Episode Summary
Executive Summary: Patrick O'Shaughnessy interviews economist Eli Dorado about the "great stagnation"—why total factor productivity has slowed and which frontier technologies could reignite growth. They examine biotech, energy, transportation, space, IT, and crypto as potential catalysts for a more abundant, less zero-sum economy.
Main Topics: The Great Stagnation: Dorado frames falling TFP as the core symptom of broad economic stagnation. Why Growth Matters: He argues growth raises living standards and reduces zero-sum conflict. Regulatory and Institutional Drag: Permitting, NEPA, and weak institutional performance slow real-world progress. Biotech as Productivity Engine: mRNA, CRISPR, and protein folding could shrink health's GDP burden. Cheap Energy and Deep Geothermal: Abundant baseload energy could unlock desalination, materials, and vertical farming. Faster Transport and Space Expansion: Supersonics and Starship could compress distance and expand economic activity. IT, Custom Silicon, and Crypto: Machine learning, custom chips, and Ethereum could create new productive tools.
Key Arguments: TFP fell from ~2% to ~0.3% annual growth, showing civilization's slowdown. Growth matters because it lifts living standards and makes society less zero-sum. NEPA and similar rules can turn approvals into multi-year bottlenecks. mRNA can program cells to make proteins and potentially help treat cancer. Protein folding matters because proteins are the body's functional machinery. Deep geothermal could provide baseload power anywhere if drilling keeps improving. Supersonic flight economics improve with better materials, engines, and demand. Starship could cut launch costs enough to make space a much larger economic venue. Machine learning is becoming useful on real problems, not just toys. Ethereum may matter more than Bitcoin because smart contracts enable new applications.
Data Points: TFP growth: about 2% per year - Average growth from 1920 to 1970/1973 TFP growth: less than 1% a year - Growth for the next few decades after the slowdown TFP growth: 2% a year - Brief spasm around 1995 for about a decade TFP growth: 0.3% per year - Current estimate cited for recent years Healthcare share of GDP: close to 18% - Used as an example of a huge productivity drag Housing share of GDP: 16 to 18% of GDP - Another large area where productivity has lagged NEPA review time: about a five-year process - To document environmental impacts NEPA no-impact proof time: about a two-year process - To prove there are no environmental impacts Energy use per capita growth: 2% per year - Historical U.S. trend over more than 200 years Energy use per capita change: less energy per capita - Trend reversal around 1977-1978 Heat energy in Earth: 50,000 times more - Between the surface and 10 km depth versus all oil and gas reserves Geothermal replenishment rate: twice humanity's current primary energy use - Heat from radioactive decay in Earth's soil Concorde fleet size: 14 - Total Concorde aircraft that ever saw service Premium transatlantic travel demand: more than doubled - Since Concorde exited service in 2003 SpaceX launch mass target: 150 tons - Starship payload to low Earth orbit Potential Starship launch cost: $1.5 million - At a high rate, per launch estimate discussed Cost per kilogram to orbit: $10 a kilogram - Derived from the Starship launch-cost estimate Cost reduction vs Falcon 9: two orders of magnitude lower - If Starship cost targets are met Mach 2: Concorde speed limit - Aircraft used aluminum and thermal limits constrained faster flight Mach 5: next-generation supersonic benchmark - Discussed as a practical upper range for traditional supersonic aircraft Mach 12: target mentioned by Venus Aerospace - Example of an even more ambitious next-gen concept 2%: annual energy use per capita growth historically - U.S. energy consumption trend before the late 1970s
Pivotal Quotes: "Total factor productivity to me is like the key metric of like how civilization is doing." — Eli Dorado: Defines the central framework for the discussion "We wanted flying cars, but we got 140 characters." — Patrick O'Shaughnessy: Illustrates the mismatch between expected and actual innovation "If energy is free, we can grow anything anywhere, which is really cool from a global agriculture perspective." — Eli Dorado: Explains why cheap energy could transform many sectors
Implications: The open question is whether institutions and capital will shift from complacency to execution; listeners should watch which frontier technologies actually escape the lab.
From the Episode
Residual term is called total factor productivity. And it sort of represents the quality of ideas and institutions and the recipes that society has for combining labor and capital into output. Total factor productivity to me is like the key metric of how civilization is doing. And the history here is that basically from 1920 to 1970, maybe 1973, depending on who you listen to, TFP grew at about 2% per year. Then something changed and it started growing. At about less than 1% a year for the next few decades. And then around 1995, there was like a brief spasm where it went up about 2% a year again for a decade. And then since 2005, it kind of fell off a cliff. And now it's 0.3% per year. So you'd round it closer to zero than you would even to 1%. So historically, we've been at 2%. Now we're at 0%. That to me is like the most fundamental metric of growth. And we're basically not doing it. I think this has all kinds of implications for society.
Can take a given quantity of labor and capital and produce a certain amount of output. In Venezuela, you can take the same labor and capital and you cannot produce the same amount of output, but you produce less. And why is that? It's because the state expropriates. It's because you can't get your rights enforced. You can't get the support you need from society to just do your thing in the most efficient way. That has to be an element as well, if we're thinking rigorously about what TFP is. There's another way of thinking about this: Peter Thiel's famous: We wanted flying cars, but we got a hundred. 40 characters. Like, is that another vector that's interesting here? Yeah, I think that is very much related to the TFP slowdown. If you want to break down the way that productivity has grown over the last, say, 50 years, it's grown a lot in IT, 140 characters, but also TV manufacturing and smartphones and the internet. Those have all been bright spots in consumer goods, consumer electronics in general, have all been a bright spot in the economy.
If energy is free, we can grow anything anywhere, which is really cool from a global agriculture perspective. What are the key sources here that are interesting in terms of what might provide both more and cheaper per unit energy going forward? The last 10 years have been huge for solar and wind, massive declines. The one I really like going forward in the next 10 years is geothermal, particularly deep geothermal. So, not tiny geothermal that we have today that is. Only used where there's volcanoes and hot springs and geysers and stuff like that. Those places around the world, it's very easy to get geothermal. That's where we've done it in the past. But basically, if you dig deeply enough anywhere in the world, there is enough heat to produce energy. And in fact, massively more than enough to provide all of the energy that humans will ever use. The stat that I've seen is between the surface and a depth of 10 kilometers, there is 50,000 times more heat energy than all our oil and gas reserves.
About Invest Like the Best with Patrick O'Shaughnessy
Conversations with the best investors and business builders in the world.
View all episodes from Invest Like the Best with Patrick O'Shaughnessy