 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 that 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. Speaker 1 (8:36) 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 Speaker 1 (9:13) 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 listen 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 Cowen, economist, author, podcaster, and chair of the Mercatus Center 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 Zittrain, who has become famously one of AI's biggest critics. Speaker 1 (10:11) 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 overstate 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... Speaker 1 (10:37) responsible parties with sell-side analysts, governments, and all 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've written a lot about AI. You also... Speaker 1 (11:06) 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. Speaker 1 (11:33) There's a tweet circulating on Twitter about all of Ed Citrin's wrong predictions so far. OpenAI just hit a billion dollars of revenue from ads. The revenue to date for Anthropic and OpenAI has been incredible. There's also Grok, 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 Zitron has talked about, that you have a lot of these companies, these big tech companies that are investing in Anthropic and OpenAI and then OpenAI and Anthropic are then turning around and spending those dollars on compute that is sold to them by basically their investors. And the fact that... Speaker 1 (12:30) OpenAI and 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 OpenAI. 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... Speaker 1 (13:27) 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. Speaker 1 (14:18) 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 do. Do I worry about day-to-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? Speaker 1 (15:00) 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