Tomas Pueyo

Auren Hoffman (00:00.656)

Hello, fellow data nerds. My guest today is Tomas Pueyo. He is the author of the widely read Uncharted Territories blog, which by the way, I read religiously, and where he analyzes global trends in technology and politics and in economics. Tomas gained international recognition in 2020 for his data-driven analysis of the COVID-19 pandemic with his article, Coronavirus, Why You Must Act Now, which reached over 40 million views and was translated in than 40 languages. Tomas, welcome to World of Dazs.

Tomas (00:33.442)

Thank you, I'm super, super excited to be here.

Auren Hoffman (00:35.746)

I'm super excited as well. Now, you write a lot of like really interesting series. You wrote a series of like geo history in a bunch of countries. There's like, you you covered like Mexico, Jamaica, Hungary, Chile, beyond the obvious, what are some of the major geographic factors that determine power in history?

Tomas (00:57.058)

think people don't realize how much this is the case. That's why I'm looking so much into geohistory, because it impacts so much of what we do today and where we live. For example, everybody talks about how Northern Europe, for example, is richer than Southern Europe because of maybe Protestant ethics, work ethics versus Catholic. And I don't think this is true at all.

And you can see it, in fact, by geography, the Northern Europe is super flat. That's right. That's right. It's the highest density of navigable waterways in the world. And why is this the case? Because you have the Alps that stop all the moisture that comes from the Atlantic. And then it creates snowpacks, which then release these water little by little into the Northern Plains.

Auren Hoffman (01:33.358)

at these navigable rivers and stuff. Yeah.

Tomas (01:55.904)

And so you end up having a very, not very intense flood driven rivers, which means that you can navigate them. And navigation is extremely important. People don't realize this, but if you reduce the cost of transportation by half, you can increase the wealth of a region by 10X. And the reason is because...

If you reduce the cost by half, you can go twice the distance before your goods are not profitable anymore. And that means the distance squared for the surface you can cover. And that means because there's network effects between all the nodes that you can connect, now you can square that again for the amount of trades value that you can produce.

Transportation is extremely, extremely important. Northern Europe has perfect transportation thanks to these rivers, also flat plains, so perfect for agriculture. And these are some of the main reasons why it's so rich. Whereas in the South, you don't have this. You have lots of mountains. And so you cannot transport on rivers. You don't have flat plains, so you don't have as much agricultural output. And so you can start understanding this way.

how geography impacts all the other parts of the world, and it's most of it really.

Auren Hoffman (03:26.914)

And is this like you have a whole series on like Mexico and Mexico is extremely hard to navigate internally. Obviously, there's like ports on the oceans and on the Gulf and stuff. Is this why like kind of a theory like why Mexico is just poorer than the US is just is just basically it's just very hard to navigate internally.

Tomas (03:49.944)

That's right. So I mentioned that Northern Europe has the highest density of navigable waterways. The US has the biggest surface that's covered by navigable waterways, which is because of the Mississippi. The biggest production of agricultural produce in the world, and also very cheap to transport. Then you compare this with Mexico. And Mexico is basically like the Rockies in the North. They extend in the South, and it's all mountains.

So everything is 10 times more expensive, most notably transportation. You cannot transport stuff in Mexico. You cannot build infrastructure easily. It's extremely expensive. So you cannot transport stuff. And so what happened in Mexico is the center is very fertile because even if it's on the mountains, it's very, it's much farther south. So this area would be much warmer, but because of the mountains is more elevated. So the temperature is great.

The temperature is great for agriculture and living. In fact, Mexico City is fantastic for living. The temperature is fantastic throughout the year. The mountains also catch a lot of rain. And so you have perfect temperature, lots of rain, and Mexico, Central Mexico has lots of volcanoes. And as a result, for millions of years of volcanic activity, you end up having an extremely fertile ground. So much so that, for example, the Aztecs,

in ten Arctic land, they could have seven harvests a year. Seven harvests a year. So massive amounts of people because it's extremely fertile, but because transportation is nearly impossible, you don't have any wealth. You don't have any trade. And the US is basically the opposite. You have massive amounts of...

Auren Hoffman (05:36.348)

So like in Mexico City, was just like a country was just Mexico City and not anything else, that's actually a pretty impressive country. It's just like the rest of Mexico makes it really hard to do things.

Tomas (05:47.95)

That's right. think 60%, 60 % or something like this, or 80 % or something like this of the country, of the population is concentrated in central Mexico in a small area of 10, 15%. Everything else in the North is basically desert. Everything else in the South is basically jungle. And so it's very, very, very concentrated. Whereas in the United States, have plenty in the Mississippi basin, plenty of population. then the coast, obviously, both of them with massive plains that were much easier to

to farm, but also much easier to build railroads or use navigable waterways for.

Auren Hoffman (06:25.892)

People often talk about the US as being this kind of like, you know, one of the more unique countries. The other country you always hear people talking about is Argentina. Yet Argentina is not necessarily like the richest country in the world. It's fairly rich, but it's not amazingly rich. Is it just like they just have been unlucky with bad governance or what's the, or is their geography not as conducive to some sort of like massive wealth building?

Tomas (06:57.939)

You are freezing a second. It's better now. We'll need to... Is it good? Is it good now? Let's see.

Auren Hoffman (07:01.762)

Yeah, sorry, your internet's been going in and out here.

Tomas (07:07.32)

Sorry. OK, I think it's good now. Yeah, I can switch Wi-Fi. Let me switch Wi-Fi quickly and see if it goes better.

Auren Hoffman (07:08.302)

Yeah, I don't know if the watt your Wi-Fi or.

Auren Hoffman (07:15.171)

Okay, perfect.

Tomas (07:26.572)

All right, let's see now. Can you hear me? Okay, perfect. There's a reason why I haven't tackled Argentina yet. But I already have the draft. I know a lot of what to say about it. And the reason is because geographically, there's no reason why Argentina could not be like the United States. The Paraná River that goes all the way to Paraguay...

Auren Hoffman (07:28.847)

Yep.

Tomas (07:56.046)

to Brazil is an amazing navigable waterway. The plains are amazing. You have all the water that comes from the Andes. The Andes stop the winds from the Atlantic and then all the rain falls down and then goes to flows east into Argentina. So extremely fertile, extremely flat.

navigable waterways, so there's geographically no reason why. Very good weather. And so the only reason there is just political. Now, obviously, we know from other countries where there's been A-B tests, let's say, of geography, like North and South Korea, or Haiti versus Dominican Republic, where you can have just politics being the only problem.

Auren Hoffman (08:31.172)

Good weather.

Tomas (08:54.734)

So we know it happens. And Argentina has been the case. I've been looking into this. And there's a history of inequality in the 19th century where all of the wealth was concentrated in some landowners. But also that actually mirrors a lot of what happened in southern America in the south of the United States, right? Where landowners

had control because the temperature and the weather was perfect for cotton and tobacco, whereas in the North, that was not the case. And that's why you grew wheat and corn. So actually, people don't realize this, but I think a lot of the political differences that happened between Northern and Southern United States come from geography, not from history. The history was a consequence of the geography. And so this happens in Argentina.

Some of these mechanics also happened. And then in the 20th century, there was the turnaround where then people became much more socialist. And so the economy was not very productive. So there's a lot of history that happened kind of in the middle of the 20th

Auren Hoffman (10:06.512)

Because if you think of Argentina, like in 1900, there was the saying as rich as in Argentine, like it was an incredibly rich country. They've had tons of, they have, you know, a lot of countries, they've benefited a lot from immigration. They have all these very, very smart people that have immigrated there. And, you know, many have come from, from, from Italy and from many, many other countries in Germany and stuff to Argentina.

They've had, they've had a lot, you just, you just like literally list down the things like they've, they've benefited from almost every major trend. They have lots of, basically can make everything they want there. they're self-sufficient yet still it's just like, they just still have just bad after bad, after bad governance.

Tomas (10:49.886)

That's right. And it's good that you say this because in the United States, one of the biggest sources of strength has come from the immigration that came in the 19th century. can see the GDP per capita was growing. It was growing at similar levels as Europe, but it's the population that was exploding. And so Argentina had something similar. But back to politics, in the United States, you have things like the Homestead Act, where the people were incentivized to come and produce their own stuff because they were given land to do it.

But you didn't have these in Argentina. And so you have a smaller incentive to come and produce much more concentration of wealth. And so that was much less conducive to generating these wealth.

Auren Hoffman (11:23.726)

Mmm.

Auren Hoffman (11:31.12)

What are, what are some of, do you think these factors are, are you just, the thing of things like rivers, like are they still going to be super important in the future? Are they going to become less important? What geographic factors do you think might supplant the ones that have been so determinant over the last few hundred years?

Tomas (11:52.55)

One of the reasons why I love studying these geohistories is to really understand what produced the past, because I believe these things are changing in the future. And if you don't understand really how you came to be where you are today, you cannot predict what's going to happen next. so I'll give you a few examples.

Tomas (12:16.524)

desalination, for example, costs are going down dramatically. they're going to... Because the technology has been going down, and it must haven't quite yet. They have a little bit, but not quite yet. But they are about to go down even further. And so suddenly, you are untying location from freshwater. That's huge. That's huge, right? That's massive.

Auren Hoffman (12:21.136)

just because energy costs are going down.

Yeah.

Auren Hoffman (12:31.418)

Yep.

Auren Hoffman (12:37.934)

Yeah, that's massive. Yeah.

Tomas (12:42.138)

Then you can have examples like Dubai or Singapore. Singapore has a big advantage based on the location, but Malaysia is close to it and doesn't have this amount of wealth. It's Singapore that was well managed and it was of swampy. It was not the perfect situation. It was good for a port, but that's kind of it. The untitled from geography...

You have countries like Switzerland that haven't a perfect geography and are quite rich. You have Dubai, very, very bad geography, didn't have oil to make it grow. And yet they were able to create these amazing cities. you are seeing these things and tying from geography. And we're seeing in a day-to-day basis where you have, most of the wealth now is generated by tech, by the internet, by data centers, and those things can really be anywhere.

And so regulation and governments now matter much more to the management and then wealth generation than geography.

Auren Hoffman (13:46.448)

And is the price of energy also something you'll see? I mean, you'll see in certain countries where the price of energy will fall faster than in others. Energy will be easier to move in certain countries. Is that going to be something that's going to lead to more rise in certain countries and maybe not in others? Or how do you think about that?

Tomas (14:09.164)

Yeah, think so. So it's interesting to look at what were the drivers of energy costs in the last few decades. And there's this Adams curve where we see the consumption of energy going up and up and up over the last, that's right, exponential until the 1970s. And then it flattens out. And the question is why? And there's two pressures there. One of them was on the supply side. We know the oil.

Auren Hoffman (14:21.552)

And this is like 1800s, like, yeah. Yep.

Tomas (14:38.382)

a crisis of the 70s, the OPEC, limiting supply to increase prices. And then you also have climate change and things like that, where there's pressure to consume less on the demand side. But now these are going to be released. And that's because solar energy, mostly solar energy, wind too, but mostly solar energy, are going to probably drop the costs of electricity.

down by 10x close to this in the next decade or so, they're already the ones. That's right. That's right. They're already the cheapest. onshore wind and solar are already the cheapest sources of electricity. And so this is going to end. And the good thing about solar and wind is that they're basically everywhere. Like Finland, which is one of the countries that are the farthest north, only has four times less sand in the equator. we only take five

Auren Hoffman (15:10.832)

And we're already seeing that happening in many, places.

Tomas (15:36.578)

five, six, seven years of solar improvement for them to have the same productivity as in the equator. So every country now is going to have cheap electricity. And that means that we can produce much more. And it also means that all the countries that today control energy, which means oil, are going to lose substantial amounts of their power.

Auren Hoffman (15:59.734)

And one of the things about solar and wind is they're a little bit more intermittent. You could see a scenario where things like you mentioned desalination, you could potentially like turn on the plant like when energy is super cheap and turn it off. Like, so if it's super cheap at 1pm, you turn it on. And when if it's super expensive at midnight, you turn it off or something like that. Right. And so

You could see these scenarios where you start to organize the economy around the price of energy throughout the day.

Tomas (16:36.754)

That's so fascinating. And there's so many things to say here, so cut me. Because there's like five branches that come from here. So the first one is to understand that solar and wind are actually extremely compatible. And the reason is because when there's no sun, wind patterns are pretty stable because they're linked to the movement of the Earth. The Earth turns around and the atmosphere follows it.

And this movement is what causes the winds and the aeolian towers capture this. When there's sun, the sun hits the ground. And so that means that the wind, like the air goes up and it interferes with the wind that is going transversally, which means that when there's sun in summer or during the day, there's less wind.

And so when you're generating electricity from solar panels, you're not generating from wind and vice versa. So they're actually quite complementary, both night and day and summer and winter. So that's the first

Auren Hoffman (17:41.673)

interesting. So we should just put turbines on the top of solar panels or something, you know.

Tomas (17:46.926)

Right. So that's one of the things. The second thing is today we cannot install batteries because they're expensive, but the cost is going down faster than the cost of solar. And so I haven't calculated yet when we're going to get into places where we can easily use batteries, but my guess is it's going to come as a matter of how many years.

The third thing is in until...

Auren Hoffman (18:17.594)

By the way, you can always just like roll a boulder up the hill when the energy is is negative and then just roll it down, right? That's that's a that's an old school battery, right? Yeah.

Tomas (18:25.774)

You're right. I think what you're saying is you can store energy in many different ways. And batteries in one, there's so many. think the obvious one is water, right? Water reservoirs, you can pump water back up and down. What you're saying is another one is heat. You can put heat into bricks or into rock and then extract it. actually, going back and forth into that actually doesn't lose that much energy. So there's a bunch of ways we can do it.

Auren Hoffman (18:29.861)

Yep.

Tomas (18:55.758)

I'm sure we're going to crack this. But this question is what do we do in the meantime? So until then, what's going to happen is that you have small pieces of land that are going to be where electricity is going to be extremely cheap for some hours of the day and the rest of the economy where that's not going to be case. So like co-located with solar farms, that's going to be

extremely cheap electricity during the day, but storing it for the night or connecting these to the grid is like these are expensive and hard. So we might not do this for some time. So then what happens to the economy to use these as an arbitrage opportunity? If you have electricity that's cheap in some places at some times and expensive otherwise, that's an arbitrage opportunity. And I think the answer is there's going to be a lot of new industries that spring up to take advantage of this arbitrage opportunity.

Auren Hoffman (19:55.12)

Yeah, because you can imagine if you're like, you know, training an AI model. Well, you don't have to run that 24 hours a day. You could run that for four hours a day. when energy is the price of energy is zero, or a negative and then, and then just turn it off for a while and then run, you know, so it, yeah, maybe it takes a little bit longer to train the model, but it's much, much cheaper.

Tomas (20:17.56)

So that's a fundamental, such an interesting comment because the fundamental force behind this is what are things where the cost of electricity matters a lot, but the CAPEX does not. And so here you give me an example of the data centers where the cost of the CAPEX is high today.

Auren Hoffman (20:46.478)

Yep.

Tomas (20:46.638)

So Nvidia is making all the money in AI. so the question, think, is if you think about it from this perspective, then the question becomes, what are the industries that have high OPEX costs from energy and can have low capex? And I'll give you a couple of them. One of them is natural gas. So natural gas today, you extract it from the ground.

Auren Hoffman (20:49.412)

Yes.

Tomas (21:14.114)

But you could generate it from the air. You can capture CO2 from the air. You can get water. You split the water. You create hydrogen with this. And you mix the hydrogen with the CO2. And basically, you get methane. Methane is natural gas. The only reason why you don't do this is because energy is very expensive. And because it's very expensive, the result is that we are

Tomas (21:42.616)

because I had a notification. And the reason, so what was I saying? What was I saying?

Auren Hoffman (21:49.328)

The reason why energy is expensive or the reason why it...

Tomas (21:51.63)

yeah, so the energy is very expensive. And then as a result, the companies that generate hydrogen, for example, focus on optimizing the cost of capex. Sorry, optimizing the cost of opex. And so they end up having machines that are very expensive. If your energy now becomes dirt cheap, you can produce machines that are

they're cheap too, because you're not optimizing for the energy. And so what you end up having, and this is true today, you already have machines that can generate methane from thin air in the United States more cheaply than pulling it from the ground. And this is only going to be more true in the next few years. Today, this is true because of help from subsidies from the government. But in a few years, it's just going to be cheaper to pull your methane from the air than from the ground.

Auren Hoffman (22:23.343)

Yeah.

Auren Hoffman (22:51.6)

Yeah, so like last year in 2023, California had negative energy prices for 20 % of the hours, I assume in 2024 will be even higher than 20%. You know, at some point, you could just see this like crazy curve, it could be like 40 % at some point where it's like literally the price is negative, like they're paying you to actually use the energy.

Tomas (23:13.294)

So that's right. And people think, because now the energy is negative, the cost of energy is negative during the day, people are going to stop installing solar panels. But that's not true for a couple of reasons. One of them is the valuable energy now happens in the morning at night. And so what happens is you have this, imagine that you have this curve of sun electricity during the day.

And so you are going to install more solar panels because your curve now grows like this. And so these sides here on the morning and the evening are extremely valuable electricity. Here at the top, you throw this energy away because nobody's going to buy it, but they're going to buy it on the sides. So in the morning, in the evening, because you have more solar energy. And so what happens is you are going to have more energy that is basically free or even people pay you to consume it in the middle of the day.

And so you can use that. One of them is, as I mentioned, methane production for sure. So imagine the geopolitical repercussions of this. Any country can produce a methane for free. And so the second example to me is farming. So farming is a lot of energy, right? Fertilizer is energy. That's right. You want put lights at night, for example, things like this.

Auren Hoffman (24:32.698)

Yeah, fertilizer, yep.

Yeah, right, vertical farming, right.

Tomas (24:39.982)

vertical farming is like 30, 40 % of the costs are energy today. And that makes it impossible. But if you divide these costs by 10, suddenly you can create vertical farming. And if you can do vertical farming, then the entire earth changes because around 15 % of the entire habitable land is farming. And all of that can be replaced with woods or whatever we want because now suddenly we can produce food in vertical farms. Not only that, but also

Auren Hoffman (24:55.237)

Yeah.

Tomas (25:10.538)

geopolitically, the consequences of that, any country now can be independent in their food production. So how is the world going to react to this?

Auren Hoffman (25:21.552)

That's super, I find it super interesting too, because if you just think of like the average consumer, let's say your electric bill is X hundred dollars a month or something like that, your energy bill, six hundred dollars a month for your average consumer. Well, if you're a consumer, you're, you're a lot of your bills, a lot of your appliances are, are, are just kind of going at random times per day and stuff.

If there are certain parts of the day where it's negative, you don't even have to be home, but you could like run your washing machine and when you're dryer, when you're not home, you can run your dishwasher and at home, you could charge your car. you know, at certain points in the time, there's all these other things that you could do. and most of those, most of the energy uses for people are actually very, very spiky. It's just that it's the dishwasher, it's the dryer, it's the, you know, it's the, it's not the refrigerator, which is always going on and stuff.

Tomas (26:08.59)

That's right. That's right.

Auren Hoffman (26:14.628)

And then of course you could always have a big battery pack in your house too. And so you could just like charge that when the energy price is close to is close to zero. So we could start to see this like interesting thing where it could like, all of a sudden it could be this like deflationary thing for consumers where they have more money in their pockets because they're spending less money on things like on, on things like energy.

Tomas (26:36.076)

I think that's probably going to be the case. And I wonder, and I haven't looked into this, but I'm wondering if the biggest impact is going to be on this side or the industry side. Because my guess is for many people, electricity is a substantial part of their, or energy is over their costs, but it's not going to be in countries like the United States. It's not going to be like 50%. Right? This is very different in regions like Africa.

Auren Hoffman (27:00.058)

Yeah, complaint.

Tomas (27:05.562)

In Africa, you don't have a grid. Energy is extremely expensive. And so suddenly, if you can have free electricity, reliable all the time, how does that change the entire economy? So there on the consumer side, it's more in countries like Pakistan or Malawi in Africa, like places like these that don't have a grid. And energy is very expensive as a share of consumer spending.

That is going to be dramatic. think in countries like the United States, where the cost of energy is a small percentage of people's costs, overall costs on average, I think the biggest impact is going to be hidden because it's through the industry. So what happens if natural gas is free? So I think what happens is your food, if your food suddenly, instead of costing you 7 to 15 % of your costs,

how it costs you like 2 or 3 % because it's really

Auren Hoffman (28:04.9)

Yeah, food prices are so energy dependent.

Tomas (28:08.526)

huge, huge, like it's energy. We're taking Haber Bosch to create fertilizer. We like the lines we were talking about.

Auren Hoffman (28:13.764)

Yeah. And of course they have to transport it, which is also very energy dependent as well. Yeah.

Tomas (28:18.092)

It is, I think. if I'm not wrong, transportation is around seven-ish percent of the cost of food. So I think it matters, but it matters less than some of these things. But here's an example, something that I found that's crazy. The productivity of tomatoes in the Netherlands per acre, I think it's something like 20 or 40 times higher than in other...

countries, even developed countries like United States.

Auren Hoffman (28:48.932)

Yeah, why? Why is the Netherlands like everyone always points to the Netherlands as being this like agricultural place? Like, why have they figured it out? And it seems like nowhere else in the world has like even anywhere near the productivity that they do.

Tomas (28:57.346)

Yeah.

Tomas (29:03.512)

So I'm like 70 % confidence on what I'm going to tell you. So yeah, grain of salt. They discovered natural gas in the 70s. thankfully, this is weaker than in other countries. And so one of the ways that they use this is to power their greenhouses.

Auren Hoffman (29:08.112)

Okay.

Auren Hoffman (29:14.104)

Yeah, the Dutch disease. Yeah.

Tomas (29:31.962)

If you take pictures of the Netherlands, some parts of the Netherlands at night, you see that they're purple. And why are they purple? Because they're lighting the greenhouses and purple is the most efficient color for plants. And so they have their greenhouses where the temperature is optimized, the CO2 is optimized, the fertilizer is optimized, everything is optimized. That's right.

Auren Hoffman (29:56.568)

Right, you're always going to have a perfect harvest.

Tomas (30:00.706)

And you can do that because energy was cheap, because they had natural gas. so now apply this to everywhere else in the world, and suddenly you can like 10x, 50x your productivity.

Auren Hoffman (30:03.952)

Mmm.

Auren Hoffman (30:14.636)

Interesting. Now, another person who really writes a lot about geography is Peter Zyhan. How do your views different from his?

Tomas (30:23.854)

I love what he's done. I part of why I started writing and studying what I do is because of the work that he did when he was a strut for, for example, there was a series of monographs that I read, I don't know, like 10 years ago, maybe something like this, like fantastic, fantastic monographs of countries. And these plus things like guns, germs, and steel.

Auren Hoffman (30:38.032)

Mm-hmm.

Tomas (30:52.232)

got me into these geographies. So I don't think that I am fundamentally different from him. I think we're focusing our attention in different places. He decided to use his insights to understand current present-day geopolitics, like what's going to happen in Lebanon tomorrow. I think I'm less interested in that. I'm more interested in the big arrow of history.

Auren Hoffman (31:13.391)

Yep.

Tomas (31:21.1)

And so not what's going to happen tomorrow in Lebanon, but what's going to happen in the Middle East in the next 20 years when Saudi Arabia does not have the oil money that it does anymore. So these are the questions I think that I'm a bit more focused on, but he's amazing and I love what he's written. And I think we think alike in geographical determinism.

Auren Hoffman (31:41.712)

And if you think of like, you you, you write a lot about oil and, oil money and stuff. And people have been somewhat predicting, oil money will go down for some of these big oil producing countries for many years. when you think like that actually catches, it does seem like many of them are planning. seems like folks like Saudi Arabia and many of these other ones are planning for this inevitable point where they will have less oil money. but, but.

When do think that happens and how do you think they respond to it?

Tomas (32:14.444)

Yeah, I'm not sure yet. I've been thinking about this for some time. So here's what I know so far. consumption is going to keep growing for some time.

Auren Hoffman (32:29.21)

But it's still only growing at like 1 or 2 % a year, right? I mean, yeah.

Tomas (32:31.81)

Yeah, it's not going fast. And the investment from all companies has been going down and whatnot. So they see this coming. But it's going to take some time. It's not going to be like in two, three, five years. It's more like...

Auren Hoffman (32:44.752)

When do you think it starts to be at 0 % per year and when do think that hits?

Tomas (32:53.344)

It's going to start happening. I'm not sure. not sure. 50 % confidence is like 10-ish years, just because solar, if you look at solar costs, I'm pretty convinced that they're going to like.

Auren Hoffman (33:00.803)

Okay.

Auren Hoffman (33:04.505)

Yeah.

more electric cars over time and hybrid cars other types of things. Yep.

Tomas (33:09.294)

That's right. It takes some time. It takes some time for that exactly. So my guess is 10 each years. But then I think it's going to go really fast. It's going to take some time, and then it's going to go really

Auren Hoffman (33:18.468)

And then it's like two, three, 4 % a year kind of type of thing decline.

Tomas (33:22.446)

Maybe this is not...

Auren Hoffman (33:27.568)

Even if it declined 1 % a year, I mean, we're talking about massive, massive drops in price.

Tomas (33:34.926)

So I think you're asking, basically, what's the shape of the curve? And so think the shape of the curve has been like this, like this so far. And then we're here. And then it's going to keep going up a little bit. And then it's going to stabilize. And then it's going to start going down, down. And then it's going to accelerate. And it's going to accelerate. And it's going to go down fast at some point. And so.

Auren Hoffman (33:37.806)

Yeah.

Auren Hoffman (33:53.028)

Because once it accelerates, mean, we're going to see it's $10 a barrel, right? Yeah.

Tomas (33:57.71)

Right, you have all this supply coming in. can remember, you can now pull methane from thin air. Solar costs are already cheaper for electricity than from oil, and they're going to get 10 times cheaper. This is going to push for other industries like heat pumps today. They are increasing very fast exponentially, but they're going to grow even faster because the differential in costs for heating

going to be a no-brainer. I'm going to go for electricity. So electrification is going to accelerate and accelerate. It's not going to go slowly. And so the curve of oil falling is going to be dramatic at some point. And we've seen this in history. You look at some transitions in history. coal in the 1600s in England replaced wood within 30 years. In the beginning of the 20th century, light bulbs

Auren Hoffman (34:26.991)

Yeah.

Tomas (34:54.636)

replace the previous technology within 10 years. these things can go really, really fast. And I think that's what's going to happen. And so what's going to happen is the countries that have had time to adapt to this upfront will be able to survive. But you have the innovator's dilemma here. It's so hard. And let's take an example of Saudi Arabia. So Mohammed Bin Salman, MBS.

is seeing this coming. That's why he's investing in the line, in all these things. That's why he's allowing women to work and to drive and whatnot, because he sees the writing on the wall. But can you change a country's culture to become hyperproductive in 10 years when the entire country has been built for 80 years on the back of oil? I don't think that's the case. And so something really, really bad...

I think it's going to happen in Saudi Arabia. And we can see some examples of other countries where something similar happened. So Nauru, for example, the island of Nauru in the Pacific used to be one of the richest countries in the world because they were exporting, I think, phosphorus. And then that phosphorus is not something that returns. And so they finished mining it. There's no more phosphorus. And the country went to shit. And now one of the biggest sources of income is immigration management for Australia.

but it's extremely, extremely poor. could not replace easily these natural resources. And I think that's going to happen to many of the oil producers today.

Auren Hoffman (36:29.538)

If oil starts to become super cheap and energy changes, you would think this is also very good for like many Asian countries, good for India, good for China, good for Japan, good for South Korea, because they're all big like net importers of oil today. Do you agree or?

Tomas (36:46.53)

Yeah, I think it's good for everybody in the long term, including the oil countries, but in the short term, it's going to be very, very bad for the oil countries and it's going to be good for everybody else. So very good for sure for Asian countries. It's going to be good for Europe. It's going to be great for Africa and all the Middle East that doesn't have oil. So Pakistan today is one of the countries that is electrifying.

and getting into solar electricity the fastest because oil is very expensive there and their grid is shit. And so they are becoming, you know, I'm going to be independent from the grid. I'm going to get solar energy. And now suddenly industries that were impossible before start becoming possible. So we're going to see this there. We're going to see this in Africa, in all of Africa. We're going to see this in Latin America. And it's always better when...

resources are distributed because nobody then can control them and tax them and have a monopoly. So overall for the world and for humanity, this is amazing. Nobody will be able to control energy anymore.

Auren Hoffman (37:54.448)

Internet adoption grew much faster than other technologies, even like the printing press or the radio. We've got these new things like mobile, which is even growing even faster than the internet. What are some of the ramifications for other things, the new kind of waves like AI?

Tomas (38:13.314)

Yeah, think we've talked about how people don't fully understand how energy works and transportation and the cost of transportation. And information is another one. And it's useful here to go back to history to understand what happened, how communication technologies shaped history. And the perfect one is the printing press. So before the printing press, information

management throughout Europe was handled by the church. The Catholic church had a monopoly on information and information moved very slowly because it was as fast as the correspondence or as fast as scribes could write. Suddenly, you have the printing press, your marginal cost of producing information, storing information and communicating information goes down dramatically.

And then immediately scientific discoveries shoot up. The other thing that you see is that politics go completely reshaped. The Protestantism is impossible without the printing press. It's because the church did not have a monopoly on information anymore that suddenly you can have people disagreeing with it.

and distributing this information. And so you have a dramatic change in science, you have a dramatic change in politics. In the politics, so much so that the church's power starts dwindling and the nation states start emerging. Why? Because...

areas that had big cities, they were the ones producing the most books and they produced it in the local vernacular. And then the people around these areas started learning this language to be able to read these books and communicate. And so what happened is little by little, you get these islands of language that start expanding. so German starts appearing from this, French, Italian, Spanish, and so you have these languages that eventually

Tomas (40:29.678)

create nations that feel very nationalistic, that was impossible without the printing press. It's because the language became discrete like this. So now fast forward to today. The internet is basically doing the exact same thing. It is changing how we produce information, how we're producing science, and how our politics are going to change.

And so you mentioned AI and you mentioned mobile. And I think these are two examples of how this process is accelerating. The internet took 30 years to develop and then mobile, and within 10, 20 years, everybody has a mobile phone. And then AI is faster. ChatGPT has one of the biggest, like fastest adoption rates in history. And so here we have this cusp where these technologies are being adopted extremely fast and faster and faster and faster.

But we haven't seen yet the scientific evolution and the political evolution that is about to come. And we're feeling it already because things like the woke movement and counter woke movement and things like this are the result of the internet. But we're living through it. So we don't have the perspective to understand what's going.

Auren Hoffman (41:45.838)

so the, cause there's been a lot of people have been saying science has not been progressing, you know, very fast. Let's say since the seventies, it's really slowed down. So, you you have this rise of communication, the rise of globalization, the rise of people all over the world to communicate very, very, very quickly. You would think that would massively accelerate scientific discovery, scientific learning. What do you say to the skeptics and say science is not progressing as fast as it should?

Tomas (42:12.93)

Yeah.

So a couple of thoughts on this. One of them is I read, I don't know, a dozen papers for each one of the articles I write. So I read a lot of papers from a lot of fields. And I can tell you that papers that are older than five, six years, they're far and in between, and they're much lower quality. And so from my anecdotal...

Auren Hoffman (42:37.39)

so you're saying the more recent papers are significantly better than even papers that were six years ago.

Tomas (42:41.676)

And there's There's more quantity and there's more quality of them. Yeah. so my anecdotal evidence there is that I don't believe that science is slowing down. I'll give you a couple more. A lot of the people who say that science is slowing down is because they're saying, where are the geniuses? And I think they look at, for example, literature and say, the geniuses were four centuries ago.

Auren Hoffman (42:45.985)

Interesting. Okay.

Auren Hoffman (43:08.282)

Yeah.

Tomas (43:11.766)

Where are the Shakespeare's of today? That's right. That's right. Exactly. But if you think about it, this is not a problem of geniuses. It's a problem of fields. Is it a coincidence that Shakespeare and Cervantes appear soon after the printing press? It's not. Because before that, it was much harder to be good at literature. And so literature was an emerging field.

Auren Hoffman (43:13.956)

Where's Mozart? Where is, yeah, okay. Einstein, yeah.

Auren Hoffman (43:36.846)

Mm-hmm.

Tomas (43:40.364)

And all the innovation happens in the emerging fields. So obviously, if physics is emerging,

Auren Hoffman (43:43.684)

Yep. Yeah, being a classical music composer today is not that it's not it's not a new technology. It's not something like the most ambitious people go do.

Tomas (43:49.518)

That's right.

Tomas (43:54.254)

That's right. And so what you see is all of the innovation in any field is early on. Music is a good example. Physics, there was an explosion in physics development in the 19th century and 20th century. Well, a lot of these things have already been discovered, so the low-hanging fruits are taken. So if you take this perspective, then the question is completely different. It's a question of innovation of fields. So the new question would be, OK, what's the equivalent of literature for today? And I'll give you a couple of examples.

video games have been evolving at a speed that is unbelievable over last few decades. And I'm sure in a century, people are going to say, my god, the creator of Nintendo, the creator of The Last of Us, these are amazing games. We don't have any creators like this. So that's an example. Open AI, Transformers, AI, my god, these people are amazing. These creators, we don't have them anymore in AI.

Auren Hoffman (44:40.694)

Yeah, yeah.

Auren Hoffman (44:49.616)

Mm-hmm.

Tomas (44:49.826)

Well, yeah, of course, because AI is not. So for me, it's more a question of fields. And I don't believe a second that science is slow enough. In fact, with AI, I'm pretty sure it's going to accelerate.

Auren Hoffman (44:53.573)

Yep.

Auren Hoffman (44:57.616)

It's interesting because like, you know, in the eighties, kind of like starting in the seventies, when people say scientific innovation went down in the eighties, like we saw so much innovation in finance, you know, that that really exploded and it was just like, well, it's kind of, maybe it's just the same person and they just decided to go, maybe that's not great for society. I don't know. You can make an argument that is, or it isn't great for society that all these smart people decided to go into finance, but that's where we saw just like ton of innovation.

Tomas (45:26.83)

So I agree with you. I don't think actually that's so bad. think what's happening is people are not stupid and they're going where there's the highest ROI in their efforts. So physics, when physics is lower ROI, they go to finance. And finance is actually an extremely useful field because it's the proper allocation of resources. So I'm so glad. But then in the 2000s after the crash, substantially fewer people were going there and they started going into tech and the internet. And that's the right allocation of resources because

Auren Hoffman (45:39.301)

Yeah.

Tomas (45:55.874)

That was a new field and everything was there to be discovered. And now they're going to AI. And so we're always doing this. So I'm not worried about the arc of innovation there in history.

Auren Hoffman (45:56.965)

Yeah.

Auren Hoffman (46:04.834)

Interesting. And do you think AI is going to be more than an internet level breakthrough? are we, it, is it even more profound?

Tomas (46:16.398)

OK, so I'm going to spell this out, but the short is my P-dome is 20%. And I think we have 8 to 15 years to live. So what does it mean? P-dome, right? So how acquainted is your audience to this?

Auren Hoffman (46:22.979)

Okay.

Auren Hoffman (46:30.992)

Fairly acquainted, yeah.

Tomas (46:32.652)

Okay, good. So the idea that you create this AI, it studies itself to improve itself. And then because it's an AI, does this faster and faster and faster. And so there's an extreme, like a fume, extremely fast takeoff in intelligence. And then they can become superintelligence in a matter of days or months. And so I believe there's a high likelihood that this happens. And when you look at the market,

like Metaculous and things like this, the predictions for this is between seven and 15 years, with the media in around, I think, eight. So they are saying, basically, by 2032, we end up with superintelligence. And I don't know if it's 2032, but the decade is going to be the 2030s. So in the decade of the 2030s, if not early, we are going to have superintelligences. And we just don't know what's going to happen after this. This is what we're saying about.

Singularity, we'll call this Singularity, we just don't know. So the only thing that I know is that things are going to get accelerating faster and faster and faster. AI is the future, is the only thing that really matters right now, unless there's some limitation, limiting factor that we don't know, that I'm not sure about, which might be energy or ability to produce data centers and things like this. But even with that, I think it's probably going to come in in eight to 15 years. And so we don't know what's going to happen after that. And this is the biggest, most important trend.

Auren Hoffman (47:59.152)

I mean, it's very, I think most people are both excited and incredibly worried and afraid at the same time. And maybe more so than ever before. You have these kind of like dual things that are happening at once. And certainly I'm both very excited, but also so scared that

And not necessarily scared that the AI is going to paperclip maximize and eat me or something, but scared that humans won't be able to deal with that. And we'll end up going to war or we'll end up like, you know, it just will accelerate the bad behavior as well. Like, where do you see, where's the optimistic case that we can avoid some of these traps?

Tomas (48:55.15)

So one way to think about this is.

chimpanzees should not create homo sapiens. If they create homo sapiens, they need to be damn sure that homo sapiens love them very, very much. But the fact is, if homo sapiens appear and they see that the most intelligent alternative is chimpanzees, the very first thing they're to do is neutralize them.

Auren Hoffman (49:14.543)

Yes.

Tomas (49:30.612)

This is a fact, right? So unless we know to make them love us a lot, which we don't, and we have 7 to 15 years to figure this out, we've been thinking about this for thousands of years. We haven't figured it out yet. We have 7 to 15 years to figure this out. And so I don't think we're going to make this happen in 7 to 15 years. So that's why I'm very worried. We are chimpanzees and we're not ready to create homo sapiens. So for me, the question is,

Auren Hoffman (49:37.359)

Hmm.

Tomas (49:59.182)

Like, should we delay this a little bit to figure it out? Because we only have one shot. So for sure, I would say we absolutely need to do this because otherwise, we know they're going to be more intelligent than us. And so whatever they want to do, we are going to be the biggest obstacle. And so they will want to neutralize us. Now the question is, what does neutralizing us mean? I don't think they're going to kill us all because that's a waste of resources. But they could just disregard us.

depending on what they're trying to optimize. And that's very, very bad. And in this situation, the best case scenario is actually us being their pets. There's actually not a better scenario than this. They're more intelligent than us. They can do whatever they want. And so we become pets in 7 to 15 years. And that's the best case scenario.

Auren Hoffman (50:48.674)

I agree with you that it would be great if we slowed down some of this AI kind of, but I don't see a way to do it because it's like, it's not like there's some sort of global police force to slow it down and you can make, well, if China beats it, then they can have like a economic kind of, and potentially military position over the US.

So is there any practical way to actually slow it down?

Tomas (51:20.898)

I think so. And if you break this down, right? So if you break what you were just saying in more specifics, there's just two countries who are going to be at the edge. It's the United States and it's China. There's no more.

Auren Hoffman (51:37.028)

Well, but if they slow it down, there's many, many other countries that have the opportunities to invest.

Tomas (51:42.038)

Yeah. you, do you, like, is it realistic to think that all the researchers that are in the Bay area doing AI are going to move in lockstep to Uganda to do this? It's not going to happen.

Auren Hoffman (51:54.608)

I agree it would slow things down if the US and China kind of got together somehow. I don't, maybe it slows it down a bit, but I imagine there'll be other places where it does kind of accelerate.

Tomas (52:16.13)

I don't think so. I don't think so. If you look at the concentration of human capital in AI, the vast majority is in the United States and then China, and there's barely nothing else. And those people are not as movable as we think. And so really, it becomes a coordination problem, not between 196 countries, but between two. And that's a much easier problem to solve, especially because Xi Jinping has manifested concern about

Auren Hoffman (52:25.69)

Yep.

Tomas (52:45.774)

If you told me China was like, we're just going to move forward and whatever, we don't care, I would be much more worried. But that's not the attitude of It's today. so I hate regulation. I think regulation is very, very problematic. And so I don't want to regulate most industries, but the one that I want to regulate a bit more.

is the United States. And I think what we need to do there is to regulate with China.

I don't think you hurt me.

Tomas (53:25.016)

Let's see, let's see, let's see.

Auren Hoffman (53:29.968)

Sorry, I lost you for a bit of it.

Tomas (53:50.093)

All right, let's see. I repeat? So I'm going to repeat the, okay.

Auren Hoffman (53:51.211)

yeah, perfect, we're back. Sure, yeah.

Tomas (53:58.703)

Let's see where it was. So the AI researchers are based in the United States in China, and they're not as mobile as we might fear. And so that's great because it changes the coordination issue from one of coordinating 196 countries, which is nearly impossible, to coordinating two. Now, coordinating China in the United States is not easy, but...

Auren Hoffman (54:26.658)

Even coordinating in the United States is not easy.

Tomas (54:28.387)

That's right. That's right. But I am much more hopeful because Xi Jinping in China is worried about this based on what we know. And so I do see and they're behind. That's right.

Auren Hoffman (54:40.208)

When they're behind the US, which makes it a little bit easier, you know, because they might not want accelerating too fast because it's likely it's the US that's going to accelerate there if it's exponential.

Tomas (54:50.959)

And there's two or three fundamental reasons why China is going to be slower. One of them is their science is mired with many more problems of bad quality, like science and numbers that are fudged and things like this. That's one problem. Another problem is that the tokenization actually is harder because of all the characters that they have. That's what I heard.

And then the third one, I think that's the most important one is that they force the models to be less truthful because of the authoritarian regime that they are. And so that just strictly reduces the quality. So they have these forces against them, plus the fact that I think they're sensitive to the AI doom possibility. so I think there is a possibility that

coordination happens between the United States and China. Now, I am not a fan of regulation. I want to deregulate many, many things, many different industries, but we only have one shot at getting this one right. And so if the question is, should we postpone heaven by 10 years or should we unleash hell right now? I think the answer is very obvious. A few years can give you...

so much more confidence that I think we need to regulate.

Auren Hoffman (56:21.56)

Interesting. Now, I know you're also a student of history. You and I have had many conversations in the past about historical things. What is an underrated war you think is kind of a turning point in history?

Tomas (56:35.079)

so super exciting. The 1870 war between France and Germany. So here's what happens, right? France was the biggest superpower in Europe for 150, 200 years. And then suddenly in 1870, Germany reaches Paris, wins the war against Paris and is founded actually in Paris.

Auren Hoffman (56:42.543)

Okay.

Tomas (57:02.765)

Like the foundation of Germany is in Versailles. And so what happened there?

France was the European superpower because it had by far the biggest population. It's one of the biggest countries, it's extremely fertile, so its population was extremely high. Then in the middle of the 1700s, there's one idea that starts pervading France and that's secularism. The church was very strong everywhere, including France, but because of secularization in the 1700s,

suddenly fertility starts going down in France, 100 to 150 years before anywhere else in Europe. And if we go back to the printing press, that's one of the reasons. You cannot have the secularization without the printing press. But anyway, it starts in France. And you see the places that became more secular suddenly lose fertility the fastest.

By the early 1800s, when Napoleon is crushing the rest of Europe, he's crushing the rest of Europe because he has a very big population. That's one of the biggest reasons. Also because he could recruit most of them thanks to nationalism ideas. So many people and nationalism ideas, that means lots of soldiers, and that's the biggest reason why he wins. Not because he's an amazing military leader, which he is, but because he has more people.

But by that time Napoleon and company in France, they already were extremely worried about the fertility rate in France, which had gone down because of secularization. They were worried to death. By the year 1870 is the year when the German population equals the French population because they kept growing, whereas France was not growing as much.

Auren Hoffman (58:57.006)

Yep. And Germany unified. now you have like many different countries coming together as one.

Tomas (59:00.868)

That's right.

Tomas (59:04.921)

That's right. So suddenly the population of the Holy Roman Empire basically coalesces into Germany. That population is bigger than the one in France. And that moment is the moment when Germany starts winning. And then after that, they...

Auren Hoffman (59:19.14)

Yep. And you had to governance things too, like Bismarck was, you know, clearly kind of the Titan of that era.

Tomas (59:28.227)

He was, but again, this is an interesting factor.

the foundation of Germany follows the Germanization. Many countries are different where you have a polity that forms and then the language coalesces around it. In the case of Germany, it was the other way around. German had been expanding and basically the Germany that Bismarck creates is wherever

Auren Hoffman (59:40.313)

Yeah, okay.

Tomas (01:00:02.273)

Germans were a majority that was Germany, except for Austria. That's basically it. Remember, the 19th century is the century where nationalism becomes a huge trend everywhere in Europe, mainly because everybody was following the example of Napoleon. Napoleon, massive nationalism in France, they saw that you can recruit all these soldiers with this idea. So everybody wanted to be...

Auren Hoffman (01:00:04.208)

Hmm.

Tomas (01:00:30.415)

nationalists. So you have this big push for nationalism in Germany that happens in 19th century that coalesces the country. now, of course, Bismarck was very strong and he did things correctly, but all the elements in history were there. And that is the moment when then a few years later, Germany was a superpower in World War I and started winning. And if they didn't have the rest of the world against them, they would have won. And the same thing happened in World War II.

Even to this day, the population in is 20, 30 % bigger in France when it's 20 to 30 % smaller in surface. And that's because of that fertility rate change that came from secularization. And so think for me, what these matters...

Auren Hoffman (01:01:12.43)

And just hit the secularization hit Germany later than it hit France.

Tomas (01:01:17.007)

like a century and a half, I think later, something like this. Yeah. So you can see in around 1750 is when it starts hitting France heavily. I don't remember in Germany, but in the UK is I think in the 1880s. So 130 years later. And it's one of the reasons why the UK actually became so powerful. It's not just industrial revolution, because actually industrial revolution was starting in the Netherlands before.

Auren Hoffman (01:01:20.2)

wow, okay.

Auren Hoffman (01:01:31.407)

Wow, okay.

Tomas (01:01:44.983)

A big chunk of this is because also the population was growing substantially faster than the one in France. And so that's why I love this word so much is because it's showing these underlying patterns where fertility is one of the biggest drivers of success in wars in the past when it's not something that we're considering. And this is very relevant today because we have fertility crashing throughout the world.

Auren Hoffman (01:02:08.144)

And a lot of people have kind of talked about this kind of like 1870 to 1945 is just like one big war that just went on for a very long time with many different, maybe different, many different governments in Germany, but just like one, one like very, kind of very long war. How do you think about that time?

Tomas (01:02:28.653)

Yeah. When these big trends rearrange, humans take some time to figure them out. France had been the superpower for a long time, and that's what caused Napoleon. Napoleon was overly ambitious, but if he hadn't been overly ambitious, he could have created a France that was substantially bigger than France is today. But what happens is this invasion of Napoleon is basically World War I.

or two at the European level. Massive destruction, massive change in ideas across the continent. Suddenly, ideas of democracy and republics start spreading everywhere. Monarchies start falling down. Nationalism starts going up. And so for 70 years, there's no more wars. Or 60 years, there's barely any war in Europe because they're trying to figure out all of this and contain France. But the trends that were underlying them were growing. Nationalism was growing.

fertility was changing power. so from the 1870s to 1945, you have now these big trends clashing with reality to figure out a new world order. And I think there's a couple of things that happened there. One of them is Europeans and people in general across the world, but especially Europeans, start becoming so scared of these military power that they say, you know what, we're going to do whatever it takes to not do anything.

to not make this happen again. And so that's why you have the European Union. But also we're seeing this to this day in another aspect, which is Europeans are extremely worried about using too much military power against Russia. They're very reluctant to helping their neighbor who needs, like they are the shield of Europe against Russia and yet they're not supporting them. And I think that's

coming from these mindsets in World War I and World War II where we were so horrified of what happened that we don't want to do it again. And this attitude is only going to change when we get a slap of reality in the face.

Auren Hoffman (01:04:38.062)

Interesting. When we think about these detailed population, mean, we're at a point, I think the fertility rate in South Korea is like 0.7. Japan's not even a low fertility country anymore. It's like a mid fertility country because I think they're at 1.3. They're doing better than most people. People always talk about Japan. actually doing better than, I think Japan's doing better than Italy now or something.

Tomas (01:04:58.635)

Easy. Yeah, yeah, yeah, yeah.

Auren Hoffman (01:05:02.698)

and so we're kind of like all kind of moving there outside of like Israel and a couple of other countries, just at almost every country has just seen this like massive decline. and is, is, like, how does that kind of like reshape the world?

Tomas (01:05:18.735)

Yeah. So I wrote about fertility, but it's a topic that I haven't touched for a long time because I don't think things are as clear cut as possible, as we think.

and I'll tell you why.

First is we have no clue why fertility is going down as much. There is 50 culprits. The normal story is, with economic development, there's more opportunities and people don't want to have more children because they want to invest more on them. But if this had been the case, then the UK would have dropped fertility much faster than France because it was getting through.

Auren Hoffman (01:06:01.828)

Yep. you know, North Korea has dropped fertility and, you know, even these like countries have really bad economic development.

Tomas (01:06:09.411)

That's right. That's right. So it is not that. And sanitation is one factor too, but it's probably not this. if you start going down, there's a hundred of these. Is it because marriage is going down? Is it because urbanization? Is it because apartments are smaller? Is it because of status seeking behavior? There's a hundred of these potential reasons. And until this is properly diagnosed, we just don't know. And if we don't know, we cannot solve it.

Auren Hoffman (01:06:33.712)

It might be each one could be 1 % of it or something like that, right? Yeah.

Tomas (01:06:37.133)

That's right. That's right. But the interesting thing is it's going down everywhere in the world. So it cannot be a very complex thing. And it has to be something that's happening everywhere with delays in time, but it's happening everywhere. So it has to be something relatively simple, because otherwise it would be different in different places. So that's, think, one of the core issues with fertility. The other thing is...

I would not be surprised if in the next few decades many of the fertility issues are resolved by themselves. And I'll give you a few examples. One of them is, we talked about it, AI. Well, once we reach singularity, who cares? Another example is longevity.

Auren Hoffman (01:07:18.148)

Yeah, in some ways, like if you think of, if you think of like, somebody with a soul that is intelligent, well, we could have, you know, for every human, you could have 30 different, you know, AI agents that are essentially, you know, they might not have physical bodies, but they're essentially act as humans.

Tomas (01:07:35.341)

That's right.

Tomas (01:07:41.347)

That's right. So that's one way to solve it. Another one is with longevity. If we can postpone death for a long time, then we don't have a problem of underpopulation, but we have one of overpopulation. Another example is we're about to figure out how to use standard cells to get them into gametes. So we can create IVF in vitro fertilization with any types of cell.

Auren Hoffman (01:07:45.957)

Yep.

Tomas (01:08:07.043)

You combine that with artificial wounds, and then suddenly we can have babies as many as you want by eliminating two of the biggest drawbacks, which are getting pregnant and then the pregnancy itself. I'll give you another example. One of the biggest obstacles in or two of the biggest obstacles for having children might be childcare and education or the cars. There's not enough car seats. But if suddenly energy goes down, the cost of energy goes down and

self-driving cars can drive you everywhere. Now you don't have a problem with cars. AI can. That's right. Exactly. So my guess is there's so many variables on the fertility issue that although if things kept going this way, I would be very worried. But I think there's so many variables that are going to change in the next decades that I'm not worried about it right now.

Auren Hoffman (01:08:40.036)

We have an AI teacher and, you know, yeah.

Auren Hoffman (01:08:55.278)

Yeah, you could definitely see a scenario where, where like it flips, right? There's a lot of scenarios where all of a sudden it flips and we see this kind of explosion and babies and stuff.

Tomas (01:09:04.623)

That's right. That's right. So if this was a problem that's going to hit us in two years, I would be extremely worried because it's something that's going to happen and hit us in 50 years or whatnot. I'm not.

Auren Hoffman (01:09:14.766)

Now, you also written a lot about real estate, which has been kind of a cornerstone of wealth building, especially for Americans. Why don't you think it'll be a good investment going forward?

Tomas (01:09:24.377)

Yeah.

Tomas (01:09:28.115)

the biggest drivers of real estate price growth are not going to be true in the future. The reasons why your house price has been going up up till now is not going to be true anymore. So if you break this down, what are the big drivers of housing? That's right.

Auren Hoffman (01:09:51.972)

Population growth, I presume, is very important.

Tomas (01:09:54.799)

Exactly. The biggest one is supply of land, actually, versus demand of land. And the biggest driver of the supply of demand is number of people. And the population has been growing since the 50s. There's no tomorrow. It's not just the population, though. It's also the household size. households were much bigger. And now you have fewer people per household. And so if you have 10 times more people, but also...

you each household is smaller than you have like 20 times.

Auren Hoffman (01:10:27.63)

Right. In the U S it used to be like the average home was like 800 square feet. that was like in the fifties, was 800 square feet. Now we're, you know, it's, it's, it's approaching like 3000 square feet. It's just so much bigger. It's like five X bigger than it used to be.

Tomas (01:10:36.109)

Exactly.

Tomas (01:10:41.451)

Exactly. so the demand has been growing and growing and growing like crazy over the last eight decades, seven decades. Conversely, the supply has been reasonably constrained. It was completely unbridled in the middle of the 20th century when cars had been invented and then people were going to the servers and whatnot. So supply was unbridled.

Auren Hoffman (01:11:03.216)

Mm-hmm.

Auren Hoffman (01:11:06.754)

Levin town, you know, growing and those types of things.

Tomas (01:11:10.255)

That's right. That's right. But that is not true anymore for the last three, four decades. And so there's the NIMBY movement and the last things. And so what happened over the last four or five decades is that you had a constraint in supply, whereas your demand was growing like crazy. And so that's why prices have been going up. These trends have lasted so long that all the people who experienced real estate before are dead. So all the people who remember real estate

Auren Hoffman (01:11:17.625)

Mm-hmm.

Tomas (01:11:39.971)

have lived this and so they think this is all of history. But that's not what happened. Up till the 1950s, actually, the price of real estate was extremely stable throughout Central

Auren Hoffman (01:11:48.196)

Yeah, even houses like up till the 70s really didn't go up very much at all.

Tomas (01:11:52.645)

yeah. So depending on the place, but that's right. That's right. Exactly. Right. So the supply is really limited starting in the eighties. And so what happens in the future is the demand is actually not going to grow because the population is not going to grow. Your household size is not shrinking anymore. And the only driver of demand going up is more square feet per person. But because, again, your number of people per household has been going down.

Auren Hoffman (01:11:54.831)

Yeah.

Auren Hoffman (01:12:17.156)

At some point we've reached like you just can't get any bigger. sometimes I go to a friend of mine's house and they're like 15,000 square feet and they've got two kids. Like they don't even know where their kids are.

Tomas (01:12:20.95)

That's right. That's right.

Tomas (01:12:28.655)

That's right. I mean, when you look at the data, it does look like it's still growing per person, like the square footage. But I agree with you. I don't think it's going to go anywhere. And so if the population is shrinking and the household size is not going down anymore, then the biggest drivers of demand are changing from going up to going down. And then on the supply,

Auren Hoffman (01:12:33.55)

Yeah.

Auren Hoffman (01:12:48.573)

And then we look like Japan where real estate's been basically flat.

Tomas (01:12:52.663)

That's right. That's right. So I think if you, you, the future is already here is just not evenly distributed, right? And Japan is the future in this. And so you can just see what's happening in Japan and that's going to happen everywhere, but not just Japan. Like you can also see places like Detroit and things like this where, where, and I think that's more like what's happening.

Auren Hoffman (01:13:13.028)

Yeah, Detroit housing is almost free. They'll basically give you a house if you promise to live there.

Tomas (01:13:16.847)

That's right.

That's right. That's right. so in case like Japan, for example, the price of real estate has been going down everywhere but in Tokyo, right? Because people will always want to go to the biggest network effects place, and that's Tokyo with the most population. And so what I think is going to happen is the places that have the most network effects, probably like New York and places like this, might keep getting more demand. And so the prices might not go down, but...

Auren Hoffman (01:13:29.935)

Yep.

Tomas (01:13:46.575)

the prices in mid tier countries are going to plummet. so cities like Detroit, I think are much more likely in the future than in past.

Auren Hoffman (01:13:55.212)

Interesting. Two more questions we ask all of our guests. What is a conspiracy theory that you believe?

Tomas (01:14:02.105)

Jesus, I didn't prepare this one. What is a conspiracy theory that I believe in?

Tomas (01:14:30.033)

yeah. So from COVID, I realized that governments are really bad at management. And so as a result, I don't believe in that many conspiracy theories because usually conspiracy theories mean lots of people are, with a lot of power are hiding and they are controlling the world. And I don't think that happens. I think it's just like poor management.

So as a result, don't believe in many conspiracy theories. But from COVID, I also looked into a lot of these things. And I think it's very likely that COVID was started in the lab in Wuhan. It's just too much. Yeah, exactly.

Auren Hoffman (01:15:15.812)

Yeah, I don't even know that's conspiracy theory anymore. It seems like it's like it's kind of like move to to general acceptance.

Tomas (01:15:23.095)

You're right. But I also give you the reason why I don't believe in many of them is because, Jesus, like people, governments are so bad at management that I don't think there's many. But I'll think about it.

Auren Hoffman (01:15:38.746)

Okay, interesting. Last question we ask all of our guests. What conventional wisdom or advice do you think is generally bad advice?

Tomas (01:15:55.395)

I think right now, 98 % of advice on career management is wrong because nearly everybody

gives advice based on their experience. And everybody's experience is about to be appended. So nobody's experience is relevant. And so I think the only relevant advice with regards to career management is get on AI, figure out how it works, and learn to learn fast. Because whatever it is that you're doing is going to be worthless in a few years. And just to illustrate this,

I have invested tons in my education. have graduate degrees and things like that. I don't really care about the formal education of my children. I think it's going to be worthless. And I'm focused much more on making them grow to be happy and curious and learn fast than about anything they learn in school.

Auren Hoffman (01:16:59.78)

I mean, if we're all gonna be pets, shouldn't we just like all just try to get cuter?

Tomas (01:17:04.641)

I always say please and thank you to Judge Bibi.

Auren Hoffman (01:17:10.736)

Exactly. Well, thank you Tomas Pueyo for joining us on World of Dast. I follow you at Tomas Pueyo on X. I definitely encourage our listeners to engage with you there. This has been super interesting, very wide ranging, and a ton of fun.

Tomas (01:17:28.281)

I love it. I love talking with you. think you really get where I'm going with my content. So it's a pleasure talking with you.