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Eli Dourado

Senior Research Fellow

The Center for Growth and Opportunity

October 6, 2023

Ep 419: Eli Dourado - Senior Research Fellow, The Center for Growth and Opportunity
00:00 / 01:04
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Bret Kugelmass [00:00:57] So we're here today with Eli Dourado, who is the Senior Research Fellow at the Center for Growth and Opportunity. Growth and Opportunity, is that right?

Eli Dourado [00:01:02] Yes.

Bret Kugelmass [00:01:04] Perfect. Welcome.

Eli Dourado [00:01:05] Thank you. Great to be here.

Bret Kugelmass [00:01:06] Well, we've gotten to know each other a lot more over the last few months or so. And where did we meet initially?

Eli Dourado [00:01:12] I think we met at a Foresight Institute event...

Bret Kugelmass [00:01:15] Nice. That was quite a while ago, then.

Eli Dourado [00:01:17] San Francisco.

Bret Kugelmass [00:01:18] Amazing, amazing. And I'm going to make you blush a little bit, but you are what I consider one of the great thinkers of our day. And every time that I've gotten to meet with you, I almost can't believe we haven't done a podcast yet because the conversations are some of the most insightful and riveting that I've ever had.

Eli Dourado [00:01:38] I'm speechless. Yes, thank you. You're making me blush.

Bret Kugelmass [00:01:44] Okay, now you have to prove it in a podcast.

Eli Dourado [00:01:44] Okay.

Bret Kugelmass [00:01:45] So first, before we get into today's modern topics and your perspective on the world, let's just talk about you as an individual. Where'd you grow up?

Eli Dourado [00:01:53] I was actually born in Brazil. I lived there until I was four and then lived in Europe until I was about nine. I lived in Greece and Portugal. And then, New Jersey after that.

Bret Kugelmass [00:02:04] What were the circumstances that led to your family being so international?

Eli Dourado [00:02:09] Well, dad is a Brazilian, so that was part of it. And he worked for a drug company and just started in Brazil and took him to Greece, Portugal, New Jersey, Canada after that, actually after I was out of the house. And then late in his career, he went to Boston. So it was like, he's been moving his whole professional life around.

Bret Kugelmass [00:02:33] So I have to ask... And we'll get to the rest of your career in a minute... But have you reflected on your own upbringing and thought that maybe this very unique international exposure gave you a different perspective, a different way of thinking fundamentally?

Eli Dourado [00:02:53] In some ways, yeah. I was always interested in things like GDP. When I was growing up, we did GNP, gross national product. But I was always looking at the World Almanac and being like, "Okay, I've been to this country and they have this GNP per capita and like, this country has this GNP per capita." And I was super interested in that from age seven to nine even. I was like looking at that kind of stuff.

Bret Kugelmass [00:03:21] And when did your interests become not so broadly economic, but more industry focused? Or did you? Was there any point where you're like, "Oh, I'm really interested in this industry and then this subset of GNP?"

Eli Dourado [00:03:33] I would say it was a few years into my career. I was initially, my first job out of grad school...

Bret Kugelmass [00:03:43] Where'd you go to grad school?

Eli Dourado [00:03:44] I got a Ph.D. in economics at George Mason University.

Bret Kugelmass [00:03:47] Great. One of the best places to go to.

Eli Dourado [00:03:52] Yes, one of the best places. And just great people.

Bret Kugelmass [00:03:53] Did you want to give a shout out to some of your professors and colleagues and coworkers?

Eli Dourado [00:03:58] So I did my Ph.D. under Tyler Cowen, who was wonderful and took every took every class I could with Alex Tabarrok and Bryan Caplan and Robin Hanson and so on. So it was just it was a great experience. Yeah, incredible mentors.

Bret Kugelmass [00:04:11] And what was the focus? Did you have a specific thesis?

Eli Dourado [00:04:16] Well, yeah, you have to write a dissertation, obviously, to do a Ph.D. So I wrote it on the political stability of anarchy, actually, and under what conditions it could be stable.

Bret Kugelmass [00:04:27] Okay, before we get on to everything else, we have to dissect this a little bit. So what is the definition of anarchy here?

Eli Dourado [00:04:35] Anarchy is sort of like a system where there is no monopolist on violence or on governance.

Bret Kugelmass [00:04:46] Because that's what a stable government almost is, it's a monopoly.

Eli Dourado [00:04:48] It's a monopoly on a certain class of services and enforcement and so on. And there are arguably a few instances in history... Like, probably the clearest cut one is medieval Iceland, where there was no executive branch of government and those functions were all sort of provided on the market in a sort of like quasi-feudal way, but in the sense of you could change your allegiance between lords on the fly just like you change insurance providers or something like that. You could be like, "Yeah, I'm taking down this guy's banner and I'm putting up this guy's banner." And so, they would sort of compete for these sort of protection services. And if you look at the Icelandic sagas... A lot of literatures are about battles and stuff, and the sagas are all about courtroom drama. So they had courts, but it was all decentralized and not a monopoly system.

Eli Dourado [00:05:59] And so my thesis was about this sort of academic argument. Tyler had written a previous paper on why anarchy can never be stable, which is a little belied by the historical events. And so, I tried to refine it a little bit and say like, "Well, here's why it could be stable under those conditions and not maybe today under the conditions that exist today."

Bret Kugelmass [00:06:22] And this wasn't just a difference in semantics. This was a difference in perspective altogether.

Eli Dourado [00:06:28] It was a difference in sort of the model. So he was really focusing on the costs of cooperation, of the different kinds of cooperation. So you could cooperate to collude, and you can cooperate to coordinate. And those are both forms of cooperation. And his argument was, if you're cooperating to coordinate on what the law is, for example, in a decentralized way, then what's stopping you from cooperating to collude between the sort of providers of the security services, let's say? They could just collude and become a monopolist, right? So he's saying if it's cheap to cooperate in one way, it's also cheap to cooperate in the other way, and therefore anarchy is impossible.

Eli Dourado [00:07:15] My argument was there's a cost and benefit you have to look at. So we don't just look at costs of things, we look at benefits of things as well. And so, anarchy works when the cost-benefit of cooperating to coordinate works, it is favorable, but the cost-benefit of cooperating to collude is not favorable.

Bret Kugelmass [00:07:41] Let me ask a question. And I've pondered more broadly on this topic. In your framing, are there multiple fundamentally different stable systems or is any stable system based on human nature and are the fundamental laws of economics the same, but with a different patina?

Eli Dourado [00:08:07] What do you mean by that?

Bret Kugelmass [00:08:09] I guess I'm wondering... When you mentioned collude, I think, "Okay, well, certainly our system has rules and laws against collusion, but really, we all know people still collude both in explicit and implicit ways." And so, then that got me thinking, "Well, is every system throughout time that approaches some sort of stability fundamentally the same but we just haven't defined or labeled various characteristics of it?" And thus we've created almost like artificial surface level differences where really, humans are humans, economics are economics, incentives are incentives.

Eli Dourado [00:08:50] I'm really enamored with this idea. There's a paper called "Do We Ever Really Get Out of Anarchy" which made the case that even if you look at, say, the United States, we have three branches of government, right? We have the executive branch, the legislative branch, the judicial branch. Okay, so let's say those branches have a dispute between them. Who wins, r right? Like, we don't know. It's not determined. There's no outside enforcer. And that's just like one example of how, in a sense, those branches of government are in an anarchy relation relative to each other, and they have to work it out among themselves.

Bret Kugelmass [00:09:29] I see. So at the macro picture, it looks like stability, but in reality we have a bunch of molecules bouncing around.

Eli Dourado [00:09:38] Yeah. So I think when I'm talking about political anarchy here, I'm talking about the stable forms of it, right?

Bret Kugelmass [00:09:46] Okay, so you're not taking the position that nothing is ever really stable in the long run.

Eli Dourado [00:09:51] Yeah, I'm thinking about the non-chaotic forms of anarchy, right? I don't personally want to live under anarchy, but the idea here is that there could be forms of anarchy that are stable and that would be potentially even nice to live under in terms of you're getting all the services that you get from government today, except you're getting them on the competitive market instead of from a monopoly supplier. And so, that's the principal. Could it be that you get security, all these public goods, etc., provided by the competitive market instead of a single supplier?

Bret Kugelmass [00:10:36] And is it that maybe technology can be the great enabler of this and that we can just connect things, government services that have historically been tied to your geographical location to those that can now be virtualized or digitalized?

Eli Dourado [00:10:50] So, yes. The sort of technological dispensation that you live under matters for this. That's part of my argument. Does it always cut the way you think, right? Going back to an earlier paper from Tyler, he made a point that you couldn't have had the size of government that we have without at least 20th century technology, right? Like in the 1800s, there was no government that controlled 30 to 40% of GDP. You couldn't have it. They didn't have the recordkeeping ability. They didn't have computers to just like even know who pays how much income tax or whatever. So you literally couldn't have the administrative state or the communication system to rule over a vast territory and extract 30 to 40% in taxes. So absolutely, taxes and technology matter for what kind of government you're going to live under.

Bret Kugelmass [00:11:54] Interesting you went to the tax collection point. I was still thinking along the monopoly when it came to that.

Eli Dourado [00:11:58] Yeah, sure.

Bret Kugelmass [00:12:01] Interesting. Okay, so you had a lot of fun in grad school putting together this work. What did that lead to?

Eli Dourado [00:12:08] Well, it led me to realizing I did not want to be like a real economist. Like an economist that works in an academic econ department trying to publish in econ journals. I have a lot more fun just thinking about whatever interests me. And so, that drove me into sort of the tech policy world because I just have a natural interest in it. And a lot of the things I learned in grad school in terms of like industrial organization about... Basically advanced microeconomics, right? The different ways that these parties relate to each other. That made me really interested in sort of a lot of tech things. So I ended up blogging to procrastinate on my dissertation and so on, and ended up getting hired to do tech policy at the Mercatus Center.

Bret Kugelmass [00:13:08] Who reached out to you first? Because to me, these are always like two distinct worlds. Now, I happen to be exposed to the economics world through Tyler Cowen, but I come from the tech world, and before I moved to D.C., it was so difficult for me to connect with anyone outside of the tech world.

Eli Dourado [00:13:25] So, a guy named Jerry Brito who was at the Mercatus Center running the tech program there. And he reached out to me. He's now Executive Director of Coin Center, which does cryptocurrency policy here in D.C. So, he reached out and was like, 'Hey, let's have lunch." I wrote a paper for him. I was talking about, "Hey, maybe I'd want to do this full time." And he's like, "Yeah, great. We'll create a position for you." And they did. And sort of, the rest is history.

Eli Dourado [00:13:56] When he left to go found Coin Center, I actually took over his job and directed the program. Sort of around that same time, I got a real interest in moving beyond software, which was the main thing that we focused on, copyright and internet governance. Those are the issues we were talking about before. And I was like, "Well, we've got to do some stuff in the world of atoms, because that's what really matters." So, I started working on things like drone policy before there was like a really big drone industry.

Eli Dourado [00:14:29] Once I did everything I wanted to do there, I took my FAA knowledge and decided I want to do some supersonics policy, so I wrote a paper on supersonics. I ended up then getting in contact with a company called Boom which was building a supersonic airliner. One thing led to another. I ended up joining them as their first policy hire, first D.C. employee, and sort of ran their policy program for two and a half years or so.

Bret Kugelmass [00:15:04] Amazing. And okay, so they hired someone that came from an academic background for this, not from a lobbying background. Were you complemented or resourced to tackle the lobbying side? Or, was their thinking just fundamentally different on how to influence policy?

Eli Dourado [00:15:20] Yeah, we had a lobbyist on contract and stuff. And so, I was providing mostly strategic direction. I interfaced with the engineers a lot. One of the things that I think made me pretty successful in my job is I talked to engineers and really tried to learn what their challenges were.

Bret Kugelmass [00:15:39] That's all I hear about because that is a huge culture shock going from the ivory tower to the belly of a startup.

Eli Dourado [00:15:46] Sure.

Bret Kugelmass [00:15:47] Can you just reflect maybe on those first six months of getting your feet wet? Tell me how you felt, and maybe articulate to our audience the challenges and the frustrations of joining.

Eli Dourado [00:16:06] So, it was not only a completely new world for me... They were in Denver and I was in D.C., right?

Bret Kugelmass [00:16:15] When was this?

Eli Dourado [00:16:16] This was 2017. So, I joined on. I felt like I had so much to learn. Looking back on it, it's like amazing that they let me take this job at all because I knew almost nothing about airplanes. I knew some of the policy stuff that I had written about, but how airplanes work? What are the challenges that engineers face while doing this? What are the different constraints that they're trying to face? I knew very little of it. And I just had to learn a lot of it really fast. They told me I had a basically unlimited budget to fly back and forth between Denver and D.C., and so I went every month at least. When I was there, I would just like soak it up and talk to people and ask questions and really try to learn it. At one point, I bought an airplane design textbook and just started reading it. It was super useful to do that.

Bret Kugelmass [00:17:18] Let me ask you a question about that too, because this is something also that in my exploration of a new sector, I found textbooks to just be the way to get up to speed. But I hated textbooks when I was an undergrad. Like, keep them away from me. Well, you've been through a Ph.D. Did you always have a love for sifting through textbooks, or was this like a new strategy for you given your goal?

Eli Dourado [00:17:41] Yeah, this was new. I would not say in school that I poured over textbooks. In grad school, it's more journal articles anyway. Even if you have a textbook, it's like you get journal articles assigned and those are more important to read. But yeah, I agree. Textbooks are written so that anybody can pick them up and learn the material in them. And they're an extremely valuable and, I think, underutilized resource by a lot of people.

Bret Kugelmass [00:18:12] Totally underutilized. And I also think people read textbooks the wrong way. What I found actually to be super useful is reading textbooks backwards. So let's say power plant engineering, especially nuclear. They start with the atomic physics. But it's like, "This is so abstract." It's like, "Oh my God, my brain is hurting before I even start." But if you go to the back of the textbook, they talk about real power plants that are built, show you the real schematics. It's like, "Okay, this is something tangible." So, I read them backwards. I felt that every time that I wanted to get a more fundamental understanding of a specific part or component or system, going back...

Eli Dourado [00:18:50] Yeah, I didn't try that way. I went from the front on the airplane one. But yeah, it worked at least. I would not trust myself to design an airplane today, but I can talk to aircraft engineers.

Bret Kugelmass [00:19:04] And you know the right questions to ask.

Eli Dourado [00:19:04] Yeah, exactly.

Bret Kugelmass [00:19:06] Okay. I want to hear about some of the challenge, though, because startups are hard. You know what's harder than a startup? A hardware startup. You know what's harder than a hardware startup? A hardware startup in a heavily-regulated environment.

Eli Dourado [00:19:22] So, the biggest thing that I spent my time on was landing and takeoff noise. So, if you're building a supersonic airplane... A subsonic airplane has wings that are like this, but a supersonic airplane has wings that are like this, and that means you need more thrust to weight on takeoff.

Bret Kugelmass [00:19:44] Can you actually just re-describe that for the audio-only audience?

Eli Dourado [00:19:46] Sure, so the wings on a subsonic airplane are out wide whereas the wings on a supersonic aircraft are pointed more back. So, it's a narrower wingspan on the supersonic airplane, and that means you need a higher thrust to weight ratio on takeoff, which means you're going to be louder. And then the other thing is when you are cruising at full speed, any sort of cross-sectional surface area adds huge amounts of drag. And so you can't do the normal trick that subsonic airplanes do to get quieter, which is to increase the bypass ratio of the engine. So they make the engine wider, more fan. All that fan on the airplane is still generating thrust, but you can't have as much of that on a supersonic airplane.

Bret Kugelmass [00:20:44] I wondered why they do that. That's just for noise? It's not for like...

Eli Dourado [00:20:47] Well for a given amount of thrust, how fuel efficient and how loud is it, right? It's both. But noise is a huge deal, it turns out, in aviation. If you think about people who live under the flight path or whatever, like they complain all the time and so on. And so, if you tell them, "Oh, we're building a new supersonic airplane. Don't worry; it'll be a lot quieter than Concorde was, which was very loud." They're just like, "Well, yeah, but how quieter? I want it quieter than the subsonic planes." And you're like, "Well that is barred by the laws of physics." You really can't get quieter, probably, than a subsonic plane with today's technology, anyway.

Eli Dourado [00:21:37] And so, the question was, "How quiet could we get?" Legally, what were the requirements? They weren't clear at all. And we got to a good place with FAA, but then you still have the international standards. And aviation is a global market, so you've got to comply with everybody's standards. If FAA gives you one standard and Europe gives you another, they always end up coordinating. But if Europe gives you a strict, more stringent standard, you've got to go with the more stringent standard.

Eli Dourado [00:22:23] If we could just build Concorde today with modern technology, it would be an amazing plane. It would be more efficient, it would be quieter, it would be cheaper to operate, etc. But we've thrown all of the gains that we've had from computational fluid dynamics, from better materials like carbon fiber instead of aluminum, from more efficient engine cores... Which the engine cores get about 1% more efficient a year, 0.5% percent to 1% per year. So we've taken all of that in. And what the industry has done is every time that we get a new gain, they throw it into making the plane quieter. And so, all of the gains are almost all entirely going to make it quieter on takeoff and landing.

Bret Kugelmass [00:23:09] And what is the driver behind that? Because I can't imagine that there's regulatory ratcheting every single iteration, is there? Is this self-imposed?

Eli Dourado [00:23:20] Well, there is ratcheting on the subsonic side, I think in a way that makes complete sense. I ended up participating a lot at ICAO, which is the UN agency that does aviation rule coordination between all the different countries. And what they do there which kind of makes sense is they just basically say every few years... They'll look at how quiet are the late model airplanes given for their weight. And then, they just like, "Okay, we're just going to set the standard to be no louder than the late model planes." So what's demonstrated on the market as like a profitable aircraft, they're like, "Okay, you can't be louder than that anymore."

Bret Kugelmass [00:24:06] Okay, let's talk bigger picture. Who is driving that direction of optimization versus cost or speed or comfort or any of these other things? What's the force?

Eli Dourado [00:24:24] It's NIMBYs, right? It's like the people who live near the airport. Maybe they moved in after the airport already existed, right? They moved to the nuisance and they complained and so on. So, when I was at Mercatus, my friend Raymond Russell and I wrote a short paper just like documenting how concentrated the complaints are. So, if you look at DC, the people in the flight path of DCA, up in like sort of Northwest DC by the river. There was one household that was responsible for 78% of the complaints that DCA got in 2015 or something like that.

Bret Kugelmass [00:25:08] But to me, this is upsetting. And maybe this is just a broader conversation... How that translates to real political or regulatory power. So for instance, I'm still having trouble bridging the connection between individuals or even thousands of individual home complaints to somebody, to that translating to an international standards body's standards changing. And why isn't there a countervailing force where clearly you could demonstrate mathematically if those gains were instead of translating noise reductions changing to fuel cost reductions, how is that not a pot of money that could go to influence that standards body for that being optimized?

Eli Dourado [00:25:49] Yeah. I think that for subsonic planes... If you take subsonic planes on their own, the fuel improvement and the noise reduction kind of went together, so nobody was really against it being quieter over time. They were just like, "We'll figure out how to increase the bypass ratio a little bit more, and it works out great for everybody."

Bret Kugelmass [00:26:09] I bet somewhere in the system there's an engineering tradeoff.

Eli Dourado [00:26:12] Somewhere, it's true. There's got to be. But for the most part, they came together, and so there was not really much resistance. When it got to supersonics, it got really interesting, because obviously everybody wants it to be quieter, but then I think a lot of the regulators, particularly the European ones, they would use noise as a sort of a cudgel. What they were very clearly doing was looking out for European industry. So, companies like Dassault and Airbus had zero plans to do anything on supersonic at all. And they saw these three or four startups in the US all pursuing supersonic technology. And they were like, "Well, we can put a stop to that."

Bret Kugelmass [00:27:01] And is there an economics term for this where the incumbents create these artificial moats, but specifically... Or not artificial, the very real moats, but almost through like a misdirection? So, claiming it's for one purpose, but really it's to protect their entrenched position?

Eli Dourado [00:27:18] Yeah, I mean, the general phenomenon is called... Not of the misdirection part, but in general it's regulatory capture. So, the regulator is acting on behalf of the industry, basically.

Bret Kugelmass [00:27:30] And what about the misdirection part. Is there a term?

Eli Dourado [00:27:32] I've never come across anything like that.

Bret Kugelmass [00:27:34] Because I think this is a lesson. We're talking about aviation right now, but I'm sure our listeners can think of how this might apply to other topics as well.

Eli Dourado [00:27:42] Yes. I don't know of a good term for it.

Bret Kugelmass [00:27:47] Yeah. Well, maybe you could write a book someday.

Eli Dourado [00:27:48] Yeah, exactly.

Bret Kugelmass [00:27:49] Okay, so we talked a bit about your experience in aviation. I mean, we could spend hours more talking about it there, but tell us about your transition to your current role. But really highlight how your focus has changed.

Eli Dourado [00:28:19] Yeah, I left Boom in 2019 and took a few months to decompress and figure out what I wanted to do. And I ended up joining the Center for Growth and Opportunity, which is led by my colleague Chris Koopman, who was in the office next to me at Mercatus. And so, we knew each other. We had many talks about what's the right way to run a university research center and so on.

Bret Kugelmass [00:28:41] What university is this?

Eli Dourado [00:28:42] We're at Utah State University. I'm here in the DC area, but the org is there. And I'm going out. to Utah twice in the next couple of months, so it's great.

Bret Kugelmass [00:28:57] What part of Utah is it?

Eli Dourado [00:28:57] They're in Logan, Utah, northern Utah. So, just talking with Chris, I was like "What I want to do is a lot more of figuring out how to end what they call The Great Stagnation." A lot of industries are stagnating, and in some cases, declining. Supersonic aviation is one of those, but nuclear, as you know, is also extremely stagnant. I want to tackle a lot of these issues.

Eli Dourado [00:29:36] Sort of the first thing I wanted to take on was permitting. If you've ever heard of the law, NEPA, I've just done a ton of digging on what is actually going on with NEPA and why do we have to do these multi-thousand page environmental impact statements that nobody reads supposedly to inform the public and so on in all these projects? But in general, I'm looking at what are the big chunks of GDP that are big because of relatively low productivity growth?

Eli Dourado [00:30:21] Naturally, if you had a sector of the economy where the productivity growth was outpacing the rest of the economy, it would tend to shrink. It would get smaller. If you were getting 100X more productive a year or something like that, it would shrink to almost zero. Like, it would get to almost zero. So if you see a really big sector of the economy, it's a pretty good bet that it might be big because it's relatively less productive relative to the rest of the economy.

Bret Kugelmass [00:30:50] So, this would be like education, healthcare, the tech stuff.

Eli Dourado [00:30:51] The ones I'm really focused on are health, housing, energy, transportation.

Bret Kugelmass [00:31:02] There are a couple questions I want to ask about The Great Stagnation, but before I do, how is it that a school in Utah came to house what I consider an extremely important mission? Like, how'd that become the focal point?

Eli Dourado [00:31:18] So, we're based at the Huntsman School. I wasn't there at the founding, but I think there were just some donors who were affiliated with the school and were like, "We want this org to be founded here."

Bret Kugelmass [00:31:28] And you and I found our connection through almost like another spin off movement... Progress, what did we call that?

Eli Dourado [00:31:42] Yeah, I don't know. I don't know if there's a good name. There was a progress studies idea going around for a while.

Bret Kugelmass [00:31:48] With Jason Crawford...

Eli Dourado [00:31:49] Jason Crawford, yeah. He's a friend, so I definitely think we both travel in those circles and affiliate with that. I don't know if there's a good name for it. I don't know if it needs a name though. I think it's almost better if it's a little bit organic.

Bret Kugelmass [00:32:06] Right, because then we can't be the subject of attack by...

Eli Dourado [00:32:09] Well, yeah. I mean there are lots of things that can go wrong once you institutionalize too early.

Bret Kugelmass [00:32:13] Yeah, well that's a whole other area to talk about. Is there consensus? Maybe there's a lack of interest, but is there consensus that there is a Great Stagnation happening, or is that a hotly debated topic?

Eli Dourado [00:32:30] I think there are multiple positions. One is, "No, we're not stagnating. Look at all that information technology stuff we have. That's actually where the value is. When you think about where we spend our attention, our time, it's on Netflix and stuff, and it's never been better. And all the gains in computing, they're not properly measured in the economy, and so on." That's like one view.

Eli Dourado [00:33:00] I think another view is, "Yeah, growth has slowed down. But you know what? We're like a fully grown country at this point. We picked the low-hanging fruit. Ideas are just getting harder to find. Obviously, we can't repeat the gains that we had in the mid-20th century where we had urban sanitation and telecommunications and electricity deployment. Very fundamental things, and you can't ever repeat those gains again." So, that's like a second view.

Eli Dourado [00:33:42] And then, a third view, which is my view is like, "All that being true, we're still stagnating, and it's in large part because of choices that we're making as a society to privilege other things besides economic growth, like people moving near an airport and deciding that they don't want it to be loud anymore. So, privileging the status quo or sort of the anti-growth ideas instead of just pursuing growth as fast as we can."

Bret Kugelmass [00:34:26] And is there a darker side to your view as well? Almost like a bicycle, if you're not going forward you're falling over on your side? Are you afraid that this stagnation will lead to a collapse of some sort, or do you think it'll just remain status quo?

Eli Dourado [00:34:40] The thing that worries me is political stability. This is getting back to the dissertation. In Chapter 1 of my dissertation, I wrote about how stability in society is driven in part by there just being a social surplus that we sort of all get. And if you don't get anything, then you revolt.

Eli Dourado [00:35:10] So, you could think about this in terms of growth. If the economy is growing, everybody's life is getting a little bit better every year. At least in expectation, right? It's like, "I'm going to go along with that. My life's going to be better next year, and I want to participate."

Bret Kugelmass [00:35:31] It discourages violence.

Eli Dourado [00:35:31] It discourages defecting from the system. And if we get a zero-sum economy because we're not growing anymore, then the economy is zero sum, right? Or if it's negative-sum, if we're shrinking, then you get different behaviors. You get grasping behaviors. That's like the populism that we've seen stirring up.

Eli Dourado [00:35:58] I think it's driven by the fact that if you look at the bottom half of the income distribution, they really are stagnating. It's more than the GDP per capita statistics would show. It's growing more slowly. From that perspective, it's unsurprising that we're seeing this populism blowing up a little bit. But I think it's pretty dangerous. I think we should try to get things moving again pretty fast.

Bret Kugelmass [00:36:28] I agree, and I actually think it's more dangerous than we realize. Because I think there is a layer of... I don't know if pacifism is the right word, but I almost think of like a pacifier, which is this iPhone that we have, which is so distracting. I think that is actually covering up a lot of the societal discontent that is poised to create real, real issues.

Eli Dourado [00:36:51] Yeah, I mean, it worries me. That's the thing I worry about.

Bret Kugelmass [00:36:54] And drugs. I mean, there is a reason we see so many opioid overdoses, right? Because people are trying to distract themselves maybe from this general societal stagnation.

Eli Dourado [00:37:05] Yeah, I think in general, just like people feeling disaffected or not wanting to do anything with their life. I mean, it's like a really bad sign.

Bret Kugelmass [00:37:14] How do you measure this? Are there other indicators? I mean, something that I just have sitting in the pit of my stomach is that there aren't too many inspirational characters out there. Like, we have our Musks, right? Back at the turn of the century, there were engineer heroes for all sorts of like just giant civil works projects. There was so much to be inspired by and so many different individuals across the world simultaneously demonstrating leadership through innovation. We don't have that much right now, do we?

Eli Dourado [00:37:54] It's like Hollywood celebrities to some extent. Online influencers. I mean, I don't know. There are pockets of it. Like, there are some great YouTube channels where you can learn engineering or where you can watch people doing cool things. But yeah, for the most part...

Bret Kugelmass [00:38:16] Well, I'm talking about heroes.

Eli Dourado [00:38:16] Yeah, you're right.

Bret Kugelmass [00:38:17] Like people who have done something that is just so awe inspiring.

Eli Dourado [00:38:22] And with the media being so competitive these days with the internet, it's giving the people what they want which is to shit on their heroes, or shit on the people who are supposedly the heroes, right? And so, any time somebody achieves something great, there will automatically be a news story on like why this person is not that great.

Bret Kugelmass [00:38:45] Yeah, I know, that's crazy. But to you, you've studied this topic and you sit in some communities that get together and talk about this topic. What's the next step? What's the next phase for change or reformation? How do we think about moving forward from our foundational understanding to affecting the world?

Eli Dourado [00:39:12] I mean, I think fundamentally it comes down to the behavior of elites in society. What do elites wants?

Bret Kugelmass [00:39:26] Can you draw that connection, though? Is it because they have so much extra influence behind the scenes?

Eli Dourado [00:39:31] Yeah, well, we live in a democracy, obviously. And democracies are really good at giving the median voter the thing that the median voter wants on the stuff that the median voter cares about. And so, on culture war topics or whatever... Anything that's the hot issue that the average person cares about, they're going to get what they want. There's almost no point in trying to influence that except, I guess you could try to influence the views of the median voter. But within the political system, it's kind of a constraint. We're going to give the median voter what they want on the things that they care about.

Eli Dourado [00:40:06] But the median voter doesn't care about most things. As soon as you get into a technical topic or something obscure, they don't care. And so, who has influence? It's the elites. It's the opinion shapers, it's the people in industry. It's people in that sphere. And if you can create a consensus among that class of people that really we need to be prioritizing growth above a lot of these other petty things, that's how you drive change.

Bret Kugelmass [00:40:47] I think I tend to agree with that. But now, almost the harder question is how do you influence this group? Are there tools? Are our ideas strong enough to stand? Is a good idea powerful enough on its own when properly articulated to act like a virus and and actually change the world? Or, do we have to then layer other tools on top of our ideas. A tool could be a conference where you bring people together. A tool could be a think tank. A tool could be you buy a newspaper. I mean, are there others?

Eli Dourado [00:41:29] There are obviously a lot of things you can do, right? I don't think it's like one idea that you can just sell on its own to everybody. One thing that has been really important, I think, in the last couple of years... So, if you take people on the left who care about climate. They passed the infrastructure bill, they passed the Inflation Reduction Act. There's tons of money flowing into industry. And they're realizing, "Oh, we can't build. Like, we have the money." They've been fighting for the money for decades or whatever, and they've got it now, and they're realizing they can't build. And so the message to them is like, "Look, we've got to be a country that builds again."

Eli Dourado [00:42:12] You send that message around with the right... You know, China, and global competition, and being able to sort of compete with... China has built 40,000 kilometers of high speed rail since 2008. We have built zero, despite funding it. So, there's the California experience, but there's also... In the 2009 stimulus, there was $8 billion earmarked for high speed rail, and we got like zero new miles of high speed rail service out of that. We got like 20 miles of track in New Jersey somewhere that's like high speed ready.

Bret Kugelmass [00:42:59] Actually, I have a question. So, this message of, "Okay, we have to build." I remember when Andreessen came out with his paper, let's say, a couple of years ago. Was he a product of this idea and this community trying to influence the elites? Was that the result of it? Or is he part of the community that is trying to get the message out there?

Eli Dourado [00:43:20] I think he's trying to get the message out. He was not the first person to sort of take that perspective. It wasn't like an entirely original thing for him, but he's like certainly...

Bret Kugelmass [00:43:38] Popularizing it.

Eli Dourado [00:43:38] Exactly.

Bret Kugelmass [00:43:41] I'm trying to understand the mechanics of this. So, if it is that you come up with this idea and you meet with 20 people at like a private meeting in San Francisco, and then one of those people happens to be an associate at Andreessen Horowitz, and he reiterates that idea. And then, Andreessen, responding to his own set of incentives thinks, "Oh, I want to brand myself as someone coming up with innovative ideas. I've already got this huge platform," and he then broadcasts that further, and that is naturally how an idea spreads. Or, does it have to be that you have to sit down with Andreessen and a few other people and say, "No, guys. We need a sustained effort. Like, this message is good this way, but not good that way. Oh, it works with that audience. And you tackle that audience with this message." How coordinated does it have to be or do people responding to their own incentives aid in your scalability of influence among elites?

Eli Dourado [00:44:42] I think that it's pretty organic right now. The question of what it should be, whether it should be more coordinated, is another one. But so far, you have people like Mark saying we need to build. People like Ezra Klein of The New York Times, the top left-of-center pundit, maybe in the country. And like, there's agreement that we need to build. There are disagreements about the details and so on. I think that's all been pretty organic and just people who, a lot of them, identify with this "progressy" sort of thing and who have been pushing this idea, and it's getting traction.

Bret Kugelmass [00:45:30] And you're not going to say it, but I'll say it. A lot of this actually traces back to your ideas.

Eli Dourado [00:45:33] Some of the stuff on on NEPA, particularly. I think I was the first to try to write about that.

Bret Kugelmass [00:45:40] No but really, the Ezra Klein megaphone. A lot of that comes from your brain, your thinking. And so, what I want to better understand is can your brain continue to propagate and scale to affect change in a time period that actually matters? Or, do we have to do things to now supercharge these ideas at certain levels of propagation out through the system?

Eli Dourado [00:46:10] I am constantly trying to figure out what's the best strategy for getting growth. I do think it helps to have a lot of fellow travelers and a lot of people echo chambering. And I don't do it for the credit, personally. I want the ideas to sort of take off and have a life of their own and make a big difference in the world. But I think through just sort of getting more people excited about the fact that...

Eli Dourado [00:46:49] It's kind of like a bad news, good news situation. The bad news is we're stagnating and it's because we're doing stupid things. The good news is because we're doing stupid things, rather than just like a lot of economics that we've picked the low-hanging fruit, then the good news is we can fix it. We can choose not to do those stupid things.

Bret Kugelmass [00:47:07] Assuming free will.

Eli Dourado [00:47:08] Yes, yes, yes, yes. We had that one.

Bret Kugelmass [00:47:11] No, no, I get it. Yeah, it a bad news, good news situation. I think something that people in our community are beginning to dissect... And even the tech world in general over the last decade has shown an increased interest in policy. Whereas, Silicon Valley used to like to stay out in California. Now Silicon Valley is dipping their fingers into DC. And I think this is good in some ways. Not good in others, because these are very powerful institutions and they have tremendous amount of resources. But it is almost building out a science of influence and change. Which, I always do think that these big people get lazy and then more entrepreneurial people can now take that science that they've developed and apply it as a tool to affect their own interest or change. And then I guess, you just have to hope that the people who are most motivated are also the best intentioned.

Eli Dourado [00:48:22] Yeah. I think the AI stuff that's been going on lately... There was an AI hearing a couple of months ago now where Sam Altman testified and Gary Marcus testified and someone from IBM testified. And they were all just like, "Please, regulate us."

Bret Kugelmass [00:48:44] But that's the classic trick. They say that in public, right?

Eli Dourado [00:48:45] But I think the engagement there on Sam's part, I think was very naive. I think he thinks we're going to go right down there, ask for regulation, and we're going to regulate to prevent an AI doom scenario. And that's not at all what Congress is interested in or politicians are interested in. They're interested in regulating to deal with all these culture war issues, right? All this like, "Oh, is the LMM too woke or not?"

Bret Kugelmass [00:49:18] Large language model.

Eli Dourado [00:49:18] Right. So, I think that's a super naive thing. And Gary Marcus just hates tech, I think and wants to slow it down, and so on. And so, no one was in that hearing saying like, "This is a thing that has enormous potential and we need to let people experiment and see what happens before we do anything that could squash it or slow it down or burden it in any way."

Bret Kugelmass [00:49:56] And when these hearings come up, do people cite historical examples? I mean, this is something that we focus on in our conversations. Aviation and nuclear; these are things that had such incredible promise and are warning stories. "Hey, don't do this with other emerging technologies. Don't stymie them before they had a chance to blossom."

Eli Dourado [00:50:15] You know, I think with the AI conversation, literally people have said "We need an NRC for AI."

Bret Kugelmass [00:50:20] Oh, my God.

Eli Dourado [00:50:21] Literally, people have said we need NEPA for AI. So, it's just like they these models. A lot of people don't see it the way you and I do that we need this innovation. We need to have a society-wide conversation about any innovation that anybody might want to do before we allow it to go forward.

Bret Kugelmass [00:50:46] Let's touch upon energy. I just realized we haven't talked really much about energy. For our audience, let's get your take on it. What are your... I don't want to say unique points, but what are the points that you want to drive home from your perspective about the world of energy and where it's been, where it could go, what we're doing right, what we're doing wrong, what we should do?

Eli Dourado [00:51:14] So, if you look at energy stats in the US, we peaked in per capita energy consumption in 1977, 1978. And since then, we've consumed less energy per capita. GDP is still going up, so we're doing more with less. And my overall message is like, "Well, let's try doing more with more. Let's have more energy and be more efficient about it, but also have more of it."

Eli Dourado [00:51:41] If you look at a country like Iceland, which consumes about twice as much energy per capita as the US, they're an aluminum smelting superpower because they have super cheap electricity. So overall, I just want people to think about energy. Energy has been wrapped up so heavily with fossil fuels, with carbon emissions, and so on. It doesn't have to be that way. As you know, we have nuclear, we have geothermal, solar has had very impressive panel price declines. It turns out electric motors are super efficient and getting better at an amazing rate. And so, there's a lot we can do if we just sort of embrace this idea of, "we need to have more."

Eli Dourado [00:52:37] As I've been thinking about nuclear, I don't think there have been great policy proposals for how we get nuclear going again. I don't know; I think you do have to dive into the weeds pretty far before you find something. The things that I'm looking at are...

Eli Dourado [00:52:59] So, we have a national nuclear laboratory called INL, Idaho National Laboratory. They're job is to build test reactors, and the last test reactor that they ran was in 1967. So, over 50 years of not building test reactors. And maybe next year, maybe, they'll have the MARVEL reactor, but that's still like a huge gap.

Eli Dourado [00:53:28] And if you look at a problem that companies have when they go to the NRC, it's that they'll have some modeling or something that shows that the reactor is going to perform in a certain way. And the NRC is like, "Well, how did you validate the model?" Or like, "What is the empirical data on this?" And it's like, "Well, we need to build a reactor, to test it, to validate it to get the empirical data. But we can't do it without your license." So, there's a chicken and egg problem that INL is in a perfectly poised position to solve by just building a lot of test reactors, or even contracting with companies to build their prototype reactors on their facilities, and that hasn't happened. So, that's like one example.

Bret Kugelmass [00:54:15] So, I want to hear your answer of why. But the first thing we should mention is INL, Idaho National Labs, used to be called Argonne West. So, Argonne was one of the National Labs that was like one of the premier... Like Fermi in like Chicago, and invented nuclear technology. And then they said, "Hey, we want to solve this issue about being able to build a bunch of reactors without having this chicken and the egg of regulation. So, the easiest way to do that is buy an area of the desert that is so remote that's it's the size of another state..." I forgot which state, Rhode Island, Vermont. "Buy an area that's so remote that you can just do whatever you want out there. Blow it up." And I think they did blow up half of their reactors, which, by the way, is how you make rapid progress in the hardware space, through destructive testing.

Eli Dourado [00:55:03] Iterating. You've got to iterate.

Bret Kugelmass [00:55:04] And so, that's how they solved this problem. They still have all that land. The remoteness has not changed, but there is such an apprehension among everyone that I have met in the nuclear industry, including its most staunch advocates, including the startups themselves benefit from this. They don't want to just go in the middle of the desert and blow something up. Why?

Eli Dourado [00:55:28] I don't know. I think a lot changed around 1970. For example, NEPA passed and was signed by Richard Nixon on January 1st, 1970. I think of that as the start of the era. But then, the anti-nuclear movement sort of picking up around then. Something in the culture, I think changed around then. I think it has seeped into this ultra caution that we see in the nuclear industry. Sort of being steeped in that culture, I think a lot of times people see like, "Oh, if there's an accident or something..." Even it's like you say, it's controlled, it's purposefully in a remote place or whatever, they just would see that as negative for the industry or negative for themselves? I don't know.

Bret Kugelmass [00:56:31] Without having the people who are most economically motivated to try to create policy change... Without having them interested in it, how do things never change?

Eli Dourado [00:56:40] Yeah, that's a great question. I don't know. I'm not sure yet. The other thing that I think about a lot in the nuclear industry is analogizing it to airplanes. So, airliners also have a Part 25 regulation for type certification for airliners. It is super stringent. Like, billions of dollars to get an airliner through that regulation. The thing that I've been coming back to lately is that if that was all we had in the aviation industry, we'd got no progress in aviation. But in aviation, we also have smaller planes. Those are Part 23 rules. They're still onerous, but much more manageable. We have experimental planes. You can basically build an experimental plane. Like, send off a sheet of paper to the FAA and they'll give you an experimental certificate. We have light sport aircraft. That is even less onerous, believe it or not, than the Part 23. And then, you have ultralight aircraft, which is like, FAA will happily have no problem letting you kill yourself on an ultralight as long as you do it during the daytime and not over people.

Eli Dourado [00:58:05] So, you have this sort of like release valve for the regulation. And what it means is that when you go to start a company that's building an airliner, for example, you have engineers on staff who have built an airplane before. They have all that experience from building experimental planes or Part 23 planes. The Part 25 stuff is more stringent, but they can do it because it's just an extension of what they've been doing. And that is one of the things I think we don't have in nuclear.

Bret Kugelmass [00:58:40] No one's ever built anything.

Eli Dourado [00:58:40] No one has ever built anything. And there's no supply chain for a lot of things.

Bret Kugelmass [00:58:47] You're so right. Okay, so now I think how do we change that? My mind is going two different directions. You maybe pick one to expound on. Is there this idea of creating a sandbox where anything goes because we set up a sandbox boundaries appropriately? So, that's one direction maybe you want to go. Or, the other one is can we create a set of generic rules that apply across industry, across the board?

Bret Kugelmass [00:59:16] So, let's say with the noise. I deal with, for 5% of my waking hours, construction noise at a certain decibel level, and that is accepted by society. So, can we just set a decibel level and a percentage of your year and that applies to construction, aviation, that type of thing? Are there rules that we can do to make things... And then, we appeal to the interests of certain industries that benefit to use their lobbying power, to use their policy power, to use their messaging power to make their incentives that they would want to do this across other industries. Okay, but you get my idea. Work with me on either one of those.

Eli Dourado [00:59:55] Yeah, sure. I mean, we can go into either one. So, when I was working on supersonics, I haven't talked about it yet, but there was also the sonic boom issue. So we have, over the United States, a speed limit on airplanes. It's not like you can make a boom that is so loud or whatever. It's not a noise limit. It is a speed limit. And so, I definitely had the thought that you had before that it was just like, "Wow, sonic booms are way less annoying than motorcycles, leaf blowers, all this other stuff." Especially cruising at 60,000 feet, right? You would hear it, but it is so much less annoying than all these other things.

Eli Dourado [01:00:39] Like, I went to NASA, I sat in the sonic boom chamber. They played me the sort of loud boom and like a muffled boom for the plane they were designing. I was just struck by like, "That's not that annoying." Even the full boom was not that annoying, certainly, in comparison to the other sounds we had. I don't know how to sort of create the level playing field across all the different things. There is a differential benefit between all these different activities that might be producing noise as well.

Bret Kugelmass [01:01:15] Sure, we can add that formulaically to this level playing field. We could calculate benefit and apply weighting factor as well. That would probably go in favor of it.

Eli Dourado [01:01:22] Yeah, absolutely. Way more than like a leaf blower.

Bret Kugelmass [01:01:29] Exactly, exactly.

Eli Dourado [01:01:32] You could use an electric leaf blower. It would be quieter.

Bret Kugelmass [01:01:34] Okay, now I'm going to make you look at the other idea as well. So, the sandbox idea.

Eli Dourado [01:01:41] Yeah, I think the sandbox, you could have it two different ways. One is you could have something like INL actually comes open for business. And they actually say, "Hey, Bret, if you want to build a nuclear reactor here, it's yours. Go for it." And that would be an amazing turn for them, but like, they could totally do that. And I would argue they should do that. So, yeah. That's, one way to do it.

Eli Dourado [01:02:17] And the other way to do it is to have a class of reactors... I don't know how you'd draw the cut off, but either because of small size or not having very much fuel onboard or whatever it. Say, microreactors. Like, below a certain threshold, maybe NRC shouldn't have jurisdiction, right? Maybe it should go back to the states. And so, every state can decide what the rules are. And I think you could see some like very small reactors getting built and there being a market for stuff that replaces a diesel generator or something like that.

Bret Kugelmass [01:02:59] Just like your ultralight example, I guarantee you we would just... Like, with Last Energy, if there was a rule for that, even if it was beneath the threshold of what we want to develop commercially, we would build a prototype reactor in that reduced regulatory environment, just to staircase it.

Eli Dourado [01:03:17] Just to have experience, right. You give your team a big win, and they can say, "I've built a nuclear reactor before."

Bret Kugelmass [01:03:27] Okay, well, there are some great ideas. We're going to keep this conversation going over beers, but before we wrap up with our audience, any idea or any ideas that you just want to leave the audience with?

Eli Dourado [01:03:42] Don't be complacent. We could be growing a lot faster. And the compounding effect of growing faster, right? I always think about, say, 2075, right? Let's say I have like 50-ish years or so left. What is the world going to look like then? It really matters whether we grow at like 1% versus 2% versus 4%. Those worlds are completely different from each other. And I want to see what happens if we get to 4%. If we could grow 4% a year for the next 50 years, that is a wild, wild world.

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