Creative Destruction: Nobel Laureate Peter Howitt on Innovation, Obsolescence, and the Future

Nobel Prize-winning economist Peter Howitt joins the Kudzu Project for a fascinating conversation about technology, obsolescence, and the forces that shape our ever-changing world. The Canadian-born economist received the prestigious prize in 2025 for his work on the theory of "Creative Destruction," the necessary but often painful process by which new ideas, technologies, and industries replace the old.

Now residing in Hendersonville, N.C., Howitt discusses the research that earned him one of the academic world’s greatest honors, what creative destruction means for ordinary people, and how innovation, artificial intelligence and even politics can influence the economy of the future.

https://www.nobelprize.org/prizes/economic-sciences/2025/howitt/facts/

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Transcript

SPEAKER_03 0:48

And we are recording.

SPEAKER_02 0:50

All right. Can I am I uh audible?

SPEAKER_03 0:54

You are audible, okay. Peter Howitt. You are my first Nobel Prize winning uh guest on the podcast, and also my first Canadian. Oh, so congratulations on those two accomplishments. Thank you. Which one do you value more? Do you you value the Nobel Prize more than being Canadian?

SPEAKER_02 1:18

Well, I I suppose I do. I I value them both. Yeah. Uh uh I'm now Canadian and American. I'm a dual citizen. Congratulations. And uh I'm happy to be that way. Uh I think I'm I'm probably more of a universalist than a nationalist.

SPEAKER_03 1:38

Interesting.

SPEAKER_02 1:39

Yeah.

SPEAKER_03 1:39

Full disclosure, I am half Canadian. Oh, really? Uh my mother's uh French Canadian, she was French Canadian, and um we can trace our lineage back to Quebec. So I know you're from Guelph, Ontario. That's right. I know sometimes people in Ontario don't consider Quebec to be in Canada, but oh well it is.

SPEAKER_02 1:59

It's uh you know it's and the French language is an official language of Canada. It's not like Spanish is here, spoken by a lot of people, but not official. Uh every public document in Canada is written in both languages. Uh every prime minister since I don't know who, probably back in the 1950s, uh, has been fairly fluent in both English and French. Uh uh the proceedings in Parliament are conducted in both languages. It's uh Quebec is is has has a very good position for a a French-speaking uh state or province uh in a whole sea of English speaking people of uh you know three, four hundred million of us, uh and they're only about uh fifteen million. Uh so uh I think they're they're thriving.

SPEAKER_04 3:01

Yeah.

SPEAKER_02 3:01

Uh they always want more, but the they there's been a long separatist movement in Canada, which uh has resulted in uh uh referenda to separate, some of which were very close, but uh it's never quite succeeded.

SPEAKER_04 3:19

Yeah.

SPEAKER_02 3:20

There may be more, but I think the the province that's more likely to sick secede right now is Alberta.

SPEAKER_03 3:27

Uh very conservative province, isn't it?

SPEAKER_02 3:29

It's very conservative. It's sort of the Texas of Canada. Yeah. Uh it's very much uh, you know, the economy is very much based on oil. And uh so they're they're sort of fighting the modern uh uh you know climate change movement and so on.

SPEAKER_04 3:48

Yeah.

SPEAKER_02 3:49

Just as the oil interests are in the United States and around the world.

SPEAKER_04 3:54

Yeah.

SPEAKER_02 3:56

And but the rest of the country is uh is concerned about it, and so there's this there's tension there.

SPEAKER_03 4:02

Yeah. My father's work um brought my family to Canada in the 80s, so we lived in Montreal for a couple years, and as I said, my mother's side of the family was French-Canadian, so we kind of returned to our roots. But the 80s were kind of an interesting time in in Montreal. I know that the separatist movement had had been in effect and had been gaining some steam. And um, Montreal had just gotten surpassed by Toronto as as the major city in Canada. And I think there was, and there probably still is to this day, a great effort to preserve the culture of Quebec and certainly the French language, um, to the point where you know stop signs say arrête um instead of stop. Even in France they say stop it. Yeah, it's uh it's an interesting culture, an interesting place. It is.

SPEAKER_02 4:51

I I went to school in Montreal.

SPEAKER_03 4:52

McGill.

SPEAKER_02 4:53

At McGill. Yeah. Uh at the time it was a sort of an English-speaking island in a French-speaking sea.

SPEAKER_04 5:02

Yeah.

SPEAKER_02 5:02

Uh although uh Westmount was still a big uh center of where a lot of the Anglophones lived.

SPEAKER_04 5:11

Yeah.

SPEAKER_02 5:11

Uh it's now uh as much Francophone as Anglophone.

SPEAKER_04 5:16

Yeah.

SPEAKER_02 5:17

Uh and during that period, uh a lot of the people that were really upset by separatism left. There was a big uh migration uh a lot largely to the Toronto area.

SPEAKER_04 5:31

Right.

SPEAKER_02 5:32

Uh and uh and as a result, I think a lot of the a lot of the Anglophones that remained were more comfortable with the the the uh the movement to preserve the French language, the the fact that uh the uh the letters of the English part of a shop sign could only be so many inches tall. Right. Uh it it did seem a little extreme. But uh you know there's I think a lot of understanding that uh that it took extreme measures to preserve the French culture in the uh in North America.

SPEAKER_04 6:09

Yeah.

SPEAKER_02 6:10

And uh so I you know I think it's working out pretty well. It's uh a lot of people are very proud that uh England and France are two countries that for most of their history have been at war. And uh here we've had the English and French getting along for longer than they ever have without actually having a war.

SPEAKER_03 6:34

That's very true. That's very true. When I um when I lived in Montreal, and when when I when we returned to the United States, I I felt like there was, you know, in in Montreal, the kids could tell you the capital of every 50 U.S. state, but you get to the United States and kids here don't know anything about Canada. It's it's kind of cloaked in mystery. And and I think that there's kind of this misconception that it's it's it's just an extension of of the United States, but but different. And I think Canada has a better sense of self than than than Americans you know give them credit for. What do you think about all this talk about Canada becoming a 51st state?

SPEAKER_02 7:19

Uh well, you know, like most Canadians, uh I find it offensive. But um uh it's uh you know, so it's it's interesting that I I have a lot of friends who express a lot of sympathy with me when when they when they hear. I mean it's mainly from Trump. It's it's not really from anybody else. Uh it's it's it's just you know personal insult. Uh uh but it you you have to take it seriously. The United States is a very powerful country, certainly militarily far more powerful than Canada. And and uh I you know, if if the US were willing to invade Canada, I'm sure they could do so successfully. Um but uh you know they'd have to put a lot of boots on the ground because it's a very big country. Very big country. So I I doubt if it's ever going to come to that. But it's just part of the uh hostility that Canada has experienced uh uh with, you know, let's face it, it's with Trump, it's not with the United States. And uh but uh you know, the United States elected him, who knows who they're gonna elect next. Uh Canada has had to start making alternative arrangements and looking for trading partners elsewhere in the world. And uh uh but you know the fact that uh most Americans don't know a lot about Canada to me is not it's not surprising. I I mean I expect if I'd grown up in the U.S. I wouldn't know much about Canada. It's everybody in Canada knows a lot about the U.S. Everybody in the world knows a lot about the US because it's the most powerful country in the world. It has been throughout my lifetime. Uh so it's uh so of course the the relationship is always going to be very asymmetric in that respect.

SPEAKER_03 9:21

I mean, most Americans don't know much about North Dakota, so I guess it's no surprise that if we go a little bit farther, they know even less about that. Yeah. You know, I do know that Canada was trying to annex the Turks and Caicos at one point. Did you read that?

SPEAKER_02 9:35

Well, there was a discussion about that. There was a there were there were a couple of members of parliament that used to like to take winter vacations and uh in uh uh is it Providentialis? And uh uh and and they actually I I'm not sure how serious it was, but they they made a proposal that uh uh in in Parliament that we enter into a political union with Turks and Caicos.

SPEAKER_03 10:03

I spent a lot of time in Turks and Caicos in in my past life in the scuba industry. Oh man and um wonder wonderful islands, beautiful islands.

SPEAKER_02 10:11

Yeah, I I once spent a vac uh a winter vacation there and uh loved it.

SPEAKER_03 10:16

Yeah, and and if you spend a winter in Canada, you know why there would be interest in annexing the Turks and Caicos. So but of course, this is not why I had you on the podcast, Peter. So um it's it's my understanding that you had no idea that you would be winning this prestigious Nobel Prize for economics.

SPEAKER_02 10:36

Well, I I guess no idea is is uh isn't quite accurate. Uh you know, the work for which I was recognized was was done a long time ago, most of it was.

SPEAKER_03 10:48

Late 80s, early 90s.

SPEAKER_02 10:50

We started uh uh work, it was all done with Philippe Aguillon, my uh uh French economist co-author and uh collaborator. We started in 1987. And the most important work of all of the work we've done was done then, and that's the the basis of the work for which we got the prize. But we can we continued it. Uh he's still working on it. Wow. Actually, it's still working on developments of the same ideas. Uh I've sort of phased myself out. I just had celebrated my 80th birthday. Happy birthday, thank you. I I realize that octogenarians don't make a lot of contributions of a fundamental nature to the subject, and so I'm more interested in golf right now. But uh but anyway, uh it when I did that work, I was already 41, I was an established economist, uh, and uh uh it was a new direction that I was moving in. Uh we came up with an idea that turned out to be extremely fruitful, and uh uh we recognized right away that it was successful because when we went around uh individually or jointly to present the first first paper that we had written together, uh we got very favorable, a very favorable reception everywhere we went. And um uh and after a few years, we we wrote a couple of books, we wrote many more papers, we undertook a lot of research projects to testing parts of our theory and so on. Um a lot of people said, Well, you're gonna win the Nobel Prize for this. And so uh, you know, it's it uh and this this was years ago. Uh but after people have been telling you, oh, I think you're gonna win the prizes here for 25 years, it hasn't happened, you you you you reconcile yourself to the fact that there are people who live uh happy, fulfilling lives without a Nobel Prize. It's not a big deal. Uh uh and and I'm I'm quite aware of uh a lot of people who uh spent the latter part of their lives very unhappily because they kept waiting every October with the uh with the refrigerator stocked with champagne for the announcement that never came. And uh and and many of them became very bitter about it. So I was quite determined to forget about this. Uh the night before the prize was announced uh last year, uh I had been up, uh I knew that the announcement was coming the next morning. And uh I I was I was pretty sure that it wasn't going to be us. I mean, uh I'd sort of decided, okay, that ship has sailed. Especially because the year before they gave the prize to Daron Asamoglu, a good friend of mine who's who's did similar work. Uh uh and I thought, well, they're not going to do it two years in a row, especially. So I'd been up watching the Toronto Blue Jays beat the New York Yankees in the World Series uh uh playoffs, and uh uh uh it was late when I went to bed. My phone had run out of juice from scrolling between innings, and uh rather than disturb my wife's sleep, I just put the phone down. I knew it was out of juice. Uh that was it. So at 6 15 in the morning, uh my wife's phone started to ring. And uh she was very annoyed about it. And uh I said, well, just answer it. Anyway, so she did, and uh it was a Swedish, very enterprising Swedish journalist who'd somehow rather found her number and said, uh uh called called to uh uh to congratulate Peter Howard on winning the Nobel Prize in Economics.

unknown 15:01

What?

SPEAKER_02 15:04

So that's that's what happened. Uh uh this journalist finally contacted us. The the rest of the world had been informed already of it.

SPEAKER_03 15:14

Uh yeah. Journalists always find a way, don't they?

SPEAKER_02 15:17

Well, this one certainly did, yeah. Uh so uh it it it was a big surprise, um, but it wasn't wasn't totally out of the blue.

SPEAKER_04 15:56

Yeah.

SPEAKER_02 15:57

You had an inkling. I had had an inkling in the past. Uh and uh I had pretty much given up hope for it.

SPEAKER_03 16:10

Yeah. So the the premise is creative destruction. Right. And the concept is um things become obsolete, new technologies replace those old technologies, and it's a driving force in our economy.

SPEAKER_02 16:24

Is that a that's right. Yeah, yeah. And it it's it's it's actually an old idea, but it was an idea that didn't fit well with existing economic theory and economic models. So uh, you know, someone said that economists are like uh a drunk looking for his lost car keys under a lamppost. When somebody said, Well, is this where you where you dropped them? And he said, No, but the light's pretty good here. And and that's it. When economists have good models that they know that they can take to the data and measure things, that's that's what they go with. Right. And none of those models included these the the these sort of strategic considerations that are so important in the contest between people that are deploying the old technologies and making a profit from the old technologies and would like things to either stay the same or continue along the same lines. And the people uh you know, the more disruptive uh upstart bringing the the new uh ideas that are going to push things in a totally different direction to the detriment of the people uh whose uh whose products aren't going to be in demand as much, uh whose plants are maybe going to have to close, they're gonna maybe lay have to lay off workers, uh and uh and there are a lot of people whose human capital will be rendered redundant by the new technologies. And uh so it it there's uh there's this this uh, as I say, a strategic uh relationship that it goes even beyond the economics, it goes into politics. We see this all the time. We see people lobbying governments, we see people uh uh trying to pressure uh regulatory agencies and so on to uh tilt things in favor of the status quo uh uh and make it difficult for newcomers to come in with with uh with new ideas. I mean we we s we see that all the time with um uh you know with with new energy sources right now, for example. Uh uh I was recently reading about how in Australia if you want to get uh solar panels uh on your roof or anywhere else, uh it's just very easy. It's like you know getting a new garage door or something. But in most places in the US, you've got to go through a lot of uh regulatory hoops to to do it. Uh there are a lot of uh new clean energy technologies that uh are basically ruled out by state uh uh regulations. Uh there are a lot of uh laws, especially tax laws, that favor the fossil fuel industry. Um and uh uh uh this this is uh you know the result of the conflict that's created by creative destruction. Uh we know that clean energy now is the uh uh by far the the least expensive way to produce electric power in almost anywhere in the world right now. Uh and yet uh there are all sorts of uh policies in place in some countries that that promote this, uh and others in other countries that that try to oppose it. And a lot of the um a lot of the dark money in in American politics is coming from the fossil fuel industry that's uh uh that is that is helping to oppose this. That's an example of creative destruction. That's just the way the world works. And um uh so we what we've been trying to do uh uh in this research project that we started in 1987 was to try to measure the way that this impinges on different factors that affect economic growth, like competition, environmental policy, uh education, international trade, uh uh intellectual property protection, uh uh you name it. There's there's all sorts of things that ultimately affect this uh conflict between the new and the old. Um uh and and as I say, it's not a it's not a new idea. The the term creative destruction was coined by Joseph Schumpeter in 1942 in a book called Capitalism, Socialism and Democracy. Uh Schumpeter was a uh uh he was born in Austria. He had a distinguished career in Austria. At one point he was a finance minister, apparently not a very successful one, but uh he ended up at Harvard and spent uh several decades as uh the one of the leading uh economics professors at Harvard. And uh it's a it's a wonderful book, this capitalism, socialism, and democracy. It's as much a book about politics and sociology as it is about economics. Uh and he pointed out that uh that economic growth is a result of this of this uh you know this continual sort of storm of innovations that bring all sorts of new ideas but but leave all this wreckage uh in its wake of bankruptcies and unemployment and foreclosures and uh uh uh and and that that this has this is a central part of economic growth, it was just too hard to model. And when I was a graduate student, uh it was we learned about it, but just as a kind of a curiosity, and when people actually started to to to do empirical work or theoretical work on economic growth, they they they used models in in which technological progress just sort of comes automatically. And and benefits everybody uniformly. It just raises everybody's wages and everybody's incomes. And we know it doesn't. And neither of those is true. It's not automatic. And part of the problem is that you need continual research and development to keep the econom the growth process going. And every once in a while you need some really radical changes, because if you keep technological progress growing along certain lines that have been defined by major innovations in the past, you run into diminishing returns. Eventually, you sort of exploit that old technological base as much as you can. And you may have done very well, but you stop growing.

SPEAKER_03 24:13

Sorry about that. This is why it's it's allowed as podcast studio on Internet. So it's a concept that it existed. In fact, didn't Karl Marx write about it at some point in some iteration?

SPEAKER_02 24:25

Karl Marx uh believed that technology was important. And uh you know, I'm not a I'm not a student of Marx. So uh uh but but people who are students of Marx have told me that yes, there's a there's a there's there's a lot of foreshadowing of that uh in Das Capital.

SPEAKER_03 24:47

But you you gave creative destruction a mathematical um support.

SPEAKER_02 24:55

Yeah, I I like to think that uh that what we did was to make Schumpeter's ideas operational. We found a way that uh that you could create models that people could look at, and as long as they could understand the mathematics, they could be, they could, they could understand it. They could see how you could develop these ideas further. You you could find a way to go out and test the ideas, to measure the importance of different effects on economic growth. Uh you you need a way, the data don't speak for themselves. You've got to organize them. You've got to have a framework for doing that. It's got to be sort of logical and ambiguous. And that that's kind of what we created.

SPEAKER_03 25:36

Yeah. So new new technology, new industry is built on the rubble of the old industry. It gets rolled into this new economy.

SPEAKER_02 25:46

Yes. And uh and as I said, it's it's as much a political problem uh as an economic problem. It has to be managed.

SPEAKER_04 25:55

Yeah.

SPEAKER_02 25:56

And how a society manages this conflict uh between the winners and the losers from new technologies goes a long way to explaining how uh how successful the uh the economic system is going to be in continuing to grow. There are places where uh the status quo, the entrenched incumbents, have pretty much managed to block technological progress. You know, countries like uh like Argentina, which a little more than a hundred years ago was one of the richest countries in the world. Uh there they were people often used to compare them very much to Canada. They're similar sort of European population bases, natural, full of natural resources, uh just a lot of economic potential. Uh and uh Canada and Argentina went different ways. And to a large extent, what happened in Canada was that in Argentina was that it became very protectionist. Uh they developed policies, especially under Peron, that favored sort of national champions in different sectors and protected them against international competition, uh, which meant that they didn't have to worry too much about being the victims of creative destruction. Uh and uh they they could continue to innovate if they like, but they were the you didn't get the kind of disruptive uh uh new technology technological movements, or if you did, they were very much regulated and constrained and prevented from really developing as much as they as they could have. Uh uh. Whereas in other countries uh they've been much more open to it. Uh you you experience more growth. And that's not to say that you should always just let these forces rip, uh, because there is a serious trade-off here. You you have to trade off, I mean, people's lives are uh are really upended by by a lot of new technologies. And uh uh that's that's a legitimate concern, obviously. I mean, you know, and and if from any reasonable philosophical perspective, if you're trying to think of what's best for society, you you've got to trade off the possibility of new benefits for not only ourselves, but future generations that would come from new technologies, uh, uh against the uh uh uh the pain and the and the disruption and the anxiety that it can create for people that aren't going to directly benefit from it.

SPEAKER_04 28:59

Yeah.

SPEAKER_02 29:01

It's not an easy choice. Uh but there are ways to mitigate that trade-off, there are ways to make it a lot easier. Um Philippe and I are often referred to the uh to the Danish systems called flex security, in which if uh workers that are laid off because uh firms have adopted new technologies that are going to be labor-replacing are offered by the state 90% of their former salary for up to two years, provided that they undergo training to uh to become employable uh again, uh, maybe with some working with some new technology. Uh and at the same, and it's called flex security, because the flex part is that in you know, in most European countries, it's very difficult for firms to lay workers off. They have to uh pay huge severance payments. Uh it's it's it's made very difficult.

SPEAKER_03 30:09

Uh you're union focused in Europe.

SPEAKER_02 30:12

Yeah, and and and that makes it difficult for firms to adopt new technologies that might require them to lay some workers off. In Denmark, there are no restrictions on firms. Uh they can do what they want, but the workers are taken care of by the state. Uh now I don't know a lot about this system and exactly how it works. It sounds very expensive to me. Yeah. Um, but they've been they've had it going for many years, and uh they're not going broke. And when people do surveys of the public attitude towards new technologies and uh and so on, uh the Danes are among the least worried about you know about artificial intelligence or anything like that. They they they they're ready to embrace the new technology. Uh uh they don't suffer the kind of anxiety that we see in many of the countries. We see it all over the US right now. So many young people worried about what their prospects are going to be with with artificial intelligence, and and rightfully so.

SPEAKER_03 31:19

Yeah, we don't have that safety net.

SPEAKER_02 31:21

But we don't have that safety net. And and uh uh and I think that uh that that's really important. That really uh uh alleviates this trade-off to a large extent. You can adopt the new technologies, and uh it's not gonna cause as much pain and suffering uh that way as uh as it otherwise would.

SPEAKER_03 31:46

Yeah. So that that brings me to my next question. How does artificial intelligence fit into creative destruction?

SPEAKER_02 31:52

Well, it's very much an example of creative destruction. It's a new disruptive uh technology. It's uh what we would call a general purpose technology. It's it's uh uh it's it's one of those technologies like the steam engine or electrification or the computer or the everything in the second industrial revolution, the internal combustion engine, something that is just changing the way we do things and the way we live throughout the whole system, not just in one or two little uh niches. And um and we we've we've had some experience with technologies like that uh that I think are instructive. Uh we know that they take a long time to work their way out and for us to realize just what the impact is going to be. Uh we know that they can be very disruptive. You can see right away there are certain jobs and occupations that are going to be rendered obsolete. Um what you don't see at first, and what always seems to happen eventually, is that all sorts of new jobs are going to be created by these new technologies. And uh it's gonna make, in the end, it's gonna make life much nicer for a lot of people. Indeed, for almost everyone. I mean, the invention of the power loom in the, you know, the uh industrial early part of the industrial revolution was absolutely devastating for hand loom weavers uh who were highly skilled craftspeople who had many of them honed their crafts over decades, and they were uh uh fairly wealthy people who were upstanding uh members of their societies and uh uh uh they were just uh you know rendered penniless. There was just no room for them uh after this. But of course, nowadays, I mean, who who among us would be better off if the power loom had never been invented? I mean, uh no, it's it's just one step along the way of making us all uh, you know, the average person today, because of technological progress, is probably just as well off as the richest person was in 1820. Uh in fact, about the richest person in the 1820s in Europe uh was Nathan Rothschild, a banker, who uh uh died in his 60s, a miserable, painful death from some uh abscess in his back. Medical technology was uh just, you know, it was laughable compared to now, except it wasn't a joke. It was uh, you know, they they put leeches on him, they did all sorts of crazy things that probably made it even worse, and he died an awful, painful death. Uh just the fact that you won't, you know, no nobody now is going to have to go through that. I mean, there are other things that have come up as well. But, you know, and and if we need an operation, we have things called anesthetics. I mean, that these things make a lot of difference to the quality to the material well-being of people, and they're the result of technological progress. Uh I I uh sometimes I ask people, okay, so put yourself back 150 years in North America when about 50% of the population uh had to work on the farm, doing very difficult work, long hours, just to feed everybody. Uh well, technology has destroyed most of those jobs. We now get by with a little more than 1% of the population producing enough to feed us and a lot of other people in the world too.

SPEAKER_03 36:12

Very true.

SPEAKER_02 36:13

Uh and so what's happened to those people? Their jobs have been destroyed by technology. Uh well, you know, if if you'd asked somebody in 1875, uh, what are these people going to do, they they wouldn't know. I mean, and you could tell them, well, you know, uh they could be podcasters, uh, they could be, you know, they could they could, you know, be auto mechanics, they could be, you know, they could be producing telephones, they could be uh movie directors, they're all sorts of things that technology has opened up. Jobs that are uh for most people much more rewarding and uh and enjoyable and pleasant than the jobs that were destroyed by that technology. But at the time, um, you know, I th I think uh a lot of those jobs though that that uh were basically labor-saving inventions in agriculture were very disruptive for people. So this is uh this is an aspect of economic growth that I see everywhere now, and of course, artificial intelligence just makes it even more obvious. Uh you you look out there and you you don't have to have much experience with Chat GPT to start asking yourself, is there anything that it can't do? Um uh and uh you know I I I'm there's no theorem in economics that proves that ultimately technology is always going to provide new jobs and keep uh people's wages uh growing with the rest of the economy. So far it has. Uh and we can certainly specify economic models and tell you under what conditions that will happen, but but they're basically sort of artificial uh assumptions that we have to make to get that as a as a theorem. But it it's happened so far, and I think it's going to continue to happen. Uh human ingenuity keeps coming up with new things that we could be enjoying that nobody would have thought of before. Uh and with new, and that opens up new possibilities for people to provide those things.

SPEAKER_03 38:55

Yeah. You know, I always say when you're going through something difficult in life, you always get to the point where you look back on that point and laugh. Yeah. Um is that what you're saying? So we're going to get to a point where we look back at this and laugh, as well.

SPEAKER_02 39:10

I expect we will, you know. Yeah. But uh but that you know, I I worry that a lot of people hear that message and they think, okay, well, so we'll just let it rip. We won't worry about it. Uh, you know, everything will be fine. Well, no, that's not the case. I mean, there are people that are really going to be, that are really going to go through a lot of suffering, and which we can make easier by by policies. And we have to worry, we have to worry also about how the the wealth that's created by artificial intelligence is going to be shared. Um it's uh uh it has the potential for create for creating a huge amount of wealth and all, but also for concentrating that in a in a small number of hands. And uh I you know I I I don't I don't think that that's that that's just. I I think there are ways of continuing to incentivize new innovations without letting the inventors capture all of the benefits.

SPEAKER_03 40:28

Interesting. So now we're kind of getting into politics in in a way. Yeah. You know, they say some say that politics is a downstream of culture. Economics is a downstream of culture, too, in a way, isn't it?

SPEAKER_02 40:40

Yes.

SPEAKER_03 40:41

Some would argue that there was wealth redistribution during COVID. Are you are you saying that there could be some kind of wealth redistribution in the AI era?

SPEAKER_02 40:51

Uh yeah, very much. I mean, I if you if you take a look at how the concentration of wealth has changed over the last uh 15 years, it's been a it's been enormous. Yeah. It's been an enormous increase. And and the wealthy, the people that have really benefited are are people in the high-tech industries, people uh that that are uh very much at the forefront of the AI movement.

SPEAKER_04 41:20

Yeah.

SPEAKER_02 41:21

Uh now, of course, a lot of that wealth is in the form of uh uh you know uh equity ownership of companies that uh that could collapse in an instant if we have a stock market crash.

SPEAKER_03 41:39

Um boom and bust. Yeah.

SPEAKER_02 41:43

And I wouldn't be surprised if there's something like that. I mean most big technological movements with general purpose technologies like the railroads and uh the the computer and the and and the the dot-com as much a uh as much a telecom uh thing as it was a computer thing. Um most of those movements have been associated with uh what people at the time thought of as bubbles. Yeah. Uh uh and it doesn't mean that that it that the stock market is just built on uh imagination. Uh there's some there's some real fundamental uh productivity potential there. Uh but the thing is that nobody knows exactly how that's going to work its way out.

SPEAKER_04 42:36

Yeah.

SPEAKER_02 42:37

And so people are placing bets on a lot of different possibilities, some of which will work out, many of which probably won't.

SPEAKER_04 42:45

Yeah.

SPEAKER_02 42:45

And that's what happened in the dot-com bubble. A lot of companies went bust.

SPEAKER_04 42:50

Yeah.

SPEAKER_02 42:51

But out of this emerged companies like Amazon. I'm I, you know, I'm sure you remember too, at a time when everybody was laughing at how you know it's Amazon. It's just this little company that's never made a profit. All they do is sell books, and they're valued more than General Motors. I mean, how could how does this make sense?

SPEAKER_03 43:09

Yeah. They were just positioning themselves that whole time.

SPEAKER_02 43:12

Yeah. Yeah. So there's going to be some companies that emerge, like the Amazons out of this, I expect.

SPEAKER_03 43:20

Yeah. But for every Amazon, there's there's 10 companies that are relying on Pixie Dust and, you know.

SPEAKER_02 43:27

Yeah. But it isn't obvious at first just which ones are going to work. And even now, we don't know which way artificial intelligence is going to go. I mean, the the things that we're familiar with, you know, Claude and ChatGPT and and the like, they're built on these large language models, which are it's it's kind of autocomplete on steroids. Um and uh there are a lot of people who think that it should go in a different direction. Uh uh man named Jan Lakun, who was the head of technology for Meta, uh Facebook uh uh uh uh company. That he's he's left and gone to Europe to start up a new artificial intelligence venture uh based on a completely different fundamental structure for how you develop and train these models that that uh is more based on trying to get the computer to learn about how things work rather than just to read a lot of text and see what follows when people usually say, well, the best way to uh wash a car is uh which is sort of what we've got right now.

SPEAKER_04 44:46

Yeah.

SPEAKER_02 44:47

Uh and we don't know whether the uh these very big general purpose models that we've got, like Chat GPT and and and and and the like. Whether that's going to be the future, or how much of it is going to be, or if it's going to be the more modular ones, like the Chinese who uh they developed this uh deep seek uh technology, which which uh uh really sort of compartmentalized the development of their AI model. So uh you know, if you if you want one that's going to help you uh understand some mathematics, it's completely different than the one that would help you understand uh uh you know how to take care of your household products or something like that. And it's much more economical. And uh a couple of years ago they really shocked all of the American technology leaders by coming up with uh with something which is publicly available, uh which is just as powerful by many measures as uh as the best American AI products. Uh and it's open source, it's not proprietary, so anybody can you know can improve it or contribute to it. We don't know which way that's going to go. Uh, and we don't know what the effects are gonna be. We don't know what the new jobs and professions are that are gonna be created by it. We don't know exactly which jobs are gonna be most at risk and which ones aren't. Uh you know, uh what one of the things I like to tell students uh to remind them about is is uh how electrification of manufacturing started in the last third of the 19th century. Uh and it was very popular and it did improve productivity. Uh but at first what companies did was to just get an electrical motor and sort of uh uh unhook the water mill or the steam engine or whatever it was that was the providing the power in their plant and replace that with the electric motor. Uh but they didn't redesign the factory. And the factories were largely sort of vertical structures that uh with a uh with a big uh shaft that would you know transmit the power from the power, the single power source up to the higher floors. Uh well it turns out that what you could do with the electrical motor was you could do you could do way better than that because you could you could distribute the power in a way that you couldn't with a water mill or something, and you could do it horizontally, and you could create an assembly line. And that's what allowed Henry Ford to, you know, allow people to earn five dollars a day. Nobody'd ever heard of that in 1914, uh, uh people without any particular skills other than enough agility to keep the assembly line going. Uh and he made a fortune out of out of this thing, and and and that revolutionized the way manufacturing was done, the way the plants were organized, the way the workflow was organized. We're going to have some changes like that. But think of that, I mean, that went, you know, that went from 1875 or so when electrification started, till 1914. You know, about 40 years it took for that potential of electrification to be realized. It's not obvious at first.

SPEAKER_04 48:48

Yeah.

SPEAKER_02 48:49

Uh and and so we don't we're really faced with a lot of uncertainty right now. We don't know which way this is going.

SPEAKER_03 48:57

Yeah. You know, in talking to people, particularly young people, there is there is a pushback against artificial intelligence and also to a certain extent, data centers, especially among politicians running for office, saying that we're going to keep data centers out of our town. Do you is that fear, is that pushback, in your opinion, based completely on fear, or is that is is there some politics involved in that? Is is there is there something bigger to that question?

SPEAKER_02 49:29

Yeah, I'm not sure that there's anything bigger than that. Uh uh I th I think that what happens to a large extent what people are worried about is that the data centers are are are going to make uh the cost of electricity a lot higher because they consume so much. Uh now that can't be all of it because a lot of data centers come with their own generators and uh you know the they're producing their own power. Uh but um I I I guess they're they're not very attractive either. And so there's this it's just like there's uh you know, there's a reaction against uh uh wind turbines, for example, because a lot of people just don't like to look at them and they don't like to listen to them worrying around in the out in the countryside.

SPEAKER_03 50:28

Um it seems to a lot of people much ado about nothing, you know, these huge turbines that are producing so little energy. But I just I see uh I see an outcry against data centers and and and AI, and it almost you in one in one hand you you have a society that's embracing AI, you see you know, remnants of AI everywhere, and you read you know letters from people that are clearly written by AI, yet there's this pushback against it.

SPEAKER_02 50:58

And um it's it's interesting to me how a lot of it I think is is job-related. Yeah. People are worried about their jobs. They're worried about the fact that that uh they're working for companies where they're told you've got to incorporate you've got to incorporate AI, and because AI is allowing you to do a lot of things faster, we're expecting a lot more output from you. And uh there people are are just feeling pressure from that. And and uh it's certainly among young people. I mean, I've gone around to a lot of universities giving talks in the last few months, and uh young people are all quite scared of it. Uh but ultimately uh you know ultimately uh it's gonna it's gonna make uh it's gonna open up all sorts of possibilities for people and even for people who are students now. I mean that they'll they'll go through a bumpy period.

SPEAKER_03 52:06

Yeah. It's impossible to put the genie back in the bottle, isn't it?

SPEAKER_02 52:10

Oh yeah.

SPEAKER_03 52:10

Yeah.

SPEAKER_02 52:13

And uh, you know, it's easy enough for me to say, I mean, I've I've done my work, I've I don't have to worry about being replaced by any by anything. Uh but uh, you know, we all got to where we are on a bumpy road.

SPEAKER_04 52:32

Yeah.

SPEAKER_02 52:33

Uh and for many of us, you know, if you tried to smooth that road out too much, uh it wouldn't go as far.

SPEAKER_04 52:42

Yeah.

SPEAKER_02 52:43

Uh and uh uh I I try to be uh optimistic with students because I I I I think they need to see that. Yeah. And uh as you say, I mean, at some point I think we're they're gonna go back and say, you know, we were worried about that. You know. And it it's it's easy to get used to a new technology and and and forget how much harder it used to be to do something than it is now. Yeah. Yeah.

SPEAKER_03 53:16

Absolutely.

SPEAKER_02 53:18

Uh so I I you know, I I I think we're we're on a good path. Uh I I wish there was more concern, there was uh a better political environment for uh harnessing the possibilities of AI here uh rather than just let it run its course. But uh but I'm optimistic.

SPEAKER_03 53:51

Yeah. So digital photography is often cited as an example of creative destruction and and what digital photography did to the photography industry, did to Kodak in in particular. But I also see young people today embrace you know, there's there's kids today that are shooting with film. There are kids listening to vinyl records. Right. Um it seems like everything that's old is new again in a way. It's and probably because they didn't grow up with it.

SPEAKER_02 54:21

Well, uh, yeah, I mean you know, there are all these sort of retro things that people people like, but but you know, the the the vinyl disc industry isn't anything like what it used to be. Sure. It's not gonna bring it back. Yeah. And uh yeah, uh it's it's still the case uh that new patents are being issued for the manufacture of horseshoes. So yeah, you know, the so the automobile didn't destroy uh blacksmith's jobs or whatever uh it uh uh or uh but it it's it just sort of put it in a different place. Yeah. And uh you know the the interesting thing about about digital photography from from my point of view was that it was actually invented by Eastman Kodak. And they looked at this uh and I guess and they made a they made a you know what was probably a rational decision. They've already got all of this capital invested and very profitably in a business that was dominant throughout the world in producing, you know, not just the film, but the cameras that use them and all of the photographic equipment and uh and uh uh if they were to really push this new way of doing things, it would render all of that obsolete.

SPEAKER_04 56:00

Yeah.

SPEAKER_02 56:01

And uh this is one of the reasons why uh there's a lot of conflict between the old and the new, is because someone that's uh that's invested a lot in the old capital has a lot less interest in pushing a new idea, uh even if it's their own idea. Uh and I I think a lot of businesses have learned from the experience of companies like Easton Kodak that at some point when you see a really revolutionary technology, you've got to realize okay, we gotta bite the bullet. We've you know, we've got to do this to ourselves before somebody else does it to us. And uh one thing that really impresses me about the financing of uh all this AI uh uh investment that's taking place right now is how so much of it is being financed by companies like Microsoft and Google. Uh these are companies that have a lot to lose from artificial intelligence. And yet they're they're finding ways to invest in. And it's difficult for the for them to do that because you know you get a whole corporate culture that's built around promoting a certain technology. Uh uh and and and I've you know I've talked actually to people who who worked with Eastman Kodak at the time when digital photography came in and uh and and and heard there them talking about about the arguments that would take place inside uh uh the company as to you know who's gonna get rights to to market this digital photography. I mean, I you know I've already got the rights to sell it all to Sears and so on and so forth. And uh it just started these fights that uh that were totally counterproductive. They have found a way uh to the Googles and Microsoft's and Amazons to finance a lot of this development in independent entities that aren't in that are aren't really influenced by the corporate culture of their existing search engines or whatever they uh uh they're pushing. That's uh that's gonna be revolutionized by artificial intelligence. Uh they're also trying to develop their own artificial intelligence models. They're probably not going to be as successful. I I would just guess it, you know, I've tried using Gemini, for example, that Google's been pushing, and it's it's it's resulted in some really embarrassing mistakes. I had, you know, I get all these invitations to come in since I won the prize to go and give talks. And I uh I've hired an agent to deal with a lot of them, uh, but I've got to deal with a lot of them myself. And at one point I had I got I got uh uh Gemini to answer a lot of them, give a sort of a polite, uh respectful uh uh uh refusal to uh for some invitations. And it ended up sending it to a lot of my uh fellow golfers at uh Champion Hills. Oh boy. I mean, it's okay. They just thought it was funny, you know.

SPEAKER_03 59:42

That's awesome. But uh and I'm glad I didn't get the the Gemini rejection letter for coming on the podcast. Thank you.

SPEAKER_02 59:51

Well, I you know, I I just uh I love Hendersonville. I love I love being here in North Carolina, and uh, you know, your your podcast sounded really kind of interesting, but the varied experiences of people that live here, and uh I know mine is is quite different, I'm sure, but well everybody's got a story, yeah.

SPEAKER_03 1:00:13

And there are some great stories in this town. Um my wife and I moved here um a little over two and a half years ago from Colorado, and um you know it just it just seems like there are so many unique, diverse people that that just settled in this area, um yourself included, and and everybody's got a story to tell. And and then, you know, folklore and and and stories are are kind of interwoven in the in the culture of Appalachia as well. So um, you know, just trying to um you know bring some of the those stories out. So how did you wind up in in the Hendersonville area, may I ask?

SPEAKER_02 1:00:51

Uh well uh I retired from full-time teaching in uh 2013. I was at Brown University in Providence, Rhode Island. And uh, you know, coming from Canada, my wife and I thought, okay, let's get as far from the snow as we can. So we bought a uh a place. We'd already had a vacation home in Naples, Florida, and we decided, okay, well let's let's go down there and uh and and uh build a bigger place down there and make that our full-time home, which which we did for and enjoyed it a lot for a while. But it kept getting hotter and hotter. And so after a while uh we started spending time in western North Carolina during the summertime just to get away from the heat. Uh and we liked it more and more, but it was difficult raining places for a long time. We wanted, we had a dog with us, we wanted our kids to come visit us, and uh uh the the places that were available one year weren't available the next, and so on. And I had a friend just down the street from me in in Naples who uh was much more systematic than me. He he decided he was going to do the same thing, and he came across Champion Hills uh and came up and spent uh spent a whole month up here and came back and told me about it. I thought, well, that sounds pretty good. So I uh so my wife and I uh made a trip up to Hendersonville. We we knew we liked Western North Carolina. Uh we took a look at the golf course there. We loved that.

SPEAKER_03 1:02:50

Beautiful course.

SPEAKER_02 1:02:51

Uh these were really good friends of ours. Uh they told us about how wonderful the people are there and how great the culture is in Champion Hills, and uh how easy it is to meet people and uh and what a nice town Hendersonville is. Uh at first we were a little uh skeptical when we came off uh I-26 and uh came down uh um what's it called, Four Seasons Boulevard, and we saw the you know the bow jangles of the KFCs, and we thought this this is it, really. Um but it didn't take us long to realize okay, this this is uh kind of place that we could really enjoy.

SPEAKER_04 1:03:41

Yeah.

SPEAKER_02 1:03:42

Much more low key than uh Naples, Florida, which at first when we uh got a place there, was a pretty sleepy area, yeah. Uh not too crowded.

SPEAKER_03 1:03:55

It was one of the fastest growing cities in America in the 80s.

SPEAKER_02 1:03:58

Yeah.

SPEAKER_03 1:03:58

Yeah.

SPEAKER_02 1:03:59

Uh so by the time we left there, we lived in a golf course community there as well. And at first it was just a uh uh you know, two-lane dirt road going out to it. Uh so by the time we left, it was a six-lane, three lanes each way, yeah, traffic full of traffic, yeah. Uh, and you needed to wait for the light to turn green before you could even make a right turn out of the community. Uh so it it had changed, and uh uh and I loved the nature there, the wildlife, the alligators, the the the waiting birds, uh everything. Uh uh it was great. I was really getting into it. But everything else about the place was kind of unnatural. Whereas I came up here and I thought, well, this is even more beautiful, and it's natural. This this isn't just here because somebody's leveled out the Everglades. Yeah. Uh this this is it's a gorgeous place, and uh you know, enjoy enjoyed meeting the the people uh everywhere I went. So and we're still we're still just loving living in the mountains. And one of the the big shocks to us from winning this prize is is that it's kind of disrupted our quiet life that uh that we'd built here in the mountains. We're we're hoping to to get back to that. But I mean, you know, traveling around the world and giving talks and uh talking to people on the you know podcasts or whatever, which I you know I enjoy very much. Uh but just look looking back to getting back to the the sort of the the lifestyle that we had six months ago or more.

SPEAKER_03 1:06:00

Yeah. Well, I thank you for taking the time to talk to me on this podcast and um congratulations on the Nobel Prize. And um, it's great to have you as a neighbor here in Hendersonville.

SPEAKER_02 1:06:14

Well, it's great to have you too. I th I think this is a wonderful idea you should got here.

SPEAKER_03 1:06:19

Yeah. Well, thank you, Peter. Appreciate it.

SPEAKER_02 1:06:21

Okay.

SPEAKER_01 1:06:33

The Kudzu project is made possible by the Lucy Agency, helping businesses across the South grow deep roots and stand out. Based in Hendersonville, North Carolina, this full-service marketing firm builds handcrafted websites, eye-catching logos, and social media that pops for businesses and organizations. Because if your story's worth telling, it's worth telling right. Learn more at LucyAgency.com. That's LUCEYAgency.com.

SPEAKER_00 1:07:12

Everyone has a story. And at the Kudzu Project, we want to hear yours. Go to Kudzu Project.com and fill out our story submission form. You can write your story for us to read on the podcast, request to be interviewed, or even nominate someone else whose story deserves to be told. The Cudzu Project is all about capturing the voices and spirit of our community, and your story could be the next one we share. Visit Cudzuproject.com and tell your story today.