Derek Kaufman
Subject: Innovative Abundance – Making Government Work
Bio: Founder and CEO of Innovative Abundance, a dynamic community of notable policy experts, think tanks, and advocacy groups to shape America’s future through an abundance-focused agenda.
Transcript:
Larry Bernstein:
Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and culture.
Today’s topic is Innovative Abundance – Making Government Work.
Our speaker today is Derek Kaufman who started a new think tank called Innovative Abundance which is working on policy prescriptions to make government more efficient.
Derek and I both worked in fixed income proprietary trading and are longtime friends.
Derek, can you please begin with six minutes of opening remarks.
Derek Kaufman:
I am going to talk about operationalizing abundance. Abundance as a word, as an analytical framework, and as a political movement. I am Derek Kaufman. I left Wall Street 10 years ago to focus on policy philanthropy, supporting think tanks, connecting great ideas with policymakers, and organizing the business community to get involved.
Abundance is the antithesis of scarcity. Some scarcity is real. There are only so many minutes in this podcast. There are engineering limits on how high you can build the skyscraper. (If you are curious, that is about a mile.) But much of the scarcity we experience in America today is self-imposed, driven by bad policy choices, misaligned incentives, powerful special interests, and political gridlock. The Pacific Heights neighborhood in San Francisco where there is a 40-foot building height restriction. The sky is not lower over that part of the city, but the buildings are short because of policy not physics.
Abundance is a framework for identifying and dismantling this artificial scarcity across housing and energy with innovation and public sector effectiveness.
Scarcity comes from both the left and the right. Let's start with the left. Development can cause small harms and inconveniences so many people want to stop it. That ends up causing diffuse harm to everyone as we fail to build enough of what our society desperately needs. The incorporation of community voice into our decision-making process has often been hijacked into something deeply anti-democratic. Who shows up at the town meeting evaluating a new apartment complex? Older, wealthier people with an abundance of time. Do they speak for the community as a whole?
The Sierra Club and the Natural Resources Defense Council are top litigants using environmental laws, such as NEPA, ironically, to block clean energy projects. Back in the 60s and 70s, they built up political muscle that stopped coal plants and toxic polluters in their tracks. But the tech stack has changed. The cost of solar has plummeted. We have got new tools next generation nuclear and deep geothermal. We need to put progress back at the root of progressivism.
Now let's look at scarcity on the right. We see skepticism of high return public investments, science funding, advanced market commitments like Operation Warp Speed, or the Department of Energy's Loan Programs Office.
We see a zero-sum mentality on trade and high skilled immigration. We also see a preference for government efficiency over effectiveness, which explains some of DOGE’s missteps. From both sides, we're stuck with antiquated systems, well-organized special interests, and a politics that lets polarization get in the way of solving problems and getting shit done. We are beholden to factions in both parties.
So how do we overcome these factions? By building abundance as a political movement. Abundance scrambles traditional left-right distinctions and is ideologically inclusive. I started Inclusive Abundance to help organize a growing community of scholars, think tank experts, business leaders, public officials, and their staff. Kindred spirits finding common cause under the banner of abundance. People from across the ideological spectrum who are collaborating to build more housing, invest in energy infrastructure, advance scientific innovation and technological progress, and make government work better for everyone. Our mission is threefold, evangelize abundance, build political power, and better connect the nascent abundance community. We've identified and supported an expert network of partners crafting details of the abundance agenda.
I'm also focused on building political power for this agenda, hosting fundraisers for pro-abundance candidates and growing a community of political donors who see artificial scarcity of the status quo is not only economically inefficient but morally indefensible.
America can and should do better. We need a real political movement that makes artificial scarcity scarce.
Larry Bernstein:
In the 20th century, we built subways at a decent price in rapid order by private enterprise. Today, New York City built a new line on Second Avenue for a billion dollars a block.
One of my closest friends runs the subway business for one of the major global construction firms. And I said just show a bid to New York to do a line. He said that that was impossible. They would change the terms a hundred times and we would lose a fortune.
Tell us about subways as a metaphor for our problems.
Derek Kaufman:
New York City has one of the greatest mass transit systems in America. The fact that it is so hard to build that Second Avenue subway line reflects a multiple dimensional failure. Part of it is that we haven't empowered one person to be in charge. There's diffuse responsibility and accountability.
In Europe, they are building things for a quarter of the cost. You need to have one objective, building the cheapest most efficient subway. The best example of where this went right was with Josh Shapiro in Pennsylvania after the bridge over I-95 collapsed. A tanker fire destroyed a bridge, shut down the major thoroughfare running up the East Coast. He suspended all procurement and environmental rules and built the bridge in under two weeks. It was supposed to take a year.
Larry Bernstein:
Was there pushback?
Derek Kaufman:
There was value of an emergency giving cover, and he pulled it off. If he had failed, there would have been consequences.
Larry Bernstein:
We had an emergency when the Pacific Palisades burned down. That gives you an opportunity. Chicago, when it burned down, completely redesigned the building codes, where the streets were, how sidewalks worked.
I had Ed Glaeser, the Harvard economist on the podcast, who discussed the opportunity, how you could increase density, and how to think about regulation to get it done quickly and inexpensively. Pacific Palisades does not seem like government using a Derek Kaufman approach. Why did Shapiro get it right with that bridge and why is Pacific Palisades getting it wrong with post-fire rebuilding?
Derek Kaufman:
A decade before the tragedy in the Palisades there was a lot of effort to do brush clearing and forest management. They ran headlong into environmental activists who said, every tree is sacred. You can't cut down that tree. You can't clear that brush. You need to spend four years doing an environmental impact statement before you can do forest management. What you get is the whole forest goes up in smoke. And the CO2 emissions and the environmental degradation and catastrophe of fire is orders of magnitude worse than the environmental impact of proper forest management.
Gavin Newsom weeks ago, in his budget made them include the exemption for housing development of the California Environmental Quality Act or CEQA, trying to make it easier to build dense housing in urban areas, which was time after time blocked by using CEQA as a cudgel.
If you don't let dense housing happen in places where there's already housing, you're going to get sprawl. And that's much more environmentally degrading to build exurbs with long commutes and more land being used than to build 10 and 20 story buildings where there's a three-story building right now in LA. Things are changing, but I agree with you that so far, it's been really disappointing the pace at which permits have been issued. And most of the permitting does not allow a real densification of areas that were lost.
Larry Bernstein:
California has a desire for light rail, but it's like the Second Avenue subway in New York at enormous expense. It is the bridge to nowhere. Very few people are riding it. From a public welfare perspective, a catastrophic project. On the left, there is a desire for investment in public infrastructure. They want a government to be a source for good. Larry Summers talks about high returns on public investment, but when you see this light rail project in California it calls into question that thesis.
You mentioned that there are people on the left who have competing objectives. On the one hand, they would like inexpensive light rail to get rid of traffic. On the other hand, they don't want the rail built in their backyard. They do not want environmental effects and it makes it impossible or too expensive to build. Why does the left not recognize those conflicting ideas?
Derek Kaufman:
It's not only the left that does not want things in their backyard. Josh Hawley, Senator from Missouri, asked President Trump to block the funding for an 800-mile high voltage transmission project running through Missouri called the Green Belt Express, which was going to connect wind and solar power being generated in the Plain states to the industrial Midwest to our hometown of Chicago. There were farmers who did not want that high speed voltage line running across their fields. They should not have the veto. One of the problems is that we have is local interests who are very well organized and high-speed rail or long run transmission get thwarted.
There is a giant void in a political party who are pro-economic opportunity simultaneously believing you can be pro-business and pro-worker. There's tension, but it is not a zero-sum fight. There are regulations that have accumulated over time that are genuinely holding us back.
Traditional Republicans have something to say there. And there are high return investments like science funding or bringing down the cost curve through advanced market commitments of the new technology that the second nuclear reactor we just built in Georgia costs less than the first nuclear reactor.
How do we come up with a synthesis of smart government investment augmenting the private sector, smart regulatory reform.
There are three deep frustrations in America right now. The first is affordability. The inflation that we had post-pandemic, the fact that rents and utility bills are going through the roof, things that are costs driven by lack of supply has entered the consciousness. Everyone from Donald Trump ran to Zoran Mamdani saying that it is too expensive to achieve the American dream, to live where you want to live, to do the things you want to do.
Piece two is economic mobility and aspiration. The American dream of making more money than your parents of being a geographically mobile society.
The third piece, which is the most urgent is national security. China has a very different regulatory environment and personal freedoms than the US.
We do not want to be China, but China has advanced manufacturing capabilities. They are building the tech stack of the future more cheaply than we are. In 2024, China built more solar than the U.S. has installed on its entire grid. They're building tens of thousands of miles of high voltage transmission. We build a few dozen. There's the affordability, the economic mobility, and the national security lens that the status quo is not working.
Larry Bernstein:
I had Eric Labs on the podcast for the Future of the US Navy. Eric runs Navy purchasing for the Congressional Budget Office. He said that delays in making nuclear submarines, aircraft carriers or destroyers continue. Costs rise rapidly making many of these projects uneconomic and unaffordable.
He said that South Korea offered to build a half a dozen Aegis destroyers for a fixed cost. Should we be moving away from cost plus as the approach to government procurement?
Derek Kaufman:
Cost Plus is terrible. The most tangible example of procurement reform that we have seen in the US is with NASA and SpaceX. NASA went from a Cost-Plus model with Boeing and Lockheed to a deliverable contract where SpaceX competed and won.
That simultaneously did two things. It built up the private sector manufacturing capability to do a commercial launch. And it saved the government a ton of money.
In China, the batteries, the electric motors and the electric control circuits for drones and electric cars, you have this whole ecosystem of many manufacturers. They learn and the cost curves come down and then they keep innovating because the supplier learns from the procurer what is needed and they innovate together.
Rebuilding that from scratch is going to be hard but is essential. It has done it where government put a hand on the scale.
China out-builds us in ships by an absurd ratio. Having friends build stuff for us for now like Korea seems fine. You need chips, you need them now. U.S. is not going to get from here to there tomorrow. You need to a short-term horizon where you build things cheaply with your friends and a medium term horizon where you design regulatory reform and public investment to get America this entire capability set.
Larry Bernstein:
In your remarks, you said that Mamdani is successful because he said you cannot achieve the American dream in New York City. It's more pro-regulatory.
Derek Kaufman:
The Democratic primary in New York City had a 15% turnout. And this is a political problem across our country where partisan primaries in places that are leaning very red or very blue, the primary is the general. You wind up getting extreme people in a low turnout partisan primary.
And if I had a magic wand, open primaries and then an instant runoff general election so that you have representation for people across the ideological spectrum in every election and who makes it to the general and ultimately becomes the representative. That would be a moderating influence.
On your Mamdani question, there are a lot of young kids of wealthy families who feel like they're a failure versus the expectations of their parent. They can't get their own apartment, because in New York City $4,000 a month is the average rent now. And the easy answer of rent control is always appealing.
It will increase rents locally because of substitution effects, because a lot of the rent-controlled units are not held by people in poverty. They're held by like the grandkids of someone who got lucky 50 years ago.
We should be building a ton more housing. That's the correct economic solution, but it won't fix the problem next year.
Larry Bernstein:
What are you optimistic about innovative abundance?
Derek Kaufman:
I am optimistic about the pace of innovation in America, especially with respect to AI. There is an opportunity for the government and the private sector to work together so that we have a rapid advancement of AI that serves human flourishing. I am optimistic that abundance as a frame has taken off so quickly.
Larry Bernstein:
Thanks to Derek for joining us.
If you missed the last podcast, the topic was Does Your College Major Matter?
Our speaker was Corey Moss-Pech who is a Professor of Sociology at Florida State and the author of a new book entitled Major Trade-Offs: The Surprising Truths about College Majors and Entry Level Jobs.
We discussed the pros and cons of choosing a liberal arts major. We also reviewed the interplay between college majors and internships. In addition, my former interns at What Happens Next spoke about what makes a successful summer internship program.
I would like to make a plug for next week’s podcast with Monique Parsons who will discuss her new book Green Gold: The Avocado’s Remarkable Journey from Humble Superfood to Toast of a Nation.
You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.
Check out our previous episode, Does Your College Major Matter? , here.
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