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- [00:00]
A
We started building these kind of like software frameworks. It allows two engineers to design an entire jet engine.
- [00:05]
B
There is no startup that builds hardware collaboration tools that can sell you anything anymore. Even spreadsheets are kind of cooked.
- [00:12]
C
The closer that our products get to being a single block of covalently bonded matter, the better they'll be.
- [00:17]
D
Intelligence is an unalloyed good. You always want more intelligence.
- [00:20]
B
If you fall behind on your ability to generate software, you fall behind on the ability to generate everything.
- [00:24]
C
The software still needs hands like it's going to be smarter than us. But if it can't make things, then those are real boundaries.
- [00:31]
D
I mean, humans are becoming verifiers, right?
- [00:35]
A
One of the things we've seen related to the regulatory is it massively reduces change aversion and improves iterations. To give you an example, like let's say you're going to go certify an airplane. One of the zillions of things you have to do is prove that it could withstand a lightning strike. And the regulatory documentation for the test plan for such a thing stretches on for say 200 pages. And what you classically do is hire a, let's be honest, not super bright engineer who's willing to be there monkey at Keyboard writing 200 pages of regulatory compliance documentation. And it takes a couple months. And by the way, if you change the airplane now, you want to cry because there's another two months of rework of this like rote kind of regulatory compliance documentation. And what we found is we can build a rag that will enable us to basically prompt our way through all of that work, you know, in, let's call it minutes. The first order effect is, oh, you save a lot of time. The second order effect is if you change the specification of the airplane, it now takes, you know, minutes, not months. So you can actually be willing to change. And the third order effect is you can now basically get rid of the not very great engineers and have a small number of really creative ones that can iterate rapidly because the cost of change goes down. And in a certain sense, like the entire regulatory burden, which really hurts, the ability to iterate drops away.
- [01:59]
C
I think that this is a really undersold story in AI right now. I think the consensus in Silicon Valley is that regulation sucks. We want to go faster, we want to realize this amazing future. We want abundance, we want just prosperity and stuff that slows down. That future is just kind of to be avoided. And certainly I think we've overregulated, we've made it impossible to build stuff it's just like, it's totally crazy what goes into getting building any type of thing in a lot of places, either physical or otherwise. But you know, like a lot of the regulations themselves are not the problem. Like if you've actually read a lot of these things, like having non smog choked cities is great. Being able to swim in like many rivers is great. Like having a lot of these things were progress. The problem is that it is really difficult for humans to deal with understanding and complying with this and that every time you have to exchange a letter with the government, you wait months. And if you could take a lot of the things that we've learned and kind of make them totally frictionless, that would actually be pretty cool. And I think that, that I think is an undersold story in AI right now.
- [03:00]
D
Yeah, until the regulator starts spewing tokens back at us and. And then you start getting huge amounts of documents from the regulators that you have to comply. And it's agent on agent wars. But.
- [03:09]
C
But that's basically what we have now.
- [03:12]
D
Yeah, but, but there is a fair fight.
- [03:14]
A
Yeah, I'd argue that's an improvement from where we are now. Like one of the terrible things right now is if you're going to build anything physical, you have to get a building permit. It's like you're guilty until proven innocent. And the worst thing that we've run into is the fire department because they have like the moral imprimatur of, you know, people pulling people out of burning buildings. And yet what they actually do is just like screw with your design for buildings for months. And you know, if we could replace the fire marshal with, with an agent that would critique your, your building plan quickly, even even if its feedback was overdone, it would be massively better than the delays that exist today.
- [03:51]
B
When Max was talking about this potentially being a good thing to have all this regulation, my, my head went to the things that make agents successful is humans or other agents setting up the right testing guardrails. A lot of people are really excited about goal. I don't know if you guys have played with that or like Ralph Loops where you tell the model, go do this and this is your exit criteria. Well, I'm telling Blake, go make us all supersonic. Your exit criteria is that you've complied with all of these regulations. So there's totally a world in where we say the regulations are great. They're our test suite. As long as passing this test, one does not incur in contradictions. And the regulations are actually Reasonable, et cetera. They're actually an awesome guardrail to have, otherwise we would be shipping slop directly into the air.
- [04:43]
D
Yeah, but this is going to turn into a Red Queen's race. Right? They're going to have agents, we're going to have agents. I think we might have better agents, which is good, as opposed to have to do human versus human. But if anything, their cycle time, their response time may get lower. Like the App Store is drowning in spam. I'm sure the patent office right now is drowning in spam. And so these agencies, they're going to be slow adopters of AI. They're going to get DDoS right by clever entrepreneurs just overloading them with documents. It's possible that the approval time for this stuff might extend out. As this suddenly gets flooded, it creates
- [05:14]
A
the opportunity to, I think, really shift the model, the regulatory model. Imagine if we drove around a city, the way we build things today, before you could go anywhere, you'd have to write a plan up, ship it to some regulator, you know, and your plan would have to specify, we're going to take such and such a route and we're going to drive this speed limit, we're going to use our blinker and we're going to stop at every stop sign and we're never going to run a red light, blah, blah, blah, blah, blah. And then three months later you get back critique. It's like, well, we think you should like drive on this other street and eventually you get approval. You can go drive somewhere. It's insane. You can never go anywhere. And yet that is absolutely the way we build physical infrastructure in this country. It's guilty until proven innocent. And, and what we should actually do is make more of these things, enforcement based rather than preapproval based.
- [06:00]
C
I mean, I don't know. I mean, I don't want to be under too much. Like if I ship a medical device to a lot of people, there needs to be. It's like there's unknowns there. It's like we were responsible, we did clinical trials, we reported all the data.
- [06:12]
D
But Max, this is why there's so little innovation in medical right now, because the FDA approval process is a nightmare. In fact, the two biggest advancements in tech in Silicon Valley in the last decade, AI and before that, crypto, they're both in the math domain because that's the last unregulated domain. And when they started regulating frontier models and started regulating GPUs, that stops as well. You know, Peter Thiel laments about how there's no innovation in the physical domain. What's been held back by just the huge regulatory barriers. And you can always find a scare version like your vaccine or medical, like famous ones. Right? But the regulations spread everywhere, the tentacles are everywhere. And there's all these different contradictory regulatory bodies. You saw, how was it? Space X? They got sued first for, for not having enough. I forget what it was, migrants or refugees or whatever, but they're not allowed to hire them by government regulation on the other side because they're not citizens. This is not like logical code that has to compile in one place. These are made up random regulations all over the place. You might comply with one state, you violate another state, you violate federal over here, you annoy this guy over here, that guy chooses to prosecute one out of 50 people who are his friend. It's very arbitrary, it's very capricious.
- [07:21]
A
And moreover, the idea that this makes things safer I think is just a complete mythology. Just watch Boeing as an example. They certified the 737 Max, which had a single sensor that had complete authority over the nose up, nose down attitude of that airplane. No Internet is dumb enough to think that's a good idea. And yet it got all the way through the certification system. This stuff doesn't actually make us safer, it just makes us slower.
- [07:48]
C
Well, I mean, there's definitely dysfunction here. I mean, I think that some of this makes us safer in the sense that the NRC makes us safer, which is that their job was to make sure that nuclear energy was safe. They did this by permitting zero plants until I think like a year ago, since the 70s. It will be perfectly safe if we never build any of it. And I want to be really clear that I'm on the side of deregulation and on a lot of this. I agree with Blake that a lot of this can be done a lot more efficiently. But I also think it's a little too dismissive just to say it's like, oh, this is like the fda or like even it's. It's in the right, it's in the agencies in general. I think the problem is deeper to the degree that when the, if the FDA approves 10 really important drugs, they don't get any credit for that. One patient dies and they get hauled before Congress and yelled at. And so they have very negatively biased incentives here. And I think the reality is, is that this is reflective of the beliefs of the American people. There's this trade off here between the perception of risk taken in human subjects research and the rate at which we get new medicines. And it is absolutely true that if we move faster on this, we would learn.
- [08:47]
A
It's totally asymmetric. And I think you're totally right, Max. If you approve a bad thing, your career is over. If you block a good thing, nobody notices. Right? So it. So it creates this asymmetric slowdown. And I think this is. I think that is the most important problem to solve in the regulatory state.
- [09:03]
C
But this is a very deep problem because it is. This is where the voters are. Again, we go and pull some of the stuff that we're working on in the future to understand kind of like where the American people are on it. And if you push too hard on this, there are all kinds of ways you could work around it. You could go to Prospera. There's all kinds of ways to try to go faster. But if you're seen as being a bad actor, then you are rejected from the society that we live in. That is the thing that you need an answer for, which is deeper than just saying, like, oh, well, we need regulatory reform.
- [09:31]
D
You have a deep point there, Max, which is. It's the voters, right?
- [09:35]
C
Yeah.
- [09:35]
D
This where the citizens are like, we like to blame politicians. You'll see this on X all the time, right? People are like, oh, this politician, that politician. Evil politicians, they're elected, they're voted, majority vote, right? This is where the people literally are. That's the package, that's the bundle they've chosen. And you may not like this instantiation, but if you were to remove this one, something very similar would take its place because the voters would just vote them right back in. And I think culturally, it's very hard for most people to understand what we lost, what we missed. Right? So, for example, like France, you know, there's a French entrepreneur on x lamenting that 57% of GDP gets sucked up by the government, and so you can't create companies. But to the average French citizen, that's not visible. They don't notice what they're missing. They just know they're slightly poorer than the U.S. the economist just did a little piece on economists is finally coming back around to being capitalists after 30 years. And they just did a little piece on how the US is outstripping everybody and growing faster and getting bigger. But then they immediately turn and say, well, it's because of the oceans, because of natural resources, everything but capitalism. Right? They don't want to say the dirty C word because, you know, for some reason, all of these, all of these magazines became Marxists at some point. But they can't, they can't envision or imagine what could have been if we had just been a little more laissez faire, a little more open. Right. I would love to see a true experiment among the 50 states, you know, different regulations, different tax structures, because right now the federal tax structure and federal regulations dominate everything. But imagine, you know, you could go to some small state if you had cancer and you could try every drug that everyone was cooking up in caveat mtor and you got to do your research and blah, blah, blah. But this is known as the experimental zone. Same way for drones, same way for, well, aircraft is a little harder because you got to cross a lot of areas.
- [11:17]
A
But I do think there's something magical in there, the, the notion of like innovation zones, because we have, we have a hu, like NIMBY problem, right? But if you create like, you know, opt in yimby zones, they create that experimentation framework and by definition it happens where people are consenting and you can try different rules or no rules, or different ways of enforcing or you know, innocent until proven guilty and then see what actually happens and what are the innovation consequences and what are the safety consequences and then the successes can spread.
- [11:44]
C
But I mean, to naval's, to Naval's point, an innovation zone would not solve the problem in drug discovery there. So there's the right to try it. Act passed a little while ago. We've had this pathway called single patient IND for a lot longer than that. The fda, like if your doctor calls the FDA and says, hey, I want to give this my patient an approved drug, they give over 99% of those over, like they approve over 99% of those. They can even grant them over the phone. The problem is that in order to dose a patient, you still need clinical grade drugs. And the only entity with that is typically the IP owner who's in the middle of running a clinical trial. Like they're investing hundreds of millions of dollars into like making this thing. And the problem is that the fda, they'll draw an adverse inference if something bad happens to your patient who's probably really sick to begin with. And that's going to be seen as a property of the drug, which is global, not related to your innovation zone. And so there's kind of two problems. One is you need to get the IP owner to give you some of your drug, which they're not going to do. And then you need to prevent the global regulator from casting doubt on what might happen with their clinical trial. If they give you some.
- [12:47]
A
How would you. I mean, I don't know your field. How would you address that in medicine?
- [12:52]
C
Oh, well, I mean, that in particular. I mean, this is just like a very inside baseball. I think the FDA has to be prohibited from drawing adverse inferences across different users of a capsid, for example. There's these, like, a bunch of specific ways that you could really accelerate innovation with a relatively light regulatory touch by just preventing this, this kind of paranoia from driving our decisions.
- [13:13]
B
Is there anything better than the FDA out there? Like, what are we benchmarking these regulators against? Or is it not an interesting question because we don't have.
- [13:21]
D
Everyone follows the fda.
- [13:22]
C
So I'll give two, two expansions to that. The first is Europe, which is not really better than the fda, but they have a different system in that they've got these, these notified bodies, which are basically private businesses that are blessed by their host government to certify things, whether this is trains or planes or medical devices. And the notified body system creates slightly better incentives at the review layer because they can hire people, they can grow. There's competition among the notified bodies. They themselves have to be compliant with the conditions placed by their host governments for certification. But it means that they can. There can be many thousands more reviewers than you might have in the US the second thing I'll say is there actually is one approved, getting paid reviewer approval, implantable BCI today, which is in China. And the CFDA is thinking for itself. And they really do have a system that I think is going to give us a run for our money if we're not, if we're not careful. And they, they handle it very differently.
- [14:17]
A
How do they handle it?
- [14:18]
C
I mean, the cost to bring a drug to market or device to market are just much lower. I mean, you can try things in humans and you can try things on market like the. So the problem that. One of the things that I've spent a lot of time recently thinking about is like, 20 years ago, we were buying far fewer laptops and phones. Each one was much more expensive. Now they're cheaper. There's far more of them. We buy more of them. The total spending has gone up. This is great. Stock prices of things like Qualcomm and Samsung and Apple are way up. Everybody's happy. They're using kind of the excess wealth generated by the phones and laptops to buy the phones and laptops. This doesn't happen in healthcare. In healthcare, because you've got this reimbursement mechanism in the way where there's this kind of enterprise sale happening, the bucket of money that we use to buy healthcare is basically fixed. It is not increasing as there is more stuff that is producing better healthcare outcomes like we see in technological growth industries. And so this means that the rate of spending on healthcare grows at roughly the rate of growth of tax receipts. And so if, let's say that like AI is booming and there's major advances that are happening, and two years from now we're spending 10 times as much on AI as we are now, this could be great. But if in two years we're spending 10 times as much on healthcare, this would be a catastrophe. And this is fundamentally at odds with being a technological growth industry. And so as time goes on and there's more things to spend money on that extend and improve quality of life for patients. Like we can restore vision to people who go blind in their 80s. We might be able to extend life in like far past where it's been before. We can restore capability to patients that are older and in worse condition. But like, how do you pay for that? There's kind of this like omni problem in healthcare, which is all really related to the same problem, which is it's just too expensive to bring these things to market. And that's what China is getting at. The way out of this is not single payer or some revision to health, to health insurance. It's to bring down the costs so that someone can buy this with a credit card, finance, maybe like a car, worst case. And to do that we have to make it cheaper to bring these things to market. And China's doing that, that, that will allow them to sell these things for $10,000 on $100,000.
- [16:18]
D
There's no private market in healthcare. And because there's no private market. What was the analogy people make sometimes? Like imagine instead of going to restaurants and paying, you would basically go to all the restaurants and then at the end of the month you would send all the receipts and all the bills to your insurer or to the government and they would reimburse you. Well, there'd be a line outside every good restaurant, every bad restaurant you know would be available. The weights would be terrible, the product wouldn't improve. You're basically running a small communist society inside a larger capitalist society. That's what we're doing in healthcare.
- [16:49]
A
It's also what we're doing on roads, which is why we have traffic. Like it's the exact same situation on roads is why there's, you know, there's no variable pricing for Getting on the highway, it's why it's always clogged.
- [16:59]
D
If you want to step on the third rail of healthcare for a moment, think about this healthcare plan. Tell me what's wrong with it, right? Imagine that the first 20% of your annual income was your health care deductible. Doesn't matter. Like if you're broke and homeless, it's zero. If you're rich, you know, it's millions of dollars. But whatever your annual income is, the first 20% is your health care deductible. And then the rest is paid by the government and the insurance system up to the usual caps that they have today. You would create a private market pretty quickly. And so like in dental and plastic surgery and sort of a lot of optional medical procedures, you would actually get a competitive situation. You get improvement. Like if you look at optometry, you know, with Lasik, you look at dental with like veneers and braces and all that stuff and kind of all the dental surgery stuff that they do, or if you look at plastic surgery, like those fields do seem to be advancing because they're private payers. They have people who are, you know, voting with their money. So we need to do some equivalent of that in the normal health care system where people lose their minds, they don't want to think one step ahead. They're like, no, no. What about the broke person? Well, the broke person has no income. So they're like, well, 20% is too much for some people. Okay, you can put some deductible in there, but generally if you don't have some private market where people are paying a lot of the times for what are medical procedures. You're just not going to get this feedback loop that you're talking about. You're not going to get this ability to spend more money into the system. Right now. Like very wealthy people can spend voluntarily into the system, but the prices aren't anywhere. The rate cards aren't anywhere. The system's not designed for it. It's like if you go shopping for medical care and you want to pay out of your pocket, sometimes they'll quote your price as 10x what they charge the insurance company.
- [18:39]
C
Have you heard Sid's story from GitLab? Do you know Sid? So he was, I mean, he had a massively successful ipo, then was diagnosed with a rare cancer and has achieved, has lived way past the prognosis, has really taken it into his own hands. I think he went from kind of, he did frontline chemo and then there was One alternative that was available, he exhausted it and the doctors were like, we've got nothing for you. Since I think like six or seven companies have come out of it. There's now 20 or 30 drugs in his escalation ladder. He's still alive years later.
- [19:13]
B
He's doing great. I saw him the other day and he basically created his own like personalized medicines and treatment plan.
- [19:21]
C
Yeah, there's, there's a handful of these anecdotes that I've heard now I, it is really clear to me that at the high end, if you just kind of have like, you're not dealing with insurance, you have the resources, you're like, I want the full toolbox of modern science. Outcomes are possible that, that like your normal, like if you go and ask your doctor, like, oh, what will happen if I do this? They will just start shouting and throwing things. But it is clear that that much that like that crazy things are possible. At the high end, I think that this type of like N of one medicine is actually going to end up being a really rich source of research for understanding how to build more translatable things.
- [19:54]
B
It requires a ton of agency from the patient in a moment where they're at their weakest, which is pretty ironic. My friend passed away from cancer and like last thing he wanted to do was research N equals one medicine because he was just, you know, like, like dying by the week. But this is where AI should really shine and come up with the right solutions and democratization of what can you actually do when you find yourself in that situation. It's kind of crazy how few people get access to this just from a knowledge perspective, not just monetarily speaking.