METR and AI Regulation, Zuck Pushes Back on AI Slowdown, Fed Hikes Rates | Diet TBPN

Well, we have a fantastic show for you today, folks. I made it to San Francisco and back since the last show. This is a new thing. I like this. Being able to get up from the show, go do something in San Francisco, get back. Very excited.

Why didn't you want to stay?

I don't know. I like doing the show. It's pretty simple. Good to be here in the TVP and Ultradome. We have a great show. We have a bunch of great folks coming on the show. What was on my mind last night? I was listening to China Talk. Jordan Schneider was talking about evaluators, third-party evaluators, and I was noticing this discourse around— it feels like we funneled into very clear camps super, super quickly. And it feels like, I don't know, too calcified for how fast it happened. The Dario essay comes out and he throws out Meter, says he's bringing in Meter, and the backlash is immediate. The New York Post is crashing out saying these are handpicked AI watchdogs. Martin Casado over at a16z, he's like— Martin Casado. He's pushing for the Department of Energy. He's like full nationalization now. And both of those have their advantages, disadvantages. They both do good work. They are the extremes. And so I was just sort of wondering a few things. Like first, what other regulatory bodies can actually work? How do they work in other industries? It's very interesting because the revolving door is something that's common in financial regulation. You get people that work at banks, and then they go and work at the regulator, and then they go back and forth. I mean, this is the— This is the story of many people in the crypto industry where the regulators who are regulating it, they go back and forth. Like revolving doors exist, but I think the pushback to Meter is very much like the door is like too revolving or it's too close, I guess. But the more interesting question to me is—

Yeah, the defense of Meter is that I don't know many groups that are qualified at all to even to even understand what's going on at the frontier, right? And so—

Is that true though? I see, that's the thing I disagree with.

I would say that there are not that many groups that have been this invested in understanding frontier model behavior for this long.

That's a separate thing though.

It's just a small group right now.

That's a separate thing. So, I think there's 2 separate things. There's one which is like super forecasting, seeing the future, predicting what's going to happen. I think that's important. I think taking that seriously is important. But then there's the other side which is like, Doing the work, reading the logs and being like, this violated this rule, this hack happened, here's how it happened. And I think that those are actually 2 separate disciplines, 2 separate jobs. And you can just tell the regulator if it's someone, you don't need to tell, like, if you hire someone and they are able to get up to speed on how these systems work and evaluate them and look at logs of different incidents, see what's happening, assess the risk level, assess the liabilities. If you can get those people up to speed, you can just be like, it is your mandate to take this seriously. And the example that I'm pulling from is like, you can be 22 years old, not graduate from college, go into the Navy, enlist in the Navy, not even in the officer training program, and in 18 months you can be responsible for the security of a nuclear power plant on a submarine. You do 6 months in nuclear field A school, about 6 months of nuclear power school, and then 6 months of hands-on prototype training before arriving in the fleet. Nuclear Power School covers math, nuclear physics, reactor principles, health physics, materials thermodynamics, electrical systems, and reactor technology. There's no part of that that's like, you need to really at a deep level understand that like nuclear annihilation is bad and could happen. You don't need to be able to forecast out like, well, what happens if China and geopolitics and Iran gets the bomb and then these people and then Pakistan? Like, you don't have to understand that to just know like, don't let it blow up. That's your job. Here's how you don't let that happen. We've created a plan for you. You're 22 years old, but we know that you can do this job and you are enlisted to do this job. And doesn't matter if you think nuclear war is impossible, or doesn't matter if you think it's going to happen tomorrow. Your P-doom on nuclear is completely irrelevant to you doing this job, right?

Yeah.

And I think that that's something that is maybe being missed here a little bit. There's like, well, you have to take it seriously.

Yeah.

You have to have seen it coming. And I actually think that like, Super forecasting, super important, awesome. Also just like fun read, really cool. And if you take it seriously, you make a lot of money, you work on interesting stuff, you get amazing technology. There's so many things that come downstream of that that are really, really positive and really important. But I don't necessarily know that it's actually a prerequisite. And then the other thing is— yeah, Tyler.

I mean, like METER, they're not the ones putting out those forecasts though. Those are other groups. If you look at like METER research, it's like, you know, very complicated benchmarks and like these kinds of things.

Totally, totally. Yeah, I'm sort of collapsing the METER criticism from like New York Post perspective. And I think that is—

Overall, I think generally people are going to like if, if there's a third-party regulator, it seems like it has to be an entirely net new group because I don't think anyone has like whether or not Meter— Meter could be operating and their actions could reflect that of a fully independent group. But the financing structure, the history of the, of the various parties there just makes it so that people don't have any trust that they would act like that?

Sure. The interesting thing is that there is actually a distinction in the history of nuclear regulation, which is there's a difference between advisors in the— before the NRC, it was the Atomic Energy Commission. And the AEC was created to oversee nuclear development. And many of the scientists who did forecast the importance of riskiness of the technology were involved. Interestingly, like Einstein writes this letter and says like nuclear war— he basically describes like what nuclear annihilation could look like. There's a whole bunch of other scientists that actually run the numbers and they're like, this is what could happen if all the nuclear bombs go off. They do all the calculations. There's some that go a little bit too far. But in general, like the scientists were the ones who got to it earlier. But the scientists didn't actually wind up being the regulators. They wound up being the advisors. So, Oppenheimer became the chair of the AEC's General Advisory Committee, which had enormous influence but didn't actually issue licenses. So, the actual work that was being done, it was like, okay, Oppenheimer in this advisory role says like, well, we need to have a security guard here with a gun that makes sure that no one can steal the nuclear material, right? But he's not the one doing it. He's not the one actually hiring that person. That's just like an engineer who's qualified for that job. And I think that actually takes a lot off of it because you could say, oh, there's all these conflicts of interest here or there or there or whatever. But if you just say, well, they're just putting out a proposal that then people are going to go and implement, but then the actual people that are doing the implementation are much less conflicted because they're just drawn from the broad pool of engineers and scientists and mathematicians and physicists and whoever else we have in America who can do this type of work. It gets a lot less complicated in my mind. There's a whole bunch of other interesting details from the AEC history. And so, today, the regulators, like nuclear regulators, are talented and hardworking, but these are not like the most elite jobs. Like, you can just be a nuclear engineer, mechanical engineer, material scientist, physicist, health physicist, geologists, probabilistic risk analysts, cybersecurity professionals they hire for this. Emergency preparedness. They hire lawyers. They hire inspectors. Pay for some of these jobs ranges between $125,000 and $187,000 for many NRC technical staff roles. This machinery did have to get sort of described by the scientists, but then the implementation of that machine, of that regulatory structure, is actually done by really hardworking, really talented Americans, but not head in the clouds, not thinking about the future in some you know bizarre way. That's enough to happen at the democratic level, and then it gets implemented. And I think that that might eliminate a little bit of this like, okay, well, this person who's really tied to you is now inside actually the one with the keys, the one with the role overseeing you. I don't know, what do you think about this, Tyler? You have some pushback?

Yeah, I mean, I know that CAISI, the Center for AI Standards and Innovation, I think that they've had a hard time like—

Getting funded, yeah.

Yeah. So it's like they're having a hard time finding people who will come from the labs. Maybe they should just broaden who they're looking for. But it seems like it's still— the ways that we detect if a model is safe or not are not set in stone yet. It's still like that's what the role of METER— that's kind of what they're doing right now.

Sure, sure, sure.

So I think it is still different than there are predetermined accounting practices and you can just kind of check the box and follow the rules. Yeah, it's still going to be grounded. Yeah, it's like a moving field.

Yeah, yeah. And I mean, there is the question of like, particularly with like agent swarms perpetrating cybersecurity violations that don't directly cause economic harm. I didn't tell it to hack you. It hacked you, but it didn't knock your payment system offline. So you didn't lose a dollar of revenue. It's like very hard for you to prove that I acted wrong and then also economic damages. So there's a whole new level of like, Tort battles that need to be battled out in the court of law to see like, what exactly do I owe you? Because I shouldn't have done that, but what do I owe you? What's the damage? What's the problem there? And then you can go and say, okay, well, you know, how do we measure that? How do we prevent that? And how do we work through that? But the discourse is getting like more and more polarizing by the day. We'll see. I think there will be the the big sit-down between the lab leaders. I wonder how important it will be to have Jensen with a beer alongside Sam, Dario, Elon with beers. Because the clear proposal, there's gonna be beers involved. That's what we know from the interviews. Everyone's asking, why can't they just sit down and get beers?

6 months of this could have been on the Cheeky Pint podcast.

It really should. That is sort of neutral ground too, 'cause Elon's an investor in Stripe. What happened there? Elon's an investor in Stripe. He's a co-founder of OpenAI, and Sam's, I think, an investor in Stripe. And then Elon's working with Dario on compute stuff. So maybe Cheeky Pine is like the perfect neutral ground. I think it'll probably be on national TV, actually. But we shall see. We'll follow it here.

Quickly jumping in, we have a rate hike.

Yes. Tell me about—

Warsh hiked 25. Yep.

Okay.

This was first time in 3 years priced in. CalShe had it, I think, at like 89% this morning. So not a huge surprise. I wanted to head over to Joe Weisenthal's feed and just kind of read his reaction if he has one.

Well, you pull that up. I'll give you the highlights from The Wall Street Journal. The Nasdaq reacted positively, up 6.67%. So this is the Wall Street Journal. They need a JavaScript plugin that changes it to 0.669 or something. Most officials penciled in one more increase this year. An energy shock and a surge of investment have reshaped the inflation outlook. We talked about the Fed interest rates yesterday a lot, but the Federal Reserve raised interest rates Wednesday for the first time in 3 years, a sharp reversal that began taking back cuts as it made last year implicit and implicitly undercut the White House's insistence that inflation is not a concern. The Fed is saying it kind of isn't a concern. The increase approved unanimously will raise the benchmark Fed funds rate by a quarter point to between 3.75% and 4%. The vast majority of officials penciled in one more hike this year in interest rate projections released after their meeting. So they think There's going to be more rate hikes. Chairman Kevin Warsh vowed shortly after taking office in May to end an overshoot of the Fed's 2% target, now in its sixth year, and followed through with an increase that had been widely anticipated in recent days. The rate hike scrambled an account of the White House had offered of the man tapped by the president for the for the job in January. Trump and his allies had cast pressure to raise rates as coming. From a committee hostile to Warsh, who last year said he would have cut rates sooner than the Fed ultimately did. It also followed a lost year in the Fed's inflation fight. The central bank has made no progress towards its 2% goal since mid-2025, including after cutting rates 3 times last year to guard against labor market slowdown. Instead, the Iran war has lifted energy prices and the AI boom has driven an investment surge that has buoyed the economy and markets Today, policy action will support a timelier return to the committee's 2% goal. The rate-setting committee said in the policy statement. Analysts said that despite intense focus of late on monthly inflation data, the biggest change to the outlook has come from a run-up in energy and commodity prices. It's the fact that the war in Iran has reintensified and the energy price shock is getting bigger again, said William Dudley, the former New York. Fed president. What you got for me, Jordi?

I was just reading through a bunch of different reactions on Bloomberg itself. Let me pull them back up. But they have a live blog. Some people are saying this is more hawkish than expected given that the Fed took away next year's cut. Big changes in the dot plot line. The Fed September dot plot. We now have 4 officials expecting to raise rates 2 more times.

2 more times.

It previously just been 1 at that level, a whopping 12. Policymakers see rates going up once more before the end of the year, and the remaining 2 see holding rates at their new 3.75% to 4% level. A reminder that in June, the last time we got these forecasts, half of the committee expected the Fed to hold or cut rates. And again, it looks like Warsh did not submit a dot, so he's going dotless here. Kind of a statement in itself. Yeah, it's so, so far the AI trade The buildout, everything has been overwhelming, even in the face of headwinds like rising rates.

Yeah. I mean, the mood from Silicon Valley was like, we're definitely not booming until we go back to zero interest rates. This whole tech thing, it only works when the interest rates are zero. So we'll just wait it out. Yeah.

And the reality is there was a bunch of ideas and investing styles that only worked when rates were near zero. But yeah, it was specifically when you look at the companies that really boomed in that era, there wasn't a lot of net new, like really truly innovative stuff outside of financial products, which benefited from low rates. Yeah.

Some of them benefit from high rates though, right? If it's like a savings product, the spread's higher, but if they have to borrow a lot of debt—

Potentially. But again, I'm thinking of like lending companies like Pipe, Pipe was a company that at the time went from incorporation to billion— I forget what their peak valuation was.

And it makes a lot of sense because they're basically borrowing at 0%, and they're lending to a company at 5% or something. Whatever their spread is, it's actually justifiable to an earlier piece of the market, but that sort of breaks down when you have to go to a company and say, hey, you want money at 12% or something like that? For an early-stage company.

Well, let's head over to Who Man. Dario, we should pump the brakes on the frontier. Sam, yeah, let's all slow down together. Meanwhile, Zuck.

The funny thing is, yeah, I mean—

Let's talk about what Zuck wrote. He said, last month I wrote about how we can build a positive and safe future for everyone. This is when Zuck said, I really want people to understand my values before we come out with our most powerful AI ever. And I at least felt like we already had a good understanding of Zuck's values. But he wrote yesterday, every lab has the responsibility and incentive to move at the pace required to train its models safely and the ability to take its own actions to ensure that happens. The reality is people don't want to use agents that are misaligned with them and don't do what they ask. So labs have a strong natural incentive to make their models more aligned right away. Starting out with this point, it's like the safety debate has not been around the idea of, oh, they're going to create personal agents that are going to be misaligned to the users. This is not at all— this is just a point that doesn't matter.

No, no. I mean, there is a— it's not the safety crowd, but the whole social media is brain rot addiction. That is something that There is a separate crowd that does critique that and says, like, I don't want the addictive flywheel of maximizing screen time to be brought to AI.

It's a totally separate debate.

Yeah, no, I agree. I agree. It's not the true AI safety debate.

Yeah.

But it is a debate.

There is a lot of debate about slowing progress on capabilities until alignment catches up. My view is that trust and alignment are quickly becoming the most important capabilities that will differentiate. Again, this is not relevant to the current safety debate.

Mm-hmm.

Obviously, people want to make products that do what their customers want them to do. No one has been worried that you can't make a model that in the near term or in the medium term or even over long-running tasks can generally do what the user wants. The concern is that if you leave models and give them a task, That is more expansive, that they can start to do things like hacking Hugging Face, right? So again, nobody is sitting here saying—

The main thing is that this is talking past the x-risk question. It's completely dismissing the discussion, which Dario is laser-focused on. And so, this feels like it's a rebuttal, but it's actually talking past it in the sense that he's like, labs face significant liability. And it's like, well, in the x-risk scenario, the liability doesn't matter. That's the whole point is that like no one's gonna come and—

And here's the best line. Meta delayed shipping Muse for several months to focus on safety and security.

That's actually very rational and important because—

Every company delays their products for months. That's just called building a good product to make it safe and secure. Like, period. This is what Meta has been doing forever. You have to do that. You have billions of users. You gotta make sure they're safe and secure. Every single product. Again, I felt like he was—

but you—

so there's a lot of things in here that are rational.

He's taking a victory lap on not taking a victory lap. Don't you realize that? He says we didn't call for everyone else to do this before we would. We just did it as part of our day-to-day work because it was clearly the right thing to do.

And again, every single company already does all of these things. Every single company that makes AI products already does.

All the other companies take victory laps while they're doing it.

He's taking a victory lap for not taking a victory lap. It's not that complicated. He says everyone else says like, we're taking safety seriously. We want a pat on the back before we delay the product. And he's saying, I want the pat on the back after I delay the product.

Yeah.

I just think it's very— No matter what, there's a lot of back patting going on. I just think it's very funny to— I think it's funny how much all these points are fine. They generally are rational and they make sense.

Yeah.

But I think it's funny that people are giving him so much credit for this note, given that he's totally missing the main point that everyone else is focused on.

X-risk.

Like, intentionally missing the point in order to get brownie points from people that don't even understand the current debate.

No, to get brownie points from other people that have a PDM of 0, who are like, yeah. And you can see who's supporting this. They're like, yeah, thank you. Like, just put Put the agents in the bag, make the tokens free and just make the products. I'm not worried about that at all. And for that crowd, they're like, thank goodness you didn't fall in the hole of stooping to this p-doom debate that I don't take seriously. That's the side.

I just wish that he would come out and say, I have a p-doom of zero. That's what he's saying. No, he's not. He's not. He's trying to position— he's saying he's not being explicit about that. He's trying to let people say, we care a lot about safety. We slowed down our development because we care about safety, trust, and alignment are important, right?

Yeah. He should definitely come out and say P-doom zero, because if it's not zero and it happens and we all go extinct, no one's going to be able to dunk on him, right? Yeah.

So, it's pure upside.

Pure upside. Pure upside to be P-doom zero guy. Why has no one considered this? The aura gain is so high.

Yeah. I would respect it a lot if he just came out and said what he actually thinks, which I do believe you're right.

P-doom zero.

Which he has a P-doom of zero and his P-abundance is—

I mean, that's what he said in the previous essay. He was basically like, I don't think the— he even was gesturing towards like the fear-based marketing, the doom-based marketing is just a marketing tactic. I don't think it's rational. And also, I don't think it's good for people to be in that headspace. And it's like, InfoHacks—

Here's the thing. One of the last lines, committing the significant majority of compute towards serving people rather than racing towards recursive self-improvement is one of the best ways to ensure we develop this technology safely. Meta has made this commitment, and other labs can do this as well. Look, like, there's absolutely zero shot that Zuck walks into MSL and like gathers the researchers and says, look, I don't want to make models that make our models better. I don't want to do it. I want you guys just focus. There's zero, zero chance. So again, like, this to me is just like he is being disingenuous with his positioning of almost every single point here.

I don't know. I do think that there is a trade-off right now between making models good at things that are not on the RSI path and those that are. And so, like, the race to become really, really good at coding is super aligned with RSI. The race to do image generation is not. And image generation does not seem to be on the RSI critical path. Although I think DeepMind put out something where they're using world models and they think they have a breakthrough there. I don't know if I saw that accurately, but— But maybe they're wrong, but at least the bet at at least Anthropic has been like, we don't need to be world-class at image generation to get where we want to go because we just need to be really good at coding. Coding teaches us, teaches the model how to train new models, and then we get, you know, and then that final model, we can ask it to spin up an image generator if we want. Zuck is saying the opposite. He's saying like, yeah, we will actually go and try and build a tool just to help you book a dinner reservation, and that's a good use of compute. Probably not on the RSI path, and that's like a reasonable trade-off. That feels real to me. I don't know. What do you think about engaging independent evaluators? Is this like—

Yeah, I think again—

He says it's already industry best practice. Is he talking about benchmark stuff, or is he talking about like actually like the— you have Slack access, you have a desk, you have a badge, like You don't work here, but you're allowed to just go wherever you want. I think that that's the next step. And I think he's maybe talking past that a little bit. Yeah.

And he's talking past this again, engaging independent evaluators and advisors is industry best practice. MSL already does this today in several areas because it helps produce better work. Other labs can just do this too. It's like other labs also do that too, also do that already.

Well, as a Last week Anthropic does this with Meter. Like they said that they were going to do that immediately. So they were doing badge and Slack access.

No, but he's not saying that he's doing that. He's saying that he's doing the thing that every group that's making model has been doing for the most part.

In the prior era.

For a long time.

But the new thing is badge and Slack access and desk, even though you don't work at the company. And that's what everyone's like, whoa, that's crazy because these organizations are very, very secretive. And you're really going to let this nonprofit come in? It's like sort of a wild move. And that's why people are like, oh, wait, like how aligned are they? And like, what is the— what's the knock-on implication? Like, can these people not leak? Can they not— can they be trusted? Are they going to go to a cocktail party and be like, oh yeah, the new model is actually really bad or whatever? Like, there's so many things that are like— like Meta deals with leaks all the time. And so the prospect of bringing in a non-employee who is there explicitly to whistleblow effectively and is allowed to talk about anything and is third-party evaluator. That is a huge step. And I think that's why people are like, whoa, this is a big deal. This is a big proposal. If this was not a big thing, if Anthropic was just like, oh yeah, we're going to do a benchmark with METER, everyone would be like, yeah, that's fine. Cool. Do that for sure. Awesome. But people are like, wow, okay, METER is going to have a Slack access at Anthropic and you're asking other people to do that? Like, that's— we got to know who these people are. We got to make sure that this is like the right team for this. This is sort of a crazy thing. This is sort of unprecedented. This doesn't happen a lot. Like, this is new. And so, yeah, the newness is not fully embraced here. And I think that's a little bit of like, okay, you're not really engaging with like what's coming down the pipe, which is like maybe a government employee in your building. That's not happening right now. Yeah. Maybe maybe nonprofit from Berkeley. Do you like that, Mark? How do you feel about that? Are you cool? It seems like you're cool with it, but I don't know if you're actually gonna be cool with it because it is a little it is a little wild, right? It's a different thing.

It's a new thing, but it's it's a modern it's a modern pull up this image.

What image are we pulling up? This this meme has been applied to like seven different people this week.

I know, but I think it's I think it's particularly relevant because you have, you have Elon, Demis, Dario, Sam, all these people from different factions that are at or—

I've seen this applied to Theo. I've seen this applied to Cohere. I've seen this applied to DeepMind and Gemini. I've seen this be applied to MSL. People are just, whatever shot they want to take, they're applying this. It's not, it's a, it's too broad at this point.

There's people—

I think it's the inverse. It's all clowns and there's one tactical soldier.

There's groups that are at the frontier.

They're on the battlefield.

Yeah.

And they're deeply concerned.

Yeah.

And you have Zuck coming in here saying, yeah, like, I built a cool personal agent. It's aligned. What's there to worry about? Nothing to worry about. You're not really in— you're not really on the battlefield yet. And I'm not saying with Watermelon they can't get there. And Muse seems like it's—

Yeah.

Muse is getting amazing reviews. It seems like an amazing product. Again, I thought the whole post was silly, just like I thought the last post was silly.

What happened to the to the Kalshe AI price tracker? Do you see this? We we talked to Tarek when this launched, and I was like, oh, this is cool. This will allow you to understand like basically a proxy for the AI buildout. Like how are how are GPUs trading? Banned. Banned apparently. The U.S. Commerce Department last month ordered Kalshe to take down one of its products tracking the price of AI compute, the crucial power from. Data centers that's driving the artificial intelligence boom, if you didn't know what AI compute was. Commerce officials cited national security concerns, and that's what stuck out to me. I was like, there's so many different prediction markets that I can easily trace through, like, oh, you have a flight delay one, and you could have somebody that calls in and tries to get the flight delayed. That could be very disruptive. FAA could have a problem with that. But this one, I wasn't worried about at all. We talked We talked to Tarek about it and we were like, yeah, this one seems sort of informative and interesting. So the product pulls together data from several markets that allow users to bet on the cost to rent Nvidia chips to create an overall picture of where AI compute costs are heading. Call sheet quietly complied, though many of the underlying markets remain open for trading. Separately, Commerce has pushed the Commodities Futures Trading Commission, which oversees prediction and future markets, to effectively freeze approval of new compute contracts for 60 days. And so even though some of the contracts are still open and will close maybe in 60 days, there won't be any compute prediction market futures, which is very interesting. But Kalshi declined to comment, while a Commerce spokesperson said the department, quote, has never once asked Kalshi to take down this market or any other markets. Interesting. So the Commerce spokesperson said this story is false to Semafor. So lots of people going back and forth. It's unclear why Commerce is worried about the nascent market, which aims to do for AI computing what oil futures do for crude, let buyers and sellers of compute lock in prices and give traders a way to bet on where those prices go. One potential reason floated to Semaphore by market participants is that compute futures could be manipulated to show a sharp drop in the cost of older chips, which might destabilize AI stocks and debt markets. Some of these markets are thinly traded, which could lead to volatility. Even without bad actors. So you're trying to wipe out situational awareness. You short the call sheet prediction markets on AI compute futures. Everyone thinks, oh, AI is bust. The market trades down for a couple of days. You clean up and then you buy back in or something like that. I guess that's what the rumor is here that some folks reporting on. The cost of compute has become one of the most important numbers in the US economy. One side of the debate fears that older chips, which serve as collateral for billions of dollars of borrowing by NeoClouds. On the other hand, on the other are concerns from big companies adopting AI that shortages of power and infrastructure will send prices of tokens soaring. That uncertainty has given rise to futures market that was starting to take off this summer. The CFTC's 60-day pause could delay plans by exchange operators like CME and NYSE parent Intercontinental Exchange, along with upstarts like Architectural Financial Technologies, to list two-sided betting Parlers. Interesting. Get that flashbang ready. Leave us 5 stars on Apple Podcasts and Spotify. Sign up for our newsletter at tbpn.com, and we will see you tomorrow.

Throwing flashbang.

Throwing flashbang.

Boom.