The Biggest Disruption Is Yet to Come — ft. Justin Wolfers

Episode Overview

• The episode, framed as a look back from December 2025, evaluates the economic performance of a hypothetical second Trump administration, distinguishing between policy inputs and economic outputs.
• A central theme is the economic impact of artificial intelligence, debating whether it will cause massive job displacement or usher in a new era of productivity, and criticizing the administration's hands-off regulatory approach.
• The discussion breaks down the true economic harm of tariffs, explaining how they permanently reduce real wages rather than just causing a temporary spike in inflation.
• The hosts and guest critique how constant political outrage distracts from substantive, long-term policy debates on critical issues like AI and trade.
• The conversation concludes by reflecting on the broader decay of American institutions and global leadership compared to more stable, well-governed nations.

Key Concepts

• Inputs vs. Outputs Framework: An administration's performance can be judged by its "inputs" (the quality of its policy process, advisors, and institutional stability) and its "outputs" (the resulting economic data). Poor inputs can signal future risk even if outputs appear stable.
• AI's Economic Fork in the Road: AI is presented as the most significant economic force of the decade, with two potential paths: a utopian one where it acts as a labor-complementing technology that boosts productivity for all, or a dystopian one where it is a labor-substituting force that causes mass unemployment and enriches a few monopolistic companies.
• The Role of AI Regulation: The administration's anti-regulation stance is viewed as a critical failure. Thoughtful regulation is positioned as the key mechanism to ensure AI's benefits are distributed broadly across society rather than being captured by a handful of tech giants.
• The True Cost of Tariffs: Tariffs are explained not as a one-time inflationary event, but as a permanent reduction in national prosperity. They raise costs for businesses and consumers, but because they don't increase productivity, wages do not rise to match, leading to a long-term decline in real wages.
• Distraction by Outrage: A major failure of the administration is its tendency to create daily controversies that consume media attention, crowding out essential and complex policy discussions on issues with long-term consequences.
• Historical Parallels for Technology: The potential impact of AI is compared to past innovations. The ATM transformed bank teller roles without eliminating them, while the word processor completely replaced the typing pool profession, illustrating the uncertainty of AI's effect on the labor market.

Quotes

• At 0:19 - "I was so pissed off that I poisoned his cookies and that motherfucker killed my father." - Scott Galloway tells a dark, humorous story about receiving coal from Santa as a child.
• At 3:24 - "Go." - Scott Galloway shares his favorite quote from The Devil Wears Prada, using it to describe his impatience with Uber drivers who don't start driving immediately.
• At 6:13 - "I look at the output they produce and I give them a grade, and then they come to my office after and say, 'But Professor Wolfers, this isn't fair. I put a lot into it.'" - Justin Wolfers uses an analogy from teaching to distinguish between judging performance on inputs versus outputs when assessing an administration's economic record.
• At 14:00 - "Are we headed for labor chaos, or new markets that absorb the shock?" - Scott Galloway poses the central question about the future impact of AI on the job market, asking whether it will be a destructive or creative force.
• At 28:22 - "That to me is the big question for economists is to what extent is this new technology going to fundamentally transform the world in which we live?" - Ed Elson frames the central economic uncertainty around AI's long-term impact.
• At 29:15 - "Regulation is bad. It basically means you're anti-AI or you're anti-capitalism. And so we're just going to say, 'Nope, the chains are off, let it run its course.'" - Ed Elson summarizing what he perceives as the Trump administration's simplistic and dangerous philosophy on AI regulation.
• At 29:35 - "The most fundamental failure is that the outrage of the day... crowds voices, including yours and mine... out of the most important issues of the day." - Justin Wolfers criticizes the administration for prioritizing daily controversies over substantive policy discussions on topics like AI.
• At 30:15 - "From a domestic economic policy perspective, AI is, I think by any measure, the most important economic change of the day, probably of the decade, and possibly of the first half of the 21st century." - Justin Wolfers emphasizes the monumental importance of getting AI policy right.
• At 32:27 - "AI... will have a huge impact on society, but the winners will be all of us, that very few companies will be able to sequester shareholder value and that it'll be absorbed by the general public." - Scott Galloway presents a thesis that AI, like previous general-purpose technologies, will ultimately benefit society broadly rather than just a few corporations.
• At 39:21 - "When it's tariffs... costs for the boss have gone up. What I produce didn't get more valuable... There's no reason for him or her to pay me a penny more. So prices go up, but my wage never catches up." - Justin Wolfers explains the fundamental difference between tariff-fueled inflation and demand-driven inflation, highlighting the permanent negative impact on real wages.
• At 51:47 - "What are the themes that you think will drive the economy in 2026?" - Ed Elson asks Justin Wolfers for his predictions on the key economic drivers in the coming year.

Takeaways

• Evaluate leaders on both policy substance ("inputs") and economic results ("outputs"), as a sound process is a better predictor of long-term success than short-term data.
• Recognize that the future of AI is not predetermined; thoughtful policy and regulation are essential to steer its development toward broad societal benefit rather than monopolistic control.
• Be mindful of how daily political controversies can be used to distract from crucial, long-term policy debates that have a far greater impact on your well-being.
• Understand that tariffs impose a permanent hidden tax on the economy by reducing the real purchasing power of your wages over the long term.
• The impact of new technology on jobs is not guaranteed; it can either complement human labor by creating new roles or substitute it entirely, a critical distinction to watch for with AI.
• Strong, stable government institutions and consistent global leadership are foundational to long-term economic prosperity and should not be taken for granted.