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Yahoo
14-02-2025
- Business
- Yahoo
What a Generational Political Shift Looks Like
From the Techne on The Dispatch Friends, it is with a heavy heart that I am writing the final edition of Techne—for now. This newsletter will be on pause for the foreseeable future, as I need to settle my parents' estate and won't be able to devote the time needed to make Techne what I'd like it to be. I've enjoyed putting this newsletter together every week and hearing from so many of you in the comments, over email, and on social media. My work at the American Enterprise Institute will continue, as will my commentary on X. So please don't hesitate to reach out! I started Techne with the goal of covering tech and innovation policy. That included commentary on state AI bills, state privacy bills, autonomous cars, Google's antitrust cases, Apple's antitrust case, the $42.45 billion program for broadband expansion, the net neutrality debate, Nvidia and the value of compute, NASA's canceled VIPER project, and recently, the competitive implications of DeepSeek. But I also covered topics in geoengineering, why shrubland drove LA's fires, and the proposed dam that might have helped stop flooding from Hurricane Helene. This newsletter has always been about more than just policy analysis. It's been about tracking how technology, governance, and culture intersect in ways that shape our world. Before signing off, I want to reflect on where we are politically, because the changes happening now will define the policy landscape for years to come. In the first edition of Techne, I explained 'Why I'm Out of Step With My Generation': Among my millennial friends, and even more so for Gen Z, it's common to believe that the United States is in terminal decline. But I remain an outlier because I think the United States' best days could still be ahead. The country faces challenges, to be sure, but we have an abundance of resources and minds to meet those challenges. In this inaugural issue of Techne, I want to explain why I'm optimistic. My optimism in America's resilience has shaped my perspective throughout my writing. It's also deeply tied to my background. I'm a midwestern Protestant, born and raised in a culture traditionally dominated by Germans, giving the region its tendency to cut down the tallest poppy. But it is also a place where hard work and competence matter more than self-promotion. Nicholas Cannariato captured this perfectly when he wrote in the New York Times Magazine, Chicago, for 'The Bear,' is depicted — accurately — as a place where the goal is not necessarily to win status or acclaim so much as to create something great and original, ambitious without pretense, committed to excellence for its own sake rather than prestige or fame. At the same time, I grew up with the internet. I'm a digital native, if that's a meaningful cohort. We had dial-up internet when I was young, and when high-speed DSL became available, we were the first on the block to get it. My high school was an early adopter of the internet because it had been connected to a precursor network to the internet in the 1960s. And I grew up in Springfield, Illinois, a decidedly political town that forced you to hide your political leanings, while also reading discussion forums, LessWrong posts, and the early blogosphere. In short, my politics are indelibly shaped by the digital. Because I was there when it was all going down, I wrote a piece last July, asking, 'Did Wokeness Get Its Trial Run On Tumblr?' In the 2010s, Tumblr served as an incubator for what would later be known as 'woke culture.' I saw it firsthand. The open-ended structure and anonymity created a space where diverse, often marginalized communities could thrive, fostering personal storytelling and deep discussions about identity. The platform was many users' first introduction to intersectional politics, which have since permeated mainstream discourse and shaped social and cultural debates. Tumblr served as a bellwether at a time of a parallel development in our institutions toward the elevation of identity. DEI has become a target of the right, and for some valid reasons. Instead of fostering environments where people can thrive based on competence and contribution, our institutions are courting preferential treatment based on identity. Writer Tracing Woodgrains' excellent reporting on Federal Aviation Administration (FAA) hiring practices for air traffic controllers captures this tendency. As he detailed, A scandal at the FAA has been moving on a slow-burn through the courts for a decade, culminating in the class-action lawsuit currently known as Brigida v. Buttigieg, brought by a class who spent years and thousands of dollars in coursework to become air traffic controllers, only to be dismissed by a pass-fail biographical questionnaire with a >90% fail rate, implemented without warning after many of them had already taken, and passed, a skill assessment. The questionnaire awarded points for factors like 'lowest grade in high school is science,' something explicitly admitted by the FAA in a motion to deny class certification. And then there are the stories from Aaron Sibarium and Chris Rufo on how shifting cultural paradigms are challenging established norms in education, politics, and society alike. All of this is to say there's a shift in politics underway that is being dominated by online political conversation. The internet is reshaping political and institutional power. I saw Tumblr users' reaction to identity a decade ago. Likewise, we are only just now seeing those reverberations in politics today. Trump 47 is decidedly different from Trump 45. It feels more like a first presidency than a second presidency. If 45 was about draining the swamp, 47 is about deleting its code. And it's being spearheaded by Elon Musk, who first made a name for himself in the Dot Com era. In the last year, tech has come of age in a way. Who could have predicted that Musk would become such an important political figure? He bought Twitter, became politicized, then became the biggest donor in the election cycle. Now, in the first couple weeks of Trump 47, Elon is driving significant elements of the political conversation. With Musk leading the Trump administration's efforts to slash the federal workforce, disruptive tech has truly arrived in Washington, as I explored in 'The Ascension of the Silicon Valley Mafia': These new leaders in the tech right came out of the Web 1.0 world. PayPal was sold to eBay in 2002, making Elon Musk, Peter Thiel, and [David] Sacks all major players as tech investors. Musk became the biggest political donor this election cycle, giving out $277 million, and is going to help run the new administration's government efficiency initiative, DOGE. Meanwhile, Thiel was an early backer of Vice President-elect J.D. Vance and has gained broader influence with Trump. Add in Sacks and it is clear that the PayPal mafia has ascended politically. Also betting big on Trump this year was [Marc] Andreessen, the creator of the Netscape browser, which was sold for $4.3 billion to AOL in 1999. He then used that money to open Andreessen Horowitz, a successful venture capital firm. If there is a through line, it's that the leaders of the Internet Exceptionalism era are trying to reform government. What began as cultural shifts in digital spaces have now extended into governance, with Silicon Valley figures moving from industry disruptors to central players in federal policy. In 2025, we have tech talent being directly applied to reduce the size of government. It is an important moment to mark, and Elon Musk, the world's richest man, is playing an outsized part. Musk deserves credit for being innovative. I don't think anyone in the government reform movement thought about utilizing the Treasury Department's payment system to drive reform, largely because there are so many laws against accessing and utilizing this sensitive data. As expected, courts have put a hold on what Musk's Department of Government Efficiency (DOGE) is doing, and as expected, there have been plenty of online conniptions about these pauses. Disruption alone is not governance. The techno-libertarian push to overhaul the federal workforce through automation, efficiency measures, and private-sector methodologies may streamline some agencies, but it could just as easily produce bureaucratic dysfunction on a grand scale. Whether DOGE ends up as a transformative project or a cautionary tale will depend on execution, and Musk has never been known for his patience with the slow-moving machinery of government. And yet, despite my reservations, I find myself more optimistic than not. There is a generational shift underway, and for all the uncertainty of this moment, I prefer this dynamic. Energy policy, AI policy, and infrastructure are all trending in positive directions, and for the first time in years, there is a genuine conversation about technological progress rather than just regulation and risk. ' I think it's important to remember: Donald Trump is a boomer, Elon Musk is Generation X, and the biggest voting block are Millennials. We are just at the beginning of this transformation. As I close Techne, I am still left in awe of this weird network we have built. In this era of profound transition, the fusion of technology, politics, and culture presents both opportunities but also sobering challenges. What began with freewheeling experimentation online has evolved into a seismic shift in how we govern, debate, and innovate. The very tools that once connected us in digital spaces are now being used to remake the halls of power. They have ushered in a new paradigm where Silicon Valley pioneers wield influence traditionally reserved for career politicians. For so many reasons, it is a moment of change. Until we meet again, 🚀 Will Anthropic's Economic Index aims to provide a real-time understanding of the impact of AI systems on labor markets and productivity. The initiative's first report offers unprecedented data from millions of anonymized conversations on mapping how AI is being integrated into real-world tasks across industries. AI use is most prevalent in software development and technical writing, with over a third of occupations incorporating AI into at least a quarter of job tasks. Notably, AI is more frequently used for augmenting human work (57 percent) rather than fully automating it (43 percent), and adoption is highest among mid- to high-wage jobs like programming and data science. To encourage more research in this space, Anthropic is open-sourcing its dataset and inviting economists and policymakers to contribute insights, fostering a broader discussion on AI's evolving role in the economy. A new frontier in space exploration is emerging, not in the depths of the cosmos but at the very edge of Earth's atmosphere. A handful of companies are pioneering a new class of satellites designed to operate in Very Low Earth Orbit (VLEO)—a precarious region where atmospheric drag is high, but the potential rewards are immense. I've been following this industry from its early formation, so it is nice to see the BBC cover it. President Donald Trump has ordered his Treasury secretary to stop producing new 1-cent coins. Using AI, economist Joshua Gans was able to quickly produce a paper exploring the potential effects. The takeaway? Replacing the penny won't be much of a cost savings if we have to produce more nickels to make up for it. I'd say more work is needed, but AI systems can help us get there. Jason Furman, a lead economic adviser under President Barack Obama, has an extended piece in Foreign Affairs critiquing Bidenonomics: 'Remember all the talk about restoring manufacturing? I never thought it was a worthwhile goal. Regardless, manufacturing employment continued to slide and industrial production was flat.' ChatGPT's deep research function is winning fans. My former colleague Eli Douardo just posted this about materials used in electronics: 'The number of possible materials is unimaginably vast. What are the odds that one of them is a highly efficient thermoelectric material? I asked Deep Research and it produced a banger of a paper.' Professor Taylor Sparks responds: 'I did my PhD dissertation on this topic. I'm pretty blown away at how good this article is.' The Trump administration's decision to put research grants on hold has cast a spotlight on the need for reform in how we fund and conduct research. Ben Reinhardt has a timely and extended essay attempting to 'synthesize the current zeitgeist around universities, our research ecosystem, and technological stagnation; Argue that part of the solution unbundling the roles the university has monopolized; and Suggest concrete actions to do that.' In a recent post, podcast host Dwarkesh Patel works through what an AI might mean for businesses. If you ever wanted to know what the capital of Tenochtitlan looked liked in its heyday before the Spanish conquered Mexico City, historian Thomas Kole put together this site with some incredibly high quality maps and images.
Yahoo
06-02-2025
- Business
- Yahoo
Leaving Free Trade Orthodoxy Behind
From the Techne on The Dispatch Welcome back to Techne! Iran has revealed its first warship designed to launch and recover drones. The Shahid Bagheri is a repurposed container ship that features a 180-meter runway to accommodate its fleet of 'hundreds' of unmanned aerial vehicles. While there is a lot of bluster with the announcement, cheap drone carriers could alter the balance of naval power in the near future. I haven't written about tariffs at all, leaving it to Scott Lincicome to cover the ins and outs of tariff policy for Dispatch readers. But with the escalating trade war and a lot of open questions, I thought I would take a crack at trying to steelman President Donald Trump's tariffs. While his rhetoric often seems impulsive, Trump's push for tariffs reflects a deeper transformation in American politics and policy. The free trade orthodoxy is being transformed into something else. Just to review a bit of recent history: Former President Joe Biden maintained Trump's China tariffs with little political opposition. Marco Rubio said in his opening remarks for his confirmation hearing as secretary of state that 'the postwar global order is not just obsolete; it is now a weapon being used against us.' Trump is pulling out of the World Health Organization. Before the election, J.D. Vance questioned Federal Reserve Chair Jerome Powell about the dollar's reserve currency status, asking, 'Why should the dollar be the reserve currency? Why would we want it to be the reserve currency? Is it a problem that foreigners like using the dollar?' And Trump, for all of his waffling, has been consistent about tariffs, announcing tariffs on Canada and Mexico before those on China. I should say from the outset that I'm not a fan of escalating tariffs. All countries lose in a trade war. And while it won't be catastrophic for the United States, it will be devastating for our regional trading partners. The rhetoric around trade and finance has shifted. There is a growing sentiment that the American-supported global trading order of the last several decades was gamed by China, harming the U.S. working class while benefiting the upper class. Tariffs aren't just punitive. They are seen as a way to reset and rebalance international relationships that many believe have tilted unfairly. This approach is fundamentally reactive, driven by the conviction that a hard reset is necessary to restore what advocates see as a more equitable system. To understand why so many policymakers are calling for a reset, it helps to see how our current trade and monetary framework came into being. A closer look at the history of international finance can shed light on the roots of today's trade disputes. Last year, then-Sen. Marco Rubio wrote an op-ed that reflected the changing orthodoxy. He wrote, America became an industrial juggernaut thanks in no small part to common-sense tariffs and trade protections. This kept our country resilient and provided good-paying jobs to millions of people. After the World Wars, however, a coalition of Washington insiders and industry elites began to abandon our protections. They lowered tariffs across the board, and they created trade agreements and programs that offered duty-free treatment to imports from dozens of countries. But the historical data tells a different story. As economist Tyler Cowen highlighted in a piece late last year, recent research shows industries with higher tariffs actually had lower productivity: A new paper from the National Bureau of Economic Research shows that tariffs probably did more harm than good. Using meticulously collected industry-level and state-level data, the paper traces the impact of specific tariff rates more clearly than before. The results are not pretty. One core finding is that industries with higher tariffs did not have higher productivity — in fact, they had lower productivity. Tariffs did raise the number of US firms in a given sector, but they did so in part by protecting smaller, less productive firms. That was not the path by which the US became an industrial giant, nor is it wise to use trade policy to keep lower-productivity firms in business. Not only does it slow economic growth, it also keeps workers in jobs without much of a future. These results contradict the traditional protectionist story — that tariffs allow the best firms to grow larger and capture the large domestic market. In reality, the tariffs kept firms smaller and probably lowered US manufacturing productivity. Still, there is an important context that Rubio skips over. The Smoot-Hawley Tariff Act, passed in 1930 as a reaction to the Great Depression, sparked a trade war. Tariffs interacted with already wonky exchange rates to make a mess of financial systems. Countries retreated from trade, and not soon after, they began preparing for war. Japan was hit particularly hard, causing a backlash against capitalism that allowed the military to take control of the civilian government. So, as leaders were contemplating the post-World War II financial regime, they wanted to forge a system that would bind together countries to sidestep these problems in the future. The agreement signed at Bretton Woods, New Hampshire, was intended to create stability, foster the reduction of barriers to trade, and ensure capital could flow to nations destroyed by the war. Participating nations pegged their currencies to the dollar, which in turn was pegged to gold at a fixed rate of $35 per ounce. By the early 1970s, this system was breaking down, with a key force being the rise in inflation in the U.S. that began in 1965. The Kennedy and Johnson administrations were committed to full employment and used the Federal Reserve to reduce unemployment. But increasing U.S. monetary growth led to rising inflation, which spread to the rest of the world. Other countries started asking for their currency to be converted into gold, draining American reserves. All in all, the dollar was overvalued. In 1971, President Richard Nixon reset this system by devaluing the dollar, an event that is now known as the Nixon shock. While it saved the Bretton Woods system for a time, it broke down by 1973. This led to our current system of floating exchange rates based on supply and demand in foreign exchange markets. This new regime gave countries more flexibility to pursue independent monetary policies, but also cemented pressures on the American financial system. Free floating exchange rates fundamentally reshaped the global monetary order. One near-term consequence was the emergence of the petrodollar system, where oil-producing nations began pricing and trading oil exclusively in U.S. dollars. This arrangement created massive dollar surpluses for oil-exporting states, far beyond what their domestic economies could productively absorb, so they plowed this money back into the U.S. economy into safe assets, Treasury securities. As economist Josh Hendrickson noted, The oil shock of the 1970s can thus also be understood as a rational response to a dollar devaluation as oil producing countries wanted to prevent a decline in real revenues for oil prices in dollars. Furthermore, the U.S. government benefited from the oil shock in the sense that the dollar revenues of those oil-producing nations were recycled into U.S. Treasury securities, the new global reserve asset. Export powerhouses like China also channeled their trade surpluses primarily into U.S. financial markets, purchasing Treasury securities, equities, bonds, and property. This was on top of the high demand globally for dollars because foreign governments, businesses, and investors needed it for trade. The dollar as the reserve currency worked in tandem with the Treasury as a reserve asset. The dollar's reserve status made American goods costlier abroad and reduced import prices at home, which in turn widened the trade deficit. The Treasury's reserve asset status allowed the United States government to borrow funds cheaply, which helped to balloon the deficit. In Trump's orbit are thinkers who want to rebalance these relationships. The 'former investment banker turned music impresario' Michael Pettis and Trump's pick to head the Council of Economic Advisers, Stephen Miran, are two worth watching. It's Pettis' view that the industrial policies of China have been the primary driver of trade imbalances. As the Wall Street Journal reported in an October 2024 profile, Pettis thinks that '[t]he U.S. imports China's industrial policy, but the mirror image [of it]. So just as China forces consumers to subsidize producers, that means in the U.S., the balancing act is that producers subsidize consumers.' Moreover, because the U.S. dollar is the global reserve currency, preferred by foreign central banks and investors, the United States bears an especially large burden among the nations with a trade deficit. 'What the U.S. needs to do is stop playing that role,' he told the Journal. To Pettis, across-the-board tariffs are an attractive means of addressing trade imbalances and boosting the U.S. manufacturing sector. Capital controls are another way of getting there but this would mean limiting foreign capital investment, which would hurt the value of U.S. stocks, potentially putting the economy into recession. Still, I think there is a paradox inherent in the thinking of Pettis and the goals of Trump. Trump doesn't want the dollar to be knocked from its podium. In fact, he has threatened tariffs if countries try to do exactly that, in what's known as de-dollarization. On the other hand, Pettis wants de-dollarization to help solve trade imbalances. The most detailed policy blueprint comes from Stephen Miran, Trump's pick to head the Council of Economic Advisers. Late last year, Miran authored a 41-page memo on ways to restructure the global trading system: Currency policy aimed at correcting the undervaluation of other nations' currencies brings an entirely different set of tradeoffs and potential implications. Historically, the United States has pursued multilateral approaches to currency adjustments. While many analysts believe there are no tools available to unilaterally address currency misvaluation, that is not true. I describe some potential avenues for both multilateral and unilateral currency adjustment strategies, as well as means of mitigating unwanted side effects. But Miran is clear that 'many of these policies are untried at scale, or haven't been used in almost half a century, and that this essay is not policy advocacy but an attempt to catalogue the available tools and analyze how useful they may be for accomplishing various goals.' Another way to conceptualize Trump's actions is to see them in service of a larger goal, which would be a renegotiation of the financial order. Economist Oren Cass, another ardent supporter of tariffs, made the case, saying, So while the headlines are about a 'trade war,' the real question is how the reset of these relationships is going to proceed. There are many different theories regarding the best way to start down the path toward dramatic change. Do you try to turn the ship very gradually by small steps or—to mix metaphors—do you start by flipping over the gameboard and scattering the pieces? In a lot of areas, Trump has shown a very strong inclination to take that latter course. Hendrickson also thinks this logic might be animating the tariffs: If you think this system is unsustainable, then what you need is a devaluation of the dollar coupled with a reset to a more sustainable strategy. Like the 70s, this would primarily benefit the U.S. Thus, neither allies nor enemies want to bear the cost. As a result, you need a big stick to get other international players to the negotiating table to engineer that change. One way to do that is by levying across the board tariffs. Signaling you're willing to take some pain to inflict pain potentially gets people to the table. But none of this will be pretty. Rebalancing means massive shocks. Entrepreneur and geopolitical commentator Arnaud Bertrand garnered a lot of attention on X, when he wrote last week about America's controlled withdrawal from imperial commitments: 'It's becoming clearer and clearer that we're looking at a seismic shift in the US's relationship with the world.' Three recent events suggest a new path is being charted: The U.S. Agency for International Development is being cut and brought back into line with State Department aims. Rubio told podcaster Megyn Kelly in an interview last week that 'it's not normal for the world to simply have a unipolar power. That was not — that was an anomaly. It was a product of the end of the Cold War, but eventually you were going to reach back to a point where you had a multipolar world, multi-great powers in different parts of the planet.' Trump brought 'tariffs on supposed 'allies' like Mexico, Canada or the EU,' as Bertrand framed it, although tariffs on Mexico and Canada have been put on hold pending further trade negotiations and no specific EU tariffs have been announced. In part, Bertrand is right. Hegemony was going to end at some point. However, these transition periods always bring significant risks, like disrupted trade relationships, currency volatility, and geopolitical tensions that could spiral into more serious conflicts. As we move away from American hegemony, the key question becomes not whether the old order will change, but whether its replacement will be deliberately negotiated or chaotically imposed. But it's ill-advised to take the view that America's attempt at running the world is over, that we're now just another great power, not the 'indispensable nation.' True, we are a great power, just as China is a great power. We need to embrace the transition back to a bipolar world. Not that long ago, the Soviet Union was considered the other great power. When I was in college, nearly two decades ago now, the big question was whether or not China would become part of the existing order. Some feared the size of its economy would mean it could create a new system on its own. But the real uncertainty centered on the transition away from a unipolar world. Historically, transitions between great powers have often come at the cost of enormous conflict and upheaval. In the wake of World War II, for instance, the United States and the Soviet Union rapidly morphed into opposing superpowers, dividing the globe into spheres of influence and entering a Cold War. Today, China's rise revives questions of how the global order will adjust to a new bipolar or even multipolar configuration, and whether this realignment will mirror the strain of previous power shifts. My hope is that it yields a framework built more on negotiation than confrontation. The path forward for the United States requires a delicate balance between acknowledging new realities and preserving beneficial aspects of the existing order. I don't want to sugarcoat it. The Chinese government has supported espionage and has been behind massive telecom hacks. They have violated norms. But China has also shown it's willing to work within the global economic system. In fact, when Trump announced his 10 percent tariffs China immediately challenged them at the World Trade Organization. At the same time, Beijing rolled out new export controls targeting tungsten, tellurium, bismuth, indium, and molybdenum, metals used in defense, clean energy, and other industries. The pressure from tariffs caused Beijing to respond. We shouldn't expect China not to react. The challenge ahead lies not in choosing between complete American dominance or total withdrawal, but in negotiating a sustainable framework that acknowledges both American and Chinese economic interests while maintaining the institutional structures that have helped prevent the kinds of catastrophic trade wars that marked earlier eras. The real test will be whether this transition can be managed through deliberate diplomacy rather than destructive confrontation. We need to choose the former. Until next week, 🚀 Will The Beatles' song 'Now and Then' won a Grammy nearly 50 years after it was recorded. The song was built from a demo John Lennon recorded back in 1977 that was isolated and enhanced through AI techniques. Sen. Ted Cruz's telecom policy director, Arielle Roth, has been nominated to lead the National Telecommunications and Information Administration (NTIA). I have worked with her for some time and have always thought she would be a good choice to run NTIA. The agency oversees the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) Program, which provides funds to expand high-speed internet access. Archivists are working to save thousands of data sets from disappearing from the government's central repository for public data: 'On January 21, there were 307,854 datasets on As of [January 30, there are 305,564 datasets,' according to 404 Media. A federal court has vacated the 2024 Council on Environmental Quality's regulations granted to the agency under the National Environmental Policy Act. The court said that the White House council had no authority to issue them in the first place. The battle for clean indoor air has profoundly influenced human civilization. Writer Larissa Schiavo explores: 'Odd as it may sound, the loudspeaker, microphone, and amplifier played a crucial role in improving indoor air. Before voice amplification systems, people relied on acoustics to make themselves heard. In huge spaces like theatres, this often involved enclosure and the nixing of windows. At best, this led to stuffy, still air shared by too many people. At worst, such as in the U.K. Houses of Parliament and the U.S. Capitol, it meant hundreds of men in full suits in the heat of summer, trying not to pass out and inadvertently infecting one another with airborne diseases.' Trump signed an executive order to create a federal sovereign wealth fund. While it's probably illegal, I just don't understand the logic. 'A jury may never see the gun that authorities say was used to kill Blake Story last year,' reports 'That's because Cleveland police used a facial recognition program — one that explicitly says its results are not admissible in court — to obtain a search warrant, according to court documents.' The always amazing Asianometry blog and YouTube channel dives into the history of Japan's Nissan Motor Corporation with some great tidbits, including how the name Datsun came about, which was what Nissan cars and trucks were called until 1986. In 1930, DAT Motors pivoted to making small cars to take advantage of a new Japanese regulation: 'Their minicar hits the market in 1932, and is called the Datson, as in 'son of DAT.' The name is later changed to Datsun with a 'u' since the 'son' in Datson, as pronounced by the Japanese meant 'loss' as in 'financial loss.''
Yahoo
30-01-2025
- Yahoo
Is AI Moving Too Fast or Is Regulation?
From the Techne on The Dispatch Welcome back to Techne! During the couple of years I lived in Chicago, I became somewhat obsessed with the 1892 World's Columbian Exposition, also known as the Chicago World's Fair. Coming just 20 years after the Great Conflagration burned significant parts of the city, the exposition was built in roughly three years, covered 690 acres and included well over 200 structures. But the main feature was a massive pool surrounded by 14 buildings in the neoclassical style designed by prominent architects. The fair was a defining moment for the nation and featured the original Ferris wheel, the first moving walkway, the introduction of Quaker oats, shredded wheat, and peanut butter, and electrical devices developed by Nikola Tesla. But it ended in tragedy when the mayor was assassinated. The Library of Congress has some great resources on the event, including high-quality maps, newspaper clippings, and so much more. I find myself increasingly sympathetic to William F. Buckley Jr. and his inclination to stand 'athwart history, yelling Stop, at a time when no one is inclined to do so.' In AI regulation, we desperately need amount of proposed legislation aimed at AI is staggering. a government relations company tracking AI legislation, identified 636 state bills in 2024. It's not even February and there are already 444 state-level bills pending. Legislators are trying to get ahead of AI by passing bills. It's an effort to right the wrong of supposedly taking a hands-off approach to social media regulation. Although I've always been skeptical of this simple narrative, the result has been a lot of ill-conceived AI bills. I've been paying close attention to bills in Texas and Virginia that would grant extensive new power to regulate AI. But instead of new laws, leaders could make sure that consumer protection and anti-discrimination laws apply to AI by plugging any gaps. The Massachusetts Attorney General made clear in an advisory that the state would extend its expansive policing power to AI systems. Meanwhile, the federal government alone has issued more than 500 advisories, notices, and other actions to extend regulatory power over AI. The Federal Trade Commission has opened an investigation into AI companies, and dozens of copyright cases are being adjudicated. But to legislators, none of that is as satisfying as a new statute. In our haste to regulate American innovation, we risk sacrificing the very technological preeminence that has defined our nation's modern character. Early adoption of tech has traditionally resulted in higher incomes, more manufacturing jobs, and growth in related industries. In Texas and especially Virginia, data centers are being built, jobs are being created and tax bases are growing, so it is unclear why leaders would want to jeopardize that, just to be the first out of the gate. I feel, as my dad would often say, that we're cruising for a bruising. Here's a common question I'm asked: Government runs slow and AI businesses are running fast, so is the government keeping up? While our technological capabilities sprint ahead, our social and legal frameworks merely power-walk behind. The pacing problem lies at the heart of AI regulation. Analyst Adam Thierer put together the graph below that captures the idea. But I think people are looking at the pacing delta wrong. Changing regulatory regimes for every new innovation could mean that you get governance wrong. There is value in waiting to see where problems arise. In nascent markets and with new technologies, oftentimes the best response to a widening pace gap is to wait and maintain regulatory options, rather than rushing to close the gap with potentially premature regulation. Finance has a concept that captures this flexibility. Real options are a kind of investment choice that a company can undertake to respond to changing economic, technological, or market conditions. To be specific, a real option gives a firm's management the right, but not the obligation, to undertake certain business opportunities or investments. Real options create value beyond the immediate investment by assigning a value to flexibility in the face of uncertainty. As economists Bronwyn H. Hall and Beethika Khan explained, The most important thing to observe about this kind of [investment] decision is that at any point in time the choice being made is not a choice between adopting and not adopting but a choice between adopting now or deferring the decision until later. This same principle applies to regulation. Regulators can act now or hold back their authority in reserve for future use when there is new information. The total value of a new regulation, therefore, includes both its immediate net benefits and the value of preserving future regulatory flexibility. Just as businesses use real options to manage uncertainty in fast-changing markets, regulators should think strategically about their option to wait. Still, what I've presented is the best case for those worried about the pacing problem. AI regulation on the ground is different than the law books might suggest. There are more than 500 AI-relevant regulations, standards, and other governance documents at the federal level; countless algorithmic discrimination cases to rely upon; an open FTC investigation that's looking into the dealings of Alphabet, Amazon, Anthropic, Microsoft, and OpenAI; consumer protection authority; product recall authority; as well as a raft of court cases, and on and on. An explicit statute is just one means of governance and it is often the least efficient in dynamic industries. Option theory suggests that regulators should wait to gather more evidence. That's not what's happening in Texas and Virginia. I've been keeping a close watch on two state bills, one in Texas and another in Virginia, because I think they could be bellwethers for other states. The Texas Responsible AI Governance Act, or TRAIGA, is the more confusing of the two. You'd think red-state legislators would hesitate to model an AI bill after the European Union's AI Act, the regulatory burden of which is known to add 17 percent to the total cost of AI deployment, and yet TRAIGA was filed. TRAIGA imposes a number of obligations for developers, distributors, and deployers of AI systems regardless of their size. Everyone along the pipeline is now subject to new restrictions, including model developers, cloud service providers, and deployers. Stargate—the AI venture backed by OpenAI, Oracle, and Japan's SoftBank—is slated to be built in Texas and would be affected. In a first for state-level regulation, TRAIGA would require AI distributors to take reasonable care to prevent algorithmic discrimination, even though companies are already subject to anti-discrimination laws in finance, housing, education, and the like. It also bans AI systems deemed to pose unacceptable risks, particularly those that identify human emotions or capture biometric data without explicit consent. While enforcement would primarily rest with the state's attorney general, private litigants could pursue legal action over banned AI systems. The bill would birth yet another regulatory body, the Texas Artificial Intelligence Council, armed with broad powers to issue binding rules on 'ethical AI development and deployment.' If those vague terms make you nervous, they should. The legislation would give unelected officials carte blanche to define ethics in AI, all while cases about AI's basic legal status are still working their way through the courts. Among other concerns, TRAIGA's construction feels actively blind to the precedents set in algorithmic discrimination cases in the past couple years, including the Department of Justice's win over Meta on bias in housing ads and the Federal Trade Commission's settlement with Rite Aid on algorithmic unfairness. Both confirmed that AI systems would be subject to anti-discrimination law. Dean Ball of the Mercatus Center, who is great on AI policy, also points out that TRAIGA's compliance requirements are particularly burdensome: On top of this, TRAIGA requires developers and deployers to write a variety of lengthy compliance documents—'High-Risk Reports' for developers, 'Risk Identification and Management Policies' for developers and deployers, and 'Impact Assessments' for deployers. These requirements apply to any AI system that is used, or could conceivably be used, as a 'substantial factor' in making a 'consequential decision.' … The Impact Assessments must be performed for every discrete use case, whereas the High-Risk Reports and Risk-Identification and Management Policies apply at the model and firm levels, respectively—meaning that they can cover multiple use cases. However, all of these documents must be updated regularly, including when a 'substantial modification' is made to a model. In the case of a frontier language model, such modifications happen almost monthly, so both developers and deployers who use such systems can expect to be writing and updating these compliance documents constantly. Kafka would be proud. Virginia's House Bill 2094, the High-Risk Artificial Intelligence Developer and Deployer Act, shares commonalities with the Texas bill. Like its Lone Star State cousin, HB 2094 borrows heavily from the EU's regulatory playbook. The bill also has wobbly language that would need to be defined in court like 'consequential decisions,' 'substantial factors,' and 'high-risk' applications. And like the Texas law, the Virginia law seems blissfully unaware that we already have many tools to address their stated concerns, from consumer protection laws to civil rights statutes, and even state-level privacy laws. Why not start there? So what type of regulation should states be pursuing instead? When it comes to Virginia, Thierer has the right idea: Rather than adopting HB 2094 and creating new, burdensome regulatory requirements, Virginia should instead look to modify existing laws as needed to ensure they cover algorithmic systems. For example, measures like HB 2411 would give the Department of Law a Division of Consumer Counsel the ability to 'establish and administer programs to address artificial intelligence fraud and abuse.' Another proposal, HB 2554, would require new disclosure requirements for AI-generated content such that any generative artificial intelligence system produced content includes 'a clear and conspicuous disclosure.' While these laws would add some new regulatory requirements and budgetary expenditures, these measures at least have the benefit of being somewhat more focused in scope and intent than the open-ended nature of HB 2094. In seeking appropriate AI regulation, legislators should follow three guiding principles. First, they should focus on actual harms rather than theoretical boogeymen. The courts and existing consumer protection frameworks are already handling algorithmic discrimination cases. The system is working, maybe not as fast as some would like, but it's working. Adding another layer of state-specific rules doesn't solve real problems if those problems don't exist. Second, legislators should be leveraging existing legal frameworks. They don't need to reinvent the legal wheel for every new technology. The beauty of common law is its adaptability. Courts have been handling new technologies for centuries without needing special AI councils or novel regulatory frameworks. Massachusetts showed the way by simply clarifying that existing consumer protection laws apply to AI. Sometimes the best solution is the one you already have. Third, state lawmakers shouldn't outsource the hard work of legislating to a new agency, as TRAIGA does. When legislators punt their responsibilities to unelected bureaucrats, the result can be a regulatory mess, especially if an agency head comes along and tightens the screws on everyone. The ghost of social media regulation haunts our statehouses, driving legislators to action when patience might serve them better. In their rush to avoid past mistakes, they risk making entirely new ones. The bills in Texas and Virginia are just two such examples. But we don't need new regulatory bodies or endless paperwork requirements to govern AI. We need the wisdom to recognize that our existing legal framework is more robust and adaptable than we give it credit for and the patience to let it work. Let's hope our state legislators can learn that lesson before they regulate American innovation right into the ground. Until next week, 🚀 Will On Tuesday, the Boom Supersonic XB-1 jet became the first civilian aircraft to go supersonic over the continental United States. Even when the supersonic Concorde aircraft was active in the 1970s, it never made trips over the United States; its routes were transatlantic. The Concorde was a joint venture between the French and British governments. From the Washington Post: 'Ruptures of undersea cables that have rattled European security officials in recent months were likely the result of maritime accidents rather than Russian sabotage, according to several U.S. and European intelligence officials. The determination reflects an emerging consensus among U.S. and European security services, according to senior officials from three countries involved in ongoing investigations of a string of incidents in which critical seabed energy and communications lines have been severed.' Genomic research is upending what we think we know about archaeology. A recent report, for example, found that one Iron Age society, which had been assumed to be male-dominated, actually centered on women. If you're looking for a podcast that will get you up to speed on these developments, check out this conversation between Dwarkesh Patel and David Reich. The conversation over ChatGPT's water and energy usage is out of proportion. Andy Masley, the director of Effective Altruism DC, has the receipts: 'Sitting down to watch 1 hour of Netflix has the same impact on the climate as asking ChatGPT 300 questions. I suspect that if I announced at a party that I had asked ChatGPT 300 questions in 1 hour I might get accused of hating the Earth, but if I announced that I had watched an hour of Netflix or that I drove 0.8 miles in my sedan the reaction would be a little different. It would be strange if we were having a big national conversation about limiting YouTube watching or never buying books or avoiding uploading more than 30 photos to social media at once for the sake of the climate.' Eric Burger, author of two bestselling books on the space industry, has profiled K2, a Californian satellite company. Instead of going smaller with its satellites, 'the company is now building its first 'Mega Class' satellite bus, intended to have similar capabilities to Lockheed's LM2100: 20 kW of power, 1,000 kg of payload capacity, and propulsion to move between orbits. … The biggest difference is cost. K2 aims to sell its satellite bus for $15 million.' Why is this important? As Berger explains, 'About a month ago, K2 announced that it had signed a contract with the U.S. Space Force to launch its first Mega Class satellite in early 2026. The $60 million contract for the 'Gravitas' mission will demonstrate the ability of K2's satellite bus to host several experiments and successfully maneuver from low-Earth orbit to middle-Earth orbit (several thousand km above the surface of Earth).' DeepSeek's attention in the last week drove people to the site, crashing the services of its AI model. I've been wondering whether DeepSeek is structurally forced to be open source. The company seems to have most of China's advanced chips, which are limited, and the company seems to be straining on the inference side, which comes from users making lots of queries. Does anyone know the best estimates for China's total compute capacity? Let me know in the comments. The New York Times recently profiled Curtis Yarvin, who first came to fame as the pseudonymous writer Mencius Moldbug. Yarvin's basic schtick is that democracy has failed and that we should strive for monarchy, citing corporate structures as his model. 'These things that we call companies are actually little monarchies,' he states, pointing to Apple as an example. The economist Alex Tabarrok had a great critique of Yarvin, which basically comports with my view. Apple may operate internally like a monarchy, but it can only do so because it exists within a democratic institutional environment that provides the rule of law, property rights, and contract enforcement. There is an important distinction to be made between institutional environments (the broader legal and social framework) and institutional arrangements (how specific organizations structure themselves). Yarvin's argument is like claiming a saltwater fish tank is the ocean. He mistakes the contained system for the ecosystem that makes it possible. I am not at all a fan of this move: The Trump administration has dismissed a security board investigating Chinese intrusions into major U.S. internet service providers. Dissolving an active investigation into state-sponsored cyberattacks against our telecommunications infrastructure seems particularly ill-timed given the growing sophistication of such threats from China.
