Closing Keynote With Facebook Co-founder Chris Hughes

Thanks for having me, Carl. It's great to be here.

Well, I think Meta as a company has exploded dramatically, not just the social media capacities that are synonymous with the brand, but also real-time messaging, group messaging, obviously the AI revolution. They've spent a lot of money in the virtual reality landscape. So as a company, its value has meaningfully expanded over time. The way I think about the government relationship with Meta and social media more broadly is one where a key decision in the late 1990s really enabled the growth of the social web, and that was part of the DMCA, specifically Section 230. We don't have to get into all the legal details, but it's a key idea that Meta, like other social media companies, was shielded from liability for whatever anyone posted on the platform. For some, that might have made sense in the late 90s because message boards were out there, and it was like, how are you going to police everything everybody posts? But the key difference is that with the social media revolution, algorithms began to review much of that information and then boost some of it. There was a sense of a normative decision being made by the platforms, and all of a sudden we become addicted to the most outrageous content or the most lascivious content or the silliest content. The more the eyeballs are there, the more the company grows. So even though Meta rose significantly and didn't rely on government revenue or contracts for much of its success, there was still important public policy that made it so that these companies could grow so large. All other industries, whether you're a mall or a plane manufacturer, have robust liability expectations. The fact that we don't have that is one of the key reasons Facebook has become as large and successful as it has commercially.

Yeah, I feel like as a community, as a country, we haven't figured out what we actually want the platforms to do. There are so many different public policy concerns. I'm a parent, I have two young kids, and my seven-year-old is already dying to get an iPhone and asking when can he be on Instagram or social media. So there are concerns around our kids, how they interact with the platforms. We have privacy concerns, misinformation concerns in the political space, antitrust. There are so many different concerns that policy makers have gotten swamped by them. None of them has had really meaningful work happen except for antitrust. Maybe we'll talk more about that. That one is unique because there were already rules on the books that prevented the abuse of concentrated power. Google's been declared a monopolist twice, and there was a suit against Meta. Antitrust might be the exception. So I don't know if that's going to change at the national level, but I know there are a lot of states prioritizing it. In New York State where I live, a recent law makes social media companies have a different set of expectations for users under 18. There's been talk about doing something similar from a hardware perspective—should Apple sell a different kind of phone by default to younger kids? So the ideas are coming, the momentum is building, and the political interest is there, but we still have a long way to go. It's less about regulation for the sake of regulation; it's really making sure these platforms are working for us, rather than just for the CEOs who run them.

Well, they're not wrong. Markets do work very well much of the time. Over the course of human civilization, no system has pushed humanity forward with health outcomes, convenience, and richness like market-based systems. Some people will say it's capitalism versus socialism, but there are many varieties of capitalism and many different ways to shape markets. If there's one idea this book hopes to land, it's that markets, particularly in the United States, are very rarely free, unregulated, or self-regulating. When you open up the history books, what you see is a dance where private investors seek profits and make bets, and government says, 'We want pharmaceutical drugs to be abundant, but we want to make sure they're safe,' or 'We want steel tubes to fly through the air so we can go from LA to New York in a few hours, but we need to make sure those markets are safe and competitive.' So you can look at pharmaceuticals, aerospace, energy, healthcare, banking and finance. Once you start listing the industries in the American economy, well above half have a deep relationship with government, where government is often trying to craft and harness them for the public good. That isn't good in and of itself—government regulation can be good or bad—it really depends on how you're doing the market craft. The book looks at history to understand when we have crafted markets successfully, so that investors have been able to benefit from their willingness to take a bet and people have been able to enjoy the fruits of innovation, and when we failed—why things went wrong.

Well, it's fascinating to watch tech in particular and what market craft is happening right now. Let's take AI, since it's very relevant to investors. We've seen an explosion of interest and investment capital over the past several years, and there have been multiple moments where government, under both the Biden and Trump administrations, Republicans and Democrats, are asking what do we want to actually do here? Is this something we want to support or regulate? For the moment, I think we have a fragile consensus that there is enough private investment flowing into this sector that we don't need additional public money, although there is some on the chips front for national security. We're not seeing an industrial policy for AI right now, and I don't think legislators want that. When it comes to regulation, we're leaning heavily on traditional tort law and liability law, which is the inverse of Section 230 in social media. If an AI model helps you do something illegal, they'd likely be held liable because it's original content the companies produce. So we're relying on that so we don't need an omnibus regulatory bill. There are also conversations around privacy, facial recognition, and surveillance capitalism. The upshot is that for the moment, we've decided we don't want to craft this market; we think it's headed in a direction that is experimental, interesting, and promising, and the state doesn't need to point it in a particular direction. I think that may be the right conclusion. However, we do see early signs of private sector entities seeking a government guarantee. If big banks go belly up, there's a sense that if it's systemically important, it can't just go up in smoke. And you see AI companies, particularly OpenAI, flirting with that same idea. I think that's the first sign of a desire for market craft of a kind of public-private partnership, saying AI has become so important commercially and for national security that we need government to be there in case things go south. I don't know if that'll happen, but it's something we should all monitor closely.

I think that's directionally right. But it's not that there's no regulatory movement happening. In California, two things have passed this year. One is a bill that ensures AI platforms are doing appropriate safety audits and disclosing red teaming results to ensure models can't become too powerful or go off the rails. Another bill bans algorithmic pricing—some companies use algorithms powered by machine learning and AI to assess vacancies in real estate and coordinate pricing decisions. They're using the same technology infrastructure to make those decisions. So there is movement at the state level on AI management and regulation. But from an investor's perspective, this so far makes the industry likely safer, stronger, and more resilient, and isn't the kind of regulation that might compress profit margins or scramble investor sentiment.

Well, there's been a shift in how we think about economics that matters for our politics and for investors. Ten years ago, the general consensus was that we should have as light a touch on markets as possible, free trade, free capital movement, labor mobility—a borderless, frictionless world because markets would drive prosperity. But if you look at the roughly 40 years when that ideology was operational, there was meaningful economic growth in the US but not a meaningful boost in income or wealth for median households. The frustration of the Great Financial Crisis compounded something that had been percolating for a long time, along with de-industrialization and China's rapid growth. I grew up in Hickory, North Carolina, where furniture was made in our little town, and then by the time I left for college, furniture was being exported to China. So the real lurch forward was with Trump in 2016, when voters realized markets weren't going to take care of themselves. In his first administration, we saw the beginning of tariff policy and the beginning of the CHIPS Act, which revolutionized semiconductor manufacturing in the US. It was passed under Biden but was the idea of the Trump folks. The pandemic focused attention on the fact that we didn't have chips for cars. So now, under this administration, we're seeing not only big tariff policies but meaningful direct investment in critical minerals, nuclear reactors, and semiconductor chips. We've moved into a new era of political economy where both major parties think markets don't just take care of themselves magically. We need to shape markets for critical minerals, drones, national security, shipbuilding, or even AI if private investment lags. Whether we call it industrial policy or market craft, these are things that will continue to be a priority no matter what party is in power. Democrats will prefer market craft for climate change, Republicans for national security, but the approach is a sea change for investors who now need to think carefully about geopolitics and the priorities of those in power.

Yeah, I call what the Chinese have state capitalism, which is so far over on the spectrum that market craft doesn't do it justice. Market craft means having a private market and trying to nudge it in a particular direction for public interest. In China, they just own the hospital or the banks. There are many private companies, but when they grow too powerful and test the limits of the state, the state pulls them in. So I don't see much that's enviable in China. They've had meaningful growth, but that's unsurprising for demographic reasons. In terms of an economic system, I would take ours any day because it is uniquely able to create space for investors and innovators to push boundaries and build valuable companies. But we also want to ensure the most important companies are turned towards the public interest. That's what old-school economists might call a mixed economy, but I would refine it to say it's about how the state manages those private markets and crafts them to work for people.

I would watch closely the relationship between the executive and what we call the administrative state—all parts of government that touch industry closely. There are a set of landmark Supreme Court cases related to the Federal Reserve and the Federal Trade Commission that will test whether Congress can insulate any agency from the executive removing the person who leads it. For over a hundred years, we've had a president appoint someone to run an agency, but they shouldn't have the power to fire anyone at any time without cause. What the Supreme Court decides will matter for the country, democracy, and for investors because it will be much more difficult to predict the future path of regulation. It'll be more short-term oriented, and the next election will be a much more important predictor of market outcomes. On monetary policy, if the Court goes a certain way, we could see the politicization of the central bank, which has huge implications for price stability and whether we can expect consistent 2% inflation over the long term. I would be watching those cases very closely.

Yeah, thank you Carl for having me. Nice to see you.