Revolutionizing Insights: Tyler Cowen on the Future of Economics and AI

You, you have co-written a book with Daniel Gross titled Talent: How to Identify Energizers, Creatives, and Winners Around the World. What's the one thing you can tell us about doing better ID of talent?

Of course, it depends on context, but the first thing I tell most groups is if you treat it as you searching for talent, you will lose.

Mhm.

You are imperfect. And small relative to the world. If you treat it as, how can I send out the right bat signals so talent is searching for me? You have a much better chance to reframe the problem that way. It's the first thing many groups should do. Of course, many groups already get this right.

Yeah, we do. Through the Koch Network, we talk about virtue-talent matrix, and we try to hire people based on their virtue rather than the talent, and assuming that We can train most talent. You can train people to do a job, but you can't train the virtue. What are your thoughts on that?

Americans are capable of achieving extraordinary things when they have the freedom and opportunity to do so. This is American Potential, and here's your host, Jeff Crank.

Well, thank you for joining us for another episode of American Potential. You know, today's guest is a dedicated writer and communicator of economic ideas. He's the author of several bestselling books, with his latest one being a generative book, Goat: Who Is the Greatest Economist of All Time and Why Does It Matter? Now, readers are encouraged to use AI chatbots and create their own versions of the book. He's the founder of Emergent Ventures, an incubator fellowship and grant program for social entrepreneurs with highly scalable ideas to help improve society. As a response to the 2020 pandemic, he created Fast Grants, which is an offshoot of Emergent Ventures, to swiftly support scientists working on COVID-19 treatments. He's also the host of the podcast Conversations with Tyler Cowen, which features today's most underrated thinkers discussing their work, the world, and everything in between. He is the Holbert L. Harris Chair of Economics at George Mason University, and he serves as chairman and faculty director of the Mercatus Center at George Mason University. I want to welcome Tyler Cowen to the show. Tyler, thanks for being with us.

Happy to be here.

Thank you. Yeah. So we were just talking about this a little bit, but the podcast— talk about your podcast first. And to tell us, you were doing this podcast before podcasts were even a thing, it seems like.

I think it was 8 years ago. Our first guest was Peter Thiel at George Mason University. And we had Peter in. This was when Peter was not very much on YouTube. So it was a huge hit. Everyone wanted to watch it. And then we just thought we should keep on doing this. And 8 years later, I now do about one every 2 weeks. And here we are. Plus, I'm on other people's podcasts. Yeah.

Well, that's great. So why did you decide you wanted to study economics? What made you want to do that?

When I was very young, I was a chess player, a successful chess player, and I thought, "Well, I don't want to do chess for my life. It's a terrible living." But I also did well enough that I realized, like, I can do something and do well at it. And then philosophy and economics were what interested me. I started going to the public library, just reading everything I could. Now I'm at about age 13. And kept on going. So I've been doing economics. I'm now 62, basically 50 years.

Wow. Yeah. Okay, so GOAT, Who is the Greatest Economist of All Time and Why Does It Matter? That's your book, right?

It's online, it's free, and you can either read it normally on your Kindle or print it out, or you can read it in GPT-4.

Okay.

First book ever published that way.

All right. So explain to folks what that means.

You can just start the book and read it. And anytime you want to ask a question, what did Tyler Cowen mean here? What did Keynes do it for? Say, what year was Hayek born? You can ask the AI. It will tell you. It's trained on the content of my book. If you don't want to read Chapter 4, you can just say, summarize Chapter 4 for me. It will do that. Go on to Chapter 5. If you want to know what would a critic say about Tyler Cowen, you can do that. That's useful perspective. A good discipline for all authors, I would add.

Okay.

So it's as interactive as you want it to be. But again, if you just want to read the book, you can do that too.

Okay. So, I mean, and that's fascinating, I think, for a lot of people.

Right, it's at econgoat.ai. Or Google my name, goat, Tyler Cowen, goat. Or econgoat.ai.

econgoat.ai. Okay, and so the book can— where can they get the book?

The book's there. You don't have to pay. It's not on Amazon. That's the only place.

Okay, so talk a little bit about the book itself and then who is the GOAT of economics?

I've been interested in the history of economics since I was a kid.

Yeah.

And having thought about it for so long, I wanted to write down my thoughts, but the proximate origins stem from pandemic. So I was locked in, locked up, didn't know when this thing would end. I thought, I need a project, but it has to be a project where I don't have to travel. And I already have all the books. And then it occurred to me, well, the great economists— Keynes, Hayek, Milton Friedman— I have all that. And I wrote that at the height of the pandemic. And it helped me get my thoughts in order. Like, who is a real talent? What are the strengths and weaknesses of thinkers? How can we learn to appreciate other people even if we disagree with them? Those are the key themes of the book. It's written from the point of view of a fan. So it's a passionate book. I put myself into it. It's a pretty subjective book. I don't think there's a single goat answer. I think the easiest answer is to say Adam Smith because he was first. My personal favorite is John Stuart Mill for his classical liberalism. But as a narrow economist, I wouldn't say Mill is the best. I think I would say Milton Friedman was the best. So it depends on your point of view.

Yeah.

And in fact, if you keep on asking the AI, who does Tyler say is goat? Every time it gives you a different answer. But that's because it's understanding the book well, not because it's screwing up.

Sure, sure. So Milton Friedman, let me just talk a minute about Milton Friedman. I just went back, not, I don't know, maybe 6 months ago and rewatched his whole Free to Choose series, which I don't know what it's on now. It's on, you know, certainly on YouTube and several other places. But he is, he was fascinating to me because he was such a great communicator of the, of the economy and thoughts and ideas. It seemed to me he had just such a simple way of laying out economic theories and principles. Do you agree with that?

I think he was the best economics debater ever.

Yeah.

It's amazing to me the mix of how ruthless he was in winning the argument.

Yes.

And how much he always smiled.

Completely agree.

Yes.

Yeah. You know, in that Free to Choose series, you know, there's the discussion point and he's got all these people who disagree with him and it just kind of reminded me of we don't do that much anymore in society where we have these free debates, where people disagree, but they're happy, they're thoughtful.

But we try to do that in podcasts, right?

Yeah, right, right, right. So he fascinates me with that. So what's the most surprising thing you learned as you were researching the book?

Well, John Maynard Keynes continues to impress me as a thinker. To be clear, I do not agree with what is usually called Keynesian economics, right? But his life had many phases. He actually writes the earliest and best statement of monetarism in the early 1920s, clearer— as clear as anything Milton Friedman ever wrote. I think his work on the Bretton Woods system was actually pretty good. His work on the Treaty of Versailles is quite interesting. So it's easy for people with what you'd call my point of view, classical liberalism, to disagree with Keynes, but there's a lot of value in there. And he's the only human I know of who impressed both Bertrand Russell and Friedrich Hayek, and he charmed them both too. And that's amazing.

Yeah. How about Hayek? Give us your thoughts on Hayek.

I met Hayek once. I think he's the most profound economist. He's the writer who has the greatest potential to completely reshape how you think about an economy. So his few best pieces, I think, are the best works in economics ever. I don't think he has the breadth of, say, Milton Friedman. I think some of his political philosophy could have been better. But he's certainly a contender for greatest of all time.

Yeah. Let me take it to politics just for just a minute. How many politicians understand economics? Not very many, it seems.

Well, if you go to Singapore, most of them do. Right?

Most of them do in Singapore. OK, how about American politics? Estonia is pretty good.

America, I think a quarter to a third of senators have a decent grasp of economics. Highly imperfect, but there are arguments they can deal with and digest. In the House, I don't know, 1 in 10. In the bureaucracy at the Fed and Treasury, it's pretty impressive. Most other places, not so good. That would be my quick answer.

Yeah. How about the— I mean, you talked about in the Treasury and other places, the administrative state. How many of those folks do you think understand economics?

Well, it's really agency by agency, but if you look at the SEC, I used to work with Hester Peirce, who's the commissioner, and I can promise you she understands economics, and she's done a great job holding back the excessive regulation of crypto, and she's worked with economists for many years, and Hester's wonderful. So some of them do. Uh, it's certainly not the usual case though.

Mm-hmm. What about— so AI, as you were thinking, what was your thinking behind using that as part of this book and allowing people to explore using AI as they read the book?

I always like to be doing new things to stay fresh. So I was one of the first bloggers, early onto the podcast scene, economics education on YouTube. We still have a channel, MRU.org, teaches economics for free. Often to high school students. And AI is this new and wondrous thing. And I thought if there's a way to combine a book and AI so you can supercharge the book and get people a lot more power from their reading experience, we should do that. So I think in a few years everyone will be doing this, but I'm very pleased to have been the first to do it. Yeah.

So you're literally the first that's done— done—

first that's done a full-length book.

Yeah.

So I worked with the people at Mercatus, Jeff Olms in particular, and Jeff helped build this bot that in essence trains GPT-4 but on the book. So GPT-4 consults the book first. So you get Tyler Cowen answers, not the too politically correct GPT-4 answers. And it really works. And very often it even sounds like me. And we're doing an audiobook and the audiobook will be read by AI. And I played a clip of it for my wife. She couldn't tell it wasn't me. It's not out yet, but it's on its way.

So we do that with this podcast, too. So we translate this podcast into Spanish.

Great.

And then AI clones your voice and my voice.

Bueno.

Yes, bueno. That's right. That's right. So it is fascinating. It really is a fascinating world we're living in.

And even getting the lip sync right, it can do.

Yeah.

And this will get much more powerful quickly. So there's a lot of books, like you ever read a long fantasy novel and you wonder, well, who is this character anyway? And you're thumbing back through. That's not necessary. It should be you just go to your bot or AI and say, well, who is Tom Bombadil anyway? And it tells you and you keep on reading.

Yeah. Yeah. I mean, think about the— so you did the first one, but let's think about the future of this. Like, what do you think this is going to mean 5 years from now? Every book will have this? I mean, what's your thoughts?

Well, there's a key issue in artificial intelligence, and one way of putting it is what's the price of a token, it's called. But just what's the cost of doing this? And we don't know how quickly those costs will fall. I think they'll fall very quickly, but it's fair to say that's an open question. Once they become very cheap, which I think will be in 2 to 3 years, I just think every book will have this option. It's not hard to do once it's been done once. It becomes formulaic. And you'll go to Amazon and you can just buy the plain standalone book or you can buy an ebook version with a bot hooked up and maybe that will cost $2 or $3 more and people will choose. It'll be a great market.

Yeah. Interesting. That's really amazing world we live in. I want to talk to you a little bit about identifying talent. So you have co-written a book with Daniel Gross titled Talent how to identify energizers, creatives, and winners around the world. What's the one thing you can tell us about doing better ID of talent?

Of course, it depends on context, but the first thing I tell most groups is, if you treat it as you searching for talent, you will lose.

Mm-hmm.

You are imperfect and small relative to the world. If you treat it as, how can I send out the right bat signals So talent is searching for me. You have a much better chance. And to reframe the problem that way is the first thing many groups should do. Of course, many groups already get this right.

Yeah, we do. Through the Koch Network, we talk about a virtue-talent matrix, and we try to hire people based on their virtue rather than the talent. And assuming that we can train— most talent, you can train people to do a job, but you can't train the virtue. What are your thoughts on that?

I don't think you should ever hire people who do not have high ethical standards. So I, I think I agree with what you're saying. I think IQ for most jobs is somewhat overrated, and simply, is the person determined and do they work every day at improving themselves? It's for most jobs the first thing I look for. Yeah. Now there are some jobs, like if it's to do a certain kind of pure mathematics, I mean, you do have to put a certain sort of talent above all else, actually. For that sort of job. But for 85% of jobs in a typical organization, determination, number one thing, ethical standards, those two are just absolute prerequisites.

Yeah. So let me ask you this. This is a great debate that's been going on. I just thought about this. It's not in my list of questions here, but there are some organizations, companies going to unlimited PTO, paid time off. Policies. And it— I have found that companies that are doing that seem to use it as a way to weed out people that they don't want necessarily working for them, right? So if you say you have unlimited PTO and you abuse that unlimited PTO, maybe that from a virtue standpoint, that's probably not someone that you want on your team, as opposed to someone who says, well, I have unlimited PTO, but I, I have to be a good producer of a quality product. So I'm not going to do that. Do you have any thoughts on that? What do you think about that?

If an employer announces PTO, I think you need to ask the next question. What is the actual policy? Because it's not in fact PTO, right?

Right.

If you take too much time, you'll be fired. So sometimes you end up in the opposite equilibrium where no one feels they can take off any time at all. And if that's the way things are going to be, I would rather announce that more clearly than have people guessing. So I think PTO works best in very high trust organizations, which there are many of, but I would say it's not in fact the norm or the median. So a lot of groups doing PTO, I'm skeptical, but I definitely see cases where it works when trust is high.

Yeah. Okay. Emergent Ventures. This is through your role at Mercatus. You run a project focused on IDing unique talent. It's called Emergent Ventures, which also includes a pandemic-specific outgrowth called FAST Grants. Tell me about how you came up with that idea and the structure.

Well, FAST Grants is over now, but we did it during the pandemic. So when the pandemic started, Patrick Collis and I were talking and we had been speaking to a number of scientists and they were saying they wanted to get to work doing something to fight the pandemic, but they were applying for funds, often from the government, even from their own schools. And it would take them 6 to 9 months just to get an answer. Now, when that's the case during a pandemic that's killing thousands of Americans every day, that is literally insane, right? It's a sign of completely dysfunctional institutions. So Patrick and I very quickly designed a program where at first we got people answers within 2 days. As it became more popular, we had to stretch that to 2 weeks, but still, to get an answer in 2 weeks We had a panel of referees, a submission would come in, we would take care of it, make a quick decision, money got sent out. So we raised and distributed over $50 million at the peak of the pandemic and got it to qualified researchers within 2 weeks, often within 2 days. And I think it was also a kind of role model. A lot of people in the government have contacted me like, how can we do better next time? You know, what can we learn from you? And just showing philanthropy does not have to be bureaucratic. We funded a lot of very important things. If you've ever done a spit test to see if you have COVID, well, the spit test was developed at Yale University. The researchers asked Yale for money. They got the bureaucratic runaround from Yale, which has a lot of money, right?

Right.

They came to us. We sent them money in 2 days, got a spit test from that. Typical example of something we did with fast grants.

Yeah. So, I mean, do you ever see government adopting something like that? It seems like there's a lot of barriers in government to being able to adopt a policy like that.

There's a lot of barriers, but the United Kingdom has a new science funding agency called ARIA. Matt Clifford, a friend of mine, was chairman of the board until recently, and they are modeled after a number of programs, including Fast Grants and other Fast Grants-inspired efforts. And they're a version of that. They're not quite as fast as we were, but minimum of fuss, minimum of bureaucracy, autonomous program officers, ability to spend money quickly. So there are changes, we're seeing it. I had a call recently with the Japanese Ministry of Culture and Technology. I'm not promising they're gonna do anything. They were interested, they interviewed me, they wanna talk to other people. So I've had calls with a lot of governments And I think slowly but surely some subset of them, they do see it as a vote winner to respond more quickly in times of crisis. And I think we're seeing some improvements.

Well, I mean, isn't that the value of philanthropy kind of over government sometimes, right? Is that there is this one, it can respond more quickly. We see that with the Red Cross and other agencies like that.

But I found a lot of times private philanthropy is as bureaucratic as government. I'm sorry to say. Maybe it's a little bit better, but there can be multiple layers of approval and committees and processes, which might make sense in many times for many problems. But again, when there's a crisis, yeah, you need to get people money quickly. And I think today a lot of our world is in crisis. It's not a COVID thing right now, but there's many problems. Take the distribution of the anti-malaria vaccine. That vaccine works like 85%. We're dragging our heels getting it to people. Who might die from malaria, kids who might die just because la-di-da nonprofits are a bit slower. No, no sense of urgency, no profit motive. Yeah, we need to get our act together there.

Right.

It would save hundreds of thousands of lives if we could just do it more quickly. It probably doesn't even have to cost us more. We just need that sense of urgency. And this, for the most part, we can't even blame on government.

Mm-hmm. So tell— what did you specifically do to be so quick in responding? I mean, how did you do that differently than what is normally done?

One layer of decision-making is the key. So you need very qualified people. We had a panel of 20 referees, but used 3 or 4 of them much more than the others. Had a person who chaired the panel of referees, and they simply had the authority to make a decision. And I would back the decision and legally certify it, and then we would send out the money and just a high level of trust and willing to realize you're going to make some errors. But to get the thing done now is what's— it's where the actual value is.

How many, if you could go into a little bit, I mean, there were some that you denied, right? I assume. Oh, there were many.

Thousands of applications and handed out a few hundred. Okay.

Yeah. So So again, how does government— how do they do that? I don't understand how a federal government agency, for instance, can get from where they are now to a system like that.

Well, let's take the National Institutes of Health, which is one of the worst offenders. Just to submit a proposal, it might take you 200 pages. It has to be formatted a certain way. If the PDF is the wrong whatever, you know, the system rejects it. Our system's basically a one-page application or a bit more. You can attach a file. Uh, people know who you are, what your work is. You link to some of your papers and you say what you want to do. And if it takes you months to even get ready to apply for the NIH, I mean, that's just on top of a process that already can take a long period of time. And I don't think it improves the quality of decisions any to have Papers sitting on people's desks. It's not that people are there pondering deep thoughts that will help them make better decisions by spending 11 months on it. They just should decide now. And it's simple. It's not hard to do. What's hard in an institution is to have the will to do it.

Mm-hmm. Yeah. What are some of the ideas that Emergent Ventures awarded grants to?

We have over 500 grant winners around the world. Uh, one area where we have many winners is simply how to improve the economics of science and science policy, make it more dynamic along the lines of FAST Grants. The area with probably the single largest number of winners is computational biology. Most of those are quite young people. I think it's the area right now that's attracting the greatest amount of youth talent, and I sincerely believe within 30 to 40 years most medical maladies we will have beaten back and we'll have done it by applying either AI or computational and statistical methods to medical problems that we used to treat in a very hokey, old-fashioned laboratory sort of way. And I think we're going to beat them all, almost all of them. It may not always be cheap or available to everyone, but that is within your lifetime going to happen. And we're funding young people who are super smart, ambitious, and who want to do this. Yeah, we have a separate tranche, people in Ukraine We have a large number of winners in India, which is right now the world's most dynamic economy. So we're looking for growth areas where people want to do wonderful things and are just flat-out ambitious and not apologetic, you know, fine with making money, uh, full steam ahead. Let's do it.

Yeah. Okay, so if people want to learn more about your book, the GOAT book, or the AI or Emergent Ventures, how do they— what's the easiest way to get in contact with you or learn more?

Well, first they can just email me. My email's online, tylercowen@econgoat.ai. I'm the only Tyler Cowen. Only I read my emails.

You're the only Tyler Cowen?

That I know of on the internet, yes. Okay. There might be someone in Kazakhstan with that name, but actually probably not. They can also just go to the GOAT book, econgoat.ai, and ask it questions about fast grants, about me. Ask it about anything. It's very good. GPT-4, there's Google. I have a homepage. I've written a daily blog for over 20 years that's called Marginal Revolution. My economics education site is mru.org. It's the number one economic education site that I know of. Those are free videos for the whole world. And I write two columns a week for Bloomberg. So there's plenty of me.

Yeah, plenty of you. All right. And again, the podcast, if folks want to listen to the podcast—

Conversations with Tyler Cowen.

And they can find it anywhere you get your podcasts, right?

Spotify, Apple, YouTube, totally free, no ads. It's there for the taking.

YouTube is video or audio only?

It's video when the guest is willing to do video, which is usually but not always.

Yeah.

Okay.

Tyler, thanks for joining us. I appreciate it.

My pleasure. Thank you.

Fascinating stuff.

Great.

All right. All right. Well, listen, this is, this is the world we're living in. And imagine what 5 years is going to bring for us. This is incredible stuff. And I do look forward to seeing what AI brings., you know, in the, in the world of publishing. It's going to be incredible. Thanks for joining us. Thanks for listening to this. And remember, defend liberty, defend freedom. Always do that at all costs. Thanks for joining us.

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