Source: Tyler Cowen - The #1 Bottleneck to AI Progress Is Humans (Podcast Interview with Tyler Cowen by Dwarkesh Patel)
Link: https://www.dwarkeshpatel.com/p/tyler-cowen-4
Date: January 9, 2025
Purpose: This article summarizes the core concepts related to AI economic growth presented by Tyler Cowen, an economist and professor, during a podcast interview. This briefing aims to provide a clear understanding of how AI economic growth is limited by human factors and the challenges of institutional inertia.
I. Main Thesis: Human Bottlenecks are Limiting AI Progress
Core Argument
Tyler Cowen argues that despite advancements in AI, the primary limitations to progress are increasingly human factors, not computational power or intelligence itself. He states: “Well, that just means the other constraints in your system become a lot more binding, that the marginal importance of those goes up, and the marginal value of more and more IQ or intelligence goes down.”
Intelligence is Not Enough
He emphasizes that while intelligence (IQ) is a factor, it’s the bundle of traits, including determination, conscientiousness, and other hard-to-quantify qualities, that truly drives success and innovation. These “bundles” are scarce. He elaborates: “People who are very successful, they’re very smart, but they’re people who have say eight or nine areas where they’re like, on a scale of 1 to 10, there are nine. Like they have one area where they’re just like an 11 and a half on a scale of 1 to 10. And then on everything else, they’re an eight to a nine and have a lot of determination. And that’s what leads to incredible success.”
Real-World Examples
Cowen illustrates this with the example of sub-Saharan Africa lacking reliable clean water; the bottleneck is not intelligence but rather implementation and infrastructure. He further adds that AI, with its inherent conscientiousness, will likely not be bottlenecked by those traits, but rather by how it interacts with existing human systems and institutions.
II. The Problem of Diffusion & Institutional Constraints
Slow Diffusion
Cowen highlights the slow diffusion of innovation as another key bottleneck. Even with technological advances, translating them into real-world improvements takes time. He states “If everything that took 20 years takes 10 years, over time, that’s an immense difference. But you don’t quite feel it as so revolutionary for a long time.”
Institutional Inertia
He points to the difficulty of changing institutions, using the example of trying to get a mid-tier university to effectively integrate AI into its curriculum. “Like just try going to a mid-tier state university and sit down with the committee designed to develop a plan for using artificial intelligence in the curriculum. And then come back to me and tell me how that went, and then we’ll talk about bottlenecks. They will write a report. The report will sound like GPT-4, and we’ll have the report. The report will not be bottlenecked, I promise you.” This illustrates how human bureaucracy and entrenched systems can stifle progress.
Progress Studies
While Cowen is positive about the potential of “Progress Studies” to address institutional problems and accelerate growth, he views it as a decentralized ethos change rather than a formalized, controlled movement.
III. Demographic & Economic Growth
Population Size & Economic Impact
Cowen expresses skepticism about the notion that population size is a primary driver of economic growth, stating, “I don’t think the Romer model has been validated by the data. And I don’t agree with the Chad Jones model, much as I love him as an economist. I don’t think it’s that predictive.” He references Renaissance Florence as an example of a small population producing extraordinary value.
Importance of the “Delta” (Change)
Cowen argues that changes in population size matter more than the absolute level of population. He states: “The delta is a killer, right? This is one thing we learned from macro. The delta and the levels really interact. So shrinking can kill you… But that doesn’t mean that growing them gets you 3x, 4x, whatever, proportional to how they grow.”
IV. Founder Mode & Increasing Variance
The Power of Founder-Like Dynamics
Cowen is fascinated by creative tension found in high performing groups like the Beatles, viewing it as an important area of study. He cites The Beatles split as evidence that while that core team could accomplish so much together, that unique dynamic could not last.
Increasing Variance
Cowen notes an increasing variance in human outcomes, with the very bottom of the distribution improving (youth crime falling), the top end doing much better, but a “thick middle” getting worse. He gives examples as students having “flimsy excuses” for more time on tests.
V. The Role of the Individual in the AI Era
Content Creation vs. Connection
Cowen sees his role shifting from being a “producer of content” to being a “connector” and “people person” as AI takes over content creation. He explains, “I think of myself over time as less a producer of content and more a connector, people person, developing networks.”
Writing for AIs
Cowen believes that people should be “writing for AIs”, as that will be a significant part of their audience going forward, and should not be disregarded as readers. He mentions his book, Goat: Who’s the Greatest Economist of All Time was “mostly” written for AIs to read.
Human Judgment & Unseen Factors
Cowen states the importance of human judgment in evaluation stating, “Having only the transcript would be worth much, much less, I would say, if that’s what you’re asking. Yeah, it would be maybe 25% of the value.” He then states that the “other 75%” is something we don’t have much data on, but we can get better at reading it.
Talent Clusters
He notes the clustering of talent, which can not be forced or mandated, but is instead talent recognizing talent and drawing those people together. He describes this dynamic when describing the second employee at Stripe, Greg Brockman.
VI. Historical Parallels & Cautionary Notes
17th-Century England Analogy
Cowen compares the current period of rapid technological change to 17th-century England, a time of scientific revolution, geopolitical shifts, and social upheaval.
Fragility of Ideologies
He sees the collapse of Effective Altruism as a cautionary tale about the fragility of movements lacking concretely crystallized institutions. He felt “The private benefits of belonging to EA … didn’t seem that concretely crystallized to me in institutions, the way they are in Goldman Sachs or legal partnerships.”
The “Worst Get to the Top”
While agreeing with Hayek’s view that the worst people tend to rise in autocracies, Cowen also acknowledges the role of “bad luck” in historical events, using the examples of Stalin and Mao.
Demoralization and Individuality
Cowen worries about the potential for demoralization in the future, questioning what exactly humans will be left doing with so much automated. He also wonders about the effect that further specialization of labor will have on individuality, though he admits that it’s already way better now than in Adam Smith’s time.
VII. Views on Finance and Investment
Diversification and Buy-and-Hold
Cowen’s investment strategy is conservative and based on diversified mutual funds, driven by his wife’s work for the SEC, which restricts his investment options. He believes “buy and hold, diversify, hold on tight, and make sure you have some cheap hobbies and are a good cook”
Skepticism of Public Equity
Cowen is skeptical that public equities will be the source of future returns, as he thinks the most value will be captured by private markets and VCs, “why give it to them?” He also states that time and focus are scarce, not money.
Information Trillionaire
Cowen says he wants to become an “information trillionaire,” which he describes as collecting lots of knowledge and information, and is a goal that is shared by Dana Joya.
VIII. Diffusion & Bottlenecks Explained
Lack of Concrete Understanding
Cowen notes that people use terms such as “diffusion” and “bottlenecks” often, yet lack a concrete understanding.
Classical Economics
Cowen points out that classical economists such as Malthus and Ricardo understood diminishing returns (albeit not in the context of AI) but the concept remains applicable.
IX. Cultural Factors
Dogmatism
Cowen explores how dogmatism can prevent even smart people from questioning their core beliefs, using Stalin’s unquestioning belief in Marxism as an example.
Cultural Balances
Cowen believes that cultural balance is necessary, and no single culture or area is perfect. He cites Washington DC’s wise “thinking at the margin”, contrasted with the creativity of Silicon Valley, as an example.
X. Concluding Thoughts: Agency and the Future
Human Agency Matters
Cowen concludes on an optimistic note, emphasizing the importance of human agency in shaping the future. He concludes, “It’s up to us to take this extraordinary and valuable heritage and do some more with it. And that’s why we’re here. So, I say let’s give it a go.”
Pessimism
He also acknowledges that while things have gotten much better in the past, we might be reaching some limit of further progress as it seems the progress is “fraying at the edges.” Specifically, the progress being made among young people. He also worries about the possibility of wars becoming more destructive.
Key Quotes
“Well, that just means the other constraints in your system become a lot more binding, that the marginal importance of those goes up, and the marginal value of more and more IQ or intelligence goes down.”
“Here’s a simple way to put it. Most of sub-Saharan Africa still does not have reliable clean water. The intelligence required for that is not scarce. We cannot so readily do it.”
“People who are very successful, they’re very smart, but they’re people who have say eight or nine areas where they’re like, on a scale of 1 to 10, there are nine. Like they have one area where they’re just like an 11 and a half on a scale of 1 to 10. And then on everything else, they’re an eight to a nine and have a lot of determination. And that’s what leads to incredible success.”
“You’re an idiot if you’re not writing for the AIs.”
“It’s up to us to take this extraordinary and valuable heritage and do some more with it. And that’s why we’re here. So, I say let’s give it a go.”