Is AI Really Taking Our Jobs? — With Noah Smith

Channel: Alex Kantrowitz

Published at: 2025-07-02

YouTube video id: UZTXhql1su0

Source: https://www.youtube.com/watch?v=UZTXhql1su0

Star economics writer Noah Smith joins
us to talk about AI productivity,
immigration, why our politics are so
silly, the state of the US China
relationship, and much more. That's
coming up right after this. Welcome to
Big Technology Podcast, a show for
coolheaded and nuanced conversation of
the tech world and beyond. Today we're
joined by one of my favorite writers.
Noah Smith, aka No Opinion, is here with
us to talk about whether AI is actually
leading to productivity, but also a lot
of bigger and broader questions about
the state of the US and the global
economy, including the USChina
relationship, immigration, uh, and
tariffs. Great to see you, Noah. Thanks
so much for joining the show. Great to
be here, man. Thanks for having me on.
It's great to have you. I definitely
want to talk tariffs with you. Um, we're
going to do that in a little bit. But
for our audience, really the bread and
butter here is artificial intelligence.
And a big question is, you know, amid
all the hype, all the bluster, is AI
having any impact on productivity? And
for someone, you know, in your position,
you've examined this, you're an
economics writer. Um, I thought we would
just start there because we'll we'll um
cover the stuff. It's definitely going
to be of interest to everybody. Uh, and
then we we'll go broader as we go.
Right. So in terms of impact on the
productivity statistics, it's hard to
tell because AI as we know it has only
been around for a couple years and um AI
LLM. Yeah. So like other AI, you know,
machine learning just like computer
vision or stuff like that. Um old ML,
old AI kind of stuff that probably had
some effect, but probably, you know,
there's a lot of other stuff going on.
We've had good productivity growth since
the pandemic. like not spectacular but
solid. And you can always think about
whether that's in the face of headwinds
from anti-development restrictions or
curtailment of trade, you know, like not
just tariffs, but like just general
deglobalization,
uh, China buying less of our stuff,
things like that. And so, you know,
there's a there's a lot of other stuff
going on. And so, we've had decent um
productivity growth and it's all been in
services. None of it's in manufacturing.
Actually, uh, manufacturing slowed down.
Oh, yeah. Go ahead. No, service
productivity is the kind of thing we'd
expect uh LLMs to to add to, but the
service productivity boom has been
around a lot longer than LLM, so it's
hard to tell. And we haven't really seen
mass business adoption. You know,
obviously ChatGpt is a popular website
that has many millions of subscribers,
but so, you know, in that sense, it's
like but but it's hard to tell whether
that increases productivity at all. It's
hard to tell whether that translates in
terms of like companies using AI to do
stuff. It's too early to tell with that.
Like we haven't seen that happen yet. We
just had a McKenzie report come across
the big technology discord that I found
interesting where the consulting firm
finds that nearly eight and 10 companies
have deployed generative AI in some
form, but roughly the same percentage
report no material impact on earnings.
They call it the generative AI paradox.
I mean, it's not that companies aren't
trying, it's that just they aren't
seeing success. What do you think about
that? Um, so I think that uh here's a
story from the uh this is one of the
economists favorite stories about
technology and it's the story of how
electricity was incorporated into
factories. So originally you had steam
powered factories which would
essentially had a large boiler. the
boiler would turn a belt or a crankshaft
or something like that and then uh
everything would turn at the same rate
and then people would have to like slap
stuff together at the same rate. You
were limited by your rate limiting step,
your slowest step, right? And so that
that happened and then um people um that
that's how factories worked. And if you
see old like Mickey Mouse cartoons, he's
like on this conveyor belt that's like
everything's like stamping something at
a at a uniform interval. That's because
that's steam powered. You couldn't slow
down. And so when they when electricity
got invented, factory owners were like,
"Okay, how are we going to do this?" Um,
let's rip out our steam boiler and put
in an electric dynamo, you know, it's uh
electricity instead of um, you know, you
just just run a electrical cord and
power your your crankshaft or your belt
that way. It turned out that electricity
released uh much less power than steam
did and so it was just a lot weaker. So
you had to pay a lot more for the same
power. It's like trying to heat your
home with like electro-resistive heating
versus gas. And so so um people were so
they they were like this is useless.
This electricity stuff sucks man. So
they ripped it out put in a steam boiler
again and went back to the old way and
this hap this that lasted for about 20
years until some brilliant entrepreneur
said wait a second we could just do all
of manufacturing just differently
because electricity unlike steam can
easily be routed in parallel instead of
in series. So that you took wires and
you routed the electric power to
different workstations on a flat
factory. And then once you did that, you
could carry pieces from one side to the
other. And what this allowed you to do
is have each step work at its own rate
instead of all having to work at the
same rate. And this allowed you to apply
a lot more resources toward the rate
limiting steps. And this this plus, you
know, some other advantages you got, but
um from electricity that required you to
uh reorganize the way your factory was
shaped ended up increasing productivity
by about a factor of five. So you got a
5x increase in productivity. this
massive massive huge increase in
productivity from factory
electrification. Uh but it took decades
for people to figure out we have to
change not just what technology we're
inputting but the whole organization of
our production process we have to
reorganize. And with AI you're seeing
the initial impulse toward AI is well
I'm just going to rip out a human
employee and put in an AI chatbot
instead of the human employee. We've
seen that with in a couple situations
that actually work. So like call centers
in some call centers depending on how
much help you need call centers have
been able to just replace humans with AI
that we've seen a few cases where this
happens. Everybody mentally thinks this
is how AI's got to work. It's a human
replacer. The chatbot sounds like a
human so you have to use it like a
human. Well no. And so in the end, you
know, and of course, uh, my friend
Daario Amade of Anthropic believes that
AI will get so good that eventually you
will be able to just use the dumbass use
case of just replacing every human with
AI. Uh, but I I say that we're not there
yet. We keep finding reasons why AI is
not quite like a human and uh and so
replacing humans with AI doesn't quite
work. However, machine tool isn't quite
like a human or or electricity isn't
quite like steam either. And so
eventually we may like people will come
along and say you know what I could just
organize my company entirely different
to take more advantage of AI and I don't
just have to replace my humans with AI.
I just have the humans do different
things and the AI do different things
and I reorganize the production process
in ways that I know a Smith sitting here
in 2025 I'm unable to imagine. And so
then we will see amazing productivity
growth at that point but it would you
know with electricity it took 20 years
for people to sort of think of it.
So then what do you make of the fact
that people are saying well because of
the introduction of LLMs into companies
entry-level jobs are harder to find
these days? I mean this is a narrative
that's taking off. We've discussed it on
the show that it seems like it's harder
to get an entry-level job uh today than
it ever has been uh maybe outside of
recessions. U like in a good economy it
seems like it's difficult. So, do you
ascribe any of that to the AI boom or is
that just something else that's
happening and we're sort of conflating
the correlation and causation? Um, I
think uh we don't know. So, um the
answer is that we don't know what the
hell's going on. You know, I've seen
data on like entry- level jobs. You
know, there there has been a slowdown
entry-le hiring, but there's a number of
reasons this could be. So, one reason is
the macroeconomy.
One reason is um two there was
overhiring of entry-level jobs during
the like 2021 during the bubble and now
people like gluted on entry-level jobs
and are now cutting back for a while.
Um, there's, you know, there's other
stuff, too. And there there's there's
the glut of people who just all
stampeded into the same few majors and
career paths.
And so, um, yeah. So, so there's all
these things going on. Uh, and it's not
it's very much unclear as to to what's
going on. So, there was a good economist
article by someone who really doesn't
believe this thesis, you know, claiming
to debunk it all. And I I don't think
they completely debunked it, but they
raised lots of other possible
explanations that were pretty
sufficient, I think, to explain it. We
don't know which is which. It could
still be AI. This could still be what's
happening. Uh but I think that we don't
have enough evidence to conclude one way
or another what's going on there. Okay.
And you mentioned that you're friends
with Daario. Uh his prediction, I think,
is that we could see 50% of entrylevel
white collar jobs eliminated in the
coming years. uh but it doesn't seem
like you agree with that. So where do
you where do you think the employment
levels will go as this technology gets
better and how do you think it will just
change our economy and our society?
Right. Before we before I answer that,
do you want me to quote you a couple of
the statistics from this economist
article that I just looked up?
Definitely. Okay. So it said that that
um young graduates relative unemployment
started to rise in 2009 long before
generative AI came along. So this trend
long long long predates AI. It's been
going on the relative unemployment of of
um you know college graduates relative
to other uh people has been rising for
quite a while now. You know that's
that's 15 years. And um it said and
their actual unemployment rate at around
6% remains low.
um 6%.
That's not super low, but that's it's
it's not high. It's it's not they're not
catastrophic. Here it says um it says,
"Returning to a measure reintroduced in
2023, we examine American data on
employment by occupation. Sling out
workers that are believed to be
vulnerable to AI. These are white collar
employees incurring people including
people in back office support, financial
operations, and sales. There's a pattern
here. We find no evidence of an AI hit.
uh those occupations as a percentage of
total employment are still rising
steadily and have been rising on
basically the same trend since about
2000.
So that trend does not appear to be
disrupted. We're still hiring a lot more
back office support, financial
operations, sales, all those people are
still getting hired more and more. Those
positions are still increasing. Those
are the positions that people ahead of
time thought would be very vulnerable to
AI. And um you know wage growth is is
strong blah blah blah. And then uh
an official measure suggests that less
than 10% of American companies employ AI
to produce goods and services. So AI is
probably not big enough to have like a
major impact yet there. Um but but so so
I think that the evidence probably leans
against a big impact from AI like
driving these trends, but it could be in
there. You know, it's this doesn't rule
it out. The like I said, there's always
a lot of stuff going on at any given
time, right? And it's hard to tease it
all out, but there's no there's no like
white collar job apocalypse from AI that
we can see yet. doesn't mean there won't
be one. So, let's talk about the future.
So, Daario thinks um Dario is an
engineer and a researcher. I mean, he's
he's more a researcher than engineer
obviously, but then um but he is I I've
known him since since you know well
before uh anthropic. So, he um
researchers target human capabilities
for simulation with AI. They say what
can a human do? Let's look at the
specific thing humans can do and
engineer a system that does that. This
is not just unique to AI. A lot of
technology does that. So if you're
looking at a machine tool, you think,
okay, humans fasten a thing like this.
Look at how my hands work. Maybe I could
make a little, you know, gear, robot
assembly, whatever that fastens things
on. So you're trying to, you know, what
humans do and then you try to make a
machine that does a similar thing,
accomplishes that purpose, right? So
you're try in in some sense, a lot of
technology is intentionally trying to
replace human labor. And we've been
doing this since, you know, the dawn of
technology, saying a human carries
water. What if I made a pipe to carry
water? A human turns this wheel. What if
I made a boiler to turn this wheel? You
know, and so you you intentionally
engineer and research based on observing
human capabilities to know what's
possible, you know, man looks at the
birds and wants to fly. You know, those
old like 50s [ __ ] Oh yes. Um that's how
we do it. And then so so when companies
like McKenzie come along and they say
how many which jobs are vulnerable AI?
how many jobs are vulnerable to AI? What
they do is they sort of chop jobs up
into tasks by asking people what tasks
do you do and then people give them a
list of tasks you do and then you um go
to engineers and say can you engineer a
system to do this and if the engineer
says yes yes I can then you say it's
vulnerable to being replaced this is
complete hoie and they all come up with
really huge percentage like 40% 60% of
your jobs are going to be replaced by
AI. So, you know, every there's a
million groups doing this and they'll
come up with different things and it's
hoie for a number of reasons. Number
one, the people that you ask which tasks
do you do are not giving you a list of
the complete tasks.
There's a lot more stuff you do than the
stuff they say there. The second thing
is that the jobs are deemed to be
vulnerable to AI when half the tasks or
something some percentage of the tasks
are you know like AI doable according to
what these pe these these engineers say
right and so if a machine instead of
taking half of our jobs takes half of
each person's job that just makes us
more productive right it frees us up to
do more things number three number three
the the engineers don't necessarily know
what they'll be able to automate they
say they can that they can't always do
it. Um, and so for example with with AI
stuff, you know, it's all fun in games
until catastrophic hallucinations cause
you to lo like lose a big client at your
AI automated sales [ __ ] right? So then
so things you can you say you can
automate often you can't really
automate. And then that's three big
reasons why these studies are bunk. And
then one more big reason, the most
important reason is that these studies
say nothing about additional tasks you
could add. So suppose that my job
consists of answering emails and then
like you know sort of like planning
strategies
and now an an AI comes along that can
answer all my emails. It's just taken up
half that took up half my day. Now I can
spend the other half my day, you know,
now I can spend the other half of my day
doing other things. So, one a very
stupid naive way to think about it is,
oh well, your wage will be cut in half
and you'll be hired for half as many
hours and you'll only do the one part,
the the strategizing part of your job
because the email part is gone. Goodbye.
Wage cut in half. Hours cut in half.
That's [ __ ] That's not how things
work. I will have I will find something
else to do. Maybe I'll do even more
business strategy than I did before. Or
maybe I'll find yet more tasks that I
didn't know that I could do because it
freed me up. And if you look at the
history of technology, if you look at
people who were freed from carrying
water, plowing the field, blah blah blah
blah blah, all this stuff, they found
other, guess what? They found other
things to do. And um factory workers, as
we did more and more machine tools, we
found more things for factory workers to
do. Um you know, so
we also find more things for people to
do at not even at the job level, but at
the you know, industry level. So like
your company could hire you for a
different kind of role. So, we saw this
thing where IBM fired all these people
because it thought they could replace
their jobs with AI and then had to hire
them all back. Had to hire like a ton of
people back. Maybe not the exact same
people, not doing the exact same things,
but for, you know, other similar related
tasks that AI couldn't do yet. Uh, they
had to hire all these humans back um who
were doing slightly different things
than they did before. And I think this
is none of these like predictions, these
dire predictions of what a of jobs that
AI is going to destroy uh take this into
account. And I think when Daario looks
at the stuff, he's looking at it from
the typical perspective of this of the
engineers that the McKenzie guys ask,
can you automate this away? He's just a
bigger version of that. He's thinking,
yes, my company can automate this away.
But there's all these other questions,
all these other things about like human
capabilities that I think that, you
know, Daario is an expert on AI, but
he's not necessarily an expert on what
humans do in every job in America,
right? No one is. Definitely. I mean, I
think if you're a salesp person, just to
take one example, this really hits home.
Um, I've been in sales before, I can
tell you no salesperson is on top of
their pipeline. Uh, they might be
concentrating on like the two or three
clients that are most likely to close
and have a 100 accounts that they have
to reach out to or nurture or nudge uh
or, you know, meet with and they just
don't have the time. So if you make a
salesperson, let's say 100% more
efficient, now instead of concentrating
on those two, three, four, five
accounts, maybe they can spend time with
10 and then all all of a sudden they
might be doubling their productivity if
they're motivated. Yeah. Yes. And so in
the past, we've we've always found stuff
for people to do. And you can say, well,
this time is different. AI is a
fundamentally different technology, and
there will be nothing for us to do. Um,
first of all, that's actually wrong. Uh
there's a thing called comparative
advantage which I'll talk about in a
bit. But but also setting that aside for
now, we don't know what human
capabilities are.
We don't know. We don't know what AI
capabilities are, but we don't know what
human capabilities are. That sounds like
a bizarre statement because we've had
lots of humans working in our economy
doing lots of different things for a
very long time. However, at any point in
time, I can point you to massive numbers
of occupations and tasks that did not
exist 10 years ago, 20 years ago, 30
years ago. Okay? We didn't know humans
had this capability to do these kind of
things but they did and we just thought
oh you know it was a matter of course
for us. If you look at the history of
technology they've been saying that AI
is going to cause mass not AI I'm sorry
they've been saying technology is going
to cause mass unemployment since the
industrial birth of the industrial
revolution. People said that industrial
technology will mean laborers will have
mass unemployment. they won't have
anything to do and they'll revolt and
they'll riot and society will fall you
know because you'll have all these
unemployed guys the you know the the the
threshing machine is going to replace
all the farmers
and the uh you know so self-driving or
or or drivable tractor like you know
going to replace all the farmers the new
and so then we found something for
people to do and now people say well AI
is different AI is different that's
going to replace all the people and
maybe they're right I can't say they're
wrong right I can say they've been wrong
every last every other time they've
predicted this. But then sometimes
something that never happened before
happens.
And so I can't tell them that they're
wrong. And yet conceptually
the idea of like, well, we made this
thing to do all these tasks that humans
do is not a is not by itself a reason to
think human labor is going to be
massplaced.
Okay. So now let me ask you this
question in terms of economics that I
think would be really interesting to get
into since you've broughten up the fact
that we've had technology and that it
has automated things but yet people have
found new things to do and you've also
talked a little bit and written about
the fact u that our hollowed out middle
class is not as hollowed out as people
think it is right I think there's a
narrative that technology may have found
other people may have found people other
things to do but if you look at the
economy more broadly today it's much
more unequal than it has been in the
past in technology is a big reason why
because if you concentrate all this is
this is just a narrative I'm I'm
actually kind of curious what you think
right if you if you look at the gains
that technology has led to it's
concentrated those gains in these big
tech companies and in the hands of
people like uh Elon Musk um whereas
everybody else um sort of I don't know
they they get what's left so from your
standpoint looking at the economics of
this talk a little bit about this
narrative and what's actually true.
Right. So
this narrative really took hold in the
early to mid2010s when we were we're
just coming off the great recession
and people really uh paid a lot of
attention to the arguments of Thomas
Petti
and some other French economists who
claimed that inequality relentlessly
rises until social upheaval emerges to
push it back down. That was the Thomas
Petti thesis.
And some people have interpreted the
unrest of the 2010s as society's attempt
to push inequality back down. Um,
inequality increased by less than most
people say. It didn't increase.
Inequality has increased since like the
70s, but it has increased by less than
most people say. And it is
it had cycles before, you know, where
inequality increased and then was was
pushed back down. um
uh
inequality. So so right around the time
that this thesis started becoming very
well accepted and popular, wage
inequality started to go down and wages
started rising more at the bottom of the
distribution than at the middle or top.
And so we've seen that uh for now over
10 years. We've seen wage inequality go
down. What is that like? How does how
does that fit in the in the model? Um, a
lot of people when they hear this fact,
they pivot to talking about all the
white collar job, middle class jobs that
AI is going to destroy and all this
stuff. But no, don't pivot to that. Tell
me why from 2013 to now
workingass wages, wages for like simple
laborers, waiters, clerks, just, you
know, the working class. Why did these
rise faster than wages for rich people,
for educated professionals, all this
stuff? Why? And so a lot of the same
exact trends that people are now using
to say, "Oh, AI is replacing the
entry-level workers, blah, blah, blah."
Those are the exact same trends that
broke the previous trend of rising
inequality. You know, it's like, oh,
look at college grads relative
unemployment relative to like non-ol
people is rising and rising.
that that's because non-ol people all
get a job and their wages have been
going up. So it's, you know, their wages
haven't been going up because of
scarcity. We imported a bazillion
immigrants, as every like rightist will
tell you, they're really mad about this,
but then we imported a billion
immigrants. We outsourced to China. We
did all this stuff. Um, workingass wages
have been going up and up. And if you
look at when wages have stagnated,
actually wages stagnated from in like
the 70s and like 80s, that's when wages
stagnated. The rust belt was real long
before AI and before the internet,
before really computerization affected
anything. Um, so we can discuss why that
happened in the past, but if you look at
a graph of median wages or wages for
like the working class, you know, the
25th percentile or something like that,
it's like up in the post-war, then this
flat period through like the, you know,
late 80s and then up again until now,
you know, somewhere in like 1994 or
something like that. It just starts
going up again. And then that that, you
know, the Great Recession broke that
trend for like a few years, like three
or four years, right? Uh and and a lot
of these negative narratives came right
after that. So it looked like you had
this this temporary dip, but then they
started rising smoothly again. And I
don't think Donald Trump did anything,
man. I think our economy just rided
itself.
Fascinating. So why do you think the
wages have gone up then?
Because I believe productivity has gone
up because new technologies, new
technologies and new markets added to
our productivity and allowed us to do
more stuff. And then humans were
compensated for that by getting paid
more. Have we seen a lot of inequality?
Have have people at the top risen more
than people at the bottom since like
1980 or late '7s? Absolutely. Although
that has the wage inequality has gone
down a little bit since like 2013. It's
been on a slightly declining trend. But
that declining trend has not been big
enough yet to reverse the big runup in
like the 80s, 90s, and 2000s. And
there's a large I mean there's an asset
gap also, right? Like is an asset is an
asset. Yeah. Yeah. And assets have gone
up way more than wages. Absolutely.
Absolutely. But that's not productivity
related. Well, it is, but it's it's it's
it's more related to like financial
market factors. Yep. So the big question
then is if we are having uh decreasing
inequality uh and wages are going up
then why is there so much unrest uh in
the world? So I I want to cap capture
that and we will discuss that uh right
after the break. And we're back here on
Big Technology Podcast with Noah Smith
aka No Opinion. You can find his work at
no opinion.blog. He also hosts a great
podcast with Eric Torrenberg. It's
called Econ 102. You can find that on
your podcast app of choice. Noah, great
having you here. So, before the break,
we talked about the fact that, hey, it
ain't that bad, right? There's been
some, you know, decrease in in the
ability of entry- level workers to get
jobs, but it's not catastrophic. There
has been there is in inequality in our
society but there has been uh actually
decreasing wage uh inequality or the
wages at the bottom have have gone up
and yet it does seem like we are living
in a society with a lot of unrest. It's
certainly reflected in the politics. Um
how do you square the fact that things
are getting better in your view but uh
politics is politics of grievance and
things getting worse?
Um that's something I don't actually
know. I think it's primarily social
media. I think that social media uh so
so I think that Americans America was
this very big diverse country. You had
ideological diversity. We had geographic
diversity. Not just like racial
diversity, which is what we typically
think about. We had all these these
forms of diversity where you could
really spread out and find your people.
Like in in 2010, you could go if you
wanted to live a conservative life, you
go to Texas. If you want to live a
liberal life, you could go to uh you go
to California. But then social media
came and especially Twitter and suddenly
everyone was thrown in one little room
with everyone else and not just people
from America but English-speaking people
from all over the world and we have the
global language right so we got people
weighing in from Argentina from Bulgaria
from Pakistan from you know UK and
places like that and so immediately it
became this giant scrum where everyone
was was constantly exposed to people who
hate them and despise them and disagree
with them we couldn't spread out right
uh I think that this caused conflict in
our society, at every level of society,
because people who had been able to
segregate were no longer able to
segregate. And so, social media is what
caused our our thing because every day
social media will find whoever hates you
and concentrate them directly in your
notifications tab, right? That's what it
does. But it's also it's interesting cuz
the politics is all about again like if
things are getting better uh in society
and in the economy. Um and it it's right
I I think you're right that social media
has brought us all into uh contact with
each other. Uh but the question is like
why has this messaging of u of uh you're
being wronged and your economic
interests are not being looked after and
they want to you know make you broke.
Um, why has that been this? I mean, it's
been I don't know, you could argue it's
a culture war message, but there's also
been an economic message that I think
has really started to work in the US. Is
it I mean, is it also the fact that like
it's kind of this like FOMO culture
where we are going to we're you know, we
see all all the activities of the super
rich all the time cuz it's on, you know,
Tik Tok and Instagram or is there
something is there something else that
I'm missing? Um, yeah. No, I think uh
that is that is basically, you know,
what's going on? Here's the thing.
A lot of the the conflicts that people
immediately had were racial conflicts or
things like that. You know, uh certainly
during the first decade of and a half of
Twitter, first decade of Twitter, let's
say, racial conflicts, I mean, there
were some gender conflicts too, but I
think racial conflicts dominated. So,
obviously, Black Lives Matter was about
that, but you saw conflicts over
representation and wokeness and white
supremacy and all this stuff, right? you
saw uh there was like um you know years
of of ra racially centered conflict in
America. People probably get tired of it
and people probably want to fight about
something else. Economic conflicts never
really got addressed, never really got
resolved,
right? Well, let's let's talk about the
um sort of the racial conflict in the US
and sort of some of the puzzling things
that are happening right now um in the
aftermath in in our politics today. Uh
we're talking on Wednesday, June 25th.
This episode will go live uh the
following week. So um there will be many
new cycles between now and then. But we
have uh the results in from the New York
City primary where Zoran Mami has has
won the Democratic primary. And you
posted this on Twitter and it's quite
interesting that I think this is the
racial um breakup of people that voted
for Zoron or uh Andrew Cuomo. So
Hispanics uh Cuomo won by 20%. White or
Caucasian, Zoron won by 13%. uh black or
African-American. Cuomo won by 44%. So,
can you explain what's what's happening
here? That you would imagine that Zoron
is the the spiritual inheritor of the uh
you know, Black Lives Matter protests uh
and the the woke left. Uh and yet it
seems like the uh minority groups within
New York City are going towards his
opponent while um white and Caucasian
groups are, you know, going towards him.
Asian Asian, by the way, Asian voters,
58% towards Zoron and 16% to Cuomo. So,
what's your read there? Um, I think that
you're seeing partly this is education
polarization. I think that white people
are more likely to have like college
degrees and stuff, you know. So, um,
there's been like a lot of sort of lefty
ideas have really caught on among the
educated populace that have not caught
on among the working class. Uh, Barbara
Erin Reich called this uh,
PMC socialism. She called it
professional professional managerial
class socialism. Um, right. And a lot of
people like infinite people have
remarked on this this tendency. I think
it's the most important political
tendency in America today. But then uh
certainly yeah I think that that you
definitely see um uh just lefty ideas
appealing a lot to the uh educated
professional class. So I think you have
an educational uh divide there. Also
among this is a Democratic primary. So
you have people who registered as
Democrats and I think in general there's
two reasons you'd register as a
Democrat. One is that you feel that like
Republicans are against your group of
people and the other is that you're a
liberal,
right? And so I think that with white
people, you don't think like you don't
think Republicans are against white
people. So you'd be a Democrat if you're
a liberal. But if you're black, if
you're Hispanic, you might think, well,
Republicans, you know, you might be a
kind of conservative person who doesn't
like like trans stuff or whatever. And
then you might um you might think uh but
you might also think Republicans are
against me, you know, and so I better be
a Democrat even though I'm kind of a
conservative Democrat. So I think
conservative Democrats are less likely
to be white. So I think that's a that's
another thing that you see that's going
on here. But I'm not a politics expert.
So this is just me, you know,
spitballing, of course. But it is it's
so interesting because the politics is
tied to the economics in this in this
case. I mean, it was an economic
campaign in many ways that uh Zoron ran
and is running. And it's been
interesting to see this professional I
think I think it's interesting the
professional managerial class uh coming
out in support of him. you shared a
tweet um it said uh Zoron's lefty uh
left-wing base so 400,000 here hedge
fund employees have concluded that
capitalists the bgeoa bodega owners must
be instrumentally liquidated as a class
uh via um a fall in the rate of profit
in order for socialism to triumph talk
talk a little bit about that yeah that
was a good joke
um yeah know so the the point is that uh
if you look at some of Zoron's
proposals. Um, one of them is to have
government run grocery stores. Now, the
reason Zoron is wants government run
grocery stores is because he has a
deep-seated belief that that government
can run industries better than the
private sector in many cases. That's why
he's a socialist. But also, he thinks
that poor people lack cheap food. He
thinks that's a big problem for poor
people in America, that they lack cheap
food. Their food is too expensive. It
makes sense because poor people spend a
lot of money on food, you know. So, of
course, the price of food is really
important for poor people. We all know
that. U America gets cheaper food than
other countries do. And actually, we do
a pretty good job getting food cheaply
to poor people compared to like most
countries. But that's not on Zoron's
radar out there. So, he's like food is
too expensive. And of course, we saw
when we saw inflation, if you see
inflation rise across the board, if you
see prices rise across the board, well,
food is going to hit the poor people
hardest, right? even if it prices rise
for like you know like
cars or whatever like it's not going to
hit poor people as much because they
won't spend as much money on a car or
maybe it'll it'll hit some poor people
like a lot of poor people drive
obviously but um so what but like things
that rich people buy like the price of
like vacations it's not going to hit
poor people as hard but food is going to
hit them hard so it's like how do we get
so so Zoron wants things to be cheaper
for poor people and he thinks how do we
do that let's do grocery stores and so
he's kind of bought into this Elizabeth
Warren rhetoric that grocery stores are
taking all the money, man. They're
making all this profit off your back and
selling these expensive food. Well, it's
wrong. It's just factually wrong.
Grocery stores make almost no profit and
like your corner store bodega makes like
no profit basically. Um, and your little
indie grocery store in New York, which
is actually what poor people mostly buy
from. They're not buying from like a big
chain. Poor people are buying from like
a little bodega or like a little like
independent supermarket in their
neighborhood. Those places, you know,
they're they sometimes their costs are a
little bit higher because they're
inefficient. They just don't make any
profit, but they don't have these big
supply chains and logistics that like
Kroger has or something, you know,
Walmart has. But but even Walmart and
Kroger, they don't make like like Kroger
doesn't make any profit. Like
Albertson's doesn't make any freaking
profit. Safeway doesn't make any profit.
These companies make like almost no
profit. So like they're skating on the
edge of like unprofitability here. And
so like there's really not much more
water to be rung from the sponge. So if
you make government run grocery stores,
it'll do two things. Number one, uh, it
will out compete all the little indie
grocery stores in bodeas, thus like a
meager source of capital and wealth
accumulation for like poor people in
poor neighborhoods. That's currently
like how poor people do
entrepreneurship. That's where they make
a little bit of money to so they can
like advance to the middle class through
starting like a little grocery store,
bodega or something like that. Most
grocery stores, most bodeas are run by
like uh Latinos and Yemenes actually
um in New York City. And so, so you're
really pushing out th you know, you're
going to push out those people. And then
also because American government is you
has this thing that the authors of the
book Abundance talk about where American
government hobbles itself. It it
self-regulates to the point where
government stuff costs more costs too
much. Because it does that the
governmentr run bodeas are not even, you
know, they're going to have to be
subsidized in order to compete. So it's
just going to be like a fiscal drain if
you want to have them actually produce
stuff cheap enough to like sell to
people. It's just a point of uh it's
just like a sort of a boondoggle, you
know. Can I make the So, let me see if I
can because we haven't really given like
the argument for why someone like Zoron
might have uh risen yet or I haven't.
Let me just make the argument and throw
it out to you. I mean, if you look at
what's going on, we talked a little bit
about asset inflation. It really is
difficult to make it, I would argue, in
New York and in many places in the
United States, um largely because real
estate prices are are really high. And
so it might just be as simple as um you
know if you look at the culture war
stuff you throw that out throw the
socialism stuff the label out the window
uh maybe what we're seeing in American
politics right now and I know this is
not a full microcosm of American
politics but this flavor is is starting
to arise is just that people have found
that um they are doing like the quote
unquote right things um and still unable
to make a go of it there the American
dream is inaccessible to Um, and when
you look at the, you know, sort of we
joke about the professional managerial
uh, class, but uh, a lot of people that
have gone to college right now, they're
saddled with, you know, hundreds of
thousands of dollars or 100,000 plus in
debt. They can't afford a home and
they're pissed. And so maybe it's just
that simple explanation as to why a
candidate of this nature or candidates
of grievance uh, are winning. Well,
yeah, but so so Zoron, I I understand
that that sort of anger over student
debt, anger, you know, sort of middle
class anger over student debt and, you
know, expensive homes. I understand why
that's a thing that people are upset
about, but also it's true that Zoron
isn't really going to address either of
those things. Like, he hasn't talked
about it. It's not in his main policies,
and he doesn't have the power. What
about I mean, the rent freeze is, I
think, an addressing that in some way.
Well, is it because the rent freeze is
for rent stabilized units only, right?
Right. Okay. How many people who just
graduate from college do you think live
in a rent stabilized unit? How how do
you get in that rent stabilized unit if
you had it? Rent control doesn't
transfer when you change tenants, right?
Mhm. Correct. Okay. So, you get your
rent reset when you change the tenants.
So, yeah, maybe in the future they live
in a rent stabilized unit that then gets
rent frozen in in the future, but then
they don't they're not the people
sitting on these like old apartments
that have been rent stabilized forever.
Those are all older people. And so also,
if you're talking about the difficulty
of buying a house, you're then and
you're talking about rent freeze as a as
a way of appeasing the people who are
pissed about the cost of buying a house.
Well, then you're looking at long-term
renting of a rent stabilized unit as an
alternative to home buying, right?
You're saying, "Well, I can't buy a
home. At least I'm going to be able to
have my rent stabilized and live here
forever."
I've seen the people who live in rent
stabilized units for like 30 years in
lie of buying a home and they're kind of
poor.
They're not, you know, they're not
they're not poor poor, but they're it's
it's a bit of a, you know, a shabby
bohemian existence to stay in that in
that rent controlled space for 30 years.
And some people are going to like that.
And maybe some people maybe some young
people see that and they're like, "Wow,
that's that's that's the best I can do.
I'm not going to buy a home." But I
think that people still want to buy
homes. You look at surveys, millennials
still want to buy homes. Zoomers still
want to buy homes even though they're
too young to do it yet. And um and so I
think that yes, I do think people care
about these things. No, I don't think
that was Zoron's main appeal. I don't
think I think that um
you know, his main like
yes, people like young people would like
a bit of rent stabilization.
Um but I think that uh
people like Zoron's attitude. He's
handsome. He cares. That does often
times explain a lot in politics. Yeah,
he's he's a good-looking guy. He um you
know, he does a good video saying like,
"I care about you. People just want to
vote for someone and like Cuomo's a
schmuck, you know, and a and a giant BB
and just basically like just a disaster
of a politician and um you know, with
nothing really going for him." And so
people look at Zoran, they look at this
young handsome guy who says, "I care
about you. I care about these prices
you're paying blah blah." And I don't
think that people necessarily look at
that deep economic impact and analyze
like the economic impact of like how
would government run grocery stores
actually do or like you know would would
we really want free transit fair you
know free bus fairs and stuff like that.
They're like, "Oh, this guy wants to
reduce cost for us. He's a like young,
handsome guy. Looks cool, does good
video. I'll vote for that guy, you know,
and if you look at surveys of people who
are voting for Zora, and a lot of them
think like that, especially when your
opponent is this complete schmuck." And
so, yeah, let's talk about what the the
Republican answer to these to these
conversations, at least coming from the
White House. And there have been two
policies that that you've written a
bunch about, um, which has been tariffs,
uh, and, u restrictions on immigration.
Um, let's start let's start with
immigration first because I I know that
you're passionate about this one. Um,
what do you think the net impact of the
Trump immigration crackdown is going to
be on the US long term?
Uh, I think the net impact of the Trump
immigration crackdown will be fairly
um uh economically will be negative but
not huge. Okay. The reason is because uh
fundamentally immigrants are a source of
both supply and demand for labor for
everything for products. And the reason
why a flood of immigration does not
actually reduce wages is that immigrants
are also buying things. And the demand
from buying things creates labor demand
for nativeorn people.
And so so immigrants really don't do
much to wages. And what that means is
when you kick out a whole bunch of
immigrants, you're not going to do much
to wages either.
what you're going to do is cause
disruption, you know, and by the way,
this also applies to prices. So, like
immigrants will demand more stuff, which
push prices up, pushes prices up, but
they also supply more stuff, which
pushes prices down. You know, you you
get a bunch of uh like it's it's 1995
and you get a bunch of Mexican guys
moving into LA. Yeah, they're going to
bid for houses, your rent will go up,
okay, but also at the same time, they're
going to provide like cheap lawn care
and cheap like daycare and stuff like
that, and those prices will go down. So
immigration pushes up uh demand and it
pushes up supply as well. Okay. And so
then what about let me can I make the
counter argument. I don't want to say
it's gonna have no economic impact
because it's going to cause disruptions.
Like if you're in an industry it's going
to cause bottlenecks, right? If you're
in an industry that relies entirely on
immigrant labor or illegal immigrant
labor like like some agricultural
industries do. I'm not saying that's
good that they do and you know I think
we should enforce wage laws and blah
blah blah. I'm saying that if you do
have an industry that has become reliant
on that labor and then suddenly you cut
them off completely from their source of
labor that industry will be disrupted
and that will create bottlenecks in our
system which will create some disruption
could create some temporary inflation
and let me just make this argument about
the AI industry because a lot of talent
that's working on AI today is um is
people coming from overseas to work in
the United States to work at these labs
right now we haven't seen like you know
people show up to like open AI uh and
and try to deport people. But I think
that there's, you know, potential
long-term consequence here where the
best and the brightest who wanted to
come to the United States aren't
thinking about doing that as much. So, I
know it's hard to measure because it's a
hypothetical, but I wanted to run that
by you and and get your thoughts on it.
I think that that's really important.
So, cutting us off from skilled
immigration would reduce our innovation,
which reduces our long-term productivity
growth. Um, and I think it reduces
clustering effects, which affects
productivity growth a lot. So like where
do where do companies want to invest?
They want to invest where the smart
people are. And if we don't have the
smart people here, we're in trouble
because we'll get less investment. So I
think that when you look at the economic
impact of lowkilled immigration, it's
not a lot either way. But when you look
at the economic impact of high-skilled
immigration, it's strongly positive. So
we're really playing with fire if we
start kicking out the smart people.
Okay. And the other side is tariffs. Um
we have a tariff deadline coming up. Uh
it's going to be on July 4th. Uh no,
it's July 4th is the tax and spending
bill and July 9th is the expiration of
the global tariff pause. Um this is
according to Bloomberg. Uh know from an
economics perspective, what's been the
impact of of tariffs so far? We have
like some conflicting uh reporting. Some
says some say everything is held up in
like the LA and Long Beach ports and
others are like well you know it's uh
everything is back to normal and then
Trump will you know everybody's
anticipating that Trump will chicken out
again and you have the S&P 500 which you
know the day we're recording is up
nearly 4% on the year it was down 15% on
the year April 8th. So an unbelievable
rebound uh from the S&P. So what's going
on? So, I do think that the reason why
the financial markets are doing well is
because people have decided that Trump's
going to chicken out and that these
pauses will be permanent and that
they'll announce quote unquote deals
that allow us to cut all these tariffs
and that basically Trump's a bag of
wind. I think traders are betting on
that. It's pretty obvious. Um, and the
reason why financial markets abruptly
crashed when Trump announced the tariffs
was because they thought this is for
real. When they decided it wasn't for
real, they bought and financial market
prices, asset prices went back up. Um,
however, do I think that that's really
true? I think that there's some there's
some issues. There are some negative
effects that these tariffs are going to
have that even if Trump does chicken
out, there's uncertainty about what if
Trump doesn't chicken out on this or
that. Also, tar it's not like tariffs
haven't gone up. They have gone up just
like more modestly than Trump was
threatening. That will go up a bunch of
things. How big an impact it's going to
have is hard to say because currency
movements adjust and other things adjust
to like balance it out. But like it's
going to be there's going to be some
pain from that especially in certain
sectors. And uh um the threat of tariff
driven inflation will lead the Fed to
keep interest rates higher a little
longer as we just saw with Powell.
Um and you know conflicting with JD
Vance all the the administration is like
no push rates down because they want
like an economic boost. So that's going
to be a factor too. And so I and then
there's uncertainty. There's people like
companies. How much do you want to
invest if you don't know what the
economic overall economic policy regime
of America is going to be in 10 years, 5
years?
What if the next person who comes after
Trump, what if JD Vance gets elected?
What if he does tears for real because
he doesn't chicken out? Okay. Do you
want to do an investment that takes 10
years to pay off if if Trump's only
going to be there for three more? you
know, and so like there's those
questions. Are tariffs now just the
consensus policy of the land? Is have we
just all become [ __ ] protectionists?
Can I curse on your show? Sorry. Yeah.
Yeah, you're welcome, too. Okay, great.
Yeah, definitely. Um, yeah. So then, so
I think that that those will erode our
economic strength in ways that don't
look like an abrupt crash, but they look
like data getting like a little bit
worse and a little bit worse. Mhm.
That's my prediction, but again, hard to
say. It's hard to predict, which is, I
guess, part of the problem. So,
um, all right. Look, before we end, I I
heard you, uh, in another podcast sort
of make the case for why the United
States and China are, um, are I I would
say maybe more adversarial than a lot of
people can see on the surface. I would
love to hear you just kind of share that
with our audience about like why the
United States and China have interests
that are competing and are potentially
leading them on a on a collision course
and and what might happen as a result.
Well, I think that that's now become
conventional wisdom. The idea that
China's leaders do not mean America well
and mean America harm has become
conventional wisdom in America since I
wrote that stuff. My position has now
become the mainstream. And if you ask
most people, the attitudes toward China
are very negative. Although they that's
moderate a little bit as people realize
that Trump our leaders suck too. Um and
so you know so but then China's ruled by
old guys by boomers.
Um and it's it's you know they're
feeling their oats from a massive runup
in development. It's very hard to point
to countries that got rich without
starting wars and being aggressive. If
you can think of any, let me know which
ones those are. I mean, Switzerland,
like little countries maybe, but like
big countries that became like great
powers. China's building 100 nuclear
weapons a year.
China is 100 a year. 100 a year. It's a
lot. That's a lot, man. A lot of nukes.
I feel like once you get to 50, you're
good. But I suppose call them and tell
them that. I don't know. You can you can
argue that with them, but but they are
building 100 nukes a year. They're
building one of the most the the most
impressive military buildup in the
world. uh right now and in absolute
terms the most impressive military
buildup the world has ever seen ever is
happening in China right now. What are
they going to do with that?
Do you think What do you think? What do
I think they're going to do with that?
Fight a war, Alex. That's what that's
for.
They'll fight a war with the war tools
they're building. Otherwise, it becomes
a sea of rusting metal. You know, the
Soviet Union built up all these tanks,
massive amounts of tanks, and then they
never used it until Ukraine, and now
they've used them all, right? Czechov's
gun.
Okay. What do you do with a military?
Well, we did, you know, we built up our
military in the Cold War. We built up
this giant military and then we went to
war in 1991. We went to war in 2003.
You know, Iraq war, war and terror, all
this stuff. Maybe the fact that we built
up this giant arsenal was one reason we
used it.
Okay. It's like we got this tool, we
better use it, you know? We got all this
stuff. And so like
Yeah, man. They they build that [ __ ] for
a reason. And do you think it's going to
be Taiwan? Uh, that's the likeliest. I I
don't know that they're going to go to
war. It might be that they don't that we
deter them, that they have internal
disscent that there could there's a lot
of reasons why we might not go to war. I
don't think it's certain that we'll go
to war. I really hope we don't. that
would suck. Um, great power war is even
worse than normal war. And so we could
we might not go to war, but I'm saying
that um it's a reason why we need to
establish deterrence. And if we don't,
we're just being dumb, right? Oh, look,
look at those guys building that massive
army over there. Cool. How's that
working out for y'all? Then they're
like, you know, like, bye, [ __ ]
Out. See you. And then we're like, oh
no. Oh no.
I mean, this is a dumb question, but how
do you establish deterrence against a
country that's building 100 nuclear
weapons a year? Well, I mean, like you
said, if you have a sufficient number of
nukes, you don't need to build 100 a
year. You have enough to deter them. Um,
but then also you you build up a large
army and you get a bunch of allies. We
need allies. And Trump doesn't realize
this enough. Trump administration's
really underemphasized this. You get a
gang together. There's a big guy on the
block, big tough guy. You get a gang.
You roll deep. You know what I'm saying?
And so we need to ally with India. We
need to ally with Japan. We need to ally
I mean we're already allied with Japan.
We need to ally with but we need to
strengthen that alliance and get Japan
to like remitize. Korea obviously. Um uh
Vietnam. We should be focusing on uh
Indonesia maybe could possibly be
helpful to us in some way. Um Australia
obviously small but they're around. Uh
Europe, you know, um Europe needs to
handle Russia, which fortunately they
may now do. Um, and so there, so there's
all these countries that we need to ally
more with, and Trump has been tearing
up, not just tearing up our alliances,
but like also tariffing people and just
being a general [ __ ] to everybody we
like. This is going in the wrong
direction. It's not establishing
deterrence. But then Democrats, you
know, tend to cut military budgets,
which is also not great.
And so, like, we need to build up our
own army and get the armies of our
allies because China is very big and
powerful.
Um, we'll see how much China's inclined
to use that military. Like in the past,
rising powers usually have a small war
before the big war. So you saw, you
know, uh, Germany had the, um,
Austropussian war before they did the
Francoressussian war and then that was
before World War I where they tried to
take on everybody at once. Japan had the
SinoJapanese War and the RussianJapanese
war before it did World War II and tried
to take on everyone at once. So you see,
we had the SpanishAmerican War. Okay? So
you see countries have these these
little wars before they start the big
war. So we'll see what China does. And
maybe if China starts a little war,
it'll wake us up to their
aggressiveness. And I think that's one
reason they're holding off because they
don't want people to realize they don't
want people to think of them as being
aggressive. They want the chance to
start the big war is the first thing.
But politically that's difficult. You
know, big war is a big big jumping off a
cliff when you don't even know how well
your army knows how to fight. So let me
just wrap up the whole conversation
because we started with AI, we're ending
with China. U let's just cross the two
and then we'll let you go. Um does this
make the USChina competition on AI uh
much more meaningful than a lot of
people are taking taking I mean yeah
giving you credit for I don't know I
think AI will be very important we need
things like computer vision autonomy
obviously autonomous drones are going to
rule the battlefield that will rule the
so we need that uh as for whether we
need better LLMs I don't know how use
militarily useful LLM are Daria would
say a lot but I cannot vouch for that so
you got me but whatever it is we need to
be good at We need good military
technology. We also need large scale
production because technology alone does
not win wars as Germany found out in
World War II when they had great rocket
bombs and jet fighters and that did
absolutely nothing to help them win.
So yeah, no, we need uh we need as good
AI as possible. Uh and you know,
military competition is only one of of
many reasons we need good AI.
The website is no opinion.blog. highly
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can also listen to the Econ 102 podcast
on your app of choice. Noah Smith, great
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show. Good to see you, Alex. Thanks for
having me on. All right, thanks
everybody for listening and we'll see
you next time on Big Technology