Y Combinator Startup Podcast — "Beyond Bigger Models: Recursion As The Next Scaling Law In AI"
Date: May 1, 2026
Host: YC (A)
Guest: Francois Chaubard (B), YC Visiting Partner
Overview: The Evolution of Recursion in AI Reasoning
This episode dives deep into new frontiers in AI scaling—moving beyond simply enlarging model sizes toward leveraging recursion at inference time. Host and YC visiting partner Francois Chaubard explore two pivotal research papers from 2025: the Hierarchical Reasoning Model (HRM) and Tiny Recursive Model (TRM). The discussion elucidates how recursion, inspired by both neural and algorithmic principles, is reshaping the landscape of model architecture, efficiency, and reasoning capabilities.
Key Discussion Points and Insights
1. Limitations of Scaling Large Language Models (LLMs)
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Historical context: The conversation revisits the evolution from RNNs and LSTMs (pre-2016) to attention-based transformers. RNNs had inbuilt recursion but suffered from vanishing/exploding gradients and prohibitive memory costs when scaling up (01:29 – 02:29).
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LLM trade-offs: Transformers circumvent backprop-through-time issues by executing all timesteps in one forward pass, but lack powerful latent (hidden state) reasoning and compressive capabilities inherent to RNNs (02:29 – 03:46).
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Fundamental constraint: LLMs are limited in their ability to perform certain types of reasoning or computation, notably tasks requiring iterative, stepwise logic like sort algorithms or Sudoku puzzles (04:08 – 05:57).
"If I have a list that's 31 characters... my transformer is 30, I run out of steps to do comparisons... In HRM and TRM they use Sudoku as an incompressible problem."
— Francois Chaubard (04:54)
2. The Power of Recursion and Memory
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Recursion as a "memory tape": Effective recursion in models is likened to Turing machines with access to memory, enabling handling of problems which cannot be solved by mere token-by-token prediction or "chain of thought" LLM outputs (05:29 – 06:30).
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The challenge with traditional approaches: Attempts to enable advanced reasoning with LLMs using chain-of-thought (COT) or external tool use can only reach as far as human-provided dataset examples or functions, unable to discover new reasoning strategies independently (17:27 – 19:46).
"Both hacks to solve this in COT and tool use, you're bounded by the bounds of human knowledge. In the event it's outside the set of human knowledge, then you're kind of sol."
— Francois Chaubard (19:46)
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Discrete vs. latent space recursion: LLMs are limited to operating in discrete token space, while recursive RNNs can perform reasoning in much more expressive, continuous latent spaces—if only they could be effectively trained (19:46 – 20:41).
3. Paper Deep Dives: HRM and TRM
A. Hierarchical Reasoning Model (HRM)
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Biological inspiration: HRM draws from neuroscience—different brain regions operate at various frequencies/hierarchies, mimicked by nested loops in neural architecture (07:43 – 08:23).
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Three levels of recursion: HRM features a low-level iterative module, a higher-level module, and outer refinement steps—all weight-shared to enable recursion (09:03 – 09:22).
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Groundbreaking results: Achieved state-of-the-art performance on ARC Prize challenges with only 27M parameters and no pretraining (09:50 – 10:05).
"This was only a 27 million parameter model ... no pre training at all. This starts from literally tabula rasa... It got something like 70% on ARC Prize 1."
— Francois Chaubard (09:50)
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Novel training trick: Instead of back-propagating through all recursion steps (as in classical RNNs), HRM utilizes a "deep equilibrium learning" (DEQ)-inspired fixed-point iteration, only back-propagating through the main modules and treating successive hidden states as if they were distinct mini-batches (11:22 – 13:19).
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Key insight: The "outer refinement loop" is the core driver of performance gains—more so than details of the inner hierarchies or even deep recursion (20:52 – 21:46).
B. Tiny Recursive Model (TRM)
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Ablations and simplification: TRM further streamlines HRM by collapsing the double "low/high" reasoning modules into a single, weight-shared module, showing that networks can learn to separate features internally (23:25 – 24:09).
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Even smaller, even stronger: With only 7M parameters, TRM reached 87% on ArcPrize 1 and outperformed vastly larger LLMs on specific reasoning benchmarks (33:25).
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Optimization details: Instead of full unrolling, TRM relies on truncated back-prop-through-time (T=1), showing that minimal backward steps plus sufficient test-time iteration was enough for strong performance (22:05 – 23:07).
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Expectation-Maximization flavor: Both HRM and TRM resemble EM algorithms—alternating updates to local and global hidden states to iteratively refine candidate solutions/memory (24:23 – 27:17).
"The most important part... is it actually is able to discover things without being teacher forced via a chain of thought."
— Francois Chaubard (27:19)
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Code breakdown: The hosts describe the models’ logic in code form, emphasizing the simplicity and elegance of alternating "local" and "global" state updates, outer and inner loop structure, and key decisions regarding gradient flow and recursion (27:38 – 32:45).
4. Scaling Laws: Beyond Model Size
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Challenging “bigger is always better”: The HRM/TRM results show that recursion (temporal depth) rivals or surpasses sheer parameter count in solving certain types of algorithmic or compositional tasks (33:05 – 34:39).
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Possibility for hybrid architectures: The most exciting future direction is combining the generalization and representation power of huge LLMs with task-specific, recursive reasoning modules for efficiency and deeper algorithmic understanding (34:39 – 37:10).
"When you take the benefit of both these TRMs and these giant models and you actually slam them together ... I think that it's just going to take off and it's going to be really huge."
— Francois Chaubard (34:39)
Notable Quotes & Memorable Moments
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On the "memory bottleneck" in transformers:
"Every single decode that I do, I still have to retain the entire Shakespeare novel just to decode a little bit." (B, 02:55)
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On bio-plausibility vs. practical performance:
"We use bio plausibility to inspire us... but we end up veering away from the bio plausible to something... that seems to work better. I think it runs better on a GPU." (A/B, 16:18 – 16:20)
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On the future of efficient, general-purpose AI:
"A 7 million parameter [TRM] wins. The right answer is to take the amazingness here and ... slam them together [with large LLMs]... I think it's going to be really huge." (B, 34:39)
Timestamps for Key Segments
- [00:00 – 02:29] — Evolution from RNNs to LLMs; problems with scaling through backpropagation
- [04:48 – 06:30] — Limits of LLM's reasoning vs. recursive architectures; Turing analogy
- [07:43 – 10:05] — HRM architecture, hierarchical loops, and major results
- [11:22 – 13:19] — Backpropagation innovations: DEQ and fixed-point learning
- [17:27 – 20:41] — COT/tool use vs. true recursive learning; continuous vs. discrete reasoning
- [20:52 – 21:46] — HRM’s key finding: importance of outer refinement loop
- [23:25 – 25:54] — Architectural simplification and performance boost in TRM
- [27:38 – 33:05] — HRM/TRM code walk-through & iterative logic
- [33:05 – 34:39] — Implications for scaling laws and future hybrid models
- [34:39 – 37:39] — Future of recursion in AI, integration with large models, concluding thoughts
Conclusion: Recursion as the Next Scaling Law
The episode’s closing reflections position recursion not only as a conceptual link back to the earliest neural networks, but now, as the frontier for practical progress. HRM and TRM prove that carefully designed recursion can produce models that are both more efficient and more capable at logical, stepwise reasoning—often outperforming vastly larger, purely feedforward LLMs in these domains. The likely paradigm of the future: hybrid systems combining the vast semantic knowledge of LLMs with the powerful, iterative reasoning of recursive architectures—pointing AI scaling toward smarter, not just bigger, models.
Final thoughts from Francois Chaubard:
"Recursion is important and it's not going away. When you take the benefit of both these TRMs and these giant models... it's going to be really huge." (34:39 – 34:57)
For more:
Check out Constantin’s YouTube scaling ablations and read Melanie Mitchell’s work on recursive reasoning limits. Stay tuned for future deep dives into hybrid and multi-agent architectures as recursion becomes central to AI’s next scaling law.