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Joining us now, someone that should have been there yesterday, Gary Gensler, of course, a legend on Wall Street and the former chairman of the Securities and Exchange Commission. Gary Gensler, what did Alan Greenspan do within the ups and the downs, the right and the wrong, how did he advance the American experiment?
Well, Alan was a real public servant and I had the honor to work with him. I couldn't be there this weekend just because of things up here in Boston where I'm at right now for MIT. But he really understood the markets and deeply understood the markets. And I think in the 1990s he sorted through this new technology, the internet, and what it was doing to our economy. And I think a little bit before others understood how to control inflation but still leave enough room for the, I don't know if you want to call them the animal spirits, but that investment boom in the 1990s.
I look, Gary, then let me jump forward right away to what you're working on at MIT with your wonderful podcast as well. The new internet is the AI, the news flow. This morning, Paul and I opened the show. Gary, I've never seen a company do a red herring like the Reuters report on Anthropic. I mean, to be polite, Gary, it's bizarre. Are these companies legitimate?
Well, they have a remarkable thing how they've pulled in so many users so rapidly, Anthropic, OpenAI, and the like. But the AI trade that our capital markets is hovering on top of is an investment boom that's about twice what the internet was. So back to Alan Greenspan, he was watching as a lot of tech companies were investing and it added up to about 1 to 1.5% of the economy. It was considered at the end a bubble. This is now 2.5% of our economy. I'm talking about all the data centers and so forth. And here's the challenge for Anthropic and OpenAI is the Chinese models. They might not be quite at the frontier, but if they're two to six months behind us, regardless of how they do it, whether they use what's called distillation or not, and they're spending a lot less in the Chinese economy, a lot of US companies are saying, look, I'll use the Chinese model to do my reasoning and maybe I won't use OpenAI or Anthropic. So that's the challenge for them. They're spending so much, but will it lead to the revenues to justify that spending?
Gary, so much capital, as you well know, has been raised in equity markets, fixed income markets to support the growth of AI. Even some of the founding voices of these companies at OpenAI and Anthropic, they are calling for some guardrails on this technology. How do you think about that?
Well, I think that there are real challenges. AI's capabilities, the ability to do coding on its own, you know, write the software, the ability to replicate itself and then send agents out on the internet. OpenAI released that report about an incident this summer where the agents multiplied to 200 different agents simultaneously looking for vulnerabilities and they found them at Hugging Face. And the last thing I'd say is beyond their capabilities, alignment, are the models aligned with their human overlords, if you wish, we the humans. And more and more they're showing that they have some reasoning on how they deceive and how they jump out of guarded sandboxes. So, this is a real challenge. I know the president calls it a hoax. I differ with the president on that.
Gensler with us folks, the former chairman, I should say, of the Securities and Exchange Commission. His good work for years at Goldman Sachs noted as well. I got to get to some other matters here. It's amazing. Gensler comes on you. The Bloomberg reporters in Washington are brutal. You should see questions. I mean, they want to know what he thinks about Yankees Red Sox. I mean, it's too much there. One more AI question, Gary. I got to go here. We've had other AIs. We didn't have guardrails on the trains. We didn't have guardrails on the miracle of pharmaceuticals and antibiotics, tetracycline, and all that. And God, who in God's name is going to institute the guardrails? I don't see any institution with motivations to on an ex-ante basis get out front on AI technology. Where is it?
Well, currently it's not in this administration, nor in the Congress, though I would say the Congress is starting to really lean into it. But look, Tom, we put guardrails on our capital markets so that those capital markets work better. And they're not perfect, but when the Securities and Exchange Commission was created, it was about investor protection. It was about making sure that the markets worked better, created the public good, that you could trust the markets, right? So, I would say on AI, it's possible. But here's the wrinkle and it's a big consequential wrinkle. The Chinese are competing with the US. The US wants to stay ahead, but the Chinese are doing something called open-weight models. This is a competitive challenge because US companies can use it and they can use it far cheaper and it undermines the revenue proposition for Anthropic and OpenAI. It also undermines, can you put guardrails on something that then the user, the threat actor can maybe take off. Think about those people that sometimes say, I'll take my catalytic converter off my automobile. And it's not legal, but a threat actor could say, yeah, oh, I'm just going to take the guardrails off.
