Are We Building AI for Progress or Power? — ft. Daron Acemoglu

Ed Elson and Scott Galloway are joined by Nobel Prize–winning economist and MIT Professor Daron Acemoglu to discuss the economic consequences of AI. He breaks down his research on why nations fail, shares his biggest concerns about America’s future, and offers advice for the next generation of scholars. Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth" out now Subscribe to No Mercy / No Malice Follow Prof G Markets on Instagram Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Flowing ad budget on metrics that look great till the CFO sees them? That's bull spend. And marketers are calling it out in Dashboard Confessions.

• 0:09Speaker 01

  I remember telling my boss, "It'll be good for the brand," when leads were slow. Yeah, it wasn't.

• 0:17Speaker 00

  Cut the bull spend. LinkedIn lets you target by company, job title, and more. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 0:31Speaker 02

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends. Like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra. Because it's not just a superior light beer. It's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser-Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 1:00Speaker 03

  I get so many headaches every month.

• 1:02Speaker 04

  It could be chronic migraine. Fifteen or more headache days a month, each lasting four hours or more.

• 1:08Speaker 05

  Botox, onabotulinum toxin A, prevents headaches in adults with chronic migraine. It's not for those who have 14 or fewer headache days a month. Prescription Botox is injected by your doctor. Effects of Botox may spread hours to weeks after injection, causing serious symptoms. Alert your doctor right away as difficulty swallowing, speaking, breathing, eye problems, or muscle weakness can be signs of a life-threatening condition. Patients with these conditions before injection are at highest risk. Side effects may include allergic reactions, neck and injection site pain, fatigue, and headache. Allergic reactions can include rash, welts, asthma symptoms, and dizziness. Don't receive Botox if there's a skin infection. Tell your doctor your medical history, muscle or nerve conditions, including ALS, Lou Gehrig's Disease, Myasthenia gravis, or Lambert-Eaton Syndrome, and medications, including botulinum toxins, as these may increase the risk of serious side effects.

• 1:52Speaker 04

  Why wait? Ask your doctor. Visit botoxchronicmigraine.com or call 1-800-44-BOTOX to learn more.

• 2:00Scott Galloway?

  Today's number 43. That's a percentage decrease in peanut allergies over the last decade. Ed, true story, I'm pretty sure I had a nut allergy when I was a kid. My parents thought I was trying to avoid church.

• 2:16Speaker 07

  Markets are bigger than us. What you have here is a structural change in the world distribution. Cash is trash.

• 2:21Speaker 08

  Stocks look pretty attractive.

• 2:23Speaker 07

  Something's going to break. Forget about it.

• 2:25Scott Galloway?

  Oh my god, that's pretty bad, right?

• 2:27Ed Elson?

  I could see it coming a mile away, in all transparency. Brings up an interesting question, Scott. Do you have any allergies?

• 2:35Scott Galloway?

  Uh, no. I literally am, as a matter of fact, I can't. I'm so sick of, waiters are, I think legally mandated in the UK, I don't know if they are in the US, to ask you, does anyone have any allergies?

• 2:46Ed Elson?

  Is that right?

• 2:46Scott Galloway?

  Yeah, they have to ask you, do you have any allergies? And I'm like, bad service? I've had it with the service in London. You are so spoiled in New York, the service is so good.

• 2:58Ed Elson?

  That's true. What are some of your horror stories?

• 3:00Scott Galloway?

  Nothing horror, I mean, you know, I don't, it takes some more than three minutes to get me my second makers in ginger. Those are my horror stories. My, my worst days are better than most people's best days, but it's not. I go to this place called, since Chiltern burned down, I gotta go to this place called Kensington Roof Gardens, which has way too many fucking dudes, and it's way too crowded.

• 3:20Ed Elson?

  Beautiful place, though. I was there over the summer, unbelievable.

• 3:24Scott Galloway?

  Yeah, it's great for the 11 days a year, you can actually go into the roof garden, but otherwise, we're all crammed inside wishing that Chiltern was still open. And, and there's, I'm not exaggerating, there's 700 people lining up at the bar, 695 of them men, and you'd think, and there's like, two bartenders sitting there like slicing limes very methodically and elegantly, and I'm like, Jesus Christ, dude, just start like literally spraying beers at us and we'll open our mouths. That's the thing about, that freaked me out about the Members Club, you're a member of Shea Margaux, because now that we're paying it.

• 3:57Ed Elson?

  I'm not a member of that club.

• 3:58Scott Galloway?

  You're not? I keep seeing you there.

• 4:00Ed Elson?

  Yeah, I get invited by, by members.

• 4:01Scott Galloway?

  Well anyways, the thing about it is, it freaked me out, I'm like, it's so young here, and then I realized, it's not, the reason I think it's so young is, you know what it has? Most of these clubs have guys in their 40s, and women in their 20s and 30s, and what Shea Margaux has, is it has a bunch of dudes in their 20s, which makes it feel like high school.

• 4:24Ed Elson?

  I gotta agree with you. Surely, surely, surely that's a, you're not very happy about that.

• 4:29Scott Galloway?

  I'm fine with that. I like it. They all come up to me, I love your content on men. Hey, what's that like? And I literally, you, were you student body president or the mascot or something? Everybody knows you. And it totally bums me out because I like to get a little fucked up and talk to everyone at the bar, throw an omelet cigarette in my mouth, put on sunglasses and just be a cliche of me. And then when people come up and say they know you, I feel as if I have to act semi-respectable. I'm like, oh, hey, hi, yeah. Oh, yeah. No, I don't know what's, what do you think is going to be the next interest rate cut? God. God. They're all so fucked.

• 5:03Ed Elson?

  This is the trouble. You shouldn't have been a professor. You clearly, you should have been like an actor or like a pop star or something. That's what you really want.

• 5:10Scott Galloway?

  A hundred percent. I'm just not that talented, but I agree with you.

• 5:14Ed Elson?

  No, I think you are. You're just, you're talented and think you've got a good brain. You've got a good economic brain and really what you want to be doing is like, you've got the basis then you want to be, you want to be like Justin Bieber or something.

• 5:27Scott Galloway?

  Uh, you had me till the Justin Bieber part. I would have gone for Ryan Reynolds or George Clooney. He seems smart and very politically oriented. But the thing, the thing I hate about your friends, that's a good way to start a sentence, is they're so, they're so annoyingly earnest. Professor Galloway, it's so nice to meet you. I know Ed, he's such a good person, isn't he? Fuck off. Anyways, they're so, anyway, it's, but it's, it's great to meet your friends out.

• 6:01Ed Elson?

  I've got to learn about who these friends are. I haven't been.

• 6:03Scott Galloway?

  A lot of your Princeton buddies. What is it, like a reading club or a drinking club? Like you guys, you guys have Pims cups or something and play cricket?

• 6:12Ed Elson?

  Eating, yeah.

• 6:12Scott Galloway?

  Is that what it is?

• 6:13Ed Elson?

  Eating club. That's right.

• 6:14Scott Galloway?

  So instead of fraternities, they have eating clubs?

• 6:16Ed Elson?

  Uh, they actually have both.

• 6:17Scott Galloway?

  Oh, really?

• 6:17Ed Elson?

  But yeah, that is, that is what it's called. It's, it's called an eating club.

• 6:20Scott Galloway?

  But you were in an eating club and you would get into anyone because of that faux British accent, which by the way, everyone is figuring out is total bullshit. You're from Nashville.

• 6:30Scott Galloway?

  All right, enough of this. Get to the headlines.

• 6:32Ed Elson?

  One of our douchiest. Okay, here is our conversation with Daron Acemoglu, Nobel Prize winning economist, New York Times bestselling author.

• 6:41Scott Galloway?

  This is not an easy segue. This is not an easy segue. Oh, God.

• 6:48Ed Elson?

  Nobel Prize winning economist, New York Times bestselling author and professor of economics at MIT. Professor Acemoglu, very good to have you on the show.

• 6:56Speaker 10

  Thanks, Ed. Great meeting with you and Scott.

• 7:01Ed Elson?

  So we want to start with AI for obvious reasons. That's all we can really talk about at the moment. We've been seeing a lot of bullish sentiment in AI. We've also been seeing a lot of circular investments happening, a lot of people saying that it's a bubble. Last year, you were asked to answer on a scale of one to 10, how much of an impact AI is going to have on the world? And your answer at the time was negative six. So we want to unpack this, starting with that hot take. What are your views on AI at this point? And do you still have a negative six rating on AI right now?

• 7:44Speaker 10

  Let's break that into three pieces. One is, is AI a transformative technology with great capabilities? Yes, that's why it's not minus one or plus one, it's minus six. Second, how quickly will this technology reach fruition? And there, I think the answer is it depends on how quickly it's pushed. So I think for a positive development path, I think we need a more deliberative approach. We are rushing into AI in a way that I think makes applications using AI less likely to develop because we are just doing it too quickly.

• 8:30Speaker 10

  And we also don't have a roadmap of what it is that we really want from AI. While we are, everybody recognizes that this is a technology that's going to have tremendous number of side effects, foreseen and unforeseen consequences. So all of these things, plus, very importantly for me, the focus on automation and AGI. While there are better things to do with AI, I think. Tip the scales towards negative. So minus six, minus five, minus seven, take your pick. But I'm very worried about the direction of AI, where it's much more concentrated. Who uses, who controls information and what we do with it?

• 9:06Ed Elson?

  Yeah. Could you break down what that negative impact would actually look like? There's the, there's the aspect of the concentration of power, and I'm sure that could have many implications. We're also worried about it. There is the implication of automation. And the idea that this would replace labor, it would replace people's jobs. Say more about how it goes from negative one to negative six, in your view. What is that destructive impact that you're so worried about?

• 9:36Speaker 10

  In the production domain, if we use AI mostly for automation.

• 9:44Speaker 10

  I think not only would we be missing some of the really transformative uses of it. But we would create much smaller productivity gains than expected. And we would also create various social outcomes that are negative related to job loss for certain groups, lack of employment opportunities for certain groups, wage stagnation or declines like we've experienced in the 1990s. All of these are on the negative part related to the production process. But I'm also very worried about

• 10:25Speaker 10

  the fact that AI is first and foremost a communication technology. And as a communication technology, it changes political and social dynamics. And when it centralizes information in the hands of a few companies.

• 10:45Speaker 10

  It can have a variety of very negative effects on democracy, on dissent, on diversity, variation in opinion, all sorts of things that we are really not prepared for.

• 11:00Ed Elson?

  What would you say to someone who would say that you are being a luddite? Or, I mean, we've seen transformative technologies in the past, whether it be oil or the electric grid or the internet. And it seems as though when these transformative technologies come along, there is a lot of concern about what it will do to our economy and how it will negatively impact our economy. But many people would say, well, eventually it works out and we shouldn't be so worried about technology. What do you say to those people?

• 11:35Speaker 10

  Well, there are really two theories that people could have about long run effects of technologies in general. The first one is that in the long run, things will work out by themselves. Let it rip. And just the dynamics of things, for example, in the labor market or via democratic processes, sometimes semi-democratic processes, is that we'll just find the right way of dealing with things.

• 12:09Speaker 10

  The second one is that, no, it's a deliberative set of choices that we have to make in order to make sure that the long run effects are better than the short run ones. And I think if you look at several transformative technologies, indeed, they did have fairly negative short run effects. The beginning of the British Industrial Revolution is associated, depending on how you measure it, 70, 80, 90 years of real wage declines or stagnation and huge increases in inequality. The transition out of agriculture similarly at first created quite a lot of social and economic hardship. But in both cases, later adaptation worked out much better.

• 12:53Speaker 10

  But I would say, even though decisions were made without a roadmap, there were specific decisions about how to use technology, how to change the organization of production, and also political decisions that were quite important. And so it's not an automatic process. So I definitely, I'm not an AI pessimist. And so I don't know what your definition of Luddite is, but I'm not an AI pessimist. But I do not believe that we're gonna get the best out of AI, or even the second best out of AI, if we just say, oh, let's not worry about all the disruptions. Somehow, things are gonna work out.

• 13:26Scott Galloway?

  So it feels as if a lot of the concern or discussion around AI has moved towards who can secure reliable, large amounts of electrons or energy. One, is this an attempt? It sounds like, do you think this is an attempt to paint a future where the demand's gonna be unlimited and a bit of a head fake? Or do you see the same sort of power constraints that these guys are seeing? And what do you see as kind of the downstream impact of that?

• 13:57Speaker 10

  I do not believe that power GPU capacity is the main limiting factor for the kind of AI that I have in mind. Because if we're gonna make AI really serve our needs, I think it needs to have much more human complementary domain-specific

• 14:24Speaker 10

  expertise. It has to be able to be an aid to electricians, to accountants, to journalists, to academics. And for that, high-quality domain-specific information, data, is gonna be the real scarce resource. Whereas right now, the energy demand is mostly from foundation models that are very impressive in some ways, but also very, very expensive to run and have not reliably reached that context-specific domain-relevant expertise. So I think we have to find a way of getting the best out of foundation models, but combine them with domain-specific models.

• 15:07Scott Galloway?

  What I've also seen is that a lot of the different LLMs are hitting sort of a technical parity. Yeah, by most, by most kind of, I don't know, hardcore metrics. Do you think there's a scenario, we had Robert Armstrong from the MT on several times, and he said that there's certain technologies where no one or small set of companies is able to ring fence. Stakeholder and therefore shareholder value that the airlines, PCs, vaccines were huge innovations, but you didn't have a small number of companies garnering trillions of dollars in market cap. Do you think this might qualify as one of those industries where even if it ends up being having a huge impact on society, that we're overestimating the

• 15:50Scott Galloway?

  ability of a small number of companies to capture a ton of shareholder value?

• 15:53Speaker 10

  I would be very worried about an industry that is so concentrated. On the other hand, it's a cutthroat industry and we don't understand what sort of industrial organization of AI is going to emerge. So it is almost certain that whoever is doing the foundation models advances is not going to be the same one, same company that also does all of the applications. So you're going to form an AI stack. So once you form that AI stack, where are the risks going to reside and which part, which layer of the stack is going to

• 16:33Speaker 10

  get most of the returns? I think that remains to be seen. It's going to depend on where the real bottleneck is in terms of doing useful things and whether the foundation models are close substitutes for each other when it comes to serving as the first layer of that stack. I think those are really interesting questions and it is made more interesting by the fact that industries that look very competitive at some point later on can be very non-competitive because early competition is about being the one that controls things later on. That's why it's so vicious because everybody thinks that they're going to get

• 17:15Speaker 10

  the prize and the prize is dominate the industry. So I don't know whether the competition that you're seeing right now is going to repeat itself in 10 years' time or whether we're going to go to a winner takes all sort of structure at the foundation layer.

• 17:31Ed Elson?

  Yeah. In your book, Power and Progress, you basically take us through history and the history of technological progress and you make the point that technology has not

• 17:44Ed Elson?

  Necessarily been as beneficial as we think of it because of how it has been distributed throughout societies, which seems extremely prevalent to what we're likely about to see with AI. Take us through that history. What is your reasoning for that? How does that play out?

• 18:03Speaker 10

  Yeah, I think there are essentially several reasons why the full potential of a suite of technologies may not be realized or may not be realized quickly. One is monopoly. If one or a few companies dominate everything and they use that in order to extract all the rents, but also slow down innovation, that's one recipe for many good things not happening. So today, I think the digital world or communication world would be very different if AT&T had remained

• 18:43Speaker 10

  like the sole monopoly. So the breakup there probably opened the field for more shakeup. The second is, you know, whether that technology is working with labor or is sort of just replacing labor and worse, like during many parts of human history is becoming a tool for repressing labor. Those don't work out great. I mean, slavery was not a very efficient system. It wasn't just bad for the coerced people, but it wasn't actually generating economic dynamism. At the time of the Civil War, the US South was falling further and further behind,

• 19:23Speaker 10

  while the number of patents, innovations, industrial production and all sorts of other things were advancing rapidly in other parts of the United States. So, so I think all of these things we have to sort of take into account. Is AI going to be a monitoring technology where workers become more and more powerless? Because there's so much data being collected about them. That's another concern that we don't often talk about. So there are many, many issues here that are intersecting and we see parallels for each one of them in history. None of those are perfect parallels. We've never been confronted with a technology that's so widespread in its potential applications. But we've had other technologies that are quite transformative as well.

• 20:07Ed Elson?

  So how do we? Harness AI in a good way. I mean, what does regulation look like in your view, such that the it is a net benefit to society versus a negative six?

• 20:20Speaker 10

  First of all, I think we need to be thinking about what it is that we want from AI. Of course, not everybody is going to agree on that, but at least that conversation is needs to be had in a more open, constructive way. And second, we also need to be clear about what we mean by regulation. I think what most people mean by regulation is a reactive kind of regulation. Something happens, AI companies do something, and then we are worried about certain additional harms, and then we regulate that. I think instead, what we want is something more proactive. Let's think about where where it is that AI can do most good and ask ourselves whether

• 21:05Speaker 10

  it is going in that direction and what are the impediments for it not to go in that direction and see whether we can do certain things to facilitate that. So if we did not do those facilitary things, we would not have the internet because the, you know, government support there was quite important. We would not have, you know, renewable technologies that are now, at least in certain applications, cost competitive with fossil fuels. So so it's not like we have a sort of a law that says the market or in particular, a few companies that are steering technology are necessarily going to choose the right paradigm.

• 21:44Speaker 10

  I think the market is excellent in doing certain things, but market participants are also locked in a particular type of business model often. They are going after a particular kind of prize, and it is possible to step back and say, well, is there another prize that we should be focusing on? And that's what I'm arguing that human complementary AI, where we try to augment human capabilities, expand human capabilities, could have real benefit, and that's not the direction in which we're going.

• 22:23Ed Elson?

  We'll be right back after the break. And if you're enjoying the show so far, be sure to give Prof G Market a follow wherever you get your podcasts.

• 22:37Speaker 00

  Are your ad campaigns lighting up the dashboard? But not the pipeline? That's bull spend. And marketers are calling it out in Dashboard Confessions.

• 22:46Speaker 01

  My boss asked for results, so I opened my dashboard for the only positive sounding metric I had: impressions.

• 22:54Speaker 00

  Cut the bull spend. See revenue, not just reach. LinkedIn delivers the highest return on ad spend of major ad networks. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 23:08Speaker 02

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an Ultra. Because it's not just a superior light beer, it's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit MichelobUltra.com/SuperiorAccess to enter. Enjoy responsibly. Copyright 2026 Anheuser-Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 23:37Speaker 03

  I get so many headaches every month.

• 23:39Speaker 04

  It could be chronic migraine. Fifteen or more headache days a month, each lasting four hours or more.

• 23:44Speaker 05

  Botox, onabotulinum toxin A, prevents headaches in adults with chronic migraine. It's not for those who have 14 or fewer headache days a month. Prescription Botox is injected by your doctor. Effects of Botox may spread hours to weeks after injection, causing serious symptoms. Alert your doctor right away. As difficulty swallowing, speaking, breathing, eye problems, or muscle weakness can be signs of a life-threatening condition. Patients with these conditions before injection are at highest risk. Side effects may include allergic reactions, neck and injection site pain, fatigue, and headache. Allergic reactions can include rash, welts, asthma symptoms, and dizziness. Don't receive Botox if there's a skin infection. Tell your doctor your medical history, muscle or nerve conditions, including ALS-Lou Gehrig's Disease, Myasthenia Gravis or Lambert-Eaton Syndrome, and medications, including botulinum toxins, as these may increase the risk of serious side effects.

• 24:29Speaker 04

  Why wait? Ask your doctor. Visit botoxchronicmigraine.com or call 1-800-44-BOTOX to learn more.

• 24:43Ed Elson?

  We're back with Prof G Markets.

• 24:45Scott Galloway?

  Do you think the US is going to be able to maintain, I mean, other than DeepSeek, it's just very difficult to think of another AI player of almost any importance globally outside of the US. Do you think that the US is going to be able to maintain that type of lead in the AI ecosystem?

• 25:01Speaker 10

  China has an engineering advantage. They have a huge number of engineers. They're generally well-selected, meaning that more talented, quantitatively skilled people enter into engineering because it's a very prestigious thing and they have exams that are relatively unbiased, and engineers are highly regarded. So when it comes to pure engineering things, I think China could have an advantage. On the other hand, the top-down system is hugely inefficient. There are so many places where inefficiencies build up, people are afraid of taking initiative, there is no decentralized process. There, the US has an advantage.

• 25:45Speaker 10

  How that will shake out at the end would really depend. DeepSeek is an engineering marvel. They didn't come up with any of the new methods. The new methods that DeepSeek was using, some of them were invented by Google and OpenAI. Many of them were invented 20 years before by machine learning scientists. So they just took them, but they combined them quite well. How many more times can they do that? That's going to be one of the questions. And then, of course, it's not just US and China. Can other countries catch up? Europe is behind, clearly. But I don't think there is a law that Europe has to be behind. There are many talented AI scientists in Europe that just happen to be all working in Silicon Valley.

• 26:27Ed Elson?

  I think this is a good segue into your 2012 book, Why Nations Fail, where discussing how America could fall behind in the AI race. And it's interesting, you're kind of highlighting that on the one hand, there are some benefits to this top-down communist structure where you can set the agenda and the tone for the nation, the tone being, we love engineers and we love. People who build AI. On the other hand, it can be a problem when you don't have the competitive forces of capitalism at work. And it it seems as though this is going to be sort of the defining question of our time, which one works?

• 27:04Speaker 10

  One hundred percent. I I I think that's a very, very well put.

• 27:08Ed Elson?

  Which brings me to the question, why do nations fail? I mean, you've done Nobel Prize winning research on this, the the role of institutions.

• 27:20Ed Elson?

  Why do nations fail?

• 27:22Speaker 10

  It's mostly institutions. There are other factors, but many of these other factors, such as civil wars, are institutional as well. And the role of institutions, both formal rules, but also informal arrangements and norms, they become much more important when we're dealing with sectors that are forward looking, innovative, require small players to scale up. All of those are things that the US was doing quite well. You know, the United States

• 28:00Speaker 10

  had an ecosystem of startups that, you know, were extremely confident, you know, people when they opened, I mean, I I knew many of them. I know many of them. Very few people think, well, if I launch a startup and if I'm successful, will I be shut down by courts? Will I be crushed by my competitors? Will I be able to get any contracts when my competitors are favored by the government? Nobody thought about that. Nobody thought about that, partly because I think people were on the optimistic side, but largely because US institutions were had a pretty good track record of not doing that. I think we're no longer sure. There are favored companies and not favored companies.

• 28:43Speaker 10

  Courts are much less impartial. Scaling up may become much harder when there is more uncertainty. So I think there are a bunch of issues where the institutional advantage that the US economy had is more of a question mark today. And the problem is that when you mess up certain things, you pay the price right away. If you mess up institutions, especially as they pertain to innovations, you don't pay the price because the impact's not going to be felt for another five, 10 years. So if there are some fundamental negative effects from Trump's attack on, you know,

• 29:23Speaker 10

  independent judiciary, the costs of that will be realized not in 2027 or 2028, but probably in the 2030s.

• 29:33Ed Elson?

  What is like the counterfactual to an institution-led society? Like, when we talk about it's the societies that have had strong institutions, those are the ones that have worked out, and that's what your research has explained to us. What is the alternative? What is a society that is not led by institutions actually look like? What enters the void? How does that lead to a less prosperous path?

• 30:03Speaker 10

  Well, I mean, I would think that every society has forms of institutions, but let's change your question to state-led versus not state-led.

• 30:11Ed Elson?

  Okay.

• 30:12Speaker 10

  So Soviet Union was state-led, but too much state, not enough market, not enough decentralization, and that was horrible. But, you know, Somalia, where clans ruled for several decades after the collapse of the state, is the other opposite. There are no state institutions that were functional. There's no third-party enforcement. This is anarchic. Ways in which even small problems would escalate. Neither of these two are are great. Probably the Somalia is worse than the Soviet Union for economic activity, although probably the Soviet Union makes up for it by killing people more effectively.

• 30:52Speaker 10

  So I think that happy medium where there is enough decentralization of especially economic activity, but also other things like communication, dissent, et cetera. But there are state institutions that can be leveraged for doing good things such as supporting innovation, providing public services, defense. I think that happy medium is is hard to maintain, but many societies did maintain it for, you know, several decades. US did for longer.

• 31:22Ed Elson?

  Yeah, if I could sort of summarize what my takeaway from from your research to be, it's it's something along the lines of this question of why are institutions even good for us? It's something along the lines of they prevent extreme concentration of power into the hands of someone who may not know what they're doing. That that to me is the defining difference as to why there are societies that work out and there are societies that don't. As proven with the Soviet Union, you could argue maybe even today with Russia, where the institutions have been kind of taken over by Putin and any other failed society. Is that right?

• 32:07Speaker 10

  Absolutely. And if you look at the data, you see that, for example, economic performance under dictatorships is not just worse than democracies, but it's also more variable. And that reflects exactly what you're articulating, which is sometimes you're going to end up with a complete idiot as your dictator, and that's a real disaster. But even very smart people can be very dangerous because their incentives are not aligned with the rest of society. So Stalin. Didn't do huge amount of damage because he was an idiot. He wasn't definitely no genius, but he did know some of the things he was doing in terms

• 32:51Speaker 10

  of killing people and creating an enormously powerful secret service, secret police. So, so somebody who has the wrong incentives and the wrong motivations, even when they are talented, could do a lot of damage. So democratic system via checks and balances, civil society mobilization, ability to change and kick out politicians when they don't do what they're supposed to do, I think creates a lot of pathways for not falling victim to that.

• 33:25Ed Elson?

  Given all of that, what do you make of what's happening in America today? What do you make of Trump's administration thus far? What do you think, what kinds of impacts do you think it will have on the economy?

• 33:40Speaker 10

  I think institutions are really the secret sauce for the United States. The US is one of the most innovative economies in the world, and that comes because people are fairly confident that they can do new things and succeed. The American advantage in finance is also about institutions. You know, in the finance, during the financial, global financial crisis, which was initiated, you know, largely speaking in the United States, what did foreign investors do? They put more of their money in the US. Why? Because during a crisis, they believe US assets, equities, corporate debt, government

• 34:25Speaker 10

  debt are just much more reliable, much more liquid than the alternative. That's also institutional. You don't want to be subject to Chinese courts, you want to be subject to American courts. So all of those require a degree of independence in the judiciary and predictability and impartiality in the broader institutional rules. Trump's agenda, which is not unique to Trump, but is an extreme version, is to build a much more executive presidency, meaning the president has far greater power than what has been the norm, and the other branches of government and the agencies are not as

• 35:10Speaker 10

  powerful. I think that comes with a serious risk that those institutional balances are going to be disrupted, and we're already seeing that in terms of, you know, corruption, in terms of people in the administration enriching themselves. But more importantly, I think a lot of uncertainty, for example, in the area of tariffs, you know, what's going to happen next month to tariffs? That's the kind of uncertainty that strong institutions avoid. If that happens, that secret sauce that has been so valuable to the American economy will start disappearing.

• 35:44Scott Galloway?

  We've been surprised at how well the economy, or at least the markets, have done because we see the same, we see the same issues you do, a lack of rule of law, lack of competition, regulatory capture. But meanwhile, it looks as if the American economy, and there's some warning signs, but we've been shocked at how well it continues to grind on. A, are you surprised? And B, do you think it's, that there's just a lag or that there's, that we're not seeing kind of the, the real issues here? Where is the state of the economy right now relative to what your perceptions would have been about it, given, given some of the concerns you've raised?

• 36:22Speaker 10

  All of the above. So I think some of it is that there are lags. Some of it is that AI optimism is masking.

• 36:37Speaker 10

  The problems. Part of the reason why the economy and the stock market are booming is because there's a huge amount of AI investment. Part of it is that, you know, tax cuts would, if you did nothing else, nothing else changed, and you just did a tax cut that favored capital, that would lead to stock market valuations increasing. And then the stock market is, of course, the incumbents. So if there are changes in the economy, such that startups start having a harder time, that may not be great for the economy, but it's not going to be as bad for the incumbents that will be protected from the startups.

• 37:20Speaker 10

  So there are a number of layers here that I think are intersecting. But but some of it, I think, is just that with tariffs, for example, we haven't seen their full effects on prices, we haven't seen their full effects on supply chains, because, you know, everything is changing so rapidly. I'm surprised, what I'm surprised by is, I'll tell you, Scott, is that people haven't been spooked as much by uncertainty. So the belief among economists, macroeconomists, was that uncertainty spooks investment. That hasn't happened. We've had a lot of uncertainty, and that hasn't really translated into people saying, well, let me hold back on my investments, because I don't know what the future is going to be look like.

• 38:05Speaker 10

  So that may be because of AI, maybe because of other things, I don't know.

• 38:09Ed Elson?

  When you look at America right now, what are your top concerns? I mean, you mentioned that institutions are the secret source of America. And it appears that institutions are under attack in some form or another, whether that's the BLS or whether it's the Federal Reserve. What are your major concerns for America right now?

• 38:34Speaker 10

  There are several layers of institutions that worry me, starting from the top, not in terms of, you know, importance. I think I would have to think a little bit harder to give you importance weights. But first of all, our ability to control corruption, enrich self-enrichment, enrichment of friends and family, those have become much weaker.

• 38:59Speaker 10

  Independence of bad rock institutions, judicial branches, that's much weakened. Like FBI, like it or not, and there were many things not to like about it, but it had an ethos of independence and not being political. That's gone. There is a network of information provision institutions from the government's accounting office, Office of Budget Management, BLS, BEA, Census, those are being weakened. So our ability to track the economy is going to be much weaker.

• 39:43Speaker 10

  And then, you know, very fundamentally, because politics is becoming more conflictual and polarized, there are concerns that we're going to be much less successful in the future in keeping politicians accountable.

• 40:03Ed Elson?

  We'll be right back. And for even more markets content, sign up for our newsletter at profitemarkets.com/subscribe.

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• 42:26Ed Elson?

  We're back with Prof G Markets.

• 42:28Scott Galloway?

  When you, we talk, it seems like these discussions are always about the US versus China. I'm living in London right now and you're originally from Turkey. Do you see any, do you see any other nations or academic institutions that you're very hopeful on? If you were to make a bet on an economy right now, other than the US or China, which economy is which you make a bet on?

• 42:54Speaker 10

  Well, I think the problem is Scott, that in many areas, especially in AI, scale matters. You know, Swiss academic institutions are doing great relative to their scale, but they're never gonna, Switzerland as a country is never gonna be a rival by itself to the United States or to China, just in terms of resources.

• 43:19Speaker 10

  Both human and and financial. So you really need European academic system to come together. And it has some great strengths and it has many weaknesses. It is not integrated in its best. The American system was much, much more integrated. You know, institutions in California and Cambridge, you know, thousands of miles apart. They're still much more integrated than, you know, those in different parts of Europe were. And that creating a hub like Silicon Valley or or or other places at some point it was in Boston. That's very, very important and you need that kind of concentration of energy.

• 44:02Speaker 10

  I don't think that it's impossible for Europe to achieve that. And there are uh several people who are thinking about that. For example, Mario Draghi of uh the European Central Bank fame sort of recently came out with a report asking much more investment in AI and digital technologies to sort of tick start something at the European level. You know, what will succeed and when it's government directed, there are many risks, especially when you have the national bureaucracies overlaid with European Commission bureaucracy. So I wouldn't bet that it's going to work out anytime soon, but I wouldn't want to bet against it either. But also for, you know, I think the world would be much healthier if we had a true multipolar world

• 44:47Speaker 10

  in terms of research, in terms of new ideas, not just US versus China, but US, China, Europe, but also something from the developing countries. There's tremendous energy in India, in in in in other parts of the world about new texts, uh new ideas, new entrepreneurship, new risk taking. I think the world would be just much richer if those countries also had their intellectual fingerprints on these advances.

• 45:13Scott Galloway?

  We think a lot about the well being of young men um on this program. And something that has, I won't speak for it, has me suitably freaked out is the collision between AI. And synthetic relationships that could potentially further sequester and isolate young men from relationships with their parents, diminish their desire to develop romantic relationships, establish friendships. Are we catastrophizing here? I see this as a disaster with no guardrails. And I can't tell if it's just as I get older, professor, I'm getting more angry and depressed, or if I see something here. What are your thoughts about character AI, synthetic relationships?

• 45:51Speaker 10

  I'm very worried, but not just for men. I mean, look, for social media, actually, the effect has been larger on women. I think many of these technologies that completely transform social relations have so many unforeseen consequences. You know, despite many mistakes and misdeeds that, you know, Facebook, Meta, et cetera, Instagram did, they didn't set out to create a mental health crisis. That was a side effect. Now, with some of these things like character AI, they're actually intending to create, you know, completely artificial bubbles.

• 46:34Speaker 10

  So, yes, I would definitely be worried about that. But the only thing I have as a small source of sort of silver lining is that they're not going to happen overnight. So these models are still going to be very clunky. So we still have some time, and that's why it's so important to ask the question, what is it that we want from AI? Do we want, you know, character AI and all of these synthetic relations and all of this isolation? Do we want, you know, sort of half-fast automation? Or is there something we can do with this very promising technology?

• 47:13Scott Galloway?

  What field or what specific application do you feel holds the most promise for AI?

• 47:19Speaker 10

  I think by its nature, AI could be revolutionary for many fields.

• 47:26Speaker 10

  Certainly, the process of science is already benefiting. We can do many more things. I think a lot of occupations that involve interaction with the real world in a problem solving manner can really benefit from AI. So that's like electricians, plumbers, uh, blue collar workers. Because they're engaged in series of problem solving tasks and AI based, context specific, reliable information could be a game changer there. A lot of other non-scientific creative occupations could get a boost as well. So there are actually a lot of different things that we could do.

• 48:07Speaker 10

  Healthcare and education are becoming a bigger and bigger share of national income everywhere. And those are the two sectors where we've had very little productivity gains. So macroeconomic productivity gains are held back because of these services. If we can do anything with AI to kickstart faster productivity growth in these sectors, that would be a game changer.

• 48:29Ed Elson?

  You've been described as the Wilt Chamberlain of economics. You know, you, you are sort of a powerhouse academic, uh, powerhouse economist. You've written books, you've taught at MIT, you've won a Nobel Prize, the list goes on. I just, I'd love to, on the subject of institutions, I'd love to get your views on just the future of academic institutions right now. They've also been under attack in a variety of ways. How do you feel about academia as a field? Do you feel optimistic, pessimistic? Uh, what does the future of academics actually look like?

• 49:06Speaker 10

  An important part of the institutional fabric of this society is also to provide foundational inputs into innovation via the academic educational process. And that's also in danger. I look, I think there were many things that were wrong with academia before Trump.

• 49:26Speaker 10

  But the current attack on the autonomy of universities cannot be justified by those problems. And I think it risks being more encompassing than those problems, whether you're going to call them DEI or whatever they are, ever could have been. Because now funding and government control are all levers that a centralized authority can exercise over universities and academics. And whenever that has happened in other countries, for example, in my country of birth, in Turkey or in Hungary, you see the costs have been quite extreme.

• 50:12Ed Elson?

  Yeah. How does that play out? How do those costs materialize?

• 50:16Speaker 10

  Well, first of all, I think very important projects that are forward looking don't get funded. You know, today is very difficult, for example, to get funding for mRNA vaccines. And those were going to potentially play an important role in fighting cancer and other sort of diseases for which we could, you know, develop new vaccine based approaches. And that's just the tip of the iceberg. But even more importantly, I think when the autonomy of universities starts being threatened, people become more timid in their risk taking.

• 50:56Speaker 10

  And that risk taking there involves going against established ways or things that powerful actors believe. So I mentioned earlier on, in China, the top down structure is really very costly. I think one of the costs you can see very clearly is in academia. In Chinese academia, despite the fact that you have very talented people selected into it, and you have high degree of engineering or other expertise. It's much more political. So nobody wants to rock the boat, which means people are not really exploring more controversial topics, whether it is in social sciences or in physical sciences. And that environment, once it sets in, is very difficult to reverse.

• 51:39Speaker 10

  One of the great things about American academia was that sort of very risk-taking attitude, exploring things that are at the edges, you know, that could become much harder.

• 51:51Ed Elson?

  Just observationally or anecdotally, from my perspective, I feel like academia and pursuing a career in academia has very recently gotten kind of a bad rap. It's almost as if academia, the expert class, there's this stuffy expert class that is either captured by wokeness or by, you know, they're trapped in the ivory tower or whatever it is. And I see this among my friends, many of whom were going to pursue careers in academia and then decided, no, this world rewards entrepreneurs. This world rewards people who start companies and work for big tech. I'm wondering if you've seen that yourself.

• 52:34Ed Elson?

  Have you seen that there is sort of a lesser interest in pursuing these kinds of careers?

• 52:39Speaker 10

  I have, absolutely. And I think some of it is real and some of it is a perception. So indeed, I think there is the right kind of technocracy and the wrong kind of technocracy. As the world becomes more complex and there are more areas in which expertise, deep knowledge matters, you need technocracy, but you need technocracy to be accountable and to be sort of in conversation with the rest of community. So in some sense, yes, the wrong kind of technocracy has emerged to some degree in many countries where, you know, experts, whether they are in universities or bureaucracy sometime, know it best.

• 53:23Speaker 10

  But I think some of what you're describing is also an exaggerated feeling of, you know, in fact, you know, some of the things that those experts were saying are in fact true. For example, on vaccines or climate change, it's just that they did not communicate it very well and the whole thing became unnecessarily politicized. And it's not just in academia. Look, for example, mRNA vaccines were not spearheaded by academia. They were spearheaded by startups and companies that thought they could really break the mold by doing something very different. So it's that whole ecosystem that's being threatened right now.

• 54:00Ed Elson?

  It almost feels as if our culture is just so dead set on finding out who are the experts, who are the people who are telling us how it is, and can we find a way to discredit them and tell them that they're wrong. And in a lot of ways, it seems ridiculous that to say, oh, it's the university professors that are telling it, telling us. It's like, actually, these are not the people who are in control right now. You're getting told a whole set of them.

• 54:24Speaker 10

  Never, they've never been, they've never been. I mean, they may, they may be accused of being arrogant, that's for sure. But that arrogance was never matched with real power.

• 54:33Ed Elson?

  Exactly. Yeah, I wish more people could understand that. My final question, do you have any advice for young academics, for people who are interested in pursuing a career in academia, who are maybe asking those questions that we just discussed, as someone who's had so much success in the field? What would your advice be?

• 54:56Speaker 10

  You know, I get very frustrated when, you know, people say, oh, you know, you should work on this topic because this topic has, you know, potential and there might be demand here. No, I think the real secret sauce in academia is you should work on whatever you're passionate about. And the best academic research comes when it's really sort of your own passions that you are following. And that's even more important when academia is under attack because some of the great research can be done even when budgets are slashed because you're just committed to it and it's not about the biggest lab, it's not about the best measurement instruments,

• 55:38Speaker 10

  but it's about doggedly pursuing something that you feel is right and you can prove it.

• 55:43Ed Elson?

  Darren Acemoglu is an institute professor at MIT and co-director of the University Centre on Inequality and Shaping the Future of Work. He is also the author of six books, including the New York Times bestselling Why Nations Fail and Power and Progress: How a Thousand Year Struggle Over Technology and Prosperity. He was awarded the Nobel Prize in Economic Sciences in 2024, his studies of how institutions are formed and affect prosperity. Professor Acemoglu, we really appreciate your time and I think you're the first Nobel Prize winning guest we've had on the podcast. So it's a win for us too.

• 56:18Speaker 10

  My pleasure and thank you very much, Scott. It's great and very happy to have been able to join you guys.

• 56:24Scott Galloway?

  That's our pleasure. Congrats again on your good work.

• 56:31Ed Elson?

  This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our research team is Dan Shalane, Isabella Kinsel, Kristin O'Donoghue and Mia Silverdo. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Prof you Markets from Prof you Media. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

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