Policy, TFP, and airshiPs with Eli Dourado [Idea Machines #38]

Eli Dourado on how the sausage of technology policy is made, the relationship between total factor productivity and technological progress, airships, and more.

Eli is an economist, regulatory hacker, and a senior research fellow at the Center for Growth and Opportunity at Utah State University. In the past, he was the head of global policy at Boom Supersonic where he navigated the thicket of regulations on supersonic flight. Before that, he directed the technology policy program at the Mercatus Center at George Mason University..

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Transcript

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In this conversation, Eli Durado. And I talk about how the sausage of technology policy has made the relationship between total factor productivity and technological progress, airships, and more Eli is an economist regulatory, hacker, and senior research fellow at the center for growth and opportunity at Utah state university.

In the past, he was the head of global policy at boom supersonic, [00:01:00] where he navigated the thicket of regulations on superstar. Before that he directed the technology policy program at the Mercatus center at George Mason university. I wanted to talk to Eli because it feels like there's a gap between the people who understand how technology works and the people who understand how the government works.

And Isla is one of those rare folks who understands both. So without further ado my conversation with Eli Dorado. 

So just jump directly into it.  When you were on a policy team, what do you actually do?  Well that depends on which policy team you're on. Right. So, so in my career you mean, do you mean the, in sort of like the, the public policy or like the research center think tanks kind of space or in, in, in a company because I've done both.

Yeah, exactly. Oh, I didn't even realize that you do like that. It's like different things. So so like, I guess, like, let's start with [00:02:00] Boom. You're you're on a policy team at a technology company and. Yeah. Yeah. So when I, when I started at boom so we had a problem. Right. Which was like, we needed to know what landing and takeoff noise standard we could design too.

Right. Like, so, so we needed to know like how loud the airplane could be.  And how, how quiet it had to be. Right. And, and as a big trade off on, on aircraft performance depending on that. And so when I joined up with boom, like FAA had a, what's called a policy statement. Right. Which is, you know, some degree of binding, but not really right.

Like that they had published back in 2008 that said, you know, we don't have standards for supersonic airplanes, but you know, like when we do create them they, you know, they're during the subsonic portion of flight, we anticipate the subsidy Arctic standards. Right. So, so for, [00:03:00] for, for landing and takeoff, which is like the big thing that we are concerned about, like that's all subsonic.

So we, you know, so that sort of the FAA is like going in position was like, well, the subsonic standards apply to, to boom. And so I kind of like joined up in early 2017 and sort of my job was like, let's figure out a way for that, not to be the case. Right. And so it was, it was basically, you know, look at all the different look at the space of actors and try to figure out a way for that, not to be true.

And so, and so that's like kind of what I did. I started, you know, started talking with Congress with FAA. I started figuring out what levers we could push, what, what what angles we could Work work with to ensure that that, that we have we've got to a different place, different answer in the end.

And, and so the, like, so basically it's just like this completely bespoke process of [00:04:00] totally like, even trying to figure out like what the constraints you're under are. Exactly. Right. So, so yeah, so it was, there's like a bunch of different, different aspects of that question, right? So there will you know, there's, there is statute, you know, congressional laws passed by Congress that had a bearing on the answer to that question that I went back to like the 1970s.

And before there w you know, there was the FAA policy statement. There was, of course the FAA team, which you had to develop, you know you know, relationships with and, and, and, and sort of work with you have the industry association, right. That we remember of that Had different companies, you know, in addition, you know, in addition to boom, there, there were a bunch of other companies Ariane, which is no longer operating.

We had Gulf stream, which no longer has a supersonic program. Or actually they didn't Edward admitted to having it announced really dead. They, you know, there was, you know, GE and rolls Royce. And so you had all these companies like coming together, you know, sort of under the, [00:05:00] under the watchful eye of Boeing, of course also.

And, and so like the industry association had to have a position on things, and then you had like the international aspect of it. So you had a, there's a UN agency called Oko that sort of coordinates aviation standards among all the different countries you had the European regulators who did not like this idea that there were American startups doing Supersonics because, because the European companies weren't going to do it.

And so they wanted to squash everything and they were like, no, no subsonic standards totally applied. Right. And so so that was, that's really the. The environment that, you know, sort of, I came into and I was like, okay, I've got to figure out, you know, I've got to figure out, build a team and, and, and figure out an approach here.

And and, and try to try to make it not be the case that the subsonic centers apply. So we, so, you know, basically we tried a bunch of things at first, right. Like we tried to like, get our industry association, like all geared up for like, okay, well, we've gotta, we gotta fight this and they didn't want to do that.

Right. So like, like [00:06:00] the other people didn't want to do that. Right. We tried a bunch of different angles in terms of, you know, we, we, what we ended up doing w w we got Congress to get excited about it and sort of, they, they started to, you know, there was a.  Sort of a draft bill that had some, some very forward-leaning supersonic language that we, we you know, worked with Congress on it never passed in exactly that form, but it passed later in the 2018 FAA reauthorization.

And then the thing that actually kind of ended up working was I had this idea in late 2017 was, well, you know, what. The, the sub the subsonic standard changes at the end of this year. Right. So, so so the end of 2017, so I was like, well, let's apply for type certification this year. Right. So we applied, like, we are nowhere close to an airplane.

Right. And know we're close. Right. Right. And I was like, well, let's just, let's just, let's just like, screw it. We're going to apply like, like in 2017. And I had to like, get the execs to sign off on that. Right. We're going to do it, but we did. [00:07:00] So by the end of, I think December, 2017, we applied, I of course, you know, talk to my FFA colleagues and told them like, Hey, we're going to apply.

Just so you know, they're like, well, that raises a whole bunch of questions. And, and that sort of got it, got them working down this path where they were like, well, you only have under part 36 of the FAA rules. You only have five years to to keep that noise standard. If, if you apply today and you're probably not gonna be done in five years.

And I was like, that's true. We're probably not going to be done in five years, but we think that part 36 doesn't apply to us at all right. The way it's written. And then they went back and then they looked at it and they were like, oh, Part 36 doesn't apply to them like they're right. Like, you know, Eli's the first person in the history of Supersonics three per 36 and very closely.

Right. And so and so then they went back and they like talked to their lawyers and, you know, they, I think came up with a new position in a new legal interpretation [00:08:00] w basically a memo that, that was, that was published that was like, okay, the subsonic standards don't apply and we don't have standards.

We can start making some standards. And if we don't have one at any time for any particular applicant, we can make one for that applicant. We can, it's called the rule of particular applicability. So that kind of, once we got that, then in early 2018, like that kind of solved their problem. Like, and I think in in at least th th the domestic part didn't solve the international part, like from, from from Europe and so on.

So. I mean, I, so, so if you think about like, what do you do on a policy team? Like you figure out like how, you know, how, how do you solve the problem that you have, that, that you were, that you were hired hard to fix and you just try things, try things until something works. It's part of the answer. Yeah.

That's I mean, that's, I really appreciate you going into that level of detail because it's like the sort of like affordances of these things seem incredibly opaque. And just [00:09:00] for, for context, the subsonic standards are the standards that do not a lot, like that set a very like low noise bar. It's very stringent.

I mean, the modern, the modern standards are pretty stringent. Like it used to be like, you couldn't, you couldn't basically like stand on a runway and have a conversation while plane's taken off these days. Like, I mean, it's, it's, it's gotten very, very impressive, but they, you know, the, the modern planes have gotten that way because they have high bypass ratios and the engines like big, big fans that move a lot of air around the engine core, not through it.

Right. And so so that is, you know, that's just not workable when you're kind of trying to push that big fan through, you know, through the air at mock you know, 2.2 is what we were doing now. Now it's 1.7 that boom. But but but anyway, that's that, you know, that, that just doesn't work as a solution.

So that's why, you know, it had to be different. Right. Right. And then did you say it's 30 S w w was it articles 36 [00:10:00] or 36? And volume, volume, volume, 14 of the code of federal regulations, part 36. Yes. Yeah. Yeah. And that's that, that's the part that specifies all the takeoff and landing noise certification rules for bar, all, all kinds of aircraft.

Got it. And, and you re and there's like, like particular wording in that part that does not apply to  that didn't apply as it was in, in 2018. I think they've now rechanged some of the definitions. They went through a rulemaking To, to cover some supersonic planes, although interestingly, still not Boone's plane. It covers the plane up to Mach basically between Mach 1.4 Mach 1.8 and below a certain weight limit.

So basically biz jets, right. Business jets, small sort of low Mach business jets, but it would be covered under, under the new role, but as part of that, they might have incorporated. [00:11:00] I, I forget the details, but they, they might've changed the definition so that so that boom was at least you know, would, would apply the five-year time limit and stuff like that might apply.

Got it. Okay. And so that's so, so sort of like they, at a company, the policy team is like really going after a specific problem that the company has figured out anyway, to, to address that I mean, that, that was, that was how that one was. I mean, I think that there are different, there are different companies, right.

And the companies that are playing more in defense rather than offense. Right. So you could imagine oh, I'm thinking of like a company like Facebook, right? Where like the first amendment applies for 30 applies. Like they have like the legal, like they have all the legal permission to operate as much.

As as they need to. And they're mostly just like putting out fires right. Of like, like people wanting to like regulate them as utility and things like that. So, so it's, it's, it's more of a defensive mode in those companies, I think. But, but yeah, it's going to [00:12:00] vary from company to company, depending on what it is you need to do.

And you just have to kind of be aware of all the different tools in terms of, well, you can go to Congress and get them to do something, and you might be able to get the executive branch to do an executive order, or you might be able to you know, get a new rulemaking or a new guidance or, you know there's, there's just a whole host of different tools in the, in the toolkit.

And you've gotta be able to think about them in the different ways that you can use them to solve your problems. And actually so this perhaps getting a little ahead of ourselves, but speaking of those tools, like what in your mind is the theory of change behind writing policy papers? I think that sort of among many people, like you see.

Policy papers being written and then, and like policy happens, but like, there's this like big question Mark Black box in between those two things.

I think there's, there's, there's definitely different theories, right? I think so before I started at boom, when I was at the Mercatus center, Sam Hammerman and I [00:13:00] wrote a paper on Supersonics and that was, you know, that one I think actually was really influential. Right. So we, we published it a month before the 2016 election, when we thought Donald Trump was going to lose and we titled it sort of as a joke make America boom again you know, so it was like, the slogan was perfect.

And and then lo and behold Trump gets elected and that paper like circulated in the, the sorta like when, when his administration got constituted in, in January, 2017 you know, a DLT like that paper circulator and people are like, okay, this makes sense. We need to be very forward-leaning on Supersonics.

And, and so, so that, you know, like we still haven't changed the law that we said was most important in that paper. Right. That what we said is that we need to re repeal the Overland ban and replace it with some kind of permissive noise standard that lets the industry got going on Overland, Overland flight.

But I think it was  influential in the sense of, it was some reference material [00:14:00] that a lot of different policymakers could look at quickly and say like, okay there, you know, there's some good ideas behind this and we need to support this broadly. And, and, and it's, you know, it's a reputable sort of outlet that, that came up with this and it's, and it's got all the sort of info that we need to, to be able to operate independently and moving this idea forward.

Got it. So, so really is like a lot of just sort of like tossing, tossing things out there and hoping like they get to the person who can make, make a decision. Well, I think  you know, ideally you're not just hoping, right? Like ideally like you're, you're reaching out to those people establishing relationships with the right people and and, and sort of getting, getting your ideas taken, taken seriously by everybody that, that matters in your field.

And another, so, so this is, again, just coming from [00:15:00] someone who's completely naive to the world is like, how do you figure out who the right person is? Well, I think it depends on what you need to do, right? So like, if you need to repeal an act of Congress, you know, you've got to go to Congress. Right. So, so that's that's an example.

So I, so I don't know. I think a lot of times the right person is, is not just one right. Person. I think that there's like a, there's also a move where you're really just trying to go after elites in society. Right. Like if you can get, if you can get sort of like elites, however you define, I don't know what the right, right definition of that term is.

But but, but you know, if you can get sort of a consensus among elites that you know, that, that supersonic flight should be allowed over land or that you know that, that we should invest, you know, like the con the government should invest deeply in, in like geothermal energy or that you know, Wait, we need to like have a a Papa program for ornithopter whatever it is.

You know, if you convince, like it leads across the board in society that we should do this, [00:16:00] like, it it's pretty likely to happen. Right. It leads still, still sort of control the stuff that at least at least the stuff that nobody else cares about. If it leads care about it, then, then they'll, they'll get their way.

One. What sort of pushback to that then I actually wanted to ask you about would be that there's there's this view that in a lot of cases, regulations sort of a codes, a trade-off into a very like a calcified bureaucracy and then sort of like seals it off specifically like an example being you could make this argument that.

Nuclear regulation, as opposed to sort of being about health and wellbeing or the environment is actually encoding a trade off that like in order to absolutely prevent any sort of nuclear proliferation at all we basically just make it so that you can't build new nuclear things. What do you w what do you think about that?

Do you have technology [00:17:00] regulations? I mean, I think like nuclear is, would be like, I would think that that would be like one of the hardest regulations change, right? The, the, the sort of you're taking an entire agency, like the national the nuclear regulatory commission. Right. And you're saying like, we have to completely change the way, like, like if I were, if I were at one of these efficient startups, right.

It'd be like, All right. My job here as the policy lead or whatever, is to completely change the way this entire agency operates. Right? Like that seems really hard, right? That is that's, that's, that's really challenging. And, you know, I don't, I'm not optimistic frankly, about, about their success. And so, you know, so in, in sort of the more like the research-y like nonprofit side of policy that I do now, you know, like a lot of what I'm looking for is areas where it isn't, that it isn't hopeless, right?

Where there, where you can work and where you only need like small change and it makes a big difference. Right. And so you're trying to find those [00:18:00] leveraged policy issues where, where you can make a big difference. So that's, that's, that's how I think about it. And it's issue selection. Like when you're, when you're in the nonprofit world and you have the luxury of that, right.

Which you don't necessarily in the for-profit world Like that's really, I think that's really important. And that's what separates like good policy entrepreneurs from bad policy entrepreneurs is, is that sort of like awareness of issue selection, and, you know, small changes that make a big difference.

And, and so let's dig into that. How did, how do you sort of like, look for that leverage? Like what, what yells to you like that, that you could actually make a big difference by changing a small thing? So I mean like, like Supersonics is a, is a great example, right? That's one that I chose to work on for several years.

And that's like, if you could get rid of the Overland band, right. One, one line in the code of federal regulations, the bands over land and flight over land, right. You [00:19:00] would unlock. Massive amounts of aerospace engineering development in a completely you know, new regime of flight that no one else has, no one else is doing.

Right. You'd get rapid learning. Then that curve you get like engines being developed specifically for that use case, you'd get, you know, variable, geometry, everything being developed.  For, for airliners and so on and, and you'd make a big difference you know, in, in the future of the industry and, and in the, in sort of this state of the art for, for flight.

So I think if you could change that one line, even if you could, even if you couldn't change it international, right. If you could change it just in the U S right, you would get, I think the U S is big enough that, you know, sort of LA to New York and, you know, other plus all the over plus all the transoceanic markets that, you know, sort of the, you know, like a boom is going for now, right.

If you got, if you got the combined, combining those two markets, you're at like, you know, DUP say doubling the market size for those planes. And and you'd get a lot more investment. And so, you know, it would be [00:20:00] a, it would be a huge A huge improvement. Right. And so, so I think that's, that's a highly leveraged one, one that I'm working on, you know, a lot more lately, I'm sure you've seen is geothermal, right.

Where sort of like, I think there's no like real policy blocker, but the sort of the thing that I've been focused on is permitting, right? So if you want to, if you want a permit you know, there's a huge overlap between like the prime geothermal locations and federal lands. And so, so a lot of it's on, you know, so you need to get the federal government to give you a lease and, and you need to get their approval for it to drill the well.

Right. And so that, that approval brings in, you know, environmental review and so on and conveniently the oil and gas industry has gotten themselves exempted from a lot of those environmental review requests. And my argument is like geothermal Wells are like the same as oil and gas Wells. So if they're exempted, like geothermal should be two, and that would speed up the approval time from something like two years to something like two weeks.

[00:21:00] Right. So you'd go, you massively speed it up. Right. And so, and so, so just that sort of speed up on federal lands that wouldn't even change anything on, on private lands or on, on state lands necessarily. W w that, that sort of acceleration, I think, would, would, you know, could bring forward sort of the timetable for sort of the geothermal industry as a whole, by a few years.

Right. So, so one small change. And so that's, that's, if you think about that, like socially, like, what is the value of that? It's many billions of dollars, right? So if I spend a year of my time working on that and, and get that changed You know, like my ROI for society for that one year is, is many billions of dollars, which is pretty good.

It's pretty good. Pretty good. Pretty good way to spend my time. Right. Yeah. Yeah. I mean, there's, I mean, other things you know, like like I'm really interested in, in enhanced weathering, right? So olivine you're using olivine to, to to capture CO2.  And I think it's like, it was the neglected thing and I think policymakers just don't know about it and if I could [00:22:00] educate them and sort of, you know, get them, get them get buy-in for like some sort of, you know, pilot program or, or whatever, whatever would be, whatever the right answer is for for that.

And I'm not sure what it is exactly. But if, you know, if you can get them going on that, it's like, oh, we, we, you know, potentially. Capture, you know, many gigatons of CO2 for, you know, 10 to $20 a ton. Yeah. That's, that's pretty cheap and we'd solve a lot of other climate problems. Right. And, and, and it would be maybe the cost of dealing with climate change would go down by something like an order of magnitude.

Right. That would be that's, you know, like again, like pretty highly leveraged.  So that's like, those are some examples of like, why I've chosen to work on certain areas. But I think, I think I'm not saying those are the only ones by any means, and it just, just what makes a good policy entrepreneur is figuring out what those are.

And, and I guess, like the thing that to put a little bit more is like, how, like, is there something that people could do to [00:23:00] find more of those leverage points? Like it was, it, is it, I guess there's like two, maybe two purchase. One would be just like take an area of interest and like, just like comb through the laws.

Like basically like point changes that way to unlock things. Or is, is there a way to like actually sort of like look for potential point changes agnostic of the actual no, it's a great question. So, so, so I've been, so I've been, you know, trying to talk to people about like, what is the way to systematize this.

Right, right. So I think that's the question you're asking and, and, and I've been, so I've been thinking about like, what, what is my, you know, what is my system, if I have such as I, such as it exists. And I think that the right answer is to come at, I mean, one is to come at it from the perspective of the entrepreneur.

Right? So, so if you, if you think about it from the perspective of, you know, this is a company that is trying to do this thing, or I wish there was a company that was trying to do this thing, like, what would, what would, what [00:24:00] would they run into, right? What is that? What is the actual obstacle? What is the actual policy obstacle that they face?

I think that that is the most construct. Way to do it. And, and, and to give you an example of a different approach, right? You can think about some, you know, a bunch of our friends, you know, we're working on this endless frontier, Zack, right. Which is like complete rethinking of the entire like science funding and technology funding thing.

Like that is a different approach. And maybe that maybe, you know, we probably need some people working on that and that modality as well. But I, I think it's released for me, it's more effective to do this sort of more bottom up You know, think about it from, from the perspective of here's this thing I want to exist in the world.

Like here's the specific narrow problem that they would face if they tried to do it, like, let me work on that as much as possible. Yeah. I think, I think another thing that's really important is you know, the, the policy analyst or whatever should try to learn as much [00:25:00] as possible on from on a technical level about, about the technology and how it works and like the physics of it or the chemistry of it, whatever it is.

And I think a lot of, a lot of policy folks don't right. I think that they they're like, well, I'm going to deal with this like legal stuff. And I'm just, you know, I'll go to the engineers if I have a question, but I don't really want to learn it. And I think that that's, that's that's not helpful.

I think you want to get in the weeds as much as possible. I mean, Boom. Like I sat people down all the time. It was like, I need you to explain this to me cause I don't understand it. And, and, and I just had tons and tons of conversations with the engineering team and, and, you know, people who weren't on the engineering team, but who understood things better than me and over time, you know, so it got to the point where like, okay, I understand, you know, these airplane design trade-offs pretty well.

Right. And, and then, and then, and then when I'm talking to a congressional staffer or, you know [00:26:00] someone at, at a federal agency or something like that, that I can explain it to them. Right. And in sort of in a way that they can understand. So, so I think that you know, thinking from the bottom up you know, try and trying to put yourself in the position of the bottom of the entrepreneur working on it, looking at it from looking at it from you're not being afraid to dig into the technical weeds.

I think those are. Those are the things that I would encourage sort of other people working in policy to, to experiment with and to try. And I think that would make them, you know, more, more successful. Yeah. And actually on that note another thing I wanted to ask you about is if you have any opinions about sort of how to get more technical people in to government and policy and like vice versa, help more government policy people like actually understand technical constraints.

Cause I just find like very often, like it's like I had this instinct too, where I'm like, I don't understand policy, so I'm just going to like try to avoid [00:27:00] anything that touches government. And, and like that seems suboptimal. Yeah. So it's something that I think about a lot. We're thinking about a lot at the CGO actually is, is, you know, how can we.

How can we, you know, either when we train people up, you know, in terms of, you know, young policy analyst, how do we get them to like, engage, you know, like maybe so we're exploring ideas right. Of how we would do this. Right. How could we, could we bring in young policy analysts and like kind of mentor them or like teach them how to, how to sort of, how to self-teach some of the technical stuff, right?

Like, like like work through this stuff, or conversely, as you say, like we can take some technical people and, and sort of teach them the road. So policy, if that's what they want to do. Right. And, and, and give them that, that toolkit as well. And cause I think that the overlap is, is really, is really effective.

If you can get it, if you can get someone that's interested in playing in both spaces, I think that that is really effective. [00:28:00] And, and the question is like, who are these people that want to do it? You know, there's not, it's not really like a career track. Exactly. Right. It's. And so, you know, if we, if we found a bunch of people that wanted to be that, that you know, in, in that sort of Venn diagram overlap, like we would, we would definitely be interested in training them up.

Yeah. W w one thought there is actually sort of what we're doing right now, which is making the, the policy process more legible. In that, like, I, I think it's, it's very silicone valley has done a very good job of like, making people see, like, this is how you change the world by like starting a tech company, whether that's true or not.

But it's, it's like very unclear, fuzzy how one changes the world by like helping with policy. So like just making that legible seems very important, you know, I think, I think the other thing about it is that you know, Silicon valley, you know, I think investors and entrepreneurs are too afraid of.

You know, what they would call [00:29:00] policy risk, right. Or something like that, you know, like, like, you know, I think it's you know, I think it varies case by case how much of a risk it actually is. But I think it, you know, sort of my view when I was at boom was like, look, there's no way that FAA is not going to let us certify plane.

Like, there's no, like, like w we will, they will run us through the ringer. It'll be expensive. Like we'll have to like, spend, you know, new, all kinds of tests and stuff like that, but they are not going to get, we're not going to get to a point where, like, we have a plane ready to ready to fly. And like, yeah, it's not certifiable because of like, something like, like noise.

Right. And so, and so like, like there was, or there, you know, there is not like that much policy risk and, and a lot of things you know, I wouldn't feel that same way about like a nuclear startup, right. Like like efficient startup, but but, but sort of being, you know, I think that I wish that The investors were a little bit more savvy about like, what is a smart policy risk to take [00:30:00] and, you know, what, what can be, what can be worked and what can't in terms of policy risks.

Yeah. And again, I think it's, it's one of those things where it's like, we need more ways of people actually understanding that of like, like how do you, how do you grok those things? And then I guess, I guess the last thing on, on sort of the regulation front is like, are there historical examples of like sort of like very broad deregulation that enabled technology, like actual, like, it feels like regulation is very much this like bracket where like we keep regulating more and more things.

And every once in a while you get like a little bit better, like in the FAA case, but like, is there ever a situation. There's a really big opening up.  Yeah, there, there are a few cases.  Aviation is a perfect example, actually. So, so if you're, I don't know if you've read the book hard landing, but but it's an excellent recommended it if you're, if you're interested in this at [00:31:00] all, but it's basically a history of sort of the aviation industry up through what they call deregulation.

Right. Which is there's happened in the I guess the late 1970s. Because up until that point from I don't remember when it started, but there was this thing called the civil aeronautics board that basically regulated routes and affairs. So if you were an airline, you got to fly the routes that the government told you, you could fly and the fares that they, and you, you, you got to charge the fairs that they Told you, you could charge.

Right. And you couldn't give discounts or anything like that. Right. Like you had to charge like that fair. Right. And so, so like, what did you have to compete on? Like, like, not very much, right? Like you, you competed actually like on in-flight service and stuff like that. So So, I mean, you had sort of before that deregulatory era, you had a very lavish in-flight meals and stuff like that.

And, and super expensive, super expensive, super expensive tickets and not a lot of [00:32:00] convenient route choice and so on. And then And then sort of in the late 1970s under Jimmy Carter, I think I think Ted Kennedy was was the, one of the big proponents of it. So was like getting rid of the civil aeronautics board.

They got rid of it, right. Like they got rid of an agency. And so and, and so that sort of deregulated the, the routes and, and the city, you know, city pairs and, and times, and, and the fairs that they could charge. So now, like you can buy like, you know, a ticket to Orlando or Charlotte, or, you know, whatever for like 200 bucks or less.

Right. And, and it's and you know, that's all thanks to deregulation. Oh, that's not really exactly an enabling technology, I think, which was your initial question, but it just allowed the industry to move forward and and, and become a whole lot more efficient. And so one could imagine something similar for.

Like technology regulations. Yeah. I think in getting rid of an entire agency is pretty rare. But [00:33:00] but, but, but yeah, I think that but yeah, it's, it's not, it's not like a lot of people think like regulations a one way ratchet. That's not totally true. Like there have been, has been times in the past where we got rid of a whole lot of regulation.

Yeah. And actually related to that, do you have any good arguments against the position of like, we need regulation to like keep us safe besides sort of well, we also need to like, like there is too much safety. Like I, I find, I wish there was like a more satisfying thing besides like, well, you know, it's like sometimes we'll have to take risks.

Right. So I think, I think, I mean, it's, it's true that Like, there's not, there's not like from an economics perspective, like there's not really a good argument for regulating safety, because you would think that the customer could, could make their own choice about how risky they want to live their life.

Right. And so so, so it is a little bit awkward from that point of view, I think we're never going to get a situation where the government [00:34:00] doesn't regulate safety and a lot of things, right. They just it's just reality is that you know, the peop the public like sort of wants the government to regulate safety.

And so therefore it will. But I think that there is still a difference in the kinds of kinds of safety regulation that we could have. Right. So, so I think one example that I think about a lot is The way planes are regulated versus the way cars are regulated. So if you, if you think so with, with planes FAA sort of type certifies, every plane that is produced or that is registered  model of plane that is produced and you have to get that yeah, it has to get an airworthiness certificate and stuff when you register it.

And so that's, that's an example of what's called pre-market approval. Before you go on the market, you have to be certified, right? Drugs are work that work the same way with cars. It's a little different, right? You have car safety standards that, that NITSA promulgates and enforces. But The way that that is [00:35:00] enforced or the way that that is, is dealt with is that the car companies, you know, know that they have to design to these standards NITSA monitors, the market, all right, the marketplace, they sample sample cars that, that and, and test them and stuff like that.

And or if they observe a lot of accidents or whatever, they can go back and they can tell the, the car company. Okay. You have to do a recall on this car. And, and make sure, you know, fix all these things that we found that, that aren't up to snuff. Right. Right. And so, so, so that's, that's an example of post-market surveillance, right?

So those are both safety regulations, but they have huge structural differences in how they operate in terms of, you know, how, how much of a barrier is there to like getting to market, right. The pre-market approval cases. It means you're, front-loading all of the costs. You're delaying you're, you're making it hard for your investors to recoup any, any returns, just see if the whole thing is going to work, et cetera.

So there's like all kinds of effects of that. Whereas in the post-market surveillance model, like you're incentivizing good behavior, but we're not going to [00:36:00] necessarily like verify it upfront. We're going to, which is costly. We're gonna, we're gonna let it play out in the marketplace for awhile. And if we detect like a certain degree of unsafeness, we're going to make you fix it.

Right. And so I think of that, I think of that structural difference is really important. And I would, I would like to see. It's more of that that post-market surveillance model. I mean, you could think about it even for drugs too. Instead of, you know, instead of upfront clinical trials, we could say, okay, like you have this technical here.

Like we see that it makes sense as a potential treatment for this thing. Like, you know, you would have to test it on people one way or the other. Right. In terms of you know, w whether it's clinical trial subjects or patients who have had the condition we will allow you to use it on this, but we're gonna, we're gonna monitor like, carefully what the side effects are in those early applications of the drug.

And if it turns out to be unsafe, we're gonna pull it. Right. And so that that's, that would be a different way of doing it. You know, you can imagine we could do that. Right. But that's, [00:37:00] that's just not where we are. And so I think it is hard for people with You know, sort of bought into the current system to, to think about like how we would get there or how that would be, you know, why we would ever do that.

Right. It, it, it does seem much more attractable to just say like, okay, we're still going to regulate, but we're going to do it in a different way though. Like, I, I really liked that and I, I hadn't thought about that very much. I'm going to completely change gears here. And let's talk about GDP, total factor productivity.

Your, your stated goal is for GDP per capita to reach 200 a thousand dollars by 2050. And just for the listener context, I looked up some numbers. The current global GDP is $11,000. So we're talking about more than an order of magnitude increase. The highest right now is Monaco at 190 K. So they're not even so I, so I'm, I'm, I'm thinking like S specifically I want to get to 200,000.

I want to get everybody there [00:38:00] eventually, but by 2050, I think we, I think we could get the U S so the U S has 63 K right now. Which so, so like we've got a triple it, yeah, we've got it from the blood. And so the interesting thing that I think is like, so the U S looks like it's both low places like Ireland and Switzerland.

And like, so, so, so my, the thing that I'd like you to justify is like why high GDP is the thing we should be shooting for, because I would argue that like, sort of on a, like, things that are going on there's like, I would rather be in the U S than Ireland or Switzerland. And so, but like they have higher GDP.

Yeah. So like Ireland, is this a special case where like, they have a bunch of tax laws that are favorable and so a lot of like profits and stuff get booked there. So, so I, so I think that that's, I think that's what's going on there. So I would say so GDP is Is it not a perfect metric. [00:39:00] I think that the degree to which it's imperfect, it's often overstated by, by people.

So it's, it's pretty good. Even, so I would say I like TFP better as a like, so I, I, I use GDP per capita because I think people are more familiar with it and stuff like that. But I, what I actually think about is in terms of TFP and so total factor productivity is just like, how much can you get more output?

From a given amount of inputs. Right? So like, if, you know, if I have in my society, a certain number of plumbers and a certain amount of you know, lumber and a certain amount of, you know, any, all the inputs that you have, right. What can I make out of them? Right. Like how much, how much, how much was the value, total value of all the goods that I can produce out of all the, all the resources I have going in.

Right. And you want that number to be as high as possible. Right. You want to be able to produce as much as possible given your inputs. Right. And so that's, that's the, that's the idea of TSP. [00:40:00] And just to like, dig into that, how do, how do you measure inputs? So like, like outputs is just like all, all like basically everybody's receipts, right.

So I'll put, so, so in this, there's a very simple model yeah. That people use, right. It's called the, the sort of the solo model. Right. And the idea there is you have you have GDP, which is just a number, right? It's a, it's a dollar value  real GDP is what you're concerned about. And then you have how much, how much labor do you have and how much capital do you have.

And then, and then you you take logs actually of it, and then you do a linear aggression. And then the residual, the residual term in that regression is your, is your number for a total factor productivity or log total factor productivity. And so that's, that's how you would do it. Is it, that's a very, very rough estimate right.

Of, of how you do it. Sometimes people add in things like human capital levels. Right. So if we if we brought in like a bunch of an educated [00:41:00] immigrants and and brought them in, so, okay. Like labor productivity would go down. If it's measured naively, but if you include in that regression, like a human capital term to, to to reflect education levels, like then, then it wouldn't right.

Ideally it wouldn't. So, so anyway, so that's, so that's how you do it is you, you, you, you take labor, capital and output and you figure out the relationship between them and you see that you're getting more output than you used to from ideally hopefully from the given amount of, of labor and capital that that went into it.

That's not true in every country. Right. You know, actually our countries where you go down in an output over time. So Brazil, where I. Peaked in total factor productivity in the year of my birth in 1980. And so, so, so it takes about 50% more resources today to produce the same amount of output that they produce that in real terms.

Right. And, and, you know, Venezuela is like a basket case, right. They produce way less. So, so so it's, it's, I think it's a [00:42:00] good it's a good concept for thinking about two things bound up together. One is technology and the other is the quality of institutions, and those are the two things that if you improve them, then, then your output, given a certain basket of inputs is going to is going to be higher.

Yeah. That's, that's compelling. I buy into the school of thought that institutions are like kind of a social technology that like, should we just actually talk about it that way? And like, to sort of sort of like prime my intuition and like other people's intuition about TFP are there examples.

In history of like technologies that like very clearly increased TFP. Like you can like, see like thing invented TFP, like brand of TFP increased shoots up. Yeah. So, so the the guy who's written the most about this is this guy, Robert Gordon. And what he actually would argue is the thing it's like thing invented like a few decades pass [00:43:00] while things like integrating it and figuring it out, then big increase in, in, in, in TFP and GDP.

Right, right. And so, and so he, he had this paper and then eventually a book on the five grade inventions. Right. And I, and so things like the internal combustion combustion engine, the idea of. Like sanitation plumbing, et cetera. The idea of pharmaceuticals, chemistry, and pharmaceuticals electricity was probably one and I think that's four, right?

And I, and the fifth escapes me right now, but he, he basically argued that we had these sort of five great inventions in the late 18 hundreds. It took a few decades for them to get rolling. And then from 1920 to 1970, you had this like big spasm of growth TFE grew 2% a year. And he basically would argue today that's unrepeatable because we don't have those great inventions.

And all, all we really have, according to him is, is progress in it. Right. Like we have, so we have one great invention [00:44:00] and, and that's, you know, it really still hasn't shown up in the productivity statistics. It may still be coming, but he would argue. Yeah. There's just, you know, we've, we've eaten all the low hanging fruit, like there's no more great inventions to be had.

And when we just got to settle for a, you know, half a percent a year or TSP crows from here on out, but as I understand you disagreed like I, I certainly share your biases. And so recently you posted a great article about like possible technologies stack that could come down the pike. Do you have a sense, like, and so like through the framing of TFP do you have like, of, of all the things that you're excited about, like which ones do you think would have the biggest impact on TFP and like, what is the mechanism by which that would happen?

I mean, so, so, so I think probably the closest, the thing that's like closest to us, where we are now is it's probably like big energy [00:45:00] price reductions. Right? So I've, I'm really bullish on geothermal, I think like 10 years from now. It's totally possible that we would have you know, sort of a geothermal boom, the way we had like a shell boom, right.

In energy, in the, in the last 10 years. And then we'll be talking about like, oh man, like energy is getting so cheap. And so energy is something that sort of like infuses every production process in the entire country. And, and so it's difficult to really explain like how exactly it moves iffy.

It just moves everything. Right. It just makes everything. You know, if we get, if we get energy costs, you know, down by, by half or something like that, then it makes a lot of things twice as, as productive or, or some, or some maybe not exactly twice, but a lot more productive. So that's, that's one example, but then like other things like longevity, right?

Like, let's say we, we we, we fix a fix, you know, extending lifespan and say compress morbidity. Right? Like we make it so that people [00:46:00] don't get sick as much. Right. Well, that manifests as lower real demand for healthcare services. Right. So, so it's like, you don't even go see a doctor until like you're 90.

Right. And like, and you don't need to learn because like you're still healthy. Then show up in GDP. They do. Right. But they, but what would happen. See here's where you have to distinguish between real and nominal GDP. Right. So in real, in real GDP, like we would, we would get the same, like with, with proper accounting, right.

We would get the same or better. We'd get better at levels of health with fewer dollars spent on it. Right. So we'd be more productive in that, in that sense. Right. And so so we would so we might spend less on health services. But we would also have, we would employ fewer people in those sectors.

Right, right. The employ those people would, you know, smart people right now who work in the healthcare sector, those people would all get to do other things like, and they would, they would all become researchers or, [00:47:00] you know, other, other kinds of technicians or, you know, whatever. And, and, and those people would produce things in their new role.

So it's like, if, if, if all of a sudden we did not need. As many x-ray tacks or something like that. Right. And all those x-ray techs are out doing new things. That's like getting the x-ray texts for free. Right. It's another way of saying it is like we're getting all that for free, that same output that we used to get, we're getting it for free.

And now we are we're taking those same people and, and getting the produce even more on top of it. So, so, so when you think about real GDP, like jobs are costs, right? Like you don't want jobs and you actually, you actually want to reduce as much as possible, like the spending on the need to spend money on things even.

Right. And so that's how you actually increase productivity and ultimately real living standards and real GDP. And, and do we actually measure real GDP? Is that like hospital or is it like, sort of like a theoretical concept? No, [00:48:00] we, we, again, it's, it's kind of like the FP, right. We infer it. So we, we sort of And we estimate nominal GDP based on just how we, how we spend, how people are spending their money and how quickly they're spending it and so on.

But even that, it's not like we're counting every receipt in the economy and adding tabulating them. Right. It's it's still an estimate. So we're estimating nominal GDP, and then we're also estimating the price level changes. Right. And so you address the nominal GDP estimate by the price level change and that's your real GDP number.

Got it. Okay, cool. This is, I really appreciate this because I see all these terms being thrown around and I'm like, what is actually the difference here? Like what's, what's going on. And last question on TFE, can you imagine something that would be like really amazing for the world that would not show up in TFP?

Is it like as just like a thought. I think, I think stuff that improves the quality of your leisure [00:49:00] time is unpaid, right? Like, like or that, or that you almost get for free. So like you know, if let's say, let's say open a designer, like an open source video game or something like that. And like, everybody loves it and it gets super high quality leisure time out of it.

Right? Like there's no money changing hands. There are utilities going up. Right. So, so like you would, you would think that that would improve living standards without, without showing up in measured GDP at all. Right. So that's, that's the kind of stuff that it's like, yeah, he's got, you got to have that in the back of your mind that, that that's the kind of thing that could, you know, throw off your Your analysis.

Okay. And so, and this is actually what some people claim is like, oh, the value of, of the internet, you know, the internet has, has, has increased welfare to something sentence. It's like, okay, yes. To some extent, but, but is it, you know, it's not like a whole like percent, 1% growth a year. It's not, it doesn't, it doesn't account for the reduction in, in TFP that we've seen.

Yeah. [00:50:00] Yeah. That makes a lot of sense. Changing gears again make the case for airships air shifts. Yeah. So I think you know, you have. Cargo that is, there's basically two modes that you can take cargo on today. You can take them, put them on a 7 47 freighter, let's say, and, you know, get them to the destination the next day.

And it costs a lot of money or you can put them on a container ship and it's basically free, but it takes, you know, a few weeks or even months to get to your destination. And, you know, what, if there was something in between, right? What if there was something that would take, you know, say four or five days anywhere in the world.

But it's, you know, like a fifth of the cost of, of an airplane, right? That, that that's like a sweet spot for cargo you know, anywhere in the world. And. You know, so, and then, so with airships, there's an interesting thing about them is that they actually get more efficient, the bigger they get.

[00:51:00] And so this is, I think the mistake that everybody's made when designing airships is, they're like, okay, we're going to design this cargo Airship to take like 10 tons to remote places. Well, no, you should be designing it to carry like 500 times, right. Because there's a square. Rule. Right. Right. If you, if you if you increase the length by a certain percentage, the, the volume increases by that factor to the cube, to the cubic power, through the third power and the the surface area and that the cross-sectional area increases by that power or that factor squared.

Right. Right. And so your lift to drag ratio is getting better. Cause you, your, your lift is associated with the V with the volume and your drag is associated with the cross-sectional area. And so you're, you're getting more efficient, the bigger you get. And so I think if you designed say a, an Airship to go to carry about 500 tons a time at a time, so it's like four loads for 7 47 loads [00:52:00] at a time.

And and, and, and sort of your target. Goods that had a value to weight ratio. That's sort of in the middle of the spectrum. So it's not, not computers or really high value items or, or electronics even, but more of the things like machinery or cars or part, you know, parts for factories and stuff like that.

You could that be a nice little business and and you could. You know, provide a new, completely new mode of, of cargo transport. I think that would also be revolutionary for people in landlocked countries. You know, so, so, you know, I, I spent gosh, like a week in, in Rwanda about 10 years ago and, you know, just sort of like studying the country.

And and one of the things that we noticed was to access a port on, in Tanzania, like, you know, you'd have to like, it's like 700 miles away or something like that, but you, you have to put the goods on like rail and the real [00:53:00] gauge changes several times between there and the port. And every time the rail gauge changes, like you would have to like pay a bribe to somebody to like move it and stuff like that, like just do their job.

And and so that adds up to a lot of inefficiencies. So it's really cheap to get your container to the port on the coastline, but then to, to get it the last 700 miles, it's really expensive. Well, what if you could just get around that by, by taking something in the air ship, right. And so if you, if you designed the Airship for this, like transcontinental or, or Intercontinental.

You know, ocean shipping market it would also work for that for that sort of landlord market pretty well. And you could, you know, you could, you could actually bring more than just machinery to a country like Rwanda from from, from that. And then I think there's also a high value remote services market, right.

And this is, this is the one that people are going after and sort of like a standalone sense to some degree, like you know, smaller ships that carry 10 or 20, or maybe even 60 tons. It's like, okay, [00:54:00] yeah, you could serve that market, but even better if you design it for a 500 ton model. So, so anyway, that's, that's sort of, my view is like, this is a missing product that we should have.

You know, it's over a hundred year old technology. We have way better materials today than we had in the last sort of the last Airship. Yeah. Think about like the, the rigid bot they ships of the past, they'll use aluminum for their internal trusses and you know, carbon fiber protrusions would have something like a six, six fold strength to weight ratio improvement.

And let's say you double the, the safety factors. Okay. So your, your weight goes down by a factor of three for your, for your whole structure. You could do it autonomously today. You don't, you don't have to have labs and heads and, and galleys and all that stuff, and you don't have to have bunks.

Like you could, you know, if you were on a a manned air ship, like you'd have to have multiple crews because, you know, it's like five day journey. So, or at least some of them would be so do it completely autonomously. [00:55:00] And then another question is like, could you use hydrogen as a lifting gas?

Right. Because I mean, so there's a bunch of different arguments for why maybe you could, but if you were on yeah. You know, even, even, even the safety regulator would have to say, well, okay, like this might burn up, but like there's nobody on board. So so maybe it's okay. So, so anyway, I think that there's, I think there's definitely something really interesting there in terms of new, new vehicles that we could have that would enable, you know, a new mode of transportation for at least for Kartra and the so, and you've also written that it's less a technology question and more that sort of like a company that's willing to go all in on, on logistics question.

And it seems like th th the way that I see it, it's like the problem is that there's not a like super lucrative niche market to go after. I think it could be super lucrative. And I think the, the, the big market is super lucrative, right? If you're, if you're let's say, you know, [00:56:00] you are. Yeah, let's say you can get 5% of the cargo of the container market, not the bulk cargo, like forget the bulk cargo.

Don't don't do that. Like, don't go for the stuff that's already on air freight. Right. You might get some of that anyway, but, but just, just the, the stuff that's containerized today, right. If you could get 5% of that, I think that that would be 4,000 airships. And, you know, if you're, if you're the first one to market, like you have a monopoly right on that, or at least that, that segment of the market, and you could charge it like a decent markup.

I think, I think it's like a, you know, you could in revenue, you could make like 150 to 200 billion a year, something like that. Right. And, and then, and then say you get you know, half of that in profit, right. An operating profit at least you know, like it's not a small market.

So the culture problem that I see is like that it's, it's worth calling out is like, that is you need to like come out of the [00:57:00] gates at a certain scale.  That would make it very hard to sort of like ramp smoothly, I think is like, it doesn't, it doesn't work with a small airstrip. Like you can't do like a half size Airship and expect to be competitive or like a small company even.

Right. Like you just come out of the gates with like a big fleet, right? Like you could say, you could maybe like, say like your first, your first five airships are targeting, like the remote market where they might have a higher willingness to pay. I think that that could be a thing you do, but yeah, you want to just, you want to rent production and just, just churn out you know, hundreds of, you know, hundreds of airships a year, right?

Like that's what you want to do. It's hard to call out. It's not like that. There's like this gap here. It's like, there could be this amazing, this like amazing new thing, but it's just like the way that companies start now. Yep. It does exist. Cool. And so in this last part, I want to just do some sort of rapid questions take as [00:58:00] long or as little time as you want to, to answer them.

Why is your love of vertical farming? Irrational?  I think it's, I like I am by no means a farming expert. Right. So like, so I, I see these th this sort of technology and I'm like, this is awesome, but I know next to nothing about it. So it's not like an informed like, well considered love it.

It's sort of just like, I I think that this would be super cool if we moved to, into our farm. Right. And that's, that's about the extent I would say it's like potentially rational. It's potentially rational, but it's, it's, it's, it's not it's not well grounded. Okay. Why are there so few attempts at world dominance?

Oh, man. I wrote a blog post on this a long time ago and I don't remember the answer.  Oh man. I don't know. I think it's, I think I think it's a, I think it's a puzzle, right? You, you see these people who become like globally famous and super influential and they and they just sort of they, they sort of Peter out and they become self satisfied with whatever they [00:59:00] accomplish.

But like somebody like there, there are some really talented people out there that you would expect some of them to apply themselves to this problem that I feel like the power influence of like extremely like wealthy, powerful people is like shockingly small compared to what I would expect. Like, I dunno.

It's like, I feel like Jeff Bezos actually has a lot of trouble like making the things that he wants to happen with the world happened. And I find that certainly certainly true with like blue origin. Yeah. Yeah. Or just like, sort of like any, anything, like, like you see, you see all of these people who like we think of as like rich and powerful and like, they want things to happen in the world.

And like, those things don't seem to happen very often.  And that, that puzzles me. Like I have no, you know, I'd say that it does raise the question of like, whether there are people who actually are having a massive influence, which don't know who they are. Right. The, [01:00:00] the, the gray eminence. Yeah. The person behind the scenes who are, who's like really, really influential.

Yeah. Yeah.  Sort of within your field defined broadly, or like, however you want who do you pay attention to that many people may not be aware of? Oh, thank you. Okay. But like in all seriousness  do