This episode explores the challenges and potential solutions in the field of physical AI, particularly robotics, contrasting it with the advancements in large language models (LLMs). It begins by introducing the concept of a "Physical Turing Test," which assesses a robot's ability to perform complex real-world tasks indistinguishably from a human. Against the backdrop of LLM researchers' complaints about data scarcity, the speaker highlights the even greater data limitations faced by roboticists, who struggle to collect continuous robot joint control data, which requires human-in-the-loop teleoperation. More significantly, the discussion pivots to simulation as a means to overcome these data limitations, detailing techniques like domain randomization and high-speed parallel simulation to train robots in virtual environments. For instance, a robot hand was trained to spin a pen in simulation, and a robot dog learned to balance on a ball, with both skills successfully transferred to the real world. The episode further introduces "Robocasa" for large-scale compositional simulation and explores the use of video diffusion models to generate diverse and complex simulated environments, leading to the concept of the "digital cousin." The discussion culminates in the introduction of the open-source "Groot N1" model, a vision-language-action model, and the concept of a "physical API" that could revolutionize how humans interact with and instruct robots, potentially leading to a new economy centered around physical prompting and a skill economy.