[Music] okay today i have the pleasure of speaking with caleb watney who's the director of innovation policy at the progressive policy institute and he's recently written a piece of the atlantic arguing that america's innovation engine is slowing so before
we get into the weeds caleb do you want to describe the main reasons why you think uh america's innovation engine is flying sure um yeah america's innovation engine is of course a very broad and multivariate uh you know uh
thing but i was trying to focus on uh three particular trends that i thought were troubling uh make a major impacts on america's ability to innovate uh and just briefly those are basically high skill immigration international talent flows uh number two our cutting edge
university system that's really the best of the world and three the uh industrial clusters the agglomerations that we have that um are sort of the geographical regions where a lot of this innovation comes from and each of those we're sort of seeing
uh maybe negative trends before the pandemic but the pandemic might serve as kind of a breaking point in each of them okay so let's start with remote work first um or at least the agglomeration effects first uh now what is so important about the
physical agglomeration effects of being in these high productivity cities why can't remote work make up for that sure um yes i mean economists have you know for hundreds of years basically been studying the effect of these close geographically
connected networks of entrepreneurs innovators uh scientists academics um you know supply chain managers when you have all of those uh people in a geographical region where they're you know running into each other spontaneously and they're sharing ideas
and they're having long conversations you know in the hallway or in their offices that they wouldn't otherwise be able to replicate um you know simply online that ends up uh leading to a more creativity uh more ideas more patents um and you know we have a lot of
uh evidence for that in the real world um as you mentioned some people are starting to counter and say oh well you know in the last 20 years we've seen this huge um array of online communication platforms kind of pop up and can't those replicate
um a lot of the agglomeration effects that we're getting in physical environment and i think that's certainly true to some extent um but i guess the right comparison here isn't even necessarily um physical agglomeration versus digital agglomeration
um but right now if you're in one of these geographical clusters you're getting the best of both worlds you're getting the the best that physical agglomeration effects have to offer plus you know i i have tons of great conversations on twitter um and so it's really
digital and physical agglomeration effects versus just digital and i think the the difference there is still pretty large and it would be a shame to to lose a lot of the high productivity um clusters that we currently have okay let me make the case that a remote
worker is actually going to increase some sort of agglomeration benefit and you you convince me that it's wrong okay so uh first of all it's just going to connect the entire world into this hypo productive city that uh we can't have in the real world
not just because of the limitations of how big cities can be and who can move in there but just because of uh the inevitable zoning laws that cities like san francisco pass that artificially limit how many people can join into the innovation circus there
and you know now we're going to have developing countries and the talent there joining into these conglomeration benefits as well as people in rural rural areas in america why won't this massively outweigh the loss of physical agglomeration yeah
no i think digital you know agglomeration these digital networks can have huge benefits and you're exactly right that there are a lot of ways you can arbitrage both bad regulations you know like zoning laws um but also you know just physical distances
um but again i think you know the relevant alternative here is not where you're just getting physical conglomeration or just digital you know right now uh living in washington dc or silicon valley or new york um you can have those conversations uh
with people from all over the world you can even hire remotely but you do also get there's a certain kind of like cultural context that you only get by like being in person and sharing conversations i mean i certainly experienced this in my own life i get a lot of
ideas you know from having conversations on twitter um but it's still very different to uh you know have a extended two-hour long conversation with a friend in their office um you know like making eye contact having this sort of spontaneous ideas that
is hard to replicate even over zoom um partially because i think zoom meetings tend to be a little bit more scheduled it's hard to have uh flexible time you know frequently the the best conversations that happen in the real world are ones that uh you know
aren't intended to start off as conversations they just kind of spontaneously arise you know you start off just sharing one thing and then it extends into a whole conversation but uh there's also kind of a zoom fatigue that you see you know
people especially right now in this era of room at work are having so many zoom calls they're um they don't want to stay on longer you know just to maybe have a conversation with with somebody extra um and so again i i think uh yeah it's good to recognize that these
aren't completely um you know contradictory or we can have both and that's really what we're getting in the big physical agglomeration effects of today um which kind of gets to the point i think we need maybe a better taxonomy of
what we're talking about in terms of the kinds of interactions that we think lead to innovation because there's kind of a spontaneity and really in-depth conversation that you can i think only get in physical um spaces but there is a obviously a huge
effect from having just way more people that you can have access to in some of these digital spaces um so that's one thing i would like to see this conversation get into is rather than like oh which is better which is more important um let's break down what are the
specific attributes of these kinds of um interactions that are happening in the physical or the digital space that's very interesting yeah you talk in the atlantic piece about how uh there might be uh aspects of remote work that advantage
the businesses that are using it but for the net uh rate of innovation is actually quite bad i'm wondering if can we understand this in the context of like um you can't explicitly say that listen i just want to hang out in this coffee
uh place or wherever in my office just in case somebody wants to help me leave this company and start another company or maybe some i'll find a mate or something here uh but getting on zoom requires some sort of explicit um uh you know explicit communication of
your motives that is you you can get away with without not doing in the real world yeah i think that's exactly right there's sort of um you know i think you've seen some workplaces try to experiment this like what if you just left your
your camera on and it was as if you were like working next to somebody in an office but people seem to be really uncomfortable with that they don't seem to like it yeah it doesn't seem to just like to have the same sort of easy spontaneous conversation that you
can mimic in the real world and i'm not sure exactly why and i also don't want to necessarily rule out the case it could be you know 30 years from now or maybe sooner uh you know we have some sort of virtual reality technology that's really blossomed and
now everybody regardless of where you're living is kind of working in these these virtual workspaces and if that's the case then maybe you know physical agglomeration effects uh really start to diminish in importance um but i certainly don't think we're
there yet uh and regardless it seems like we're kind of uh or there's a big experiment being taken so i'll be very curious to see kind of what are the effects of all of these you know big tech companies uh facebook twitter
um others you know that are moving to all remote work for the foreseeable future and again i think you you kind of pinpointed something in your earlier comment uh there's both productivity within the firm that i'm sort of concerned about but in some ways
you could say that that's internalized you know if the companies themselves are seeing lower productivity measures lower idea generation then they should be able to internalize that themselves but the thing i'm particularly concerned about from a
public policy perspective is the the public spillovers the fact that you have fewer new firms being formed and of course you know facebook doesn't internalize that cost and so they have no reason to to consider that um but as a matter of public policy you know
we do care about new firm generation and the kind of idea spillovers that that are generated in these public externalities is there a reason why um agglomeration effects are so salient even today when we have online courses or open source code i
would expect these sorts of more public and transparent um displays would like reduce the effect of having to be in the right cluster at the right time yeah i mean i think they have reduced it to some extent but at base i think humans are extremely pro-social animals
uh we just do all of our thinking and um yeah idea generation sort of in groups um i mean of course you have some you know lone geniuses that are uh you know introverts or something but i think that's a pretty small minority of the population uh
another way to maybe think about this is uh how long silicon valley has lasted already and how high the the rent costs have gotten the fact that everybody you know continues to to live in silicon valley and pay these absorbent rent fees despite the fact
that all of this online technology has uh you know gotten so good is perhaps evidence um that the the benefits the productivity benefits of being in those clusters is actually really quite high although we're seeing the rent prices
crater recently so we'll see what happens in the future yeah we'll see um oh so let's talk about the big picture before you get into these different points about why it even matters if america's innovation engine slows and somebody else takes over so
why can't i make the case that listen whatever country in the future is the innovation hub will be the one that is you know free prosperous has adopted the policies you're advocating otherwise it wouldn't be the innovation hub so why does it matter if somebody
else takes the mantle of the innovation hub great question i think one thing you've seen um and you know this last generation of communications technologies is actually an interesting example here that there are a lot of cultural values that are conveyed
in the building of especially technology platforms that end up becoming the underlying infrastructure that are used in the rest of the world um and the technology has a great degree of path dependence um you know sometimes it's easy to be a
technological determinist and say like oh whatever is the best technology will always win out and that's true you know obviously within some bounds but it's also the case that sometimes we can get really um you know caught on a particular infrastructure and that can be either
like a physical or digital infrastructure or even like a cultural infrastructure and um so if you look at a lot of the social media platforms you know the biggest ones internationally are primarily american firms and they've built into those platforms
certain kinds of um cultural mores around uh say free speech or the separation between the private and the government sector about intellectual property law uh you know about a huge number of of different sort of choices that you end up baking into
your platforms and so uh i think if we were in an alternative universe where all of the main social media companies uh being used globally were you know uh chinese or run by the chinese communist party especially um there would be very different values
embedded in those platforms and that would end up really shaping the direction that technology plays and so especially as we're starting to look um into the future of technologies that might even be more monumental like artificial intelligence
um i think it is worth thinking very carefully about um where the leading firms are geographically and what kind of um you know cultural attitudes or or um you know social infrastructures you end up building in and and i for one would much prefer that
the united states and their sort of you know broadly liberal democratic values are the ones ending up building into the the emerging technologies of tomorrow um than the chinese communist party okay but then what about the claim that um
that's kind of turned into a truism at this point which is that liberal democratic countries are just necessarily going to have higher rates of innovation the so as long as the chinese communist party stays authoritarian they're not going to be the next
innovation hub for the things we care about um i don't i mean i i hope that's true um but we certainly can't have um you know complete competence and that i think if you were comparing a lot of um predictions of you know liberal
democratic economists from you know 20 years ago about what china's expected development path is they've certainly you know uh outplayed i think the vast majority of predictions um and some of that might be catch-up growth but they have much higher rates of catch-up
growth than you know almost any other country um they've much been much bigger and they've maybe had other issues that they've been able to overcome kind of surprisingly the other thing is i i wouldn't underestimate our ability to kind of shoot ourselves
in in the foot um so i would say that um absent uh actively bad policy this sort of free liberal democratic model should work um or should outcompete i think especially because the nature of innovation kind of uh relies on free thinking and iterative
thought that's different from the consensus that that tends to i think work better with these sorts of cultural values um but that doesn't you know that only works so long as say policy is equally conducive in in both kind of cultural environments
um and i would say that right now the united states is certainly not playing into its role as uh you know the global r d hub of the world um and we're shooting ourselves in the foot in many ways that end up undermining our own ability to play that role
but there's some questions raised about the effectiveness of chinese r d uh patrick carlson has a question up on his website about like why why aren't the leading given how much china spends on r d why is why aren't there any influential papers in the
fields he cares about uh that come from china so is there something about the way they're doing science there that's not that productive yeah no i share some of those same concerns again i would kind of look at this in like an expected value model right so there's
like some probability that um china you know kind of stagnates or can't really you know maybe they're really good at catching up to the technological frontier but it's just an entirely different kind of question um than actively pushing out the
technological frontier that's actually where i'd say like maybe the the majority likelihood is um but we can't completely rule out the chance that they're going to continue you know making progress in the way they have um but to that point i i do think that
there are a number of um i think it's called good hearts law you know the idea that when a metric becomes a target it ceases to be a useful metric um and uh you do see i think lots of examples of that in china uh one of my favorite examples is
um you know they made a big push recently for ai and they were saying uh you know we're going to have 50 world-class leading ai textbooks and 50 world-class leading ai online classes which kind of seems to like miss the point of like what a good
textbook or what a good online class is supposed to do i mean after you have the first you know five really good ones i don't know what the other 45 are really getting you um and so yeah i do think you see sort of um issues like that uh but i think the
other point here is that regardless of whether or not china stagnates it's good on the merits by itself for the united states to try to play this role um and so it's sort of like a it's good if china does end up playing the threat that we fear but it's also good even if
they end up stagnating and don't uh you know it's kind of a win-win either way okay so let me give you my optimistic scenario which is that maybe the u.s shoots itself on the foot uh but like china takes over or start to take over as the innovation
hub and the us innovation is the sort of thing that you only recognize its importance when you can see saliently it's lack right so you see like china's making animations we're not and then we reverse the mistakes that we made that led us to less innovation
and we also already have like go to universities we have a history of innovation so then you know we'll become the innovation hub if uh you know we start to lose our edge we'll we'll correct course and we'll become the innovation hub in the future uh is
this a persuasive model uh yeah i think it's again certainly within the the range of of possibilities it is it so does ring true that uh the united states um seems to uh sort of coast for long periods of time and then
when they feel particularly threatened by another great power they kind of kick into a whole other gear that a lot of the world kind of forgets that we have uh you know you look at how galvanizing it was for the us you know when the ussr was able to launch
sputnik uh and and get into orbit before um the us was um that kind of was a great political like awakening and there is something to um i don't know you could use the term techno hegemony on the idea that you know the united states is traditionally or at least you
know maybe since the the 1940s or so um the sort of clear unrivaled leader in science and technological development um and that when we have the chance we'll kind of coast in that role but as soon as somebody like explicitly takes
up the mantle as a challenger in that um that that does kind of kick us into another gear so we'll see if that can happen um but i think the counter cons or the the case for concern would be that american um you know governance institutions are much more
sclerotic than they used to be um if you look at you know would the van hour bushes of today you know be willing to work in the nsf uh and i think you could have a pretty compelling case they wouldn't you know there's just so many more roadblocks to
wanting to be an inventive you know interesting person who is trying to push out the the frontier in useful ways and also working in government um that i think means that even if maybe we get our cultural attitudes right maybe our institutions are just too
sclerotic to really be able to kick into high gear in the way that they they once were okay and as far as these institutions go there's um i know there's always been a debate about like whether you reform these institutions or you try to create new
institutions that are better uh when it comes to institutions that are funding science political institutions whatever else but do you think the best course to increase innovation is just to make them less bureaucratic and have
less red tape or is it just to start alternative institutions yeah i mean i don't know that i have strong priors on that i think it's going to be for some of these questions it's really a matter of like political opportunism um you kind of have to like play with
the cards you're dealt and so i would certainly guess that reform um seems much more likely um than you know outright um you know abolishing these institutions or creating new ones um but if the chance presents itself to you know create new ones then uh then
that might certainly be worthwhile part of it i think is uh we're almost trying to create like a a governance infrastructure that can easily scale to the kinds of problems that we we see ourselves facing or to the kinds of you know new roadblocks that existing
institutions are are running into so for example with science funding i think one of the easiest you know lowest cost things we can start doing is sort to introduce more like almost randomized control trials within science funding so you saw
um you know i think it was new zealand uh did an interesting experiment recently where instead of going through this lengthy science funding application process they just randomly distributed funds to um you know uh projects that met some you know qualified
uh metric and i think so far they found it to be pretty successful and uh you know they were trying to randomly distribute it so it'd have some sort of external validity um but you can imagine you know running 10 different versions of that experiment
in the united states where you're tweaking little variables within the current science funding apparatus and seeing how each of those um you know randomizations end up making the results better or worse um and then you can then take those
results and depending on how you know willing the the current bureaucracy is to incorporate those results then decide whether you want to reform or tear it down yeah the concern there is that the people who would be writing the experiments are the ones that have
vested interest in preserving the current structure it reminds me like a story that thomas soul always tells the world just like but he used to be marxist and then he worked at the labor department for summer and he had this idea of studying whether
the minimum wage actually increased employment and he was just completely um reputed by this department because it was like they were saying this guy's just going to make us all lose our jobs um so yeah it's interesting how you go
about like instituting those kinds of studies for sure yeah there's i mean yeah there's the whole meta problem here of can you even you know break through the current sclerosis enough to be able to do things that would test the level of sclerosis and it
becomes almost circular inside in some sense yeah yeah okay so let's talk about immigration now um i i just want to bounce some anti-high school immigration arguments off of you and see how you respond okay so senator tom cotton has proposed
limiting uh chinese students from coming to us and studying in stem fields um he this is a direct quote if chinese students want to come here and study shakespeare and the federalist papers that's what they need to learn from america they don't need to learn quantum
computing and artificial intelligence from america and the case here is you know is it just some sort of arbitrage where they'll learn the information that taxpayers have subsidized in the u.s and get that innovation and just move it to china
why is it a bad argument yeah i think it's it's a pretty foolish uh argument and it would be even worse if we ended up uh you know actually running some version of that i think there's a number of factors here um one it's good to recognize uh what does the ccp themselves
recognize as their biggest barriers to actually achieving some sort of you know technological leadership role and they've consistently pointed to their lack of talent acquisition uh you know they've said multiple times that their their really innovation
um strategy is a talent first strategy because they're one of their single biggest problems in the regime is that all of their best and brightest don't want to stay in china and said you know go to the us go to australia go to other foreign
universities and then want to stay and work there um so if you look at something say uh ai phd students from china that study in the united states when given the opportunity you know 90 plus percent of them end up staying in the united states
um and that's a that's a really big problem for china if you're then trying to you know develop the cutting edge ai um companies of the future um so they've been pretty explicit in the fact that yeah talent retention is their biggest issue um they're
you know undertaking a bunch of programs to try to fix that they have the thousand talents program and the thousand foreign talents program um that are both aimed at trying to recruit both you know chinese nationals that are brought back home and even just you know
generally talented scientists from abroad and recruited back home uh and so in some sense if we took extremely broad measures to just you know shut down all chinese students from coming here to to learn stem we'd be really doing them a huge favor
because that's exactly what they're in sense hoping for you know like great now we can keep all of these you know smart chinese stem students here in china rather than in the united states um so i think one yeah it would sort of play into the
ccp's hands there um two i don't want to downplay and say that um you know chinese industrial espionage isn't a problem because yeah there are certainly um many examples of it one problem is we don't have a good uh sense of like how big or small the
problem actually is you hear tons of you know anecdotes or or tangential stories but it's hard to know systematically kind of by the nature of espionage you know how widespread this is um and so i would certainly be supportive of you know more narrowly
targeted um ways of trying to say you know do more background checks before um chinese nationals are working on sensitive government projects or receiving you know government funds or for for research or whatnot i think there's a number of you know
more carefully targeted or we can run counter espionage networks um or additionally sometimes it's the uncertainty about chinese students ability to stay in the united states that ends up giving the ccp leverage and so if you give them a clear path to
you know say permanent worker status in the united states upon completion of their degree i think that reduces a lot of the leverage that the ccp has um so broad story i would say yeah we could certainly take many more targeted actions than we should to reduce you
know the threat of espionage but to um take overly broad actions that end up you know playing into the ccp's hands would actually be a mistake yeah the fact that their top talent wants to come here and stay here is such a good car to be have and
it's it's amazing that people just want to burn it down absolutely yeah okay so here's another argument eric weinstein argues that in the long term uh in a free market uh wages and demand uh equilibrium so there's no such thing as labor market
shortage so that this entire business about having uh shortages and stem fields as a conspiracy from the nsf to reduce reduce wages for stem fields uh graduates to help employers yeah i think again that's pretty silly uh i think
it really misses the like positive some nature of uh especially you know fields and technology the fact is we don't have some set number of you know top-end machine learning jobs that are just waiting to be filled by american nationals and if you keep you know foreign
national south and that means more jobs and higher wages for americans um like that may be true in individual cases but i think in a dynamic equilibrium it's totally not true you see that um you know foreign immigrants that come here have much higher rates of patenting
and that they actually um they're sort of again going back to the agglomeration effects they make their american counterparts more productive and they patent at higher rates when they've had exposure to these international entrepreneurs um
they also start businesses at higher rates which again if you're like explicitly starting a business that's kind of by definition net positive in terms of um the number of jobs um yeah so so i i think yeah he's completely missing the
the um the positive sum element of this and i think in some ways like the the there's sort of a word game about oh is there a stem shortage or not um but i think is again like not particularly relevant um because it is true that to make progress
on the cutting edge of emerging technologies you just need more really smart people working in a conducive environment and the more really smart conducive or people you have working in a conducive environment the faster your progress will go
um so again i would prefer the united states to have that progress inside i want all of the best and brightest world uh talent to be coalesced in the united states and i'd say is one additional point there's also some interesting i mean there's there's a long line of uh
academic research i think backing up there's a very strong case for high school immigration um but there's a new paper uh recently that came out in nbr that specifically showed when you cut down programs like the h1b program it actually increases offshoring
because when companies don't have the option of bringing their talented people that they would like to hire here in the united states it's sometimes easier to just move your headquarters somewhere else where you can hire them um so i think that's a whole other
dynamic that he's not considering well that's a very interesting piece of evidence and it's probably going to be exasperated by remote work so it's going to be much easier to just offer labor um and uh yeah it seems our intuition works here when we're just talking about
native born talent it's like there's more cs graduates now than there were 20 years ago but there's more i.t jobs because every new cs grad is a probability that the new business is going to be created and more jobs will be created
is it no go ahead sorry i would say though that um i think there's a lot of complaints against the h1b program that are completely valid and i have you know a long list of reforms that i would like to see the h1b um you know undertake um but just taking
it as it is and sort of like cutting in half or slashing it i think would be very uh counterproductive yeah i know those pains personally um my dad is a doctor and so when i was eight we moved to the us and i'm 20 now uh but we're still waiting in the queue
to uh get uh you know get because there's country caps to get green cards so we'll start yeah get green cards and i'll probably get kicked off unless congress passes a bill to um let kids stay on i'll probably get kicked off and i'll have to start the
process again to get my own h1b off my cs degree and at that point it might be easier to like leave the country and go to another where there's more lacks immigration laws yeah that's such a mess okay so how how would you go about reforming the h1b
visa yeah um so i i would say i have a number of specific reforms for the h1b but then almost as a meta thing i think in some sense the h1b is like an overrated visa program and i would like us to almost move our focus more broadly but i'll start
with the specific reforms to h1b um so there's a couple problems here you could try to address uh one is the fact that the current lottery system um that's used is it adds a lot of unnecessary uncertainty and also doesn't prioritize the the most
highly skilled candidates that we care about uh you know because it's just a lottery if you've met certain qualifications uh it gives kind of equal weight to the uh you know top-end machine learning engineer who has a you know salary offer of 400 000
from you know some top firm with the um you know i t specialist that is still important but would be making 60 or 70 000 you know and i just think um if this is a high skill immigration you know program we should be giving priority to those that have like the higher salary
um uh offers and so some suggestions have said oh maybe we should do a salary ranking where basically like the higher up you have as a salary offer than you know the higher priority you should have in the queue um i would be open to something like
that but i would also want to modify it to include equity um because there's a lot of times small startups can't compete on you know uh just a salary wage but they can offer pretty you know uh lucrative equity um packages and so i think so long as you have some sort of
equity adjusted salary ranking i think that would be you know one easy way of uh making the h1b much better targeted um another issue with the h1b is that it's tied categorically to like a very specific employer and then it's kind of hard to transfer
and this is you know leads to some of the complaints people have that oh well maybe you can be underpaying workers because they really have no other option but again that's not like a problem with the workers or them being in the united
states and bringing their talents here it's a problem with the structure of the visa that doesn't let them switch um you know and so you could either try to uh make it easier for uh you know h1b workers to switch between um uh between employers or to even start
their own business because oftentimes you have people that you know come here want to live and work in the united states and maybe they even have an interesting startup idea but they end up having to work at a big company you know for for
six years while they're in line for green card and then finally once they get permanent residence would be great yeah that would be ideal yeah um which kind of gets to i think the larger meta problem that the h1b is just pretty poorly
structured to actually like both attract and integrate the kind of talent that that we want and so i've been looking at alternative programs one that i'm particularly excited about is the 01 visa for immigrants of extraordinary ability it's a pretty under leveraged visa right
now but in principle it's very flexible because congressionally has no cap um it's just supposed to be you know for immigrants of extraordinary ability and then uscis has uh like sort of an eight factor test uh evidentiary criteria um for for
choosing who then fits into that um and so you could conceivably have a new uscis director come in and either issue new regulations to change those eight criteria or even just rewrite the internal guidance documents that they use to you know make these decisions and end up
letting in dramatically you know more really talented really exceptionally uh you know individuals through that program um and the nice thing is unlike the h1b that's not categorically tied with one employer so you could use an 01 to then start a business or
work for a startup for you know any number of things so um that's just you know a few examples yeah isn't that called like the einstein visa because of how hard it is to get it and how rare it is it is yeah um yeah so it's very hard
right now you know you really have to be like a top top hub end and you know even then it's like a 500 length you know uh or 500 page length petition process which is awful but again because it's so subjective and because the congressional mandate is so broad
i think that means that the the scope for possible reform without even necessarily needing to go through congress is also very broad ah okay um has joe biden spelled out how he would if he would liberalize high school immigration and
how he would do it if he became president he has not given a lot of details you know he's certainly spoken very positively about you know trying to undo some of the damage of the last four years and make it clear that the united states wants
to be uh you know the the destination for a lot of these uh high skill immigrants but i think understandably uh voters have not shown a strong preference really detailed policy plans and so i don't think that's his highest priority right now
um but i think in the the months after the election um if he wins then uh there will be a lot of attention to actually getting the details on board i hope so um oh so now speaking of uh what's going on at this time um so another argument that i forgot to bounce
off of you is well listen high school immigration is usually good and we should usually have more of it but right now given the high unemployment rate given the economic catastrophe we need to be emphasizing uh our own laborers and
so for for a little while let's just pause the h1b while our uh while our economy adjusts yeah i mean again i think you can see that we have lots of economic evidence about you know the regions that have higher rates of h1b historically have higher rates of
job growth you know for native workers they have higher wages um so uh again i think if you're looking at in a positive some sense even like a pause doesn't necessarily make sense um one because also the the kinds of uh you know job categories that have been the
hardest hit by the pandemic are not the ones where h1b employers are typically going to be hiring from and so i think it's mostly service sector jobs or jobs that require a lot of in-person um you know interaction with customers
and whatnot so i think it's pretty unconnected from the the specific job market issues of this pandemic to the extent it is connected it's through medicine which is an increased demand now if anything exactly yeah yeah yeah um okay so uh i think you said
somewhere or wrote somewhere that immigration is the one lever you change first to increase levels of innovation why is it so much more important than other factors yeah i mean it's i would consider it my number one uh level right now simply because um
it i guess it's so far away from optimal so um if we look at maybe say trade policy as an analog right you could talk about the free flows of people in the free foods are good um right now the um the the free flow of goods is like pretty close to optimal
right we have we still have tariffs and we still have um you know uh dumb regulations and investing that prevent us from you know getting to some hypothetical free trade optimal um but you know moving another five percentage points um in favor of free trade on the margin
just matters not that much but we're so far away from the global optimum um on immigration policy that you know a five percent change in how many really smart skilled um talented people i could come to the united states could make a very large
difference um and i think also if you kind of follow the idea that uh people are in some sense the ultimate resource right you know they are uh sources of creativity of innovation then of course if you're trying to affect innovation you want the
thing that you know can most uh directly come up with new ideas um which are people yeah yeah that's definitely all very persuasive um okay so let's talk about big tech um we were talking uh i think a month after congress held hearings considering
anti-trust authorization against big tech companies um and here are the concerns and i want you i want to bounce these off of you as well okay uh they're too big they're the smallest artists can't compete with them um and they limit innovation they buy up
new startups so these are a lot of concerns so there's a lot to unpack here but um and then you've also written a paper about uh decreasing the barriers to entering the ai market and the concern is they have too much data and how are you supposed to compete
with the petabytes of user data that google has and they need to be broken up so there could be more competition and innovation will breaking up these big tech companies increase innovation yeah so there's a lot there um obviously
we can try to break it down into chunks um i think in in broad strokes i would say that um again if we're looking at this in like expected value terms there is some probability that if you broke up these big tech companies you know maybe you get lots of innovation
um personally i would assign a pretty small value there i just think it's unlikely given um you know many arguments that we can talk about in just a little bit but in brussels i think it's pretty unlikely and the the other factor is it's a very high risk strategy
so if you break them up and you're wrong about the effect of innovation then you've just destroyed like you know the few golden geese actually producing productivity gains in our economy and that's extremely bad and you've given an edge up to china
so i think a much lower risk strategy that maybe gets some of these same concerns would be um sort of like a big national push to tear down entry barriers make it much easier to compete against these companies in a variety of ways and sort of you know
reduce the the maybe emotes they have around them in some sense uh increase you know the gale of creative destruction to use the schumpeterian term um and then if they can survive that you know a level of increased competition then that further increases
the evidence we have that maybe they are efficient they are competitive um and if they end up you know falling because now some new startup has not completed them then congrats you've gotten the outcome that you wanted um so i think as a meta strategy i i
would prefer to at least at first try the strategy of really you know increasing the level of competition they're faced with not by artificially tearing them down but by making it much easier to compete with them um and so that's uh sort of the broad
strategy i was trying to lay out in that ai paper um one thing kind of briefly connecting this to the immigration discussion is the fact that i think a lot of these big tech companies have a huge advantage in the immigration market
because they actually have you know large hr departments that are capable of braving the immigration bureaucracy um if you look at the career preferences of a lot of these you know top end talented immigrants a lot of them say they would prefer to
work at startups or start their own company at a much higher rate than american native born workers in these same you know graduate programs but then in actuality um the immigrants are way more likely to work at the big firms because that's the
only place that they can actually end up getting you know an immigration visa um and so if you could find ways to make it you know just as easy for startups to have access to this you know high skill talent i think you would sort of unlock a whole
pool of entrepreneurial talent that right now is currently stuck at big tech firms um so that's just one example of a policy level i think you could pull that wouldn't be artificially tearing down um you know these big tech companies but would be making it easier
to compete against them um and i think you could try to do similar things for um you know data i think on the data side we sometimes get confused um if we think of data as this like homogeneous thing but like oh just the more data you have always the better it
is data is not context independent it's just you know reams and regions of data and the more you have the better it is um in reality data uh is very context dependent it almost has no value outside of um you know almost the original circumstances that created it and and
trying to almost utilize data is itself it requires like a massive infrastructure internal operation to be able to utilize the data um you know if someone gave you all of the the you know the data from amazon web services or from you know google
search result it's like pretty unclear how you could use that even if you're trying to build um a competition or competitor and even then even if you have this one-time static flow of data that totally misses the dynamic flow of data that actually
matters because it's what happens when you make a change in your platform and then you can see the where the results are um and so i think yeah there might be like one-off isolated cases where i'd be in favor of like interoperability but i think we want to
be pretty careful about that because also trying to make data useful in the first place is a very expensive operation you know it requires building a massive internal infrastructure where you have you know data engineers that can collect
the data in the first place or think carefully about what kind of data you're trying to collect how can you process it actually turn it into useful insights and then how can you apply it and so you actually need lots of talent again at each step of that phase to be
able to turn raw data into something useful um which is i think actually in some sense where the barrier is um and i think there might also be some interesting things you could do with government sector data you know the government like has lots of data
about you know the business sector and uh you know geographical regions and there's been plenty of examples of times in which the government has made uh you know information that they only have and then made it public and then
that's ended up you know leading to two pretty large gains you know probably one of the best examples is a lot of um geolocation data from uh you know uh gps satellites and how that's created you know an entire industry um so i would be interested in also
looking at um you know maybe various um open source data sets or data sets you could make open source um yeah you've been writing about um uh how this attention the news media gives to uh glowing attention news media gives to eu's regulation of tech companies
is so misplaced because if the claim is that they're really going after the big guys um uh you have to explain why only one of the top 30 big tech startups came from uh came from europe and these new startups are the ones that
would be competing against google and facebook and amazon they're the ones that these companies are afraid of and they put up such barriers against starting such things that it benefits the very uh the very big companies that they're presumably trying to target
that's exactly right if you look at you know something like the gdpr uh which you know europe was touting and still you see tons of conversations in the united states about oh well really we should just adopt the eu approach and have our own version of gdpr
um but after the gdpr has gone into effect it's only increased the market share of facebook and google um because you know again it's sort of similar to the immigration discussion um the the more you have you know these large bureaucratic uh
burdens that you need to meet the easier it is for large companies to be able to handle that because they actually have the the staffing resources to be able to have these huge teams of lawyers to make sure that they're compatible um and so yeah the united states is the
one that's actually producing a lot of these top-end um companies that are competing internationally uh they're by far you know uh the most innovative in terms of like patents and where interesting startups are coming from um and then the eu you know talks a big
game but uh their regulations in practice just make it even easier for the big companies to succeed there yeah i i like a thing jonah goldberg says which is that complexity is a subsidy that if you have more cognitive or um legal or whatever other research
or labor resources the more recent the resources you have the easier you can navigate the complexity um that's a great framing yeah yeah um okay so let's get a little bit into the politics here um this might be a meaningless question but
uh given that there's an election coming up which party cares more about innovation or would have a better pro-innovation strategy because you can look at trump and say um there's he might be good on regulation taxes he's bad on immigration and the
congress or the democrats on balance which one is better for innovation yeah i mean i i think trying so almost talking about parties is in some sense uh i don't know if it's the best framing partially because um the parties are so broad i mean if if on
the one hand you have one party that incorporates everyone from aoc to joe biden on the other hand you have everyone that incorporates someone from uh donald trump to jeb bush you know really i think a better way of almost thinking about is that there's
subparties within the existing national parties and they're you know competing and um then whoever you know wins the primary ends up getting um sort of the national thing but uh i would say certainly i think a job biden agenda would be better for
innovation in the united states i think than a donald trump agenda um especially when you consider what i would what i would see is like the biggest driver's innovation right now that we're missing which are things like uh high-skill immigration reform um i
think uh federal r d reform uh you know a lot more housing in these big um you know agglomerations and these industrial clusters this would probably be my top three and on each of those i think you know joe biden has uh expressed more interest in those
than donald trump has oh i didn't know that he was proposing zoning reforms in the big cities well again he's not really talking about many of these things but in terms of like where is the energy within the the the people that would likely be end up
you know put into the the various cabinet positions good good okay i'm happy to hear that but what about the fact that he wants to raise a corporate income tax rate or probably increase the regulations that trump cut down yeah i mean that would be you know bad
in in some ways um everything is like a series of trade-offs um i would say at this point like i i would take a trade-off where we get more high school immigration and more say you know federal r d or experimentation there in exchange for
you know slightly higher taxes or higher regulations in some ways um but again i i think you know the better way to try to look at these things is on a case-by-case basis i mean of course at some level practically you have to choose which of those packages
do you prefer um and yeah that's kind of what i would prefer at this point but that doesn't mean you have to you know strategically you know i'm going to be also trying to to push the buy demonstration in a better direction in some of these things
i'm happy to hear that okay um all right so i want to ask you uh with these three areas what is the most undervalued um phenomenon relative to its impact okay so uh relative to its impact what is the most understudied public policy issue stuff like
immigration taxes regulation healthcare oh that's a good question um i think we still have a pretty poor understanding of um why some of these industrial clusters form in the first place um it seems like sometimes it's like accidents of history you know that it
just so happened that such and such a company was here and then you know there was a number of competitors that kind of formed around them um but then how you get from sort of like a fledgling industrial cluster to something that becomes you know full
scale like silicon valley i think it's pretty mysterious um and uh certainly we've had lots of artificial experiments um to try to you know seed new industrial clusters in other places that have have failed pretty miserably
um but you know sometimes they work so i i think a much better understanding of how and why these agglomerations form is one of the things that i i would love to see um i think also the the structure of federal r d support is is pretty understudied
um you know it seems like both as like a percentage of gdp we've seen you know uh basic r d support from the federal government just keeps on declining as a percentage of gdp um but then also we're just not seeing like a lot of experimentation
in the structure of these grants and so i'd love to see almost like a science of science like uh how do we know that actually the you know these structures where we're using are the best versions of them because i think we're probably pretty far away from the optimal
but um given the huge public spillovers of you know really well-structured well-targeted um you know public subsidies for r d uh it matters a lot so i'd love to see a lot more attention on that too okay so i have it like a sort of like
naive uh i know that like i know like the first few arguments against more government spending in r d and i want you to just uh see what you uh respond with here so matt ridley's new book on innovation talked about this um the problem with government spending
more on innovation is that they don't know where the next big areas of innovation are and so they might be spending their money and worse yet they might be crowding out the priorities of the actual businesses that have a hands-on practical understanding
of what the interesting problem areas are and so the researchers are working on the problems the government wants them to work on instead of the problems that businesses would have a better understanding of yeah i mean i again a lot of these arguments could be true
like in the abstract but not necessarily true on current margins and i think that's probably an example um so if you look at something like the r d tax credit um which is probably like the biggest in terms of spending that the federal government
does um the nice thing about that is that it's not directed towards a particular thing it's basically saying hey you know companies you invest in the r d that you think is most valuable and it will reduce the amount of you know taxes you need to pay on that
basically uh and you've seen that a lot of you know um the the biggest tech companies today are by far the biggest r d spenders you know if you look at like the top five it's like amazon google uh apple qualcomm you know in some order i can't
remember exactly but um it's certainly uh it seems to be successful in in prompting our big tech companies to be able to to spend on r d which is good um i think the other thing is it we maybe need a better structure or a better theory of um what are the kinds
of science that we want the federal government to be investing in so so for from my perspective i think private companies will invest in r d so long as it is sufficiently predictable in sort of what kind of outcomes you're going to get um sufficiently timely in
terms of like is it going to be you know on a profitable timeline in the next you know five to ten years um and uh i guess uh sufficiently um you know cost effective um you know has to be like profitable in some sense um but there's
a lot of ways in which um valuable questions don't fall into one of those three categories and in which previous scientific advancements have not met one of those criterias i mean especially in terms of the predictiveness we're constantly getting scientific
advancements in fields completely unconnected from what we think we're going to be studying um partially because you know scientific advancement especially breakthroughs um kind of in some sense has to be unpredictable otherwise it would have
already been you know discovered um that means that uh there's not really an incentive for uh you know google's revlon's car division to be pouring a lot of money into something that you know might suddenly have an advancement for molecular biology you know um
because uh why why would they wait they do that so the more unpredictable in in terms of what how is this going to pay off the less likely companies are to do it and so i think when you start focusing on what are the kinds of scientific
questions that fall into those three buckets um the less relevant the crowdup question is um because again if private companies are not going to be spending on these areas anyways because it's sufficiently untimely sufficiently unconnected and
not sufficiently profitable um then yeah you have way less concern about uh credo yeah and there's also the question of there's a lot of science that's uh inexcludable and inexhaustible and maybe it's not worth it for companies individually to invest in that r d
but for the economy as a whole the tech is more than worth it for sure yeah yeah uh okay so uh the next question is what is relative to its impact what is the most undervalued future technology this is like stuff like crypto or agi biotech
vr yeah ah it's hard question um i mean i would say sort of it depends on on um if agi does end up being feasible then probably it's agi just you know given uh how wide-ranging its effects would be across the economy um but of course you know that's in some
sense begging the question we don't know if if agi is going to be you know completely um possible to create there might be you know difficulties um that we we're not running into yet that we don't know about um so i i i think one thing i would like
to see a lot more emphasis and research on is um sort of big climate mega projects um that i think are being very under hyped um we're getting to a point where to really avoid um some of the you know worse outcomes of climate change we're
going to start needing pretty dramatic action now um but i think any sort of political approach that basically just asks consumers to take massive welfare hits themselves is going to be completely untenable it's not going to get anywhere um but there's lots of you know big
environmental mega projects that we could do eli dorado has been paying a lot of attention to this um he's talked about um olivine is this kind of um mineral that i think you can put on a lot of beaches um that ends up absorbing a lot more
carbon than traditional sand does but it has a very similar texture the main difference from sand is that it's green so it kind of even looks cooler um uh or you know you could do something like uh yellowstone produces just an absolutely
massive amount of geothermal energy partially because there's a massive super volcano underneath it and so you could tap yellowstone for geothermal energy um supply a very high percentage of the u.s national energy needs um just via that uh and you would also
be reducing the risk of that super volcano erupting so it seems like a win-win um so uh yeah those are i think just a few examples but i think as an area it's really under leveraged oh yeah it's it's super fascinating i actually had no idea about
the specific things you talked about uh and also if you think climate change is a serious threat to human civilization it makes perfect sense to take a few risks uh just see what happens if you throw some stuff in the oceans if it's gonna you know
save for sure yeah yeah you know it yeah okay so relative to its impact what is the most undervalued uh social or true political trend this is stuff like falling fertility rates the rise of asia stuff like that yeah i mean i think earlier i would have
said maybe falling fertility rates just because um you know it's only really in the last couple years especially in the us but i feel like that's become like a major political phenomenon but you are starting to see a couple of books now that are starting to discuss
that more explicitly um raw style that's um uh decadent society makes that a big um central focus uh matt iglesias is upcoming one billion americans talks about that so i'm glad to see that um you know start becoming a major focus but it does seem
like demographics are just so connected with a wide range of outcomes um you know culturally i think it makes like a society more um conservative and less risk-taking um you know when you have an older demographic uh you know megan mccurdle had
an interesting example i think a couple years ago when she was writing about this uh where she talks about you know think about an average town that has uh you know median age of 27 versus um a town that has like an average age of 57 um and just you know when you're that much
older like yeah you are more experienced and maybe you have more uh you know human capital technical skills but partially because you have less time uh and you're you know more embedded in like a family you're less willing to work the 18-hour days
and to you know leave your job to go you know create the new startup um and so that ends up having sort of cultural effects um both in terms of company formation and idea generation innovation um that i i think end up uh resounding and of course even young people that are
traditionally surrounded by an older society i think will themselves be less risk-taking too so um yeah maybe i would still say um you know demographic aging just given the fact that it's starting to get a bit more attention now but it has such
wide-ranging consequences that um uh and it's not really talked about in the you know national discourse in a major way yet oh yeah that was a scariest chapter in the decadent society for me and there was a chapter on uh uh authoritarianism coming to liberal
democracies and the one on falling for syria yeah um okay so by the way does that mean that you expect sub-saharan africa um and parts of asia to be a much bigger deal given that they have rising populations oh totally yeah i
totally buy um you know i think at the end of the decade in society ross says you know one of the the more optimistic um version to some sort of like uh afro uh eurasian um futurism you know where sort of if you imagine um you know
classically uh european uh cathedrals being filled um you know by sub-saharan africa like that that's a great vision and and something that could end up uh you know providing both a sort of like multiple multicultural society that we want to see um while also
uh trying to help solve some of these you know uh birth rate problems well kind of forever yeah so that's the future okay um all right so to close it out uh what kind of advice would you give to a 20 year old maybe when you were 20 or just to a generic 20 year old
yeah um i think i would say think hard about like the kinds of questions that you think matter for society um and where you might be most effective so one of the things that i was trying to think about in my own career is um i think problems that uh like the
profit motive can kind of be brought to bear on i just have a higher um certainty in my own hand that those will eventually get solved like if there's money out there someone's gonna solve it um but where there's not um that's maybe
where there's more attention worth throwing at it um because in sometimes that runs like counter to self-interest um so i think something like uh policy analysis like the reason i'm in there is because it does kind of seem like the missing element in like the american
growth engine if you think about like an o-ring theory of growth where you need all of the components to really be working well for like the rocket ship to take off it seems like bad policy is really the thing that's like um
strangling you know the american growth engine um and so trying to to fix that bad policy is not something that right now is going to be economically you know profitable but could end up having like a really big impact um and it just so happened that i think
you know my comparative advantage was in writing and communicating and went on so that's why i went into that but yeah if you think about yeah sort of you can use a traditional you know effective altruism framework you know what's the highest impacts
combined by uh you know what are your efforts on the margin gonna have the highest impact on and i think that'll that'll get you pretty close to what you should do yeah i'm glad you're doing the work you're doing because um innovation is like the most salient
fact about our civilization if we just look at what makes our life uh better over time it's it's clearly innovation but our incapacity to see future innovation and how much better our lives could be it just makes us undervalued so much i'm
glad you're doing the work you're doing thanks yeah no uh i'm hoping to yeah get other people excited about this too so okay well thank you so much for talking to me this is a lot of fun i learned a lot definitely yeah great conversation [Music] you