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Technology disruption has both positive and negative effects, so it is important to align incentives and consider the cost-benefit trade-offs. Globalization has caused a lack of trust in authorities and decreased social mobility, so Tony Siva proposes relocalizing production for the benefit of those affected. New technologies have the potential to reduce costs and create material prosperity, but it is uncertain whether democracy can solve coordination problems when economic growth slows down.
Technology disruption can have both positive and negative effects, so it is important to consider general principles that can be applied to different sectors in order to maximize the benefits and minimize the harms. Automation of labor could lead to livelihoods being lost, so it is necessary to be systematic in the evaluation of any general rules or principles that apply. Aligning incentives is key, and the joint stock limited liability corporation does this by giving people stock in the enterprise. Utopian approaches to social organization may also be attempting to do the same, but in an implicit way.
Marx's analysis of social order focused on the conflict between labor and capital, and proposed a new social order in which workers would own capital. In recent years, power has been a focus, and technology has been used to correct misalignments. Globalization has been difficult to implement, as it is hard to correlate individual actions and desired goals. Solutions such as stock options are used in smaller companies, but larger companies require working backwards from the end goal to implement local goals. Market forces are used to solve this problem, though not necessarily efficiently.
Technology is causing disruption and elites are not being honest about the cost-benefit trade-offs. Wealth inequality has increased dramatically in developed countries, while global inequality has decreased due to globalization. This has led to a lack of trust in the traditional mechanisms of taxation and redistribution, and the emergence of a quasi-permanent elite class of managers and media elites. This monopoly over decisions has caused people to question the legitimacy of authorities and has decreased social mobility, leading to a justified lack of trust in the system.
Globalization has had negative effects on many people, with elites often disregarding their struggles. To avoid further atomization and destruction of politics, Tony Siva proposes the localization of production and a retraction from globalization. This could help incentivize productive activity and ensure that wealth is produced for those affected. Mechanisms must be put in place to ensure that incentives are aligned with the goal of increasing productivity and wealth, rather than further disrupting the lives of those already struggling.
Extractionist based models of production can lead to alienation at a global scale, and relocalizing production can help to address this. This could involve keeping the value in the same communities or regions, however this is not a complete solution. External signals from the global market are essential to identify and eliminate fraud and incompetence in the semiconductor industry. Solar panels are a more economical option due to their low barriers to entry and abundance of sunlight, potentially offsetting the effects of protectionism.
Technology has the potential to reduce inequality, however, it can also increase it due to the returns on intelligence. Tony is a vocal supporter of decentralization, but the speaker is more hopeful of a concept of prosperity born of super abundance which could lead to self-sufficiency for communities. Ancient philosophies of bread and circuses suggest that if people have a good quality of life and others have an even better one, inequality is more acceptable. New technologies have the potential to reduce the costs of energy, transportation and food, creating material prosperity and abundance, which could reduce the consequences of inequality.
Technology could help free us from drudgery and allow us to focus on pressing issues. Current market solutions only work when scarcity is present, but in a world of super abundance, these may no longer be necessary. This could have both positive and negative consequences, as it is uncertain whether democracy can solve coordination problems when economic growth slows down. This is evident in China, where people are more open to technological disruption than those in the West.
Technology disruption is inevitable and can have both positive and negative effects. To maximize the benefits and minimize the harms, it is important to consider general principles that can be applied across different sectors such as energy, transportation, food, agriculture and labor. Automation of labor could lead to livelihoods being lost, so it is important to find an optimal path to make the most out of these changes without descending into chaos. To make this palatable, it is necessary to be systematic in the evaluation of any general rules or principles that apply.
Technology disruption can be a good thing if the benefits outweigh the harms, but people are often hesitant due to globalization not being done in the best way. Aligning incentives is key, and the joint stock limited liability corporation does this by giving people stock in the enterprise to align their interests with the long-term benefit of the company. Utopian approaches to social organization may be attempting to do the same, but in an implicit way.
Marx's analysis of social order focused on the conflict between the interests of labor and capital, and suggested a new social order in which workers would own the capital to align incentives. This has been further developed in the last generation with a focus on power and its various forms. Technological change can be used to correct misalignments of the past and ensure new misalignments do not emerge, and management is focused on creating proxies for the true goal function that can be optimized locally. This is a key idea in ensuring alignment among incentives.
Globalization has been praised for its potential to benefit everyone, but it has been difficult to see how this will happen. Marx underestimated the difficulty of creating a correlation between individual actions and desired goals. In small companies and startups, stock options are a transparent mechanism for making this connection. However, decisions in larger companies are more complicated and require working backwards from the end goal to implement local goals or loss functions. This is a major problem of civilization and is solved in some way by market forces, though not necessarily efficiently.
Technology is causing disruption and elites are not honest about the cost-benefit trade-offs. Promises are not enough to get through this wave, something new like cryptocurrency is needed as trust in elites is dead. The climate science community is in a legitimacy crisis due to fundamental mistakes in their core scenarios and refusal to admit errors, which is fuelling the conspiracy narrative and political pushback.
There is a disconnect between the enormous engine that produces income and wealth and the traditional mechanisms by which it is redistributed. Wealth inequality has increased dramatically in developed countries, while global inequality has decreased due to globalization. People have lost confidence in the traditional mechanisms of taxation and redistribution as they are functioning poorly or inadequately. This has led to doubt in the legitimacy of authorities and has caused people to question whether mistakes are being deliberately hidden.
Inequality has increased within countries like the US, mainly due to the rise of professionals and large salaries rather than returns on capital. This has led to the emergence of a quasi-permanent elite class of managers and media elites, which is part of the Trump-Bannon critique of society, and is tied to the development of wealth inequality. This monopoly over decisions that affect globalization has led to a lack of trust from the rest of the population, which is justified, as the social mobility figures indicate that America is not as meritocratic as it once was.
The United States is one of the wealthiest countries in the world, yet many people are struggling to make ends meet and have difficulty believing this. Despite the rhetoric of elites, people have observed the negative effects of globalization and are frustrated with the lack of attention to this issue. It is important to ensure that disruption is beneficial to people now, rather than just promising vague retraining and other solutions that never seem to make it into the budget. Changes to outsource labor happen quickly, but the consequences are not dealt with.
Globalization has caused many to lose out, and this could be further exacerbated by automation. To avoid this, mechanisms must be put in place to ensure that incentives are aligned with the goal of increasing productivity and wealth. To bridge the gap between productive activity and the value it produces, Tony Siva proposes the localization of production and a retraction from globalization. This could help prevent further atomization and destruction of politics and democracies in the face of the next technological disruptions.
Extractionist based models of production involve taking resources from the ground, reassembling them and sending them to the other side of the world. This can result in alienation at a global scale, and relocalizing production can help to address this problem. This could involve keeping the value in the same communities or regions, rather than having it flow to other parts of the world. However, this is not a complete solution, as demonstrated by China's unsuccessful attempt to develop an industrialised semiconductor industry despite their expenditure.
The speaker argues that external signals from the global market are essential in order to identify and eliminate fraud and incompetence in the semiconductor industry. Re-localizing production is not necessarily the same as putting tariffs on imports and trying to create a local competitor. New technology has very low barriers to entry, meaning that the capital costs may not be prohibitive and it is viable at different scales.
Solar panels have the potential to be democratizing as they can be built at any scale, from a single panel to larger ones. Unlike coal and nuclear power plants, they are economically and practically viable on a small scale and can be found everywhere due to the abundance of sunlight. This means that localized production is more economical than globalized value chains, as raw materials don't have to be shipped from the other side of the world, and there are no scaling benefits to justify such transportation. This could potentially offset the effects of protectionism, though it is likely that some of it will still occur.
Technology has the potential to make local production more viable and competitive than it is today, however, this is an oversimplification. Despite the democratization of certain sectors, such as video production, the Pareto Distribution still holds true for incomes. Every technological disruption intensifies the effects of the Pareto Distribution and spreads it to more areas of the economy. Relying on decentralization alone is a dangerous distraction and a different solution is needed to combat the effects of the Pareto Distribution.
Cryptocurrency is a new form of decentralization, but it could lead to increased inequality due to the returns on intelligence. Tony is the most vocal supporter of decentralization on the team, but the speaker is more hopeful of the concept of prosperity born of super abundance which could lead to self-sufficiency for communities, sub-regions or regions. This could be a solution to the problems caused by decentralization, although it is a trite idea.
The ancient idea of bread and circuses, that if people's bellies are full and they are entertained, they will not complain, has been seen in both ancient Roman and Chinese philosophy. There is an underlying logic that if people have a good quality of life and others have an even better one, inequality is more acceptable. New technologies have the potential to reduce the costs of energy, transportation and food, creating material prosperity and abundance. This could open up the possibility that inequality will not be as consequential as it is today, creating the space for agreement on how to address remaining problems.
The problem of solving pressing issues is made more difficult due to the inability to agree on how to start. Technology could help free us from drudgery and allow us to focus on these issues. The current way of solving coordination problems is through a web of markets, but these only work when there is scarcity. If things become too cheap to bother putting a price tag on, then the market solution does not work. Water is an example of this, as it is so abundant in some places that it does not require a functioning market.
In a world of super abundance, the market mechanisms that allow for the production of goods such as pipes and pumps may no longer be necessary. This could have both positive and negative consequences. Democracy and economic growth have gone hand in hand, and it is not clear whether democracy can survive in a low growth environment. This is evident in China, where people are more open to technological disruption than those in the West. It is uncertain whether democracy can solve coordination problems when growth slows down, and it is important to consider the implications of this.
Growth in the economy should be broad-based and real, leading to real benefits for people in order to encourage them to accept disruption. To achieve this, it is necessary to grow the economy, although this is difficult. It is important to consider what is meant by growth and to distinguish between elements that are essential, beneficial, and those that are not productive. There is a hope that prosperity can be decoupled from economic growth, and that it can be achieved without the pollution and other unintended consequences that are often associated with it.
so yeah what i was hoping we could talk about is um the the social uh implications of technology disruption and they're sort of unavoidable we've touched on them of course but but in particular i'm wondering if we can think of any sort of solid general principles that might operate across many different cases of disruption um that are that can be useful as a guide for how to maximize the benefits of of relatively rapid and abrupt and and um uh substantial technological change uh and minimize the harms of that and i think that we at the present moment we we certainly can imagine that uh the disruptions that seem to be imminent in a number of different sectors so we've got energy we've talked about we've got transportation we've got food and agriculture we've got human labor the labor markets of globally it's easy to imagine that as as extraordinary as some of the benefits might be there also be major um uh harms done to to uh individuals to communities and perhaps even to entire societies because the um you know there are almost certainly going to be livelihoods lost by the tens of millions farmers um especially uh come to mind but if we automate labor more broadly then then you know who knows which livelihoods will even be safe so we'd imagine that there's you know there are some major downsides major risks of harm even if the potential benefits in the longer term in principle hold and i should avoid using the word in principle there because i wanted to reserve that actually for thinking of principles of how to sort of maximize the benefits and minimize the risks and harms but at any rate we can imagine that there that there will be both benefits and um uh detriments to disruption certainly in the short term and i'm wondering if we can be systematic in our evaluation of um uh of any general rules or general principles that apply to um you know to sort of charting a path an optimal path through that that um that challenge right that difficulty of you know getting the most out of these things without um without sort of descending into chaos in the process and uh uh i think that there's there are a number of reasons for doing this i mean one on its face it seems like it's pretty obvious um but uh a second one that's perhaps not quite so obvious is that um uh if if we want societies to be prepared for these um technological changes that are coming and if we imagine that there is an inevitability to them um then the the overarching idea of them needs to be palatable and right now
it's so threatening because the the downsides are so obvious to so many people or or or easy to imagine for so many people at any rate um uh whether they're whether they're valid or not uh that it's it's this is the the instinctive reaction is to is to um uh sort of to hunker down and defend the status quo and um as we've talked about i mean if there if these changes are in a sense inevitable then that is quite a futile response as well as you know ultimately being sub-optimal if if the benefits outweigh the harms which we imagine i think that they probably will in the longer term so at any rate the the this is always kind of a fancy way of saying um let's see if we can figure out a general way to think about disruption and uh make it a good more of a good thing than a bad thing yeah i wonder if i mean i guess one of the reasons why people might be hesitant to be enthusiastic about technological disruption is that i wouldn't call it globalization at least the latest version exactly a technological disruption but it's certainly a disruption in the organization of manufacturing and labor and this is kind of a textbook text textbook example of how not to do it in a way right in the sense that well um the benefits and harms accrued to different groups of people and uh the benefits accrued to small numbers of people relatively at least in terms of um well that's not fair but they definitely accrue to different groups of people right as many say midwestern towns in the united states can attest so it seems like the key problem is something like aligning incentives right i don't know how to think about that at a in a country scale but one of the key innovations of the joint stock company um there was a there's an interesting book i read i think it's by william rosen it's called the most important idea in the world or something along those lines it was about the industrial revolution but it was not about well it was partly about technology but it was emphasizing the role of patents and the joint stock limited liability corporation in being the vehicle for coordinating groups of people by aligning their incentives namely by giving people stock if they're part of an enterprise so that they are aligned with the long-term benefit of the company and not just in aligned with the short-term benefit that would be the case if they only drew a salary right um right and i think i think i mean in in a perhaps not an explicit way but i think in in an implicit way many utopian approaches to social organization or
social critique and i'm thinking in particular marx's analyses and the and the the interpretations of marxism and communism and socialism there are various different flavors that followed in the wake of that we were i think a part of the the the concern there was that the interests of labor and of capital were in conflict and and the thinking was well we can imagine a new social order that aligns those in other words um uh if if the you know the the workers own the capital then there's then that aligns the incentives it and it solves that that misalignment problem and or at least allegedly or at least you know implicitly that seems you could infer that that was a major part of the goal of the um prescriptive responses to marx's original analysis and and and a lot of his original analysis was showed i think that um uh what happens when when these you know these incentives are are misaligned and i think it's a lot of social uh thinking even today now especially with this focus in the last generation or so in the social sciences on power in its various different forms um that's also you know deeply connected to incentives right um so i think you've really hit on a key idea there which is which is through these disruptions uh through it or i mean we've been talking about just disruption but i suppose it could be any technological change um uh yeah keeping incentives aligned or correcting misalignments of the past or ensuring that new misalignments don't emerge that seems to be a very uh uh important sort of general principle to try to try to keep a sentence and keep or ensure that um alignment among incentives yeah very very good yeah it's i mean if i could use a computational metaphor so the the thing that strikes me that's clever about the way that say startups work versus the way a large i mean a large part of management is somehow constructing proxies for the true goal function which you can implement locally and which you can get employees in a small part of an organization to optimize for but which are somehow correlated with the overall goal you're trying to maximize if that's an appropriate language right where if i draw on the board here i mean if here's your organization and somehow out here is the target function whether that's income or you know if it's a company i mean if it's a country wealth or you know wealth plus whatever metric you decide to optimize for maybe that's leisure time it doesn't matter but that that overall aggregate quantity is a function of many individual
decisions in a very complicated way right and decisions that don't directly affect the the end goal but do so through many intermediaries so maybe that's maybe this is an individual and they're working inside a company and they only affect the overall well-being via their effect on the production of wheat and so this is wheat and wheat only affects overall wealth by you know being sold at a supermarket and etc etc and all the way through um and a key management problem is to to work backwards from that desired end goal to implement at each node some kind of local goal or loss function in machine learning language for which individuals will optimize and that's you know incredibly difficult i guess doesn't really work one of the places where it really works is small companies in the early stages namely startups where stock options are a very transparent mechanism for making this correlation between the sort of desired goal which is increasing the value of the company and individual actions and individual actions can have a tangible effect on that just by looking at the number of customers changed in a month or whatever that's kind of why i guess people like working or some people like working at such organizations because that connection between the goal and individual action is so tight and it's a lack of respect for that i mean it seems to me that one of the major critiques of socialism is is just that it pretends this problem doesn't exist right as though right right you simply you simply i mean this this problem is everything right this is the problem of civilization this problem is the hardest problem we have in many cases and it's uh solved in some way by market forces i suppose you could say although maybe not very efficiently but to pretend as though it doesn't exist it's i'm not saying this is a modern socialist doesn't make this mistake probably but marx certainly underestimated the difficulty of that and if i if i think about what happened in the latest round of globalization and which no doubt certainly has informed the attitude towards technological disruption of many of your countrymen adam um yep yep then it's very difficult to imagine actually how you uh because people will always say and they did say and kept saying for decades in the uk in america here in australia that globalization is great uh it will benefit everybody and if if you are resisting it then you're a protectionist redneck um and of course many of the predicted harms of globalization did come
to pass for many parts of society and the fact that it happened continues to be denied by many elites and is one of the reasons why politics is completely broken in your homeland and in the uk and increasingly here so i i think i'm very skeptical of the capacity of current elites to talk honestly about the cost-benefit trade-offs of technological disruption um at least in the west and so the problem the solution can't be to simply get the elites and experts to think about it and then tell everybody a reasonable thing to do because at this point nobody will believe them and nor should they probably so it's yeah i mean go ahead i'm just going to say that you know i think promises aren't enough for getting us through the coming wave of technological disruption i don't know whether it's mechanisms like cryptocurrency or something else but something that doesn't require trust in elites because that at this point is dead in the water yeah it's interesting you mentioned that i've just i just wrote a um i'm i'm working on a new essay a new blog post for our our site that touches on a little bit of the on a little bit of that in the um with respect to the climate science community the specific example i'm using is that um we are sort of in a legitimacy crisis uh among i'm not thinking sort of power elites or political or um economic elites i'm thinking in in the um in terms of authorities of knowledge so knowledge elites whether they're academic or you know the scientific community more broadly than just academia um government institutions of science and and technology so the cdc for example in the united states has come under a lot of scrutiny it's it's um made some major missteps during the covet um covered 19 pandemic and in the case of climate change um uh the current piece i'm working on it it points out these major flaws major errors fundamental sort of mistakes that the um that the environmental and climate science community made with respect to technology in its um in the core scenarios that the entire community shares and that the entire community bases models and and um analysis on and recommendations to policymakers and we talked about those and of course one of the the cr a key crisis of legitimate legitimacy that i think is coming is that um the community refuses to admit those errors and uh uh is not owning up to them and this is only fueling the the um uh the the conspiracy narrative the political politically motivated um uh uh pushback that says the scientific
community has an agenda and is being dishonest and um by refusing to admit an error we end up you know looking like the only other alternative which is liars and you know you when you make a big mistake you can either admit you were a fool or you could pretend it was pretend it was deliberate but if it's a big enough mistake you know people are gonna say wow that was really horrible if you really did that deliberately um and uh you know that's what it's it's it's refueling that um uh that uh uh doubt in in the legitimacy of these of these authorities so i i completely see where you're coming from it's been on my mind recently and one thing that occurred to me in the process of thinking about this and looking at the diagram that makes sense with what you've drawn up here is that we we have um i think we have a major disconnect between this this the this enormous engine that is producing income and wealth and the the traditional mechanisms by which that uh income and wealth would have um recirculated back to the throughout society right so although societies in the past the wealth was certainly polarized um and you know income um was captured by uh capital owners and elites of various kinds political elites and so forth um uh it was it was of a different magnitude and of a different i think maybe character than in in the era of globalization and um uh you know giant multinational corporations and individual people who are worth you know 200 plus billion dollars now this this just looks shocking to to people and individuals are operating inside a system where we can see that a fantastic amount of wealth is being created and yet somehow they're still struggling still they're hanging out by their fingernails and the traditional mechanisms of you know claw it back with taxation and then redistribute it that just seems to be fundamentally broken in some societies like the united states or at least at least functioning so poorly and inadequately that people have lost all confidence in it as an effective mechanism um and uh i i'll i'll stop there for a second and let you chime in dan but um uh there uh there is a follow-up to that which i'll get to in a minute but go ahead and and um uh yeah i was just going to comment one thing which is the the increases in wealth inequality within uh developed countries let's say i mean as you know the global inequality has decreased dramatically due to globalization because china and india have become much less poor than they were
mainly that's the cause but within countries like the us inequality has increased but it's not because i mean the major driver of that is the rise of professionals and large salaries rather than necessarily return on capital i mean i guess there's a lot to pickety's argument about the return on capital and so on but the statistics show that it's just large numbers of people with high salaries that drives the inequality and it depends how you how you measure inequality i guess but i think in terms of the social effects there have always been you know rockefellers and uh races right and gates and i don't think it's the exist i mean i don't think the fact that bezos is much more wealthy than rockefeller if indeed he is relative to you know global wealth or whatever uh i don't think that's the driver of the problems we're seeing because those people they have a lot of influence but i think it's a bit of a cartoon villain problem where people or something right right right i think it's much seems to me much more the case that the existence of a large kind of stable i mean in china it's clearly an aristocracy in the west i think it has many aspects of that it's less dramatic and clear-cut here perhaps because we tend to think of it as still to some degree meritocratic uh you know that's i think the the um uh what's the what's the term social mobility figures tend to indicate that in fact you know america can not really call itself a meritocracy to a great degree anymore uh i mean more so than many other places but much less so than it was in the 70s and 80s for example right right and the emergence of that quasi-permanent elite class of managers and uh media elites and others i mean that's that's the part of the kind of trump bannon critique of society that is true i mean lots of it's insane but there is some truth to that and it's tied to the development of wealth inequality and to the fact that that class of people to which i mean i guess you could say both of us belong um at least we're at the lower ends of that the the monopoly that we have over the decisions that affect for example globalization not us directly of course but sort of the class of people to whom we talk and circulate with um basically uh the other the rest of the population doesn't trust us slash them um anymore and maybe they shouldn't and this is you know i think i mean certainly in the united states in the united states that trust is is that or that distrust is is it's hard to argue that it's not justified it's and
we often hear and whether it's accurate or not you know we hear this this common refrain the united states is the is the richest country in the history of the world and you know you can you can split hairs on that but at any rate it's the the united states is a very very wealthy country both in absolute terms it can as a whole and on a per capita basis um but you know the the um you know the the the it's tough to hear that and then find yourself as an as a for example someone working for minimum wage and really struggling you know basically having a more or less impossible time of getting by with any semblance of security um uh is is you know it's it's very difficult to to to um to become invested in the idea that or rather in the ideal that this represents you know um so it's understandable and i think i'm a bit frustrated actually with i mean i used to think of myself as being on the left i don't know where i sit politically anymore for various reasons but same here i'm pretty frustrated with many you know most of the people i know from my job are left leaning many very left-leaning and i'm pretty frustrated with people's inability to really understand what even like pay attention to for example trump's speeches in the 2016 election you know it's easy to character trump as an idiot and you know certainly not a fan of trump but uh i read his ghost written books and i listened to his speeches because i thought he might win as he did um and you know those speeches are a very clear articulate critique of decades of promises by elites that globalization would be great followed by the you know gut-wrenching decrease in living standards in many parts of the u.s and that's echoed in many other places of course outside of the us and people can connect the dots right even though they're being told the dots are not connected over and over and over people aren't stupid and they can observe basic facts about the world and draw conclusions so anyway maybe we're getting on a bit of a tangent but i think that uh if one wants people to buy into disruption then uh it has to be like not that the benefits are true to people now and then we'll deal with the negative consequences later which was of course promised you know there's always vague promises of retraining and all sorts of other things but somehow they never quite make it into the budget but you can bet that you know whatever changes were necessary to outsource the labor happened pretty fast the problem is it's it's sort of unclear
how to that's what i mean by aligning incentives right so to be blunt about it so the losers from globalization in the next round whether that's automation or whatever how do you actually put in place mechanisms that they can trust that actually align their incentives with the overall goal of leveling up the society to a new level of productivity and wealth which now that is what is achievable with these technological disruptions but i mean we're guaranteed to further atomize and destroy our politics and democracies if we let the next three disruptions happen in the same way that globalization did i don't i don't think we'll make it so i have a couple of things to it is great it's fantastic and and um i'm very much of a of a mind with you on on all of this um a couple of things to think about here um the first is that the uh and again i'm looking at your diagram but if we think that that production productive activity however you want to however you want to define that but let's let's keep it abstract for now this pro this you know the productive activity occurs in in in um it occurs in let's let's again let's keep it very abstract productive activity occurs in one place and then the the wealth the value again very keep it very abstract it's not even used let's not even use income or wealth um more abstract than that the the value um uh and in some sense at its most abstract remove that economic growth and economic production and it's pairing to consumption uh they're but they're about value they're about utility in some sense okay so let's keep it very abstract the the the um uh there's there is this going back to mars there is this alienation there is this there is this divide the separation between um productive activity and the value that that productive activity realizes in the world now if you want to make all of that more concrete you can say well the people who do a lot of the work inside the companies and institutions and factories and on the farms and wherever else they are creating a lot of um uh useful stuff goods and services and somehow the value of that stuff is captured elsewhere it's it's it's it and there's this gap okay so this has long been observed and discussed and analyzed and so forth one of the things that that uh my team and in particular tony siva is is very keen on as a potential uh way to respond to that um uh issue is by the the um the localization of production and the basically a retraction from globalization and every and and
withdrawal from the current uh uh prevailing model of production which which in our team i'm not such a fan of it but our team is generally you know you know how these terms are we just come to use them and we get stuck with them um but this we call it the sort of the extractive um or extractionist based model of production where you're sort of you're sort of in in in a crude sort of cartoon version you're digging up resources from the ground under your feet and you're you're flipping them around reassembling them into something useful and then you send it off to the other side of the world and somewhere you know people pull people pick a percentage of value off of that uh constructive work along the way until it reaches its final destination and maybe may well literally be on the other side of the world in fact for a few things like the ingredients and batteries at the moment they're crisscrossing oceans several times before they get to their end use which is you know in some ways called madness and the idea is that if if oh if if production were to become relocalized as a you know and to shift away from um to back off from globalization um then uh this would allow the value to if not to remain literally in the same hands as those who produced it to at least remain in the same communities in the same regions that this would go a long way to um redressing the this problem of alienation at the global scale that we've seen from you know sort of inter-regional international um uh uh globalism uh alienation that you talked about with globalization so this is one potential possible you know one potential um i wouldn't call it a solution because it's very unlikely to be a complete solution but it is a way to sort of redress that that um uh uh problem that we see you know by shifting a little bit of the dynamics in the system and and um tightening the you know the loops um so that they don't extend so far uh from from um their points of origin uh so that's sorry go ahead yeah um i guess it strikes me as the the history of protectionism and the attempt to develop industrialized economies in the presence of say the british head start in textiles um plus the okay let me start with the example of china and its chip industry currently so china's been very successful in in creating a local tech industry in some sectors as you know but so far well uh relative to their expenditure anyway much less successful in semiconductor manufacturing and part of the problem there is
well you can you can for example put subsidies on imports and close off a part of your economy in order to nurture a local competitor but then the discipline of actually having to sell your product in a competitive marketplace is i mean that that's part of the signal that comes in at this end point here right in my diagram which is which is so valuable right because you your company or your i mean there's an incredible amount of fraud and incompetence in the semiconductor industry in china plus a lot of brilliant engineers of course but a lot of their efforts are sort of wasted because of fraud and theft and lying and etc and that sort of happens in here somewhere right but the signal from the outside is a bit like sunlight and if you it allows you to locate those things that are really screwing up and and it gives you the leverage to get rid of the people even in the face of local opposition and power structures within your company and government interests and connections and all of that i mean if you can just point to we are not succeeding against our international competitor well that's a very clear fact that you can use to make the internal changes so it's a bit like back propagation in in training a neural network right if you have an error and you can pin it down then you can correct it but without that external signal it's ambiguous actually what's an error it's a matter of opinion so i think my concern about relocalizing manufacturing is to what extent is it actually different to just for example putting on tariffs on a country's imports of semiconductors and trying to have a local competitor i mean if you do re if you do localized production then at the beginning it's not going to be competitive with the global production it's a bit like you know trying to compete with british textiles after they've gotten a head start you have to put up some kind of tariff boundaries i don't know any other way to do that historically well i i think the i think actually well i can be wrong here but i think the conception is that um the new technology the the the specific technologies that we're talking about um by their nature have uh very low balance very low barriers to entry um and and relatively unlike i should shouldn't be so hyperbolic they have relatively low barriers to entry they have um potentially uh they're viable at very at different scales and so you the capital costs are not necessarily prohibitive i mean that's obviously the cost of capital is a very big barrier to
entry um but expertise and and other things are as well but if you imagine you know if you imagine solar panels for example one reason why they're arguably have the potential to be democratizing and to help localize uh uh production is that uh unlike coal power plant certainly unlike a nuclear power plant you know you can build solar panels at any scale you you know every anything from literally a single panel it costs a few hundred dollars on up i mean even smaller than that you could wear you can literally wear solar panels and batteries on your wrist and a wristwatch and and so there's there are all these viable um smaller scales that you know you can't put a nuclear power plant i mean people talk about small modular reactors and so forth but so far that's a that's you know it only works in powerpoint presentations it's not a reality yet and we're not close um and certainly coal power plants you know that's similar sort of situation um uh and so the the that pattern in principle we think holds quite well across a number of these technologies and what that means is that uh because they can be economically and practically viable at a small scale locally and you know the availability of sunlight everywhere as opposed to you know coal which is only in a few places and oil which is only in a few places you know concentrated unlike concentrated um uh natural resources sunlight is abundant you know many areas um uh you you have a situation where the the localization of production is a logical economic consequence in other words it ends up being cheaper than the globalized um uh uh value chains that we have today and mainly because the the raw materials that you need are available locally they don't have to come from the other side of the world and the scaling benefits aren't there so the you know the the the savings from having them kilometer long factory on the other side of the world don't aren't there and so they don't justify shipping all over the all over the all over the world to take advantage of those scaling benefits um and so this is the idea is that is and i think that's what maybe has the potential to offset you know um the the i mean you talked about how it could be this could be something a phenomenon that ran parallel to protectionism and it wouldn't work and i i think that certainly some of that's true and i think we're almost certainly likely to see that i mean people are not people let's say um institutions and decision makers who have uh and even ideologies and political you
know um uh parties and so forth that have embraced protectionism in the past you can bet they're gonna trot that that same sort of philosophy and thinking out again when it looks like it can work a little better this time thanks to helping hand from technology right so i would say i think we should probably be on our guard for that but with luck um uh the uh they will you know these technologies will actually be viable economically and competitive is what i mean by that um at a local level in a way that that um uh that local production today isn't because there's such benefits just to scaling of production elsewhere um and uh and i i think probably doesn't hold across the board and it's almost certainly an oversimplification but i think this is one thing that these these the character of these new technologies at least offers a little glimmer of hope that that will be um possible so i guess i i sort of want to believe that but i actually don't see the argument almost at all so you could why why doesn't this argument apply not i mean take manufacturing and replace it by video production you could have said that youtube definitely democratized video production and made it accessible i mean there's probably 100 times more people making a living making videos selling makeup doing 100 other things 100 000 other things on youtube but the pareto distribution still holds for their incomes so democratization isn't doesn't mean that you actually mean you democratize access to say manufacturing and suddenly you'll have a pareto distribution again because some people are just much better at making use of that resource and the same disruptions will make transportation much cheaper and more efficient so it will draw the global economy ever tighter together i just i i i you know i'm not an expert but i do sense a kind of great dose of wishful thinking in many of my friends are very enamored of localized production and moving away from uh you know localized governance and many things like that which i i see the draw but i feel like it's actually a kind of dangerous um it's uh it seems to me like it might be a bit of a distraction and allow i mean if you just accept that the predator distribution holds every technological disruption will heighten its effects and spread it to more areas of the economy and by default like you can't compete with that then you're sort of forced into finding a different solution i i feel like relying on decentralization like even even the forms of
decentralization which have appeared in recent you know years decades in the form of cryptocurrency which is genuinely a new form of decentralization under the sun i i don't see i mean they decentralize certain things like you know you don't have to trust centralized institutions to the same degree but economically i think there'll be enormous forces for increasing inequality because they will just multiply by massive factors the return on intelligence you know if if smart kids in you know rural india can can make a living writing smart contracts then then they they will and it will just you know make the returns on intelligence much higher or something like that i just i think like the the idea that decentralization automatically leads to uh like leads us back to the glorious 80s when the middle class was functioning and vibrant and on the way up this just i don't see this um but yeah i'm i'm i'm in again i'm i i i yeah it's a larger conversation to have and and i'm the the are the biggest uh the most vocal fan of this as a in a general concept on our team is certainly tony and he could articulate i think some of his reasoning better than i can i'm sort of having to put myself in his shoes i have us personally i i mean i can't really respond to all that because i'm going to need more time to think about it i mean you raise very very very keen uh you know insightful points there um i so rather than trying to you know on the spot think through those um that's going to take me some time as it always does with the things you you bring these conversations down um instead let me let me mention something that i have thought a lot about which maybe it it doesn't make this any of this irrelevant but i think it adds context so one of the things that i've been thinking about that i think connects to sort of the localization of production certainly uh production that is that can lead to um uh self-sufficiency and i don't mean self-sufficiency like in some mountain man you know individual rugged individualist in the wilderness kind of thing i mean like a community or perhaps some you know uh uh sub-region or region um self-sufficiency um and so it's so connected to that idea um i actually have a lot more of my hopes pinned to the the uh prosperity itself and in particular prosperity born of of super abundance that um for for um uh for solving some of these problems and and and so in some ways this is quite trite unfortunately so there's always been this very very long time in this idea
that um you know people won't complain too much if uh you know their bellies are full and they're entertained you know the bread and circuses kind of um uh idea that goes back you know many many centuries uh to ancient roman earth certainly earlier than that and their analogues i think for that's that sort of um uh thinking in in um uh in ancient chinese philosophy in texas well i've encountered that same idea many times but i do think that there is sort of a a an underlying logic to it which is that if um if if life is prosperous enough for everyone then um uh inequality has less sting to it right i mean if if somebody else is a law is alive and healthy and their children are alive and healthy and you are dying and your children are unhealthy and dying this is not an acceptable you know kind of equal inequality that you can live with but um if if you're doing fantastic and you have a great quality of life and you know somebody else down the road has um an even more fantastic quality of life well that kind of inequality is something maybe we can live with and so my um uh what i'm what i'm wondering is if in this again with these particular technologies we're talking about today at the moment um that are that according to our analysis are going to radically reduce the costs of pretty much everything in the global economy by by reducing the cost um and and the um uh and the externalities associated with energy and with transportation and with food and agriculture and and you know sort of their multiplicable multiplicative effects amongst those three things so they they sort of sort of um magnify one another's effects as you can imagine so that uh my my hope again this is just a hope my hope is that um the material prosperity that emerges and the st and the super abundance material super abundance that emerges will um uh at least create the open up the space you know open up the possibility that um inequality won't matter as much it will cease to be as consequential as it is today and um i i think that that that may be a precondition for then you know um coming to agreement about um uh you know how to address the remaining the problems that will certainly remain afterwards and and so that's a way of saying that right now these the problems seem so stark and that they and they are so divisive and there's so little consensus or agreement more common ground about how to address these problems that we've got um uh you know distributional problems basically that you know we we we're at a
standstill so even though the problem is massive we can't we can't even agree on how to start solving it which is sort of an ironic situation to be in right if the problem weren't as bad if the problem weren't as stark then it would be easier to agree on trying out some solutions to it and ironically would be probably easier to get to make progress on solving um uh uh problems that were less pressing but because the problems we have are so pressing you know we can't even get started on them because we can't you know we can't agree enough to get going um and so so this is this is this is at least part of my hope is that um uh uh the the the the um this technology in it's in its in in its idealistic sense will um will free us not only from sort of the shackles of toil and drudgery but also get our eyes up out of the dirt and you know our our get our get our vision um higher so that we can stop squabbling and we can actually make progress solving other problems and and one last one sorry one last piece to add to this is that um the current way that we the current way that we solve a lot of the coordination problems today inside the the circle of the diagram that you've drawn there dan is we depend on sort of a web i guess in some sense it's a hierarchy but really it's more of a web of markets right that are all sort of functioning together and they're aligning incentives and and and but markets only work when they're scarcity so that mechanism that sort of that sort of coordination and allocation uh mechanism the market solution to that to the problem of allocating um resources you know that only works with scarcity it doesn't work for things that are too cheap to bother putting a price tag on and um so that's you know if a lot of things entered that category of being just too cheap to bother you know um bother bother um uh applying competitive production dynamics to so in other words by you know if if like like um i'm trying to think of an example um like where i live water for example fresh water is in the in michigan is so super abundant um that you know we don't really have uh functioning markets for it you can just you can you can stick a pipe in the ground you literally hammer a pipe 80 feet into the ground and get as much water as any you know unless you're nestled and want to bottle 100 million gallons a day order i've used this i've mentioned this example in the past i think um uh it's it's a super abundant resource and so markets don't function around around
that um here they're different markets you can you know there's a market for for pipes and hammers to hammer them into the ground with and there's a market for pumps and so forth but um not for the water itself because it's just too abundant and i'm wondering if a lot of things move into that category we lose we lose that market mechanism and that in itself could be a you know um well it has it it that in itself has has potential upsides and but also major downsides right if we lose the the benefits of that of those mechanisms so this anyway that's that's part of my thinking is that um localization of production could go hand in hand with the emergence of super abundance uh in a material sense and the end of scarcity and in some ways we depend on that scarcity today but that scarcity also is the source of many problems so it's um disentangling all that is is you know that's daunting but it's part of what we've got to think about i guess um i guess we have to wrap up in a minute i gotta there's a new seminar this week which is about um learning in cells you're welcome to follow me tonight but i understand yeah that might be relevant to your interests in uh sort of related to our conversation last time actually um but i want to pick up on one thing you said briefly which is yeah i often lavender and i often discuss how it's easy to think that democracy itself solves a lot of problems but since democracy at least very modern forms of it have come hand in hand with a lot extended period of economic growth it's maybe not so easy for us to disentangle the two and i think that actually we don't know how to solve our problems we just grow and then the problems become less acute or they change and to an extent we came to think we'd solved a lot of coordination problems when in fact we just learned how to grow and when growth slowed down suddenly we discovered that actually we're really bad at solving coordination problems and democracy doesn't help much uh or it doesn't doesn't solve the problem i'm i'm not convinced that democracy can survive in a low growth environment which is why i'm very skeptical of people who want to return to you know something like low growth or no growth and think that's sustainable i'm much more skeptical of democracy in a low growth environment than than most people i just you just look at china right i mean definitely not a democracy but chinese people are much more open to the idea of technology and technological disruption than people in the west why
because they saw growth in their lives as a result of it in recent history it's very straightforward right and not like growth in the sense of some segment of the population gets more of a fixed pie but actual growth right where right right broad base growth i i very much agree with the sentiment i think you're expressing which is that the key to getting people to sign on to disruption in their lives is to grow the economy in a real way for them and then that's it right but that's hard but i don't think there's much short of that i don't know of any and you could imagine new institutions or something else that might fix the problem i mentioned earlier and tie promises of benefits to uh you know actually make the elites that make the decisions deliver on those promises but like i think it's in some sense very simple right we we either grow or the problems don't go away maybe that's good news right because the disruptions in principle should lead to growth but maybe we should pick the order of the disruptions carefully or something right so that well let's let's i know you've got to go but let's pick this up right here next time this is super exciting it's a really really interesting topic i i'm very sympathetic to it as my thinking has evolved over the last 10 years or so i i've come to think i think in ways that are very aligned with what you're saying here um and but with some perhaps with some subtle differences too and um uh what i think one thing that would be really great to talk about would be to define what we mean by growth and to unpack the um uh you know all to disaggregate all of its different um sort of all the elements that comprise that and see which are the things that are essential which are the things that are really beneficial which are the things that we can you know that we ought to really be continuing continuing to grow um when we say economic growth or something like that and what are the things that that uh that we need to decouple from economic growth that are currently coupled that are that are not productive but have just sort of been baggage or or unintended consequences or side effects or whatever um you know sort of pollution along the way kind of thing um and i think i mean there there there's this hope in the environmental community maybe a little bit in the d growth community that we can have that prosperity or or not that's typically not defined that way it's typically this this sort of psychological version of prosperity pure almost purely