Feb 8, 2025 · 2025 #5. Read the transcript grouped by speaker, inspect word-level timecodes, and optionally turn subtitles on for direct video playback
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Politics and Economics
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Speaker 2
Hello, everybody. It is Saturday, February the 8th, 2025. Alfred Hitchcock famously said that, for him, the cinema is not a slice of life, but a piece of cake. And according to my friend Keith Teer today, his weekly That Was The Week newsletter, Politics and Economics, Two Worlds Collide, This week has been rather like a piece of cake. Is that fair, Keith?
Yeah, well, I'm depicting the layers that make up society. And at the bottom of everything is economics. Obviously, economics drives human experience because without value and growth, there's nothing. But, you know, politics sits on top of that. And, you know, that's where fights happen. And if the fights don't get resolved, you end up with wars. But as long as everything's stable, you get society and life. And this week, what we've seen is the breakdown of politics and it beginning to impact society and life to the point where we're living in what you might think of as hysterical times.
Yeah, I don't think there's any doubt about that. But the hysteria, the paranoia is obvious. although Richard Hofstetter wrote a famous essay about that many years ago, so it's not new. I do want to question you. Firstly, it's a terrible photo, Keith, and why is it just Asian businessman with this cake?
Your piece of cake is an Asian piece of cake, so that's... I'm sure someone will start complaining about the anti-Asian or pro-Asian bias of Grok, but... Your argument that economics is the base of a cake, you take as given. I'm not sure everyone would necessarily agree with that.
Well, it deserves discussion. I mean, economics to me is not a thing separate from human existence. Economics is the word to describe economics. how we manage our lives through a division of labor, through exchange and trade.
The old Marxist in Keith creeping out in terms of layers, then for him, economics is the foundation, although some people would say we're a little less rational than that.
Well, economics isn't rational. It's the end product of a lot of behavior. And much of that behavior isn't rational. So economics isn't rational, but it is capturable in numbers and therefore can be thought of somewhat scientifically. That's why we have social science, not just sociology. And I do think that we're living at a time where... government spending, which is the big discussion of the week, and Musk as the kind of solution.
The assumed solution provider, the Department of Government Efficiency. Mr. Doge. Yeah. So really, most of the fights are happening around what should we spend and how much.
So we're going to get to that. But your editorial this week, Keith, I thought was interesting. you note at the end in conclusion that you're in favor of Doge, but you also confess, and I'm not sure this is worthy of a confession, you say, I have emotional reactions also. I think we should try hard to rise above them. Why should we rise above our... emotional reactions are you suggesting that the higher up you get in the cake the more emotion there is and at the foundation this economic foundation the uh superstructural level or the operating system of life is uh beyond emotion not not
really i'm making a slightly different point you're close to the point i'm making but it's different what i'm saying is that if the if the economic structure is not working what happens is that is experienced in the layers above and the the hysteria at the social layer today is symptomatic of an underlying economic problem that we experience through our you know through our emotions and i think almost everything trump does is is channeling emotions both on a daily basis, but also, you know, bigger picture, why did he get elected twice? It's channeling emotion, and the emotions are valid. They're not wrong.
Yeah, you start the editorial this week. Most of us experience the world through individual events. This week, it feels to me as if the entire world is in React mode. Do you think that being in React mode... is where Trump wants us to be. If we can rise above this endless reaction to everything he's throwing out, it seems almost on an hourly basis, that we need to stop reacting. Is that the key?
And then we all react, either positively or negatively.
Words and timings
Andthenweallreact,eitherpositivelyornegatively.
Speaker 3
Well, he's also doing it. Actually, both things are true. He's also reacting. But every now and then, he has a glimmer... of clarity. And usually we don't agree with him, but things like, you know, the idea that NATO doesn't make sense anymore, to me is a glimmer of reality. I kind of agree with that somewhat, that the 20th century we're in, you know, doesn't really need military structures that were built at the end of World War II. When he says things like, you know, the government is spending too much money and we've got to balance the budget, that isn't reactive. And it's kind of correct. It's more or less right. So he goes from react mode, like when he said America should take over Gaza. I think he was reacting to his meeting with Netanyahu. But he also has glimmers of clarity. But we don't.
No, I think he's better than that. I mean, I don't think he's a stopped clock. I think he's not old school. You know, he doesn't really take received wisdom and just take it for granted as being correct. He questions things, which is not a terrible attribute, by the way.
So a lot of people get me thinking, why are we talking about Trump and politics and economics is supposed to be a tech show. There is, of course, the Doge element and our old friend Elon Musk. What's Musk and Doge got to do with this? Is this central for this week, Keith? Is it dominating the news? And is this in some ways more of a tech story than a politics or economic story?
Well, it's really an American story, but it's got a tech subplot. The tech subplot, obviously, is that Musk, who everyone is accusing of being an unelected kind of baron, forgetting that he's working for Trump and Trump was elected. And so what Musk is doing is entirely democratic. Even if you object to it, it's not undemocratic. And Congress isn't stopping him. They would have the power to, but they're not.
I don't think we know if it's constitutional, because I think that fight still has to be fought. And there is certainly a case that it isn't. But at least until somebody fights that fight, he's acting under the authority of an elected president. So it's pretty hard to say that he's some kind of renegade. And of course, people don't like what he's doing. That's the hysteria.
Well, no, some people admire it. I mean, my understanding, and this is what makes it a tech story, is that he's replaying the X model that he used when he acquired Twitter, fired whatever it was, 80% of the people, came in like a maniac, threw a lot of stuff at the wall. Some of it stuck, some didn't. Is that a fair analysis? Was Twitter for Musk a dry run for Doge?
there's certainly a lot of similarities you're right andrew it's interesting this week it was announced that twitter is now very profitable and the debt holders were able to sell the debt this week for 97 cents on the dollar which is close to being made whole um and so twitter despite all the turmoil is now thriving although some
Well, they correlate. Nothing is separate, is it? Everything's interrelated. It's trying to figure out, as they say in AI, what the weights are. What are the key variables making things happen?
Yeah, and coming back to layers, I like your metaphor of layers that you used for this week's newsletter. I mean, what Musk did at Twitter, for better or worse, was get rid of the layers. Yeah. He did. He basically came in and destroyed the cake, didn't he, Alex?
Yeah, yeah, there's a good example this morning. The NIH announced that it's cutting research spending to Harvard and Yale and John Hopkins. It's reducing the administrative overhead allowed for research from 69% down to 15%. So exactly what you said, cutting out layers.
And there was, you'll see when we get to post tweet of the week or post of the week, Musk is pretty confident that he's going to deliver historical savings without negatively impacting government services.
Well, he said it in four words. One wonders whether he's So, Keith, you and I don't agree on this. You're in favor of all this. At the bottom, then, you say, I am in favor of Doge. I thought I had to say that because... You didn't have to. You could have said you were against it.
Why are you in favor of it? I'm in favor of modernizing government and making it be able to deliver services better and cheaper. Well, no one would argue with that, but that doesn't mean that you have to be in favor of Doge. That's what Doge's job is. I mean, they don't have any other job. So you kind of have to be in favor of it. Now, I think I say that despite, you know, on any given particular thing, I may have misgivings, but I don't have misgivings about the existence of Doge and its goal to cut government spending. And I would highly expect most of those savings come from either bureaucracy being let go or programs being defunded.
That doesn't seem... Yeah, I mean, it goes back to sort of, I mean, it's like arguing against apple pie, speaking of cakes and pies. I mean, no one's against excessive government spending, but that's a completely different thing from saying you're in favor of doge which has gone about government cutting government spending in an incredibly aggressive and controversial way so you approve for example of essentially the elimination of the the usaid institution well i'm not convinced it's it's it's
say keith in the editorial you say um So the real issue becomes whether USAID is misusing taxpayer cash, which it clearly is. I'm no expert, but nor are you. I mean, nobody really quite knows. I mean, you can always find some misuse by some government agency of a few hundred dollars, but there's no proof one way or the other at the moment, is there? Any more than any other government agency.
Yeah. Yeah. Well, some of the stories coming out, Andrew, and I don't want to give them credibility because I don't know if they're true yet. But if they are true, they're very concerning. For example, how much of the money going to Ukraine has disappeared?
Yeah, I don't know. You know, there was a big story about Politico, which seemed to me at least misrepresented. You didn't put this link in the newsletter, but I was particularly taken by Nicholas Kristofs. op-eds is one of the best op-ed if not certainly on this issue the best op-ed writer around uh with the title uh the world's richest men take on the world's poorest children i mean whether or not there's some truth to the fact that usaid is is misusing some funds it's a it's a shocking headline and and and it It has some degree of truth in because these are the world's richest men and they are taking on the world's poorest children. And those children have no control over these funds.
You know, I think if Musk was answering, he'd say that some of the poorest children in the world live in the United States, mainly in suburbs, they're mainly non-war. I doubt he would say that. And, you know, his targets, for example, there's a pretty good chance the Department of Education, the federal one, gets closed down because U.S. education is not a federal service, it's local. and the money going into local schools. I don't think Musk is on a fighting poor children mission. So that headline to me is just a very, very cheap shot. It's more symbolic of the hysteria of the moment that he wrote that.
I don't agree. I don't think it's cheap shot, especially coming from Christoph, because he knows his stuff as well as anyone. And secondly, the problem with what musk is doing even if in some of it may be well intentions is it lends itself to this kind of headline so it is terrible pr at least for america and the rest of the world maybe he has a domestic constituency that likes these
I'm not really speaking the Keith-Tier view of the world here. The Keith-Tier view of the world is a post-nation-state world, but we live in nation-states, and it isn't unreasonable that a nation-state wants to manage its budgets. That's not unreasonable. Well, no one would argue with that.
Anyway, I mean, this isn't a politics show. You and I disagree on this. I'm I don't know if I'm against Doge, but I'm certainly against some of the stuff they've been doing. And you're clearly more sympathetic. Let's move on to the news of the week. One of the interesting stories is Daniel Penny, the guy who was involved in the subway chokehold death of Jordan Neely, has been hired by Andreessen Horowitz. Is there an intention here just to upset or shock people here? Why are they doing this?
I think there's an intellectual war going on that that higher is symbolic of, which is to turn the tide against what Andreessen calls wokeness by siding with
So you were true of that because you always are going on and on about, well, I don't even know what workness is. It never seems to bother me, but it bothers you.
I find it sickening. It doesn't just bother me. I think workness is sickening because it's pretending to fight racism and sexism and not actually doing it.
Well, that's a – we're not going to get – I'm not going to get drawn into that one. But it doesn't reflect well, Keith, does it? I mean, maybe it does for some people. But hiring a guy who – Well,
let's just say what the guy did, just in case there are people that don't know. He was on a metro in New York, and somebody was being – certainly objectionable, I think, violent towards other passengers. And this guy intervened. And a bit like George Floyd held the guy in a stranglehold, the guy ended up dying. The courts found him not guilty of homicide. And he's become somewhat of a celebrity because... Right.
Well, George Floyd wasn't threatening anyone. So the killer was the aggressor. In this case, the person who died was the aggressor. And so it's a bit different. And the guy is a bit of a hero.
Well, he's a bit of a hero for some of us, for some people. I'm not sure for everybody. He was a former military guy, wasn't he, a naval officer? I believe that's true. But even so, I mean, is he qualified to work at Andreessen Horowitz, the top VC in Silicon Valley? I mean, what skills does he have?
At 2% a year in fees, they have an unlimited amount of capital. And making a hire like this to make a statement is a small cost for them. And Andreessen clearly is pulling strings in D.C. way more than any of us realize.
Yeah, and he's the anti-Musk. He doesn't want anyone to know about it. So on the one hand, we've got Andreessen doing their own sort of diversity hire, hiring people who killed people on metro trains in New York and got off. On the other hand, we've got this week, Google ending its diversity hiring. So the zeitgeist has changed dramatically, Keith, hasn't it? Maybe Daniel Penny should apply for a job at Google.
I mean, if Harvey Weinstein or Jeffrey Epstein, if, if they weren't either departed or in jail, I'm sure they could get a job at now at Google or Amazon, couldn't they? You're right about the zeitgeist.
It was okay to be male before I'm a male. I've never had a problem with it. You know what I'm saying? I don't know what you're saying. What are you saying?
But the whole zeitgeist is shifting to a more assertive, pro-American, stand up and be counted, let's stop the BS on spending. And that is a night and day change. I agree with that.
Well, let's just put diversity down and bring it back in a second. Let me just say one more point first. It definitely is the case that the reaction against all of this doesn't understand that it's popular. This stuff that Musk and Trump is doing is popular. And the reaction is a throwback to the reasons the Democrats lost the election. They're trying to defend the territory that's just been defeated. And by doing so, shrinking into an even smaller minority in society. And that's the tragedy of it, because my core belief is we need We need humanism.
And diversity, by the way, is clearly... Yeah, well, humanism is a meaningless word. There was one very good op-ed, which you didn't include. I texted it over, you must have forgotten, by Jen Palker, who was... I think second in command of tech under the Obama administration. She had a very good op-ed in the time saying this is how Democrats can counter Elon Musk. She talks about her own plans that got nixed for reforming government. So, I mean, one can believe in making government more efficient, digitalizing government. and remain a progressive. You don't have to be Muskegon to believe it.
I agreed with almost all of it. I think she's exactly right. The Democrats, and I don't literally mean the Democratic Party, but anyone progressive should be standing on the ground of cheaper, better, modern government with services to people. And to me, diversity is an organic development of wealth. Most wealthy societies are highly diverse and you don't need to make special provisions for diversity if you have a healthy society,
because it just happens. Well, I'm not going to get sucked into that one, but certainly I would strongly suggest people read the Palker essay. Meanwhile, and maybe this is part of all this hysteria, something real is going on in the world rather than people arguing about diversity. It's AI, of course. You have one essay from Thomas Pueyo suggesting that this week in AI was when decades to happen. Do you think there's a connection, Keith, between all this hysteria over some stuff that a lot of it is... cake-like perhaps in its relevance and the fact that AI is changing and is about to really dramatically change the world in ways that we can't even imagine?
Well, that's bound to be alienating, isn't it? You literally don't know whether you're going to have a job and how long for because it's becoming clearer and clearer that AI is going to be good enough to do lots of tasks in an automated way. And the latest is the creation of, and this is a good way of thinking of it, there's really three types of AI now. There's the large language models that we're all familiar with. Now there's reasoning AI, and this week, OpenAI launched a model called O3 Mini, which is a reasoning model. Reasoning models are different than... Are they built, though?
Yeah, they need LLMs to be trained. So you can't build reasoning models unless you have LLMs, but they're different. They do different things. They think, as in, they'll show you their train of thought and the conclusion. And then there are agent models. Agents not only think, but act. So they can write to databases, send emails, build websites, and so on and so forth. So once you have that chain of the large language models, the reasoning models, and the ability to act, obviously you're getting very close to manipulating the real world, the digital real world.
So, but back to my question, I mean, whilst we're all historically, hysterically, and perhaps historically, arguing about cake and musk and doge, something really significant is happening in the background, which may be both a cause and a consequence of the other stuff.
I think they're parallel. I don't think there's that much correlation, honestly, between them. And I think... Of the two, the more important is what's going on with AI in terms of understanding how the future is going to play out. So I think they're parallel. I think some people may be aware and react to the AI stuff, but most of the reaction, I think, is in the political realm.
Yeah, back to your cake then, your politics and economics cake where you have society on top of politics, on top of economics, the base is economics. Where's AI in this, is it?
AI is at all levels, but it's mostly at the economic level today. The amount of money being saved by automation is already starting to kick in. You know, one would imagine that Musk would be the first to ask the question how that could impact government by making things better and cheaper. But he doesn't seem to be doing that.
Right, well, Jen Parker does, though. And I agree strongly with her and you that that's where progressives have to go rather than the hysteria over Musk and Trump. One interesting piece of news this week, which proves you right and me wrong, not first or the last time that will happen, is that Alex Kantrowitz has a piece about boom times for ChatGPT. I've always kind of written them off because I've always assumed there's too much of a circus around Altman. But clearly ChatGPT is doing very well, isn't it?
Yeah, if you read that article alongside the Andresen Horowitz one about the success of what they call rappers... WRAP, not RAP. It's basically making the point that the company that owns the user interface is going to be the big winner in revenue. So just having a large language model doesn't really give you anything. That's going to become commoditized. Having the way that people interact with large language models is going to be very valuable. It's interesting because I think perplexity ends up being more valuable in that world as well. You mean as an AI search engine? Yeah, exactly.
Yeah, I think that the good players, and I'd include DeepSeek in that now, will all grow. But open AI is far ahead. Open AI is more like the Google of this stage of tech.
Why are they so far ahead when you've said in the past and others have said that these products are commodified? What does open AI have that the others don't?
I also use Claude, and I think it's best at some behaviors. That said, we're in a minority, Andrew. Most people are not using Claude, they're using OpenAI. And the fact that Apple built it in is a huge boost to it.
No, I don't think so. Well, just to give you an example, you know, I use AI for coding and I've used Claude. Really, since I started doing it, I've always used Claude. This week I switched to OpenAI's O3 model because it's better.
Well, the O3 model, as you say, is sort of built upon LLNs. It's a reasoning model, although you have to assume Anthropic will follow up with that. Well, it's certainly not going to be the last... Time we talk about AI, even in February, let alone the rest of the year, that interesting piece of news. The UK is ordering Apple to let it spy on users' encrypted accounts. Your interview of the week or our interview of the week is my interview with Ethan Zuckerman, a very distinguished internet analyst activist who had a piece in The Atlantic about America no longer being the home of the free internet. So it's not just the UK, it's America in particular. And Zuckerman, I really like and admire. I mean, he's very explicit in his critique of America's attempt to ban...
Yeah, exactly. I mean, this goes back to economics and politics and society. Economics is global. Politics is national and local. And society is certainly local. And what happens is when the local people at the political and societal level try to control things, They usually fail, by the way, because because economics is global and technology protocols tend to also be global. Getting control is hard. And so that Apple story, Apple hasn't said yes, and it won't.
And it's always convenient for it, isn't it? Well, that has consequences. What the consequence will be that the UK won't have the full iCloud that Apple gives to us in America. And so when nation states require things that give them spying capabilities and companies which are not UK-specific say no, the UK loses. And every nation will lose in the face of... Well, UK users use.
Well, it will lose because UK users, today, for example, O3 is not shipped in the UK or Europe because regulatory approval is required prior to shipping. We're all using it already.
So you're a no-hold bars guy. for big tech companies to jump into bed with their governments. Of course, one of the other pieces of news this week is that Google publicly removed its pledge not to use AI for weapons from website. This is part of the shifting zeitgeist. Is there anything any of these tech companies can do, Keith, that would outrage you? Are you okay with all this sort of stuff now?
No, I'm actually quite critical. Just because I put it in the newsletter doesn't mean I agree with it. I don't believe, I personally don't wanna do anything to support the US military and its supposed competition with other nation state militaries. And my three sons are strongly advised them never to join the armed forces. So my personal point of view, I am a globalist through and through, but I'm documenting and charting the rise of nationalism, the cooperation between tech and national interest And it's pretty self-evident, right?
Yeah, it's astonishing that in the same week that Google, which is the quintessential, as some people might say, woke big tech company, ended diversity and removed its pledge not to use AI. It's interesting. It's been quite a week, or certainly quite a couple of months, Keith. and much more will happen over the next few weeks. Let's move on to our startup of the week, Deal. Fairly non-controversial in a controversial week. Tell us about Deal, why they're interesting.
Yeah, Deal's a fintech company, a very popular fintech company, and it just raised a massive amount of money to undermine the incumbents in banking and money flows. So... was a pretty easy choice um it's who are the incumbents who are they going after bank of america wells fargo people like that not hard those are talk about dinosaurs right yeah exactly and what is so what does deal do it's um it basically does uh uh fintech based uh banking uh for businesses mainly um and uh uh You know, one of the big things is payment, for example.
Yeah, it's a middleman, but it controls money flows. It's not a custodial. That is to say you don't bank with it. But instead of using Bank of America to pay your employees, you use Deal. So the game in fintech is to own as much of the money flow as possible without being a custodial. Because in America, it's hard to become a bank.
They're the big... I was going to say deal of the week, but they're startup of the week. Finally, in this new environment, he's back. Keith's heartthrob. He hasn't appeared for a while. Paul Graham is our...
our x of the week or our i don't know what what new term keith post of the week post of the week it's changed used to be tweet then it went to x now it's post paul graham wrote doge is unlike any other government doge is unlike any other government departments then its performance can be precisely measured I'm not sure about that. But anyway, how much smaller is the federal budget next year? If Elon can cut the budget by 5%, I'll be impressed. And Elon responded, at least 10%. I mean, isn't this a bit childish? Yeah.
Well, yes, but I don't know that that... Cut it mildly. I mean, there's so many other metrics involved in this that it's not simply cutting and being proud of cutting, but...
Well, that's my critique of Elon, which is he's so obsessed with cutting that he's not thinking about the qualitative part of government. So cheaper and better is important, not just cheaper.
aren't they? Paul Graham's not prickly and he's not, he's definitely not on the spectrum, whereas Elon clearly is. But, you know, You know, for Elon to say he's going to cut the budget by 10 percent and Paul Graham then says if that is true, it's going to be historic and other governments will want to follow suit. I would think it's fairly easy for him to reduce the budget by 10 percent. I think I think. And knowing him, he's rigorous, right? So he's going to be thoroughgoing in saving money.
Let's check. Is it $2 or $3 trillion? I'm going to check because I actually don't know in my head. This is real time. Ask Claude. The US government budget was 1.2%. The deficit in 2024 was $1.83 trillion, but I don't know if the deficit and the budget are correlated in any way. They're probably not.
The budget's got to be, I would guess, around $2 trillion, $2 to $3 trillion. $6.75 trillion. Oh, shows how much I know. So if that is true and he cuts it by 10%, that's $670 billion.
We shall see. I mean, it's complicated and it's going to play out over the year. But, Keith, you've made me hungry for a piece of cake. Lots of cake in our conversation today, as Hitchcock said. For me, the cinema is not a slice of life but a piece of cake. That's like that was the week, Keith. We will be back with more cake. and other things next week. Have a great week, Keith, and we'll talk next week. Thank you so much. Thank you.