This episode of Hub Dialogues features host Sean Speer in conversation with Eli Dourado, a senior research fellow at the Center for Growth and Opportunity at Utah State University. They discuss innovation, technology, and what breakthroughs may pull us out of the “great stagnation.”
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SEAN SPEER: Welcome to Hub Dialogues. I’m your host, Sean Speer, editor-at-large at The Hub. I’m honoured to be joined today by Eli Dourado, a senior research fellow at the Center for Growth and Opportunity at Utah State University and a leading thinker and scholar focused on innovation and progress. He completed his Ph.D. under the supervision of economist Tyler Cowen, a past Hub Dialogues guest, and like Cowen, he’s become a powerful voice for a vision and policy agenda dedicated to ending the “great stagnation.” I’m grateful to speak with him today about various topics concerning innovation and progress, including some of the technological areas where he is bullish that we’re starting to see major developments. Eli, thanks for joining us at Hub Dialogues.
ELI DOURADO: My pleasure, Sean. Great to be with you.
SEAN SPEER: Let’s start with a question of biography, if that’s okay. What is it about you and your background that’s responsible for your interest in innovation, progress, and what one might even describe as futurism?
ELI DOURADO: Well, I come by it honestly, I’ll tell you that. I think I’ve been interested in some mix of economics, technology, and politics since I was a kid. I remember reading the World Almanac when I was nine years old and looking at per capita GDP statistics and charting out the growth rate of what I could expect when I was an adult. So just as long as I can remember I’ve enjoyed tinkering with technology and opening up computers and other devices and figuring out how they work.
And so, yeah, I think it’s funny because when you’re asked as a kid, “What can you be when you grow up?” There are only so many tracks, right? You can be a fireman or a dentist or whatever, but there’s no track really for what I do. I’m really pleased with how things have turned out because I think like the little kid version of me would’ve been thrilled.
SEAN SPEER: Let me follow up with a contextual question that will form the foundation for a lot of our conversation. What is the great stagnation, what do you think caused it, and how will we know if we’re out of it?
ELI DOURADO: I think of this great stagnation as—mainly I think of it as a slowdown in total factor productivity growth. So maybe we’ll start by just talking about what total factor productivity is, right? I think of it as just how good is the economy at turning inputs into outputs, right? How good is it at taking a fixed basket of input to how much output can you make with that fixed basket of diverse inputs?
We see in the aggregate data for the U.S. from about 1922 to the early 1970s that number, total factor productivity, it grew annually by about 2 percent. So 2 percent year after year after year. That’s really what made America the richest country on the planet, and the most powerful country on the planet is 2 percent cumulatively over that period of time.
And then, in the early 1970s, 2 percent stopped. Two percent was over. It went down to 1 percent, had a brief resurgence in the late 1990s and early 2000s. And actually, since 2005, it’s been about half a percent or less. So we’re in a deep stage of stagnation at this point.
So what I think of is, we’ll know it’s over when we get back to 2 percent year after year. That, to me, is the answer. I’m very focused on that one number. Rather than just saying, “Oh, it’ll happen when we get AI, or it’ll happen when we have autonomous vehicles, or whatever.” Let’s reserve judgment until the numbers start getting back to where they should be.
SEAN SPEER: What do you think is behind the productivity paradox concerning modern computing’s seemingly disappointing effect on productivity? Is it that it takes a while for us to figure out how to optimize general-purpose technology? Is it regulatory impediments? How can everyone have supercomputers in their pockets and still be stuck in a period of sustained stagnation?
ELI DOURADO: I think of it as mainly about just diminishing returns to one sector. So if you have really rapid growth in one sector, what does that do? That lowers the cost of goods in that sector, and it raises the cost of goods in every other sector. And during the earlier period of great American growth, from 1920 to 1973 or so, we had—Robert Gordon calls it—five great inventions. So you had this broad-based growth that was in internal combustion engines and petrochemicals and urban sanitation and electricity and telecommunications, and you had this broad-multisector-led growth.
Yet when you only have innovation in digital technology, well, it turns out like most of the world is still the world of atoms. We still mostly live in a physical world, and so there’s only so much you can do. It isn’t matched by an increasing level of permissiveness of what we can even use the digital technology for.
I think one example that I really find striking is, I thought being an early adopter of the internet in the 1990s, I thought surely real estate cartels are going away, right? We’re going to be able to list your house online, and it’s going to be free to transact a house. But here we are still in 2023, and real estate commissions are still pretty high and, in absolute terms, higher than they’ve ever been. So I think we just haven’t made the adjustments that would allow digital technology to even work in the rest of the economy.
SEAN SPEER: Yeah, that’s a great segue to my next question. As you alluded, your Twitter bio says, “atoms, not bits,” which is an idea also broadly associated with Peter Thiel. What does it mean, and in broad terms, what should we be doing to extend progress from the world of bits to the world of atoms?
ELI DOURADO: That’s a great question. Yeah, I think that there’s a lot we could do, but I think it’s actually quite challenging. So I think the biggest obstacle to progress in the world of bits actually comes at the level of deployment. So it’s not at the level of basic R&D or engineering or proof of concept. It’s really at the level of, “How do we deploy inventions at scale?” And if you think about even the great inventions that Robert Gordon talked about, those were deployed at scale; the automobile needed a national highway system. The electricity grid needed a rollout of power lines, which did not happen by itself. And I think that that’s the area where we have most failed, is we make it hard to deploy new systems at scale through laws that require a lot of public consultations and that take years to go through. I’m a believer in safety regulations, but not safety theatre regulations. So I think that there’s—to a considerable extent—a lot of the safety that we have it’s not real.
And other kinds of laws especially make work laws, right? Laws that say you can’t actually do this because someone would lose their job. Those three things—there are costs to innovation and disruption, and those costs include that somebody might be inconvenienced, somebody might get hurt, and somebody might lose their job. And if we’re not willing to bear those costs, then we’re not going to get a lot of deployment and disruption in the economy. So I think, to me, at the root of it is we’ve become unwilling to bear the costs of essentially doing great things.
SEAN SPEER: Let me ask a wonky policy question before we get into your analysis on sectors and technologies where we may be poised to see significant progress. Should government policy prioritize incremental innovation or breakthrough innovation, or is that even the right way to think about the role of public policy?
ELI DOURADO: I’m going to have to say both. We should be doing both. I think that it’s different levels of government doing different things. So I think there’s definitely a basic research function of government, and I’m happy to see a lot of money going into basic research. But I think at that level, when you’re spending the dollars on basic research, it really should be bold and go after big game-changing innovations in pushing the limits of science and really targeting innovations that could be transformative, if they ever got to full scale. At the level of we have to regulate a transportation infrastructure or whatever, let’s just—basic competence is basically, I think, all we really need there. And it doesn’t have to be a grandiose vision. It just needs to be effective and do a good job. So I would say it depends on what level you’re talking about. Are you talking about the actual regulator or the science funding agency?
SEAN SPEER: I’m afraid I lied. Let me ask one more question about the great stagnation and its factors, including the role for public policy, that may even serve as a segue into your thinking analysis on new sources of progress. Why did the U.S. government stop the Space Shuttle program, and do you believe that space travel has the potential to be the source of progress into the future?
ELI DOURADO: Well, the Space Shuttle was a failure as a program. They had five orbiters that they built, and two of them died, blew up in catastrophic accidents—one on launch and one on reentry. And the cost was never good. It was an incredibly expensive launch vehicle. And just never really reached the vision of full reusability for the vehicle. The orbiter was, of course, reusable after a lot of overhauls, but the booster was never reusable. Yeah, so I think that the Space Shuttle was a failure, even though it was the symbol of American dominance in space for a while. But it was not a good program. So it was cancelled ultimately, I think, because of lack of safety and economics.
What makes space viable is full reusability and just doing it over and over again, and having a very high cadence of launches. And I think we’re starting to see that with SpaceX—we’re seeing it demonstrated with SpaceX. I think we’re seeing the rest of the industry buy into that model, that that’s really how we’re going to do it.
And if we can get the cost of space launch down to, I’d say, a double-digit number of dollars per kilogram launched to a low earth orbit, which is where—under $100 a kilogram to low earth orbit—that would be, I think, a game changer and would allow us to start doing a lot of interesting things in space.
In the long run, most of the universe is out there. Most of the universe is not here on earth, and it would be a shame to be confined only to one planet and to only be able to benefit from the resources on one planet when there are so many other resources in space. It will take a long time to fully realize that vision, I think. But I hope that’s where we’re going as a species.
SEAN SPEER: Eli, one of the reasons you’re so interesting is that you have a deep knowledge of innovation and progress across various sectors and technologies. You’re something of an expert on geothermal and supersonic flight, and virtually everything in between. You’ve written two comprehensive essays on possible areas of progress in the past few years. The first “Notes on technology in the 2020s” was published at your Substack in late 2020, and the second, “The new productivity revolution,” was published in City Journal in spring 2021. What were you trying to achieve in these essays which I would highly recommend, by the way?
ELI DOURADO: I would hesitate to ascribe any grand strategy to definitely not the first one. So literally, I think that the first one notes on technology in the 2020s was just a friend of mine who asked me to write it up. He was just interested in my thoughts and was like, “Hey, you should write up your thoughts on what are the possible sources for growth?” And I just took them up on it and said, “Okay, sure, I’ll put these thoughts down.” And I did that and covered a wide array of areas. Yeah, and in City Journal, I just wrote a piece on three things, three areas where I think we’re starting to see some progress potentially breakthrough. And those are biotech and geothermal and space.
So with biotech, I’m just so impressed by what’s going on in our biology labs today. I mean, the scientists in these labs they’re basically like wizards. They can do incredible things. Of course, gene editing, we all know about, but things like growing organisms and control the growth that they do. There’s a scientist that can grow worms with two heads or zero heads, or however many heads you want. And it’s incredibly impressive. And I think that the gap between what we see in biotech and biology research, let’s say, and the actual medicine is just so large that I see it as an area that has so much potential.
And geothermal energy is, to me, incredibly exciting because of just the staggering size of the resource. So if you add up all the geothermal energy in Earth’s crust, it’s something 40 times bigger than all the fissionable material on earth combined, plus all the fossil fuels, plus a bunch of other odds and ends. So it’s just such a staggeringly huge resource that seems almost inevitable that will eventually tap it, especially since actually getting it is technically—we’ll take some advances, but it’s not conceptually that complex. It’s just literally you just have to drill deep enough, and we’ll get there. And then in space, we already talked about it, but reusability is just driving costs down and down and down.
And I really think about trade with space as like using the gravity model. So this is the most successful empirical economic model of all time is called the gravity model. And it just says, “The amount of trade between two places on earth is inversely proportional to the costs of getting goods and people between those places.” And if we can get the costs of getting goods and people into space down by another order or two of magnitude, then that should radically increase how much presence we have in space, and it’s going to change a lot of what we do.
SEAN SPEER: If I can ask followed questions on biotechnology and geothermal. First on biotechnology, what explains the gap between the tremendous progress in biology and its transfer into market outcomes? Is it a market failure or is it a government failure?
ELI DOURADO: I’ve been trying to figure this out. I think that one thing that is clear is that the cost of clinical trials has gone up. So it used to be $10,000 a patient that you enrolled in a clinical trial, and now it’s $500,000 a patient. So 50X increase. Now, is that entirely because of regulation or entirely because of the market? Probably it’s a mix of the two or the two interacting, and it’s not obvious to me how you fix it. Probably having some lower level of—given the dysfunction, some lower level of regulatory requirement is probably warranted, but I don’t think it’s entirely the regulation. I do think there’s something dysfunctional in the industry as well.
And that is—I mean, from a total factor productivity perspective, that is, there’s a huge obstacle because drugs are unreasonably effective at producing health. I think it costs three—we save a life for every $3,000 or something that we spend on drugs, which is just the numbers you don’t see really in a lot of other places. And if you could replace a surgical procedure or some other kind of medical procedure with where you’re taking highly paid, trained professionals and very expensive equipment and replace that with a few pills, that is going to win every time. So it’s really important to get the cost down for getting new drugs to market, especially.
SEAN SPEER: And on geothermal, pardon me, for me and listeners who aren’t as familiar with the technology, what are the potential applications? How can progress in geothermal manifest itself in people’s lives?
ELI DOURADO: So geothermal has been around in some form for over 100 years. It started in—Italy was the first place that they actually did it to produce electrons. It provides the majority of the power for Iceland. So Iceland is a country that has done it already at scale. And the idea behind new geothermal drilling technologies is, essentially, if we go deep enough anywhere, it’s basically like Iceland. So wherever you live, if you just drilled a little deeper, like say, seven to 20 kilometres of depth, those are super-hot conditions down there, and we could use that hot rock. We could send water down and then back up. After it harnesses that heat, it comes up as super-heated steam, and it could be run through a turbine just like the turbines that are used at coal plants or nuclear plants, or whatever.
And so, you could produce basically unlimited amounts of electricity at what I think hopefully is a pretty reasonable cost, and it’s completely carbon-free and its baseload, and so it doesn’t vary by time of day or by what the weather is. And so it’s the holy grail of energy because it’s superabundant, it’s reliable, and it’s cheap, and it’s zero carbon emissions. So there’s not really a lot not to like about it. And we could certainly decarbonize very quickly, but we could also increase our energy use and not just be satisfied with a decarbonized economy, which would be great, but also have a more abundant vision of a decarbonized future.
SEAN SPEER: If I understand correctly, you live in the Washington D.C. area and work for a centre at Utah State University, which means that you have direct insight into remote work and its potential to decouple where we work and live. What do you think of its potential? Are you bullish or bearish?
ELI DOURADO: Great question. I was also remote in my previous job, where I worked for a company in Denver and lived in the D.C. area—in fact, I was the first employee in the D.C. area.
I am probably less bullish than a lot of people. I think being in person with people really matters. I just literally was in Utah last week, so it was just so refreshing to see my colleagues who were there. In my previous job, where I worked in the private sector, I flew to Denver every month. So it was truly a high-cadence commute situation. I think it’s all important because the bandwidth of that face-to-face interaction is just so much higher, and the informal connections are also very high.
I think that for knowledge work—so having been remote for almost six years now, for knowledge work, it can work pretty well if you are a highly motivated person with a lot of internal drive to accomplish certain goals, it can work. If you’re either not as motivated or your employees are not as motivated, it doesn’t work as well. And I think also if you’re working on certain kinds of hands-on work, any kind of engineering work, it really matters that you have those high-bandwidth conversations a lot more frequently. So I think it has a role, certainly, but I don’t think it’s going to be a game changer for the economy.
SEAN SPEER: There is a growing policy and political interest in so-called “moonshots.” Do you think moonshots are a useful framework for supporting and organizing big scientific initiatives, or does it risk causing more harm than good?
ELI DOURADO: I don’t think there’s too much harm in going after a moonshot, and I certainly think it’s good to have some. I think, if anything, maybe we’ve diluted the term a little bit so that we use the word moonshot for something that is actually not as challenging as going to the moon. I think about 1969 when we actually landed on the moon; it was only 66 years after the invention of flight at all. So it’s just incredible the rate of progress and the ambition of that effort as extraordinary. I don’t know that we have very many things that are equivalent today at all. But I do think it is good for people to organize around ambitious goals. And it would be good if we did that more I think.
SEAN SPEER: I should just clarify, Eli, to the extent there are concerns, it’s the tendency, as you say, to overuse the term and not think critically about the particular conditions that were present in the Apollo project which made it so compelling a collective vision to work towards. And so I think there is a risk that we start to dilute the concept, or, as I say, that we don’t think enough about the conditions that made it such a unique collective project.
ELI DOURADO: Yeah. Yes, I would agree with that. I would add that the negative that I really see from the Apollo program was that we stopped it. We planted the flag, declared victory, and then didn’t go back ever again. It was completely unsustainable. And so nobody has been to the moon since the early 1970s—so almost 50 years of just absence from the moon entirely, and only a handful of people who have ever been on the moon are still alive. So it’s really, in that sense, the flag-planting aspect of it, and then letting it go, I think, is the other really unfortunate aspect of it.
SEAN SPEER: Let me ask a separate but related question. Just as there’s growing political interest in the concept of moonshots, there seems to be growing interest around the world in importing the DARPA model. We have something of a new agency in the U.K. and the Canadian government has just announced the creation of a new innovation agency. Do you think DARPA can be replicated, or are there unique particularities within the American defence industry that makes its application to other sectors or technologies or jurisdictions more limited?
ELI DOURADO: Well, I’m not even sure today’s DARPA is the same as the DARPA in the good old days. So there’s definitely some possibility that it was a time and place kind of thing. But in general, I’m pleased to see people experimenting, including trying new DARPAs or new ARPAs for things. And in addition to the ones you mentioned, my friend Ben Reinhardt has created a private ARPA, Speculative Technologies, which is trying to just—as a charity—do projects that are too risky even for governments to do. So it’s such a bold vision. But yeah, I think that the innovation system broadly needs a lot of experimentation.
I think that that’s where, if we’re talking about what is the deficiency of the U.S. resource system, I think it’s like too much money is all funneled through the NIH. It’s like one giant agency. It’s not quite a monolith, but it’s pretty concentrated in how the funding is allocated, and we just need more experimentation and to see what other models work. And then the ones that work, we can scale up and give a little bit more money to and take away a little bit of money from the ones that aren’t working as well. And that dynamic feedback process, I think, has not really existed. So I’m really pleased to see experimentation, including with ARPA models.
SEAN SPEER: What about the net zero target? Do you think it’s a useful framework for collective progress towards an energy transition and other trends needed to lower global carbon emissions?
ELI DOURADO: I’m okay with the target. In general, in climate, I feel like we’re not trying very hard in the sense of we actually have a lot of tools that we need to address the climate challenge, and it’s mostly getting stuck on things like deployment. So in terms of—certainly in clean energy—we have a lot of tools at our disposal, and we’ve just made it very hard to deploy them.
And then in carbon removal, there’s an amazing array of tools. The one that I’m most fond of is enhanced weathering, which uses a mineral called olivine to react with the atmosphere and essentially turning the carbon atom and CO2 into bicarbonate ions that would then deacidify the oceans as well. So it’s a twofer. That kind of system would be, if we actually tried to deploy such a thing at scale, it could potentially be a very cost-effective way of hitting that zero with no new unobtainable technology, like with today’s rock crushing and drilling technology.
Another example is solar radiation management. We basically have the tools to cool the earth’s climate if we wanted to do it, but it’s extremely controversial on a deployment level. It’s actually, to some extent verboten to even do experiments with it. Although some of those are now happening, and which I think is a good thing. And if the experiments pan out, I think we should talk about whether is this a good way to control the thermostat of the climate.
SEAN SPEER: I don’t know if you can discern from my last several questions, Eli, an underlying idea about the political economy appeal of different concepts, ideas and arguments to build a political constituency for a progress agenda. I observe politics in Canada, U.S., and elsewhere and see the political fecundity of nostalgia and no one really trying to build political support for an aspirational, progress vision and agenda. I don’t know if you agree with that assessment. Maybe I’ll just put it to you: why?
I just can’t help but think that there is an underlying political market demand for your vision and agenda, and it’s partly reflected, for instance, in consistent polling that shows that people are down on the future which, in my view, is at least in part, because no one is presenting a positive vision of the future. Why do you think that is?
ELI DOURADO: I think that a big chunk of the problem is that it’s actually non-obvious and hard how to actually do that. I think that the market for political optimism in the past has come from either the Left wanting to undergo particular programs that are big government programs or as from the Right wanting to say that everything is fine, that there’s no need for government to get involved because things are so much better than they used to be and they’re going to continue getting better in an indefinite way—in a way that doesn’t require any specifics of thought and so on.
And so, a vision of the future that’s steeped in technological reality and the ability to actually think through how are we going to engineer this and so on, I think that there is a desire for that, and it’s shouldn’t be ideological. It should be based on like, we just—or the ideology is itself that we want to grow and we want to do great things as a society and as humans. And it’s not going to start from the perspective of we want a government program to do X or we don’t need a government program because everything is fine.
Instead we need to start from the point: “What is it that we want?” and try to make it as realistic and intractable as possible. I have noticed an uptake in that, but it isn’t something that has really been tried in the past.
SEAN SPEER: Final question: Do you think we’re going to break out of the 2 percent trap? And if so, what are the major determinants? If it’s a lack of society-wide urgency, as you alluded, how do we solve for that?
ELI DOURADO: Yeah, I think it’s entirely up to us whether or not we get there. In my writing and in my work in general, I’ve really taken the strategy of trying to convince elites in society. I don’t think engaging with the culture war or the issues that appeal to the rank-and-file voters I don’t think of that as very helpful at all. And so I’ve just been trying to write for other thought leaders and try to build elite consensus that this is where we need to go.
My model of the political system is that for the culture war issues or the stuff that normal voters care about, you basically have to give the voters what they want. There’s not really in a democracy another alternative, but then outside of those issues, I think elites have a lot of sway. And they can move things in one direction or another. I think that is the model that makes sense to me for how we would get there. So that’s how I’ve been trying to approach it.
SEAN SPEER: Well, if people want to understand how we get there, I’d strongly recommend they read the writings and thinking of Eli Dourado, which you can find at his personal website, elidourado.com. Eli, thank you so much for joining us at Hub Dialogues.
ELI DOURADO: It’s been my pleasure, Sean. Great to be with you.
