Freakonomics Radio - 683. In the New Space Race_ Who Makes the Rules_

0:06Speaker 1A couple months ago, Elon Musk became the world's first trillionaire after his rocket company SpaceX had the largest IPO in history. Two weeks later, Musk lost his trillionaire status, at least temporarily. Why? Part of the answer is AI, because SpaceX is also now an AI company having gobbled up XAI, another Musk firm. And AI investments are, as you probably know, pretty volatile at this moment.

0:34Speaker 1But SpaceX, along with several other big players in the new space race, are still betting huge on AI. Specifically, putting AI in space. This would mean fewer power plants and data centers on our planet. It could also mean hundreds of thousands of new objects in the skies, increasing the risk of collision, environmental degradation, and perhaps much more.

0:58Speaker 2In last week's episode, my free economics friend and co-author Steve Levitt talked to some of the people involved in Google's attempt to move AI to space. I fully expect that by the year 2100, the great majority of energy used in the solar system will be going toward AI and will be both harvested and consumed off Earth. These AI and space projects will be complicated and very expensive. At the moment, most of the investment is coming not

1:28Speaker 1from governments, but from wealthy individuals and firms like Google and Musk and Amazon founder Jeff Bezos. You may think this is a modern phenomenon, but it is not. Wealthy investors have been financing space ambitions for a long time. He initially thinks about building a large pyramid for himself that he can be buried underneath like the pharaohs. Eventually some astronomers get on to him and say, well, you know, sir, you could actually build the first ever mountaintop observatory.

1:56Speaker 5So today on Freakonomics Radio, where is this new space race headed and who's going to regulate it? Base is extremely dangerous and you really don't know what the consequences of your actions in space will be. Steve Levitt is back in the host chair for part two of our series on relocating AI to space and it starts now. This is Freakonomics Radio, the podcast that explores the hidden side of everything with your guest host, Steve Levitt.

2:45Steve LevittLast episode I spoke with people working on project Suncatcher Google's attempt to build AI data centers in space That team is thinking about the future how much processing power will need and how cheaply we'll be able to launch satellites So this week I wanted to ground the conversation in the present and the past so I started by reaching out to an economist My name is Alice McDonald. I was the first chief economist at NASA and now I'm a senior associate at the Center for strategic and international studies in Washington DC. So you were the first chief economist at NASA and it wasn't like you just stumbled into that job. You were not a typical economist. You're a PhD economist and your research had been focused very squarely on space exploration. Now I've never met another economist who thought about space before. Was space travel something that has been captivating you since you were a kid or just something that caught your attention as

3:45Alex MacDonaldpromising research area when you were in grad school. Well, it was a combination of both for me. I remember very distinctly the moment when I knew that I couldn't be an astronaut, and that was in grade four when I got glasses. Because back then, if you had suboptimal eyesight, you could not be an astronaut. I'd always had a passion for space. I was a big fan of science fiction growing up. I grew up in Canada, and I really always enjoyed just going out in the winter nights and looking up at the stars. When I was doing my master's degree, in economics. A couple of things happened. One was the flight of Spaceship One, which was the first privately funded human spaceflight vehicle to go above the von Karmen line, which is the internationally recognized definition of space, 100 kilometers up. And NASA, George W. Bush, had announced the plan to return to the moon under what was then called the Vision for Space Exploration. I remember very distinctly thinking, okay, if we're going to build a moon base,

4:43Alex MacDonaldThat is an economic development problem. It's a very distinct type of economic development problem, right? There isn't really farmable land and you have to essentially import or produce its significant costs all of your air. But it's still an economic development problem. And so economists are going to be needed to make that happen. That was in 2005. And I basically switched my PhD subject. So in your analysis, Alex, of the economics of space, you

5:12Steve Levittdon't just focus on the last 60 or 70 years studying with Sputnik or the Apollo missions. You take a long view. So in particular, you've looked at the construction of astronomical observatories over the history of the US. And you've come to what I would say are really interesting conclusions. One thing that I found very surprising is how expensive some of these observatories were. They were massive investments.

5:38Alex MacDonaldYeah. As you know, there's different ways that you can do these cost adjustments from historical time periods. You can just buy the share of the economy that these projects represented. And you can also just adjust for the cost of the primary input, which in space observatories in the 19th century and today is still primarily skilled labor. And so when you do those calculations, we find that projects like the Palomar telescope, which was essentially funded by John D. Rockefeller's wealth, or the Mount Wilson Observatory, which was essentially funded by Carnegie's wealth. These are in the hundreds of millions to low billions of dollars, depending how you do that adjustment. My favorite single example is actually the Lick Observatory. And James Lick isn't very well known today, but in the 1870s, he was the richest man in California because he had bought up a lot of property prior to the San Francisco Gold Rush, and he's coming to the end of his life.

6:35Alex MacDonaldand he decides that he wants to leave a legacy for himself. He initially thinks about building a large pyramid for himself that he can be buried underneath, like the pharaohs, and people convince him, hey, well, maybe not. Eventually some astronomers get onto him and say, well, you know, sir, you could actually build the first ever mountaintop observatory. This would be a much more impactful astronomical observatory to which Lech reportedly said, Well, okay, but can I be buried underneath it? And the astronomer is being very clever. He said, yes, of course, sir, if you pay for it, you can be buried wherever you want. And so to this day, James Lick's final resting place is underneath the main plinth of the primary telescope of the Lick Observatory. And that was another one of these billion-dollar scale observatories because they had to build a whole road up the mountain. This was in the 1870s. They had to import these lenses from Europe often. These were very complicated technologies. In fact, there's these great

7:29Alex MacDonaldstories about the giant reflector lens that had been built by Corning out on the East Coast, largest ever built for the Palomar Observatory, and they had to then take it across the country by train. And people would line up to watch it because it was such a technological marvel of the day. And we kind of think that the Apollo program is such a high point of modernism and technology and public wonder and all these things. But actually, space has been doing that for hundreds of years.

7:58Steve Levittthese observatories were always these large spectacles as well as institutions of science. And when you say they cost a billion dollars in modern terms, that's not too different than the cost of the kinds of things that NASA does. Now, not necessarily going to the moon, but other projects they do, aren't really categorically more expensive than these observatories were.

8:22Alex MacDonaldExactly that was for me the core insight for a modern let's say probe to Mars or the outer planets like Jupiter or Saturn These are products that will come in regularly in the half a billion dollars to a few billion dollars So that means that there were these precedents of privately funded missions Equivalent to the costs of modern space missions now your point is the first chief economist at NASA in 2019 and you served in that role for five years It says a lot about how unimportant economists are to the world, that NASA didn't think they needed a chief economist until 2019. Don't you think? Well, there'd been a lot of economics work done, of course, at NASA. There was the famous economic impact studies that have been done during the Apollo program. And of course, the space shuttle involved a pretty extensive economic analysis as part of the cost estimation process. That was the main way in which economics

9:17Alex MacDonaldintersected with NASA's portfolio was predicting how much things would cost. But what started to change in the mid-2000s and the 2010s was that we started to see a lot of private investment. And once you start to see private investment on the scales of billions of dollars, you start to see that, well, you're going to need to intersect NASA's policies with economic strategy. Now, are there specific situations you can remember where by thinking like an economist, you're able to score huge wins for NASA. I'd love to hear about a few of those. The human landing system was probably the single biggest change that I was involved with in the Apollo program. We had essentially a government design for a whole system to land humans on the moon. These were built by contractors, right? The majority of the money still went out to contractors, but NASA was paying for it and was responsible for the systems at the end of the day.

10:15Alex MacDonaldThat was true for the Artemis II mission where NASA did the same thing for the Space Launch System and the Orion vehicle. But that will not be true for our actual landing of astronauts on the lunar surface because we took a fundamentally different approach with the human landing systems. And the difference was basically we said we were going to buy astronaut delivery to the lunar surface from commercial companies. We were going to put essentially fixed price milestone payments.

10:44Alex MacDonaldfor the development of those systems, and then the purchase of services afterwards, and that we were going to compete that. And of course, now we have two of the richest people in the country whose space companies, SpaceX and Blue Origin, are competing to win those NASA contracts. That means that there is investor money now covering some of the upfront costs that NASA is not having to provide because they're looking to compete for those contracts in the future. So it's given here that space exploration and government funding of it is a sensible thing to do. But I've never quite understood what the government thinks it's optimizing in the space program. What do you think motivates politicians to fund these programs? Well, I love that your assumption is that there's an optimization function going on in government. I'm not quite sure that I would say that that's exactly what the process of government is. I think when you look at the origins of spaceflight, there's really

11:41Alex MacDonaldtwo core, I'll say, state demands. The original and leading one was essentially national security. The ability to launch something around the earth has foundational importance for military systems. So things like satellites have turned out to be super important. That was true in the mid 20th century. That continues to be true today. The very first maneuvers as part of the Iran war were in space.

12:06Alex MacDonaldThey were electronic interference and jamming activities that the US undertook against Iranian satellite assets. So that really is a core and deeply enduring reason that started on continues. But shortly thereafter, there was this second function, which I tend to think of as a signaling function. And of course, Steve, you're well aware of signaling theory. I'm sure many of the listeners are too, but it's this idea that a costly action can credibly transmit information.

12:34Alex MacDonaldWe talk about this a lot in education. My favorite example is always, if you see someone driving a Lamborghini, you don't necessarily know anything about them, but because you see them driving a Lamborghini, you know one of three things, right? They're either wealthy themselves, they have wealthy friends with good access credit or they're good at stealing things. And you know this because access to Lamborghini's is expensive. If you think about being someone in the world in 1957, when Sputnik launches into space, You're looking at the Soviet Union you're looking at the US if you're in Thailand or Ghana or somewhere in the world that these countries are trying to convince you to join the alliance so to speak You don't really have necessarily a lot of information related to what's the quality of life This is the pre-jet age and a lot of people traveled to these countries and seen what it's really like But if you know one thing which is that one of these countries has launched something into space and the other has not and You know what that takes and you can verify it independently

13:28Alex MacDonaldwith radio telescopes and radio communications, then you know something meaningful about the technological and economic power of those countries. And the same thing of course applies to landing on the moon. And so space has become and continues to be a really important part of how leading nations signal to the world leadership and technology and economic organization, which of course is a proxy for many other things. I was surprised to hear that

13:55Steve LevittEarly on in the space race, John F. Kennedy offered to Khrushchev, the leader of the Soviet Union, the chance to work collaboratively to reach the moon. And if Kennedy hadn't been assassinated, and Khrushchev wasn't so suspicious of Lyndon Johnson, maybe getting to the moon would have been a joint U.S. Soviet mission. This seems at odds with the signaling story, doesn't it? I would argue that basically

14:19Alex MacDonaldKennedy is trying to signal he wanted a more collaborative future. He was very worried about a future nuclear conflict and he said, hey, we need to figure out a way to collaborate here. So he tried to use space as the signaling device to encourage cooperation. At the same time, importantly enough, Congress actually passed a law that essentially said, thou shalt not use any of the money in this bill appropriated for NASA for any collaborative programs with the Soviet Union. Interesting.

14:47Steve LevittAnd so Congress was well aware of the signaling good that they wanted the United States to put out there and achieve. So Congress was trying to signal to the developing world that the U.S. was the country to jump behind and Kennedy was trying to avoid World War III by signaling to Khrustov that he was a friendly type. Yeah, it's my interpretation. At the same time, the U.S. and the USSR were racing to the moon. They were also negotiating rules to govern human activity in space, even in space.

15:18Rosanna Hoffmannthe world is run by lawyers, like this one. I'm Rosanna Hoffman. I'm the head of space law and policy and now also sustainability at the United Nations Office for Outer Space Affairs or UNOSA, as we like to call it. We're really the UN's home for space. We're also the convener.

15:40Rosanna Hoffmannfor space negotiations. So we help states negotiate everything around space, from space law to space technology to really everything from disaster management and on and on. I advise states, but also more and more industry on how to really implement space law, how to ensure that their space activities are done sustainably and safely. And I help states negotiate space law and the use of space.

16:08Steve LevittAnd that's what I've actually been doing the last two weeks. The Committee on the Peaceful Uses of Outer Space, which meets six weeks a year in Vienna, where I'm based, just concluded its meeting a few hours ago. It's so interesting to me to hear you talking such a familiar way about these organizations that I've literally never heard of. It's a kind of world that I think the regular person can walk through and never know that what you do exists. That's true. We're a small office, but we exist since 1957.

16:37Rosanna HoffmannSome listeners might know the year. It's the first time a satellite was launched into outer space with Sputnik the year after. Of course, we had more satellites being launched into outer space. And it was that year in 1957 that states in the UN and the General Assembly in New York said, OK, space activities are becoming a reality. We need an office dealing with these matters, ensuring that space is used peacefully, safely, sustainably.

17:07Rosanna HoffmannWe need to make sure that the war is currently ongoing here on earth, the geopolitical tensions. This is in the middle of the Cold War, right? That we don't move that on over to space. Well, surprising right in the middle of the Cold War that these countries were sitting down and talking in such a civil way. I agree. But I just come from two full weeks of negotiations between member states. And just yesterday I sat in a room with the US, with the Russian Federation, with the Chinese, with the Ukrainians, with the Iranians, all in a room, civilly discussing space activities. Space is actually one of those domains where states continue to negotiate and discuss. They've always done so. We're so dependent on space from navigation to Earth observation to our internet connection that

18:02Rosanna HoffmannIf one state becomes a bad actor, so to say, we will all suffer the consequences, including the bad actor themselves. So it is that inherent need for space that brings us together to the table and allows for these discussions to continue. Although I have to say, I don't want to sound too optimistic here. There was some self-preservation behind the negotiations in the 50s and 60s. It was all about ensuring because we weren't sure who would get to the moon first, ensuring that whoever did would not suddenly have the rights to the moon. And also ensuring that should we place weapons of mass destruction or nuclear weapons in outer space, we really didn't know what the consequences for Earth could be. Could that be the end of Earth as we know it? So it was really this protective spirit and self-preservation at the end of the day. Out of that era came five treaties.

19:00Steve LevittThe foundational one is the Outer Space Treaty of 1967. It states that space belongs to everyone and that no country will place nuclear weapons in orbit. 118 countries ratified it, including every major space-faring nation. And then the treaty making slowed down. The last big treaty was ratified in 1984, even though there are a lot more people making use of space now than there were then, including private actors. I asked Hoffman,

19:30Rosanna Hoffmannwhy the law stopped keeping up. It's such a good question and I get it so often and every time I think of a bit of a different answer because there is no one answer that fits to that question. The last treaty that was negotiated was the Moon Agreement and even that treaty, some consider being a failed treaty because it only has 17 ratifications. Compare the Outer Space Treaty with 118.

19:54Rosanna HoffmannSo already there, even in the 80s, we already saw a steep decline in states willing to enter into treaties that would bind them with international obligations. Why did this happen? Generally, when we look at it historically, we see that states beginning in the 80s are less willing to enter into international binding treaties. There was a big push for it after the Second World War. You had the establishment of the United Nations. You had a lot of international agreements being negotiated. There was a strong willingness between states to enter into this multilateral discourse and bind themselves internationally. That completely ebbed out in the 80s and 90s. And then another point, which is specific to space, is that a lot of the topics that they needed discussing were

20:48Rosanna Hoffmannvery technical. I'm talking about space debris mitigation. I'm talking about space traffic coordination or space resources, for example. They're so technical in nature. The way we do those types of activities will change so much in a short time frame that a treaty isn't the right way of dealing with it. A treaty takes a lot of years to negotiate and is not easy to amend.

21:16Rosanna HoffmannSo what happened after the 80s is that states decided to go into the direction of something called non-legally binding instruments, guidelines, resolutions, principles, standards that dealt with more of the technical aspects of space and that could be rewritten and revised more quickly, more easily going forward. But of course it's not legally binding. So some would argue it does not have the same effect. Others would say,

21:45Steve Levittit can if states implemented international law. So I'm curious. So let's say China's got a satellite and for some reason it's maybe going to crash into SpaceX's satellite. Does someone in China call up someone at SpaceX and say, hey, we got to do something about these orbits? Or how does that actually work? That's a really good example. And it happens more often than you might think or know. Currently, there is no global space traffic coordination mechanism. It's what the UN

22:15Rosanna Hoffmannand its member states have been asked to work on since 2025 June. And we just finished a session of the committee where this was the main topic of negotiation. So what is happening for now is that the Chinese operator through their governmental entity would contact, for example, the State Department in the US. And that often takes quite a lot of time because we're talking about SpaceX. It's a commercial entity.

22:45Rosanna HoffmannWhen will that information of that close collision finally get to the operator's technicians' room? And when will they be able to know whether they should move or not? I was on the way back from a mission I did in Ghana last June, helping Ghana draft their national space law. I had to stop over in Brussels, and my phone was being called by the Malaysian Space Regulator.

23:14Rosanna Hoffmannsaying that a satellite in low Earth orbit, one of their only satellites, an Earth observation satellite, a large piece of an object, is about to crash into a satellite owned by North Korea. And they don't have diplomatic ties with North Korea. They don't have a mechanism of talking with them, of informing them that there is this very near chance of collision. On top of it, the Malaysian satellite was non-maneuverable, so they couldn't move.

23:43Rosanna HoffmannSo what we were asked to do and we really only had a few hours to do it was reaching out to the North Koreans and luckily, really in the 11th hour, they were able to move the satellite and collision was avoided. And this would have created amounts of debris that would have impacted space activities for a very long time. So we used this example. We shared it with member states and we're talking, you know, you and member states, it's a lot of them and said, You need to come together and come up with a mechanism. Everyone needs to have at least their 24-7 point of contact within the system, but not going through my phone or right above me, my director's phone, and then that's it. You know, that's who we are. It's a small team. After the break, orbital data centers may sound like science fiction, but the history of spaceflight has been influenced by fiction from the beginning. He wrote in his diary,

24:42Alex MacDonaldabout, after having read those stories, climbing a cherry tree one day, trying to trim some of its branches, and having a vision of a vehicle taking off from the valley below. And from that moment, he basically dedicates his life to the development of the technologies to make that possible.

25:29Steve LevittGoddard, the father of modern rocketry, he got about half of his funding from private sources, especially from the Guggenheims. And that's despite the fact that what he was doing with rockets had such obvious military applications that I would have thought he would have been just swimming in government money devoted to defense. He did get a fair amount of money from defense. He was essentially developing his rockets in the 1930s at the exact same time that von Braun is developing his rockets in Germany.

25:57Alex MacDonaldAnd so those two people are actually competing to be the first people to launch something into space. Goddard's primary funder is the Guggenheim family. von Braun's primary funder is the Wehrmacht, the German army. What happens is, interestingly enough, in the early thirties, they basically achieve an equivalent level of space flight, which is maybe kilometer or a couple kilometers up. This is obviously a significant achievement for a liquid fuel rocket. But the responses of their funders are very different.

26:26Alex MacDonaldThe Guggenheim family says, that's great, keep going, but we're keeping the funding the same. Whereas essentially the German army commits to a billion dollar development of an entire research facility in Penemunda in north of Germany and begins the development program of the V2. One of the reasons was actually because these were not ICBMs, right? They're really able to bombard only a few hundred kilometers away.

26:49Alex MacDonaldFor the US you weren't be able to do launches across the Atlantic but for Germany, of course There's a lot more targets nearby and so the incentives for the two different militaries were fundamentally different Goddard however is convinced that he needs military money and so he does leave his Guggenheim perch, which he had a nice life out in New Mexico and He ultimately goes and works for the US military to develop Genesis to take off rockets and move to Annapolis It was actually Charles Lindbergh who personally convinced the Guggenheims that this was the future of flight There's this part of the story of Robert Goddard, this famous professor of rocketry and developing the first rockets, where his first flight in a plane is literally being flown back from the DuPont facilities by Charles Lindberg himself. It's interesting hearing you talk because you don't talk like the typical economists. You like stories. You seem like a little bit of a romantic, which fits in with the idea that you wanted to be an astronaut. Do you think that the rich history

27:48Steve Levittof science fiction stories about people traveling to the moon or to Mars. Do you think those have served an important role or do you see them as kind of secondary to the technology? I think they're actually quite foundational. You know, spaceflight is a very interesting economic outcome, let's say. As I think folks know, it's pretty hard to live out in space.

28:12Alex MacDonaldThat's the understatement of the year. Yeah, you know, as they say, Mars ain't a kind of place to raise a kid. What that means is that a huge amount of effort, a huge amount of investment, a huge amount of blood, sweat and tears goes into creating the systems and surviving out there. What motivates us for that? There's a little bit of the achievement and public acclaim that's a type of incentive, but actually most.

28:35Alex MacDonaldpeople who do spaceflight work, including most astronauts, they're not really the public figures that they would have been in the Mercury program, the Apollo program, right? And so I don't know if that's really the main incentive. I think the real core incentive is an internal psychological one, which is that the story of humanity figuring out how to become sophisticated enough, advanced enough, maybe even benevolent enough to manage to go out into space together and extend the story of humanity throughout the solar system and in a far future potentially even to other stars, I think that story is very motivating to people. Not everyone in the space industry necessarily believes in that story. There are good technical and scientific reasons to believe that that may not ultimately happen. But if you don't believe in that story, then you're not going to self-select into the community of people who works on it. What is so fascinating to me is that spaceflight is largely in many ways the result of

29:33Alex MacDonaldenough people believing in that story that they dedicate their labor to making it happen. And it has worked. And for me, that's something that fundamentally, I'm not sure we really fully accounted for it within economics. I remember early on in my PhD, I became very convinced that this idea of an inelastic supply of labor was really important, that actually people would be dedicating their labor irrespective of the economic incentives, right? Because they might believe in a particular story sufficiently strongly that other incentives don't really matter.

30:03Steve LevittSo you're essentially saying Robert Goddard didn't really care if he got paid for these rockets. He was just gonna do it because he was born to do it. Whereas somebody like me, well, you know, I'm kind of willing to do whatever people pay me to do. And it is something that's more or less outside of our economic models, the idea that people just believe so deeply in something. Belief is a hard thing for us to model.

30:27Alex MacDonaldExactly. But it clearly motivates a large amount of labor, right? Goddard, he didn't just believe in the story randomly. He received it as a teenager. He read about it. He read the War of the Worlds and he read the unauthorized sequel to the War of the Worlds called Edison's Conquest of Mars. He read that as a teenager and he wrote in his diary about, after having read those stories, climbing a cherry tree one day, trying to trim some of its branches and having a vision of a vehicle taking off from the valley below.

30:57Alex MacDonaldAnd from that moment, he basically dedicates his life to the development of the technologies to make that possible. I mean, that's a powerful belief, right? And when I was adding it up, his belief, the similar belief and motivation that the original German pioneer of looking for rocketry, a Hermann Oberth had and the same kind of figure in Russia, Konstantin Sokolovsky, they're basically dedicating, you know, on the order of 50 to 100 years of high technical labor to a project.

31:26Steve Levittindependent of any economic incentives. And they laid the foundation for a good free rocketry. So yeah, you know, if there's an appeal to economists out there, think about how to incorporate inelastic supplies of labor and the role of belief in the labor market and the economic systems. And we might start to see some new economic theories emerge. Belief may have been a big part of what got us into space, but space today has become big business. And the incentives are more purely economic.

31:57Steve LevittSatellites today are an enormous economic activity. Do you have a rough idea what the revenues are right now of satellite companies and other private companies operating in space relative to NASA's annual budget of about 25 billion? Yeah, it's a great point. The overall estimate of the size of the global space economy is roughly on the order of 500 billion to 650 billion a year. So 20 times 25.

32:26Alex MacDonaldTimes bigger than NASA's budget. That's right. And the vast majority of that 75 80 percent of it all is simply telecommunications Historically, this has been satellites in geosynchronous orbit around the earth. So 36,000 kilometers away These are the satellites that would be providing your satellite television But increasingly it's now these low-earth orbit constellations constellations like Starlink They're bringing in revenues on the orders of tens of billions of dollars already just for things like Starlink so There's almost two space industries. One is all the kind of stuff that seems interesting, like space exploration and human spaceflight and even space defense. But that's actually a relatively small portion of the economy relative to telecommunications because moving data around in space is actually by far the largest space industry. I've been talking to some folks at Google who

33:17Steve Levittforesee a world in which a huge share of all the computation done by humanity would be done in space in the form of swarms of the solar-powered satellites, what they call Project Suncatcher, and they'd be acting as data centers for a future AI-driven world. What do you think the chances are that they or someone else will actually pull this off? Yeah, so Orbital Data Centers is the hottest new topic for economic engineering debate within the space community.

33:46Alex MacDonaldThere are currently zero revenues or maybe single-digit million-dollar research revenues at best related to the use of orbital data centers. But the projections that some people are putting out there are very, very significant. Of course, this is tied to the projections over all of increases use of AI and the potential to put these data centers in space, not just because of potential benefits of solar power, but also, frankly, because you have very different regulatory regimes up there. You don't need to take up anyone's land to put it up there. I have no doubt that we're going to see a number of attempts to do so, the cost of trying to put one of those up. There's really only in the orders of hundreds of millions to low billions of dollars to really see how long can these GPUs last? What are really the efficiencies? What are the costs of, and frankly, the scales of these data centers?

34:34Alex MacDonaldYou talked about that in a very matter of fact way, but most of the way you talk about space is more romantic and more intuitive, I would say. What's your intuition? I mean, you know, two economists making predictions about these things. I'm not making any predictions. I'm only asking you for one. Yeah, Touche, Touche, you're putting all the pressure on me. Look, I think we're going to see some of them, but I don't think the night sky is going to be radically transformed. I am moderately bullish on AI in general. I think the ultimate demand for orbital data centers will be limited and there are going to be a lot of practical challenges with it. I do think we're going to see a number of them fielded because I think there are going to be edge cases for data use even just in space where you're going to want to be storing and processing your data on orbit. I do think like many tech hype cycles, though, there are a lot of people eager to sell you axes and overalls for this particular hypothesized gold rush. And so you may want to be on the overalls and pickaxe version of this rather than the searching for gold one.

35:35Steve LevittUltimately, there's a practical dimension to this question. AI Space Data Centers are objects launched up into space that need to be regulated just like everything else. I asked Rosanna Hoffman from the UN how she would think about regulating AI data centers in space. The good thing is a data center is nothing else than a bunch of space objects, right? A lot of them, of course.

35:59Rosanna HoffmannSo they too will have to adhere to the outer space treaty. You'll have to register them. You will be liable for damages caused. They need to be authorized and supervised. They need to meet sustainability expectations, etc., etc. However, the number of satellites required for data centers will bring that question from emerging spacefaring nations, as we call them, or the global south, or developing countries, that say, sorry, but if you're planning hundreds of thousands of satellites in low-Earth orbit, will there even be place for us? Where will we be able to put our satellites? So that's one question. And another question is space situational awareness or space traffic management. Data centers, because they would consist of so many satellites,

36:53Rosanna HoffmannThere has to be some global mechanism on space traffic coordination. But then going a step further, it's just the broader notion of space sustainability. Even though we think space is infinite, it really isn't. And especially low Earth orbit, it's not, right? So we need to make sure that that area of space remains usable for future generations. We need to make sure that if we're planning hundreds of thousands of satellites, that they are able to deorbit.

37:23Rosanna HoffmannWhen it's their end of life, do we require, for example, attacks for every satellite launch that goes into a pot that then would be used for removing satellites or removing debris? Spoken like a true economist. That's exactly the sort of thing that economists would say we not only should have, but really need if you're dealing with this negative externality of space tank.

37:49Rosanna HoffmannExactly. And these are discussions that are happening at the UN, and member states are discussing it. But the question is, I ask myself this, not as the UN official, but as just Rosanna, do we need a major disaster happening first until we see the need for something like this? We haven't really seen major damage happen on Earth. We haven't seen a cascading event of damage happening in outer space.

38:17Steve LevittSo do we have to wait for that to happen, or can states and commercial entities already foresee this need today? After the break, if AI goes to space, what will it learn? We train AI on all the beautiful deltas of the Earth and the forests of the Earth and the river systems and so on. It will care more about the Earth, the humans, the rest of life on the Earth. I'm Steve Levitt.

38:49Steve LevittYou're listening to Freakonomics Radio and we'll be right back. In this episode, we've heard some reasons that space might be a good place to put data centers. But there's another reason AI and space belong together and it has nothing to do with electricity or real estate. It was explained to me by Will Marshall, who I spoke with on the last episode. He's the co-founder and CEO of Planet, the data company who satellites photograph the entire Earth every day.

39:32Steve LevittBefore NASA, I had done a PhD in physics. It was incredible to work with some geniuses and humbling, which helped set my career more into space, which I thought I could handle because these physicists are just out there on the next level people. There's a lot of public uneasiness around AI and its growing importance in society. You've got a vision of a future version of AI that looks very, very different from our current models. Could you describe...

40:00Steve LevittWill you think AI is going to take us? I think there's a new era of machine intelligence that I call planetary intelligence. So let me do a little backdrop first. Everyone's familiar with large language models now, incredibly powerful. They've read all the books in the world and the text on the internet, can write an essay, can hallucinate, obviously sometimes, but they can do code. I was testing some of those LLMs early on. I was inspired to find just how capable they were at advanced physics, I was like.

40:29Steve LevittI think I'm smarter on this specific area of physics that I did my PhD in. Let's see. And I was like, damn, that's not messing around. They have a lot of late knowledge and they can pull all that together from all the disparate fields like no human can. But for all this capability, LLMs, the chat GPTs and Gemini's and what have you are essentially blind. And what I mean by that is that they have no understanding of what's going on in the real world day to day. So give you an example of a farmer.

40:59Steve LevittStarts asking about farming for their field in chat gbt is gonna tell them all about the theory of agricultural science about crop science and all this sort of stuff, but it's gonna know nothing about that person's field today what the conditions are and what they could do better Well, there's all these physical or datasets, but perhaps one of the core things is earth data Landsat in 1972 studied imaging the whole planet every month It has down for the last 50 years. Planet in the last 10 years has been imaging the whole Earth at three meter resolution every single day. Both those systems together have for about 5,000 images of the whole landmass of the Earth, documenting change over time. Imagine adding all of that to these LLMs so that they have all that knowledge of agronomy and glaciology, but they also have literal understanding of what's going on in space and time.

41:53Steve Levittday to day so then the farmer asked that question and they can say well your field's doing this it's got blight in this corner the next door neighbor farmer did this and they did better yield last year after they had done this intervention why don't you do that and interestingly all the ai leaders been talking recently about physical models trying to build ai to have understanding the physical world and of course ai is only as good as its training data and here we sit in the space community with a whole ton of data about the physical world, you know? And it's not just satellite data, it senses all around the place. But our data is, if you like, the Wikipedia for this next phase is the foundation data set that will enable us to then answer questions about the physical world, about those fires that's farming, that insurance, that, so on. And that is going to open up a huge new set of domains of applications. Why hasn't it happened already? I mean, interestingly, before the LLMs,

42:50Steve LevittI think people would have said that what we've done with computer vision was actually remarkable and had gotten way ahead of what the LLMs have done in the meantime. What's the holdup? Is it the models? It's not the data. Good question. I've been impatient with this for a while. In fact, I did a TED talk in 2018 called Quarible Earth where I was just talking about how we should with computer vision and all this earth data be able to index everything on the earth and make it searchable. But it was harder than I thought because Each different thing you'd want to monitor trees, ships, planes, you'd have to build a bespoke model. It was a lot of training, and then it only worked in this area and didn't work in that area and all these things. LLMs have enabled them. It's more generic. And in fact, excitingly, this is not just hypothetical anymore. We're just about to launch a public beta app.

43:42Steve Levittwhich should be out by the time this podcast comes out that enables anyone to go in look at our images and chat with all those images so you can search the whole earth for an object by text or by finding one and say search for more look like this write me a report of all the agriculture in this region or land use change over time over here or shipping activity over there and it can have a pretty sophisticated analysis of a whole set of imagery.

44:10Steve LevittI really hope that will unlock a lot of the latent value in all this Earth imagery data sets. You've talked about this in a very practical way, but I've also heard you talk in a very wistful pro-humanity way. Could you talk about the Fermi paradox and how you think this kind of planetary AI will fit into the future of humanity? We want to align i with human interests and the rest of life on earth and i alignment is a big challenge that we don't know how to solve yet. But i think a couple of things firstly i is gonna be hard for it to learn well without sensors a baby learns to interacting with the physical world by having sensors eyes and ears and so on and actuators arms and legs and touches and so on.

45:04Steve LevittAnd interacting with the world, it learns, it becomes intelligent, and ultimately self-aware and conscious. I think the same of AI. We want it to care about life on the earth. Well, people tend to care more about things they know more about. My partners into ornithology, and as we've learned more about birds, they're cool, they're marks, they're different types. You don't just look at, oh, there's some birds over there. I start going, oh, there's two rubbins to what have you.

45:32Steve Levittyou care more about them intrinsically. So I hope that as we train AI on all the beautiful deltas of the earth and the forests of the earth and the river systems and so on, it will care more about the earth, the humans, the rest of life on the earth. Now that's very speculative but I haven't seen a good thesis for how we ensure AI alignment and I think that's part of the puzzle potentially. That sounds like a really great science fiction story where you train the AI to value the beauty of Earth and humanists in order to protect our long-term. You asked about the Fermi Paradox. Look, fundamentally, the Fermi Paradox is the universe is really large. There's lots of opportunity for life. Why haven't we seen the aliens yet? Roughly speaking, I'll spare you the math. There's about a thousand billion billion Earth-like planets. That is planets that look like the Earth in the sense of geology, liquid water, and all that. That's about...

46:27Steve Levitt100 billion earth like planets for every human on the earth. It's just a vast, vast number. We've looked at loads and found lots of planets around nearby star systems and none of them look as good as the earth. None of them have we found any signs of life yet. At the minute we either know we're either very rare or alone and either way the incredible interconnected complex web of life that we have on the earth is incredibly precious. One of the answers to the funny facts of why we haven't seen life is simply do we get technological then blow ourselves up or any species when it becomes technological it blows itself up and all you have to believe for that is that when a species becomes technological in our universe typically they get faster at building the technology than the social smarts to figure out how to control that technology and accidents happen. Now I won't speculate too much on how good we are social.

47:24Steve Levittsystems. But we're certainly very good at technology. I mean, look how far we've come from a horse and cart to man on the moon in a century or what have you. And it's just crazy how fast we're going. And now soon we're on the precipice of artificial general intelligence or super intelligence, which might be just a couple of months to a couple of years max a couple of decades away. So in geological times, really very soon, we are going to have general intelligence or super intelligence, super intelligence being smarter than humans on everything.

47:53Steve LevittThis is not a minor moment. This is arguably the most important things humans have ever done. It's not like any other technology because it's a technology that can build anything else. And how we do that could actually relate to Fermi Paradox. Are we going to steer ourselves smartly through there? We sort of Bumbled our way through nuclear weapons. We didn't blow ourselves up, but we came closer a couple of times. What are we going to do here? This is a big test, and I haven't to think that we haven't got a good path yet, but maybe, just maybe, training it on understanding all the life on Earth will help it to appreciate that. I don't think we should rely on that. I think we need more robust mechanisms, but I think that could be part of the answer. I wanted to end where this whole series began. With Blaze and Guir at Yarkus, the person who first thought up

48:41Steve LevittProject Suncatcher. You talk about this in terms of a moonshot, but also you're describing it is as if this is going to happen for sure. So I'm curious, in 40 years say, what do you think the chances are that this will have come to fruition? And we will be doing a lot of our AI computing in space, like a number. What's your number on that? My number is 90%. That doesn't sound like a moonshot.

49:09Speaker 2No, in that sense it's different from a moonshot. And the reason is that when we started to work on the Apollo project, we really did not know if it was possible. It was unknown whether it would work, but also it was unknown whether there was really a compelling reason to go to space. And indeed, it turned out that there wasn't at the time. The reason to do it was to show off and to look big alongside the Soviets after the Sputnik moment.

49:37Speaker 2for really doing space at scale, the motivation was just not really there. Whereas here, I think we're in a different situation for two reasons. One of them is that the physics and the engineering are already proven. Like we know how to do this. And it really is just a matter of whether there is a point in doing it. And we also know that there is a point. The physics of energy and the demand curves of AI are things that I think we've already understood.

50:07Speaker 2So, when I think about what the 10% looks like where this doesn't happen, it is either my expectations about AI demand are completely violated, which would really surprise me, or we have some much larger scale setback and civilization really slows down for a while. I mean, those are the scenarios into which I think this will not happen. Let's hope that the great majority of that 10% is your expectations about AI, not...

50:34Speaker 2nuclear holocaust or whatever incredible societal disaster that would lead us to be no longer able to launch satellites. I am an optimist, but there's no question that things like nuclear proliferation is getting more serious now. There are real risks, right? And I think we do have to acknowledge that. I'm not talking about AI, apocalypse, et cetera. I'm just talking about the fact that we are an advanced and in some ways fragile civilization and we have many, many means to harm ourselves given our great powers today. But you think that AI apocalypse is not among the leading worries of the next 40 years? I wouldn't say that it's not among my concerns, although I guess my versions of that probably look quite different from those of many AI doomers. What's your version of AI apocalypse? What do you think? If something's going to go really wrong, what do you think would be? Well, AI can definitely be used.

51:30Speaker 2to do really large-scale cyber attacks, bioengineering, et cetera. There was just a story in The New York Times about huge numbers of synthetic drugs that have been killing a lot of people in the Cook County prison. So that's a classic dual-use sort of scenario. The fact that we can use AI to make really large new numbers of drugs is great news in terms of drug development, but it has a dark side too. And that's true of nearly every great power that we acquire.

51:59Speaker 2And to be clear, the reason that I'm fundamentally more optimistic than some people encounter is because I have come to the conclusion that intelligence has this very fundamentally social character. Intelligence is pro-social. That's how intelligence is made. And so in that sense, the sort of fantasy of the evil supervillain Like, I always used to wonder, why aren't there more evil supervillains? Why is that only a thing in cartoons? And I think the reason is that there is actually an inherent prosociality in intelligence. And I believe that has already saved us many, many times over. So that's why I'm optimistic, but it doesn't mean that we can't screw up. A lot of people talk about using energy for AI in a way that implies that

52:48Speaker 2energy is a zero some sort of thing that if it's going to AI, then it's not going to something else that is better for humans or something. And there are two things that I think are important to keep in mind about this. One of them is that as entities become more intelligent, more sophisticated, they spend more and more of their energy on thinking. It's why so much of our energy of our bodies goes to our brain. That's only true of the brainiest recently evolved species, fully a quarter of our energy goes into the operation of our brains.

53:18Speaker 2And as cities grow and become more intelligent, meaning that they develop a larger technological base and they become capable of more things, more and more of the energy in the city goes toward thinking as opposed to manual labor. So these are really large scale trends that have to do with the whole evolution of intelligence on earth. And from that perspective, you know, I fully expect that by the year 2100, the great majority of energy used in the solar system will be going toward AI and will be both harvested and consumed off Earth. So when I think about what 2100 could look like, it could look like this Earth as a beautiful biological paradise with lots of happy humans and animals and plants and so on and a kind of computational mesh that extends much farther out in the solar system.

54:12Speaker 1and the amount of computing happening in that measurable dwarf, what is happening on the ground, along with the amount of energy. So that's where I see things going over the longer term. And I think that it's a continuation of a process that has already been happening for three and a half billion years.

54:44Speaker 1Coming up next time on the show, former SEC chair Gary Gensler has had a front row seat for every financial shock in recent history. So how is he thinking about the AI boom? I think that we have a stock market that is highly valued by any measure. We have

55:03Speaker 7a boom in the capital expenditures that will plateau and maybe even decline in the next few years. So when that comes, that's a reversal that you see will happen for all of these chip manufacturers' construction and so forth. And something has to give. That's next time on the show. Until then, take care of yourself. And if you can, someone else too.

55:27Speaker 1Freakonomics Radio is produced by Renbud Radio. You can find our entire archive on any podcast app. It is also at Freakonomics.com where we publish transcripts and show notes. This episode was produced by Augusta Chapman and edited by Gabriel Roth. It was mixed by Jake Loomis with help from Jeremy Johnston. The Freakonomics Radio network staff also includes Dalvin Abouaji, Eleanor Osborn, Ellen Frankman, Elsa Hernandez, Alaria Montenacourt, Pete Madden, and Theo Jacobs. Our theme song is Mr. Fortune by the Hitchhikers and our

55:57Steve Levittcomposer is Luis Guerra. As always, thank you for listening.