00:00You write that analysts across the financial world are scouring data for signs that AI is making the economy more productive.
00:06That's certainly the holy grail of new technology.
00:09Are they finding out that it is making us more productive?
00:12Is it making the economy more productive?
00:15Well, that's the big question.
00:16So the question right now is, are we in a kind of a 1990s style tech boom where the economy grew, people's wages increased, but ultimately inflation didn't take off?
00:26So the Fed at that time was able to keep interest rates low.
00:30That's a benign outcome.
00:31Of course, the other side of the debate is actually we could be even if we do get a so-called productivity gain where we all work smarter, that will be outweighed by job destruction and, of course, broader societal destruction that that kind of an AI revolution will bring.
00:46Now, you know, on paper, all of this is quite abstract.
00:49It sounds academic.
00:50What does an AI driven productivity boom even mean?
00:53But this technology, these technological changes are happening fast, happening in real time.
00:58And hardly a week goes by now without somebody from the Federal Reserve commenting on how AI might impact the economy and how it may impact productivity.
01:07And then there's also a very salient political angle to it because Treasury Secretary Scott Besson, for example, he's pushing a line that we're in a Greenspan boom.
01:15And just like back in the 1990s when technology drove economic growth and inflation and then Fed Chairman Greenspan held his nerve without raising interest rates.
01:25This time around, the Fed shouldn't be worrying about inflation.
01:27Given what's going to be happening with productivity, they should go ahead and cut interest rates.
01:32So as I say to you, it's somewhat of an academic, abstract debate, certainly not one on Main Street.
01:37But it's very, very important in terms of how this ultimately does diffuse through the entire economy.
01:42You know, I also often wonder, too, and like how does the Federal Reserve and the regional banks, like how do they go about analyzing something like AI that some say we're still early on, that it's the spend, but we're waiting to really see the ROI for a lot of different companies and a lot of different industries?
02:02Well, it's tricky. I mean, the concept of productivity is difficult to measure anyway.
02:08The statisticians will freely admit that.
02:11So when you try to nut out how exactly large the LLMs or chat GBTs and the like are impacting how we're all working, that kind of adds to what's already a complicated job.
02:21A lot of economists will tell you one of the biggest problems is we don't measure productivity correctly and we're not geared up to even measure AI.
02:27So just to be clear, there's going to be question marks over that.
02:29And then anyway, it takes time for it to come through into data.
02:33It could take a year, several years before policymakers can look back and go, hey, look, actually, back then the U.S. economy was going through this major tech boom that did lift productivity.
02:43And that's why inflation stayed low. But we made the decisions we made at the time.
02:45So there's a lot of unknowns in this.
02:47But the.
02:49Yep. Sorry, go ahead.
02:49No, I want to just jump in because in your story, you mentioned Kevin Hassett, head of President Trump's National Economic Council.
02:54And he said, hey, I is lifting worker productivity at a, quote, remarkable rate.
02:59BlackRock's executive reader said, quote, we are in a productivity revolution.
03:05So are they doing that based on data?
03:09So, I mean, there has been some uptick in productivity and you're absolutely right.
03:13Some of these candidates for Fed chair have been explicit in the view that AI is already impacting productivity in a very positive way.
03:21And there are different ways you can slice and dice at that.
03:23But I think perhaps more objective or impartial economists or observers make the point that I was trying to articulate there that that's very possible.
03:32But we just don't yet know because it's very complicated to measure it and are trying to figure out how to gauge how it's impacting the economy, how it's diffusing through the economy.
03:40But let me be clear, though.
03:42We know we all know, you know, and everyone around us that this kind of technology is being adapted everywhere at a very fast rate.
03:50I spoke to companies for this news article, spoke to one company who's in the HVAC space.
03:54And he explained to me how HVAC technicians are using his proprietary LLM software to help them on repairs to old equipment in houses around the country.
04:03And he said it saves them up to eight hours a week.
04:05So we're in a dilemma where we know the technology is being deployed and we know people are using it.
04:11But we don't yet know just how it is impacting the economy.
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