Masters in Business

How AI Could Freeze Progress with Hilary Allen

February 20, 2026

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  • The prevailing narrative of technological innovation often serves as a marketing tool to justify regulatory avoidance and secure venture capital funding, rather than reflecting genuine technical superiority, as seen in FinTech. 
  • The memory of financial crises fades quickly, leading to the erosion of necessary stability regulations, which the guest, Professor Hilary Allen, predicts will soon be missed. 
  • LLM-based Artificial Intelligence tools are fundamentally statistical engines prone to hallucinations and accuracy issues, making them unreliable for high-stakes professional work like law, despite marketing claims of productivity gains. 
  • The concept of "techno-solutionism" leads to dismissing crucial domain expertise and ignoring the possibility that a technological solution may not exist for a given problem, as exemplified by the Theranos case. 
  • Over-reliance on the perceived 'magic' of technology, fueled by massive investment and hype surrounding AI and crypto, makes people susceptible to believing narratives that are fundamentally flawed. 
  • In times of uncertainty, investing in fundamental human skills like clear communication (writing and speaking) and nurturing personal relationships remains the most reliable advice for career success, even as technology advances. 

Segments

Financial Crisis and Regulation Fading
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(00:06:49)
  • Key Takeaway: Public memory of financial crises fades quickly, causing people to view necessary regulations as mere hindrances once the immediate threat dissipates.
  • Summary: In the depths of the 2008 crisis, few argued against regulation, but as time passes, the rationale for existing rules is forgotten. The erosion of securities laws, which have historically protected investors, is currently underway. The speaker anticipates a future moment when the necessity of these protections will be keenly felt again.
Deregulation Pre-Crisis Context
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(00:08:10)
  • Key Takeaway: Key pre-2008 deregulatory acts, like the Commodities Futures Modernization Act and the repeal of Glass-Steagall, were not reversed post-crisis due to a shift in political economy calculus.
  • Summary: Radical deregulation preceded the financial crisis, including allowing insurance products without reserves and merging depository and speculative banking functions. The Obama administration prioritized healthcare reform over immediate, large-scale financial structural reform, allowing the industry time to lobby for weaker post-crisis rules. By the time Dodd-Frank passed in 2010, the political environment favored less structural change.
FinTech Driven by Legal Design
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(00:15:14)
  • Key Takeaway: FinTech innovation is often driven by legal design and narrative construction (like convincing regulators blockchain is revolutionary) rather than inherent technological superiority.
  • Summary: The speaker initially accepted the narrative that FinTech was revolutionary and efficient until realizing the proponents had something to sell. Blockchain technology is described as a clunky database whose value proposition has been convincing regulators to avoid regulating it. Examples like predatory payday lending disguised as AI-driven FinTech and ‘Buy Now Pay Later’ schemes avoiding loan regulations illustrate this regulatory arbitrage.
Economic Precarity and Policy Gaps
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(00:12:36)
  • Key Takeaway: The financial system is failing over half of Americans who live paycheck-to-paycheck, suggesting broader public policy solutions are needed beyond financial investing to address economic precarity.
  • Summary: The idea that a rising tide lifts all boats no longer holds true, as significant economic inequality persists even in good economies. The financial system should aim to solve this widespread economic precarity. Billionaire philanthropy supplementing democratically elected policies is viewed skeptically, as livability should not depend on the whims of the wealthy.
Venture Capital Playbook Critique
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(00:23:38)
  • Key Takeaway: The Silicon Valley venture capital model prioritizes quick cash-outs (5-6 year duration) and relies on an insular network, often funding businesses that replicate existing models or rely on regulatory arbitrage.
  • Summary: The VC model, despite its iconoclastic veneer, follows an established playbook, attracting cheap money through subsidies and favorable tax treatment. VCs tend to invest in businesses developed by their peers, seeking rapid growth rather than long-term, decades-long development projects. PayPal is cited as an early prototype of blitz scaling based on aggressively flaunting banking laws to avoid deposit-taking regulations.
Critique of Techno-Solutionism and AI Hype
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(01:06:44)
  • Key Takeaway: Techno-solutionism flattens complex human problems into solvable technology issues, ignoring domain expertise and leading to inefficient solutions like Juicero, which could be solved manually.
  • Summary: The belief that every problem is a technology problem waiting for funding dismisses the ‘human messiness’ of real-world issues. LLM-based AI tools are statistical engines that cannot inherently understand accuracy, leading to hallucinations, as demonstrated by the Air Canada chatbot case. The speaker worries that reliance on these tools removes the necessary learning rungs for younger professionals to develop critical thinking skills.
Value of Crypto and Blockchain
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(01:03:56)
  • Key Takeaway: Major cryptocurrencies like Bitcoin and Ethereum lack intrinsic value, functioning as Ponzis, while blockchain technology introduces unnecessary operational risk compared to traditional smart contract databases.
  • Summary: Bitcoin and Ethereum derive value solely from the expectation that someone else will buy them, meaning they could theoretically go to zero or less than zero due to lack of underlying assets for administration costs. Smart contracts can function without blockchain, and using blockchain introduces operational risk because the underlying software is maintained by unregulated entities with no obligation for cybersecurity investment.
Government Seeded Tech Success
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(00:29:28)
  • Key Takeaway: Major technological innovations, including the internet and the iPhone, were fundamentally seeded by government investment (DARPA, NASA), contradicting the self-made narrative of tech elites who then lobby against taxation.
  • Summary: The foundation of the internet and technologies within the iPhone originated from public investment through agencies like DARPA and NASA. This public-private partnership has broken down as tech leaders benefit from state-funded R&D while simultaneously lobbying against taxes needed to fund the state and universities that foster such development. Mark Andreessen’s start with Netscape, based on University of Illinois internet research, exemplifies this reliance on public investment.
Critique of Techno-Solutionism
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(01:06:58)
  • Key Takeaway: Technological development often flattens complex problems, ignoring necessary domain expertise in favor of a magical deference to technology.
  • Summary: Throwing money at technology to solve everything leads to inefficient solutions, like using a machine when bare hands suffice. Hilary Allen suggests that with AI, we might be better off using our ‘bare minds.’ This mindset prevents acknowledging that some problems may lack a purely technological solution.
Theranos and Techno-Solutionism
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(01:07:52)
  • Key Takeaway: Theranos serves as the prime example of techno-solutionism, where a fundamental medical constraint (venous vs. capillary blood draw) was ignored due to the belief that technology could solve anything.
  • Summary: The failure of Theranos stemmed from ignoring the medically specific requirement for drawing blood from a vein, a constraint that technology could not bypass. This failure was enabled by VCs lacking healthcare expertise who were susceptible to the narrative of the next Steve Jobs. Critical examination of technology becomes difficult when societal norms favor belief over contrarian questioning.
Mentors and Academic Path
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(01:12:43)
  • Key Takeaway: Mentors like Stephen Kavanaugh and Patricia McCoy supported Hilary Allen by valuing her passion and practical experience over traditional academic credentials.
  • Summary: Stephen Kavanaugh encouraged her early career in financial services by valuing her input on new Australian law. Patricia McCoy supported her non-traditional academic path, recognizing her passion for preventing financial crises despite fewer typical credentials. This highlights the value of mentorship that looks beyond polished resumes.
Reading and Dystopian Interests
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(01:14:09)
  • Key Takeaway: Hilary Allen’s reading preferences lean toward dystopian literature, including Octavia Butler’s ‘The Parable of the Sower,’ alongside high-quality children’s literature.
  • Summary: As a former English literature major, she favors dystopian works like ‘Handmaid’s Tale’ and ‘1984.’ She also enjoys Philip Pullman’s ‘Dark Materials’ trilogy and current children’s books by Catherine Rundell. Professionally, she is reading Jacob Silverman’s ‘Gilded Rage,’ which relates to current financial topics.
Career Advice for Graduates
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(01:15:22)
  • Key Takeaway: In uncertain times characterized by technological shifts, graduates should prioritize mastering fundamental skills like clear communication and investing in personal relationships.
  • Summary: Becoming a good communicator who can write and speak clearly will never go out of fashion, despite the push toward AI tools. Investing in personal relationships is crucial, as they have been a major factor in her career success. These fundamentals offer stability when the ground beneath career paths is shifting.
Financial Crisis Indicators
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(01:16:22)
  • Key Takeaway: All warning indicators for a financial crisis are currently flashing red simultaneously while regulatory oversight is being withdrawn.
  • Summary: Hilary Allen notes that in a crisis, all correlations tend to go to one, and she believes the world is currently on the brink of a crisis. She refuses to put a specific timeframe on it, citing Keynes’s observation about market irrationality. The simultaneous presence of warning signs and regulatory pullback suggests significant risk.