America’s Economy Is Entering a New Era — ft. Noah Smith

In 2025, the US fertility rate fell to another record low, and economist and blogger Noah Smith calls the slow-motion consequences “corrosive.” On Prof G Markets, Smith joined Scott Galloway and Ed Elson to walk through the biggest forces reshaping the American economy — from the China-US AI race and the sustainability of AI demand to wealth inequality, sovereign wealth funds, and the demographic crunch ahead. The conversation is a grounded, caveat-rich look at where the economy actually is, not where the headlines say it is.

The China AI Threat Is Real but Overstated

The release of the Chinese model Kimi K3 — open-source, cheap, and reportedly outperforming Anthropic and OpenAI on benchmarks — has sparked fears that China is about to leapfrog the US in AI. Smith pushes back. The pattern with Chinese models, he says, is that they “test very well in benchmarks and then their capabilities are very brittle when you go beyond just teaching to the test.” Export controls on chips and chipmaking equipment remain effective, and China has far less compute available for inference — the stage where models actually do their thinking. “Even if you exactly steal the weights for Claude,” Smith notes, “you can’t run Claude’s capability most of the time if you don’t have the inference compute.” He expects this to be another “DeepSeek moment” where early claims of world-beating performan