Six New Ideas We Had Coming Out of Thompson and Klein’s Abundance

We just read Abundance, an interesting new book by Derek Thompson and Ezra Klein about the troubling practice across American government and politics (all too frequently from the left) of deliberately using process and bureaucracy to prevent essential things that need to happen like building new housing or permitting new energy facilities. Since the book spends most of its time persuasively outlining the problem, we thought we’d take the conversation a step further with some solutions of our own.

(1). Create a new version of Race to the Top for energy permitting.

The Obama administration was tremendously successful in incentivizing states to adopt education reforms through an innovative program called Race to the Top. Even though the amounts awarded weren’t really all that much in the big scheme of education funding (typically less than $1 billion per winning state), it seemed like a lot, which was enough to catalyze political support and overwhelm opposition into agreeing to new reforms on issues like teacher tenure and charter schools.

Much of Abundance articulates all of the roadblocks that have been created that make building affordable housing or permitting new energy facilities incredibly slow and costly. We debated whether a similar program to Race to the Top could work to incentivize better state and local housing policies around environmental regulations and reviews, community review and veto power, and union influence and project labor agreements — all of which either typically block new housing entirely or increase the cost so considerably that affordable housing is not actually affordable. 

The good news is, there is already a movement in many states (YIMBY) to make housing easier — and we have seen reforms already enacted in some, notably California, Illinois, Minnesota and in Washington DC. A Race to the Top program could incentivize the adoption of desperately needed housing reforms. But since most of the cities where housing is simply too over-regulated and expensive to build affordably are in blue states, the odds of a Trump Department of Housing and Urban Development rewarding blue states with anything seem incredibly low. 

However, the same concept could work for energy permitting. Easing the process around approving and permitting transmission facilities, pipelines, construction of nuclear plants, solar facilities, wind farms and other forms of renewable (and even traditional) energy could greatly reduce the cost of construction for energy providers and the cost of usage for consumers. Just as important, it would allow the nation to start producing the amount of energy necessary to power and fully benefit from the upsides of artificial intelligence.¹ 

This is especially true for nuclear power, a form of energy with great promise and power but also one that produces significant (and understandable) anxiety among nearby residents. In fact, given Microsoft’s recent deal to purchase and restart Three Mile Island, it’s conceivable that the major AI providers could offer their own funding and version of a nuclear focused Race to the Top (Amazon already did this once with its national competition among cities to host its second headquarters). Trump’s Stargate initiative might already be a vehicle and funding source that could do this. 

In the case of Race to the Top, money to schools was seen by communities as a sufficient carrot to force political reform over the objections of teachers unions. Here, no one directly wins from streamlined energy permitting in the same way, so the prize money would have to be used as energy rebates for residents of states that adopt the reforms. If the individual rebate is significant enough — especially in a time of rapidly rising inflation and plunging markets due to new tariffs — it could be the boost energy reformers need.² 

(2). Incentivize venture capital to invest in societally useful technologies through tax policy.

This is an extremely nascent idea, but it seems like: 

(a). Society really needs venture capital to succeed in order to fund the technologies needed to solve all kinds of problems and emerge from all kinds of messes ranging from climate change to fusion to drug development to subpar schools; 

(b). Government can try to fill some of the gaps in research and development and frequently has (DARPA/ internet is the best example), but politics makes that difficult to count on, especially now that one of the two major parties openly disdains and distrusts science; 

(c). Venture capital tends to go through boom and bust cycles that see a lot of output and investment for a few years and then a strong pullback after that at a time when the nation can’t afford anything but continuous investment; and 

(d). Venture capital has become so rapacious that it is hard to fully back and incentivize it because rewarding highly and sometimes dubiously inflated funds and startup valuations creates a moral hazard.

But what if there were thresholds for capital gains application that were based on how societally needed a technology is rather than simply how long an investment is held? VCs investing in early stage companies working on ideas like carbon capture or fusion could receive preferential tax treatment while VCs investing in SAAS companies making interoffice communication mildly easier would not.³  

All tax policy is based on incentivizing and disincentivizing economic behavior. If some forms of venture capital investment are societally essential and others hold little value beyond their specific benefit to a company, its investors, employees and customers, why not distinguish between the two? The federal long term capital gains tax is 20% and the highest regular income tax rate is 37% — a difference meaningful enough to incentivize investment in the fields that really need it. 

(3). Create a dedicated revenue stream for key government research institutes. 

For society to advance and to solve really big problems whether in energy or medicine or housing or education or anything else, you need constant investment and research and work from the public sector, the private sector and the non-profit/ academic sector. 

If government agencies like the National Institutes of Health (NIH) are dependent solely on annual appropriations and the whims of politicians (and right now, they’re being cut), then that disrupts the entire cycle and makes it hard for innovation to happen (and it’s why we fall behind countries like China that have far less democracy but apply far more logic and discipline to long term problems). 

If we said that a certain percentage of taxes paid on profits from initial public offerings (IPOs) were automatically sequestered and sent to different government research institutes like NIH or NSF (National Science Foundation) or NASA or DARPA (the Department of Defense’s innovation arm)⁴ or CDC (Centers for Disease Control) or labs like Fermi and Brookhaven, then they could operate free of political interference. They could ensure that regardless of which base controls the moment, the research needed to keep society evolving doesn’t stop. In this scenario, the funding would not be subject to Congressional appropriations, nor could agency directors or OMB divert or cut the funding. It is fully independent. 

If IPO gains represent an estimated 2% of total tax revenue, that’s $70 billion. Given that the total combined budgets (pre-Trump cuts) for NIH, NSF, NASA, CDC, DARPA, Brookhaven and Fermi combined is an estimated $98 billion, securing this funding stream would go a long way towards guaranteeing sustained innovation and protecting it from politics. To be clear, this is not a tax increase of any kind — just a dedicated use of the proceeds. 

(4). Require use of AI and latest technology for all compliance, grant applications, grant reviews and anything else that takes time from researchers that isn’t spent on research.

This approach would mandate that if there is a way for a government agency to use AI to complete paperwork, it must do so. It would allow applicants to use AI to fill out grant applications, paperwork, documentation, compliance mandates and all of the other processes that take time away from what we want researchers actually doing (Klein and Thompson say that 40% of time by researchers is spent on paperwork and others say it’s even more). And, it would require federal agencies to then use AI to review said applications, paperwork, documentation and everything else. We can also replace the people at the agencies and institutes focused on reviewing compliance and re-invest that money back into research grants (the team at DOGE should at least like the personnel reduction part).

This would also work at the state and local level (and their same technology could also be used for procurement, licensure, permitting and applications for everything from getting into a public university to reserving a softball field). 

(5). Teach Operation Warp Speed at policy, law, business, medical, nursing and public health schools.

Operation Warp Speed is one of the greatest success stories of government and the private sector working together this century, if not all time. In under a year, the federal government was able to work with Pharma (most notably Pfizer and Moderna) to develop COVID vaccines that worked (it usually takes at least 5-10 years to fully develop a vaccine). Then they all worked with state and local government, hospitals and the medical community to make the vaccine freely available to anyone who wanted it. It saved an estimated twenty million lives and enabled society to get back on its feet. 

As the book points out, ironically, neither side wants to praise or take credit for the greatest governmental success in decades – getting a vaccine for Covid created and distributed within a year (Democrats won’t do anything that praises Trump and Trump has adopted an anti-vaccine posture, so he can’t take credit for his own work). 

There is a dearth of understanding among graduate students as to how government really works and even less understanding on how government and business can work well together (even public policy schools mainly just teach theory by tenured professors with little real world recent experience in government or politics).

There should be a curriculum developed around Operation Warp Speed that is distributed for free to graduate schools across the country with resources for students to learn exactly how it all happened and then create their own (theoretical versions) of a successful public-private partnership.⁵ This hopefully will give enough leaders in every sector the awareness of what has been done, what can be done and what to do in the next crisis.⁶ 

(6). New legal reforms to prevent spite/time wasting litigation that slows projects

One clear villain in Abundance is Ralph Nader.  As Thompson and Klein make clear, by solving one problem (government unwillingness to enforce existing laws and keep consumers safe), Nader and his colleagues developed tactics that made most people’s lives worse for a generation — and those practices then lived on to do even more harm.

Even if Nader was protecting public or consumer safety in specific areas, his approach of using litigation to delay projects, kill new ideas, stall innovation and handicap government’s ability to be effective has been adopted widely by both sides to  prevent progress on virtually anything difficult or important from high speed rail to nuclear energy permitting to affordable housing. 

If we made CEQA/NEPA lawsuits — lawsuits used to stop infrastructure, housing and construction in the name of environmental protection — only enforceable against governments and not against private actors, it would greatly reduce the scope of litigation used to stall progress (or, we could eliminate the private right of action under these laws altogether, which would be even better). So far, government has been smart about limiting private rights of action around AI. Limiting the scope of CEQA and NEPA litigation is another case where state Attorneys General can weigh the cost/benefits on behalf of the people.  

Another reform is to force litigants to post bonds in amounts associated with lost project time and lost costs. That way, if the litigation is judged unwarranted, the bonds could be used to expedite projects to make up for lost time.  

All six of these ideas require a lot more time and study, but there are clearly a lot of new ways to tackle the problems posed by a society currently way too focused on a Hobbesian zero sum mentality of government, politics and life in general — an approach that leads to inaction, mistrust and a lower quality of life and standard of living for almost everyone. Thompson and Klein deserve credit for moving the concept forward. Let’s hope some of our elected officials and regulators take the problems they point out and start enacting solutions to them.⁷ 

1. It seems to us that the greatest potential for AI rests in three areas: (1) drug development to ultimately find molecular combinations that can address every disease; (2) carbon capture and other forms of climate mitigation that can not only help limit emissions but remove carbon from the atmosphere; and (3) individualized education that allows each student to learn according to the style that suits them best, significantly amplifying the ability of our teachers to break through.

2. Energy rebates might prove especially attractive in a time of soaring inflation.

3. Bob has also raised the additional idea of basing the threshold on TAM so that markets that have the greatest potential and upside are receiving a disproportionate share of investment although it’s unclear to Bradley if the market doesn’t already function roughly along these lines.

4. Bob also suggests treating DARPA like a sovereign wealth fund where it owns direct stakes in companies and technologies that it can use for future investment.

5. Bradley taught a class at Columbia Business School for four years and Bob taught the same class last year that had students develop full campaign plans to legalize disruptive technologies in multiple states so we know this type of project can be done without prior expertise.

6. While the curriculum could be created through any form of government funding (especially if we had a working federal Department of Education), the truth is Pharma could probably just as easily pay to develop it and would probably benefit tremendously from it. 

7. The ideas above also include steps that could be taken directly by industries like major AI companies and Pharma.