Anthology Intelligence: humanity’s collective brain is already our superintelligent friend: We don’t need to build superintelligence because we did it already. We have it. It is us. Behind the paywall because I am behind, and so it is not yet a thing, but only an outline…
What is man, that thou art mindful of him?
And the son of man, that thou visitest him?
For thou hast made him a little lower than the angels,
And hast crowned him with glory and honour.
Thou madest him to have dominion over the works of thy hands…
Doug Jones: Calories and curves <https://logarithmichistory.wordpress.com/2025/06/16/calories-and-curves-9/>: ‘Comparing energy expenditure (TEE or Total Energy Expended) and fat among humans and our closest relations: chimpanzees…gorillas… and orangutans (Pongo)… adjusted for differences in overall body mass…. Humans are a high-energy species. Also we carry a lot more body fat… particularly… women… extra fat to meet the high energy demands of human infants, gestating and (even more) nursing. But it even applies to men…. A high-energy life-style means… an extra reserve of fat in case of emergencies. We don’t know [for] how long ago our ancestors [had done this]…. A high energy life-style also goes with extensive food sharing and changes in human kinship…
Secular Stagnation in Occlusion, Yet Global Savings Glut Still in the Foreground: With Fed policy frozen for at least the summer, the monetary muddle continues: Today’s discount rates reveal the real anxieties haunting global finance, while the Fed’s dot plots reveal a split committee, and hence one that has to be modeled not as a rational but as a confused actor…
Remember when the future was really cheap? The market’s discounting of long-term value has quietly shifted, exposing deep uncertainties about growth, savings, and the persistence of chaos-monkey governance. The market’s real interest rate calculus has changed. The “normal” macroeconomic world of the 1990s is a fading memory, replaced by a regime where the future is more valuable, but hardly secure—still haunted by the global savings glut, if not full-blown secular stagnation, with policy uncertainty never far from the stage.
Across my screen comes the very sharp Tim Duy, who writes:
Tim Duy: Fed Watch, 6/18/25 <https://public.hey.com/p/5gobQ2gmfq4owmTHRvNSgCcY>: ‘The path to a [Federal Reserve] rate cut begins with inflation coming in below expectations [of 0.3%-points per month] over the summer, which means that tariffs are absorbed in the economy somewhere other than in consumer prices, or that service sector disinflation compensates for tariffs. There is a lot of data between now and September. The Fed’s not going to know what it’s doing until it gets its hands on that data.…
The SEP projections for 2026 and 2027 show slightly more persistent inflation than previously expected. This is, perhaps, a nod to the structural forces—demographics, deglobalization, fiscal expansion—that have made the post-plague world so challenging for central bankers.
And Tim Duy notes that the Federal Reserve is now substantially and evenly split. Barkin, Hammack, Kugler, Logan, Musalem, Schmid, and Williams are expecting and hoping to hold interest rates constant throughout the rest of 2025. Bostic and Kashkari are pencilling in one 25%-point rate cut. Barr, Collins, Cook, Daly, Goolsbee, Harker, Jefferson, and Powell are pencilling in two cuts. And Bowman and Waller believe an 0.75%-point rate cut before January would be appropriate.
For the no-big-shock longer run, the hawks see the neutral Fed Funds rate that is the economy’s aggregate demand-supply balance point as still at something like 3.75%/year; the doves see it as 2.75%. (With the current 3-Month Treasury-Bill rate at 4.2%/year and the 10-Year Bond rate at 4.4%/year; and trailing-year CPI core inflation at 2.75%/year.)
With a confused and evenly split FOMC, the Fed’s stance is firmly “wait and see.” Summer inflation news, primarily driven by the evolving impact of Trump chaos-monkey tariff governance, ought to be decisive. Then again, history teaches us that “the next six months will probably be decisive” is more often than not an unhelpful cl=op-out.
Connects the dots, and warning that with neofascist tariff pluto-populism the big losers are the ordinary households of America. If you think tariffs are a clever way to shore up American industry, think again. Recognize that the institutional wreckage wrought by Trump’s trade wars is likely to be the big source of damage. And recognize that a United States launching trade wars against the entire world has no reliable trading partners to do the things it cannot do most efficiently in a globalized division of labor, while every single other country can easily find reliable trading partners to substitute for the U.S. in its role. Thus the rest of the world is likely to escape not scot-free but low-scot from the bad consequences of Trump’s chaos-monkey international economic policy. The U.S., however, cannot and will not…
I learned back in the 1990s, back when I was working for the US Treasury, that every single honest technocratic cut you take at the issue reveals that tariffs are an extraordinarily inefficient and regressive way of raising money. Just whatever analytical take we took, the inevitable conclusion was that cutting our tariffs was the way to go. This held true even without any reciprocity in terms of trade barrier reduction by other countries. Yes, it would be better if other countries reduced their trade barriers also. But it was very hard to get a benefit-cost minus unless you assumed that other countries would raise their trade barriers to our exports when we reduced ours against their imports. And it is completely impossible to get an increase in our trade barriers producing benefits either in terms of productivity, efficiency, income distribution, or national economic welfare if you incorporate any reciprocal increase in other countries’ trade barriers at all.
Adam Posen: The Household Impact of Trump’s Tariffs <https://www.piie.com/commentary/testimonies/2025/household-impact-trumps-tariffs>: ‘Compared to other forms of taxation, tariffs create chaos and uncertainty for small businesses, individuals, and consumers while encouraging corruption and abuse driven by taxpayers seeking deals and exemptions…. The middle quintile of the U.S. income distribution would pay $2,600 a year in additional taxes, in lost… real after-tax income. That number goes up, the further down the income distribution you go…
Plus the policy chaos has been further amped-up by Trump’s refusal to take the G-7 seriously. Together the rest of them outweigh the U.S. economically and diplomatically, and have the potential to do so militarily as well within a decade. And now the G7 has been, de facto, replaced by a U.S.-excluding G6.
And because Trump’s word is no good, there is no way any additional channels can be used to coordinate policy.
The most important of Adam’s points here are, I think, institutional. Trump’s tariffs are, for institutional reasons, even an order of magnitude worse than the garden-variety permanent, consistent tariffs the Treasury’s Office of Economic Policy spent its time analyzing back in the 1990s. It is the lies about projected fiscal benefits—1.5%-points of GDP in revenue, supposedly—and the downsides for when those chickens come home to roost.
I am beginning to think that my guess that TRUMPXIT will be like BREXIT is too low. I am now thinking it is likely to be a more than 1%-point of GDP per year growth headwind for the United States over the next decade.
Tariffs are bad. Neofascist populism is bad. Neofascist tariff populism is worse. And neofascist tariff pluto-populism, as Martin Wolf calls it, is worst of all.
I think this is the place to draw the curtain. I confess that I do not understand the persistence of the fantasy that tariffs can serve as a clever lever to “shore up American industry”. It is, I think, a particularly persistent and damaging species of economic folklore. Yes, big losers from neofascist tariff pluto-populism include cosmopolitan elites and globe-spanning corporations with their globalized value-chains, but they buy from, sell to, and employ ordinary American households. They will find themselves paying higher prices, facing greater uncertainty, and watching the social safety net more than fray.
Trump’s trade wars, waged with the subtlety of a chaos-monkey let loose in the machinery of global commerce, will leave the United States increasingly isolated and bereft of reliable trading partners willing to coordinate with it on those tasks it cannot perform most efficiently itself. Every other country, faced with American unpredictability, can and will find alternative partners—substituting away from the U.S. in supply chains, trade agreements, and the informal networks of trust and cooperation that lubricate the world economy.
The rest of the world, I guess, will not escape the fallout entirely; but they will, as the British might put it, get off “low-scot,” finding new equilibria while the U.S. absorbs the brunt of its own folly.
The upshot, then, is a grimly asymmetric distribution of pain.
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The MADE IN THE USA “T1SM Phone” Trump Mobile smartphone is not about technology and manufacturing. It is about confidence games.
Plus it is about the willingness of an awful lot of people who know better to sanewash Donald Trump and his family, in the interest of helping those confidence games succeed.
It is about profiting from fantasy narrative. It is a case study in the persistent American fantasy of industrial self-sufficiency, a fantasy that collides, again and again, with the realities of comparative advantage and global value chains. The economics are clear: unless one is willing to pay a premium—often a steep one—“Made in America” is, for now, a slogan, not a supply chain. The performance is the point. The T1 understood as a $499 phone made in America that beats Apple’s biggest, priciest iPhone models will never ship. But its myth is already in circulation, and being propagated by people who know better.
Get ready to experience the power of TrumpSM Mobile. Our MADE IN THE USA “T1SM Phone” is available for pre-order now. Reserve your phone TODAY!! The “T1SM Phone” will be available in September 2025…
It has, according to its launch text, a “5000mAh long life camera”. That means that its camera can deliver 5 ampere-hours of current to the phone before it is exhausted. The problem is that cameras on smartphones are described in units of megapixels—1,048,576 picture elements. Batteries are described in units of mAh. Batteries do not have picture elements. Cameras do not have cumulative DC electric current-delivery capacities.
Nobody touching or taking a look at the Trump Mobile phone-offer website <https://trumpmobile.com/t1-phone> before its launch understands a smartphone well enough to be able to distinguish between its battery and its camera.
And I doubt very much that anyone building a phone would offset the fingerprint sensor at the bottom to the right of the center of the screen.
But I would also doubt very much that anyone drawing a mockup image of a phone would offset the fingerprint sensor at the bottom to the right of the center of the screen.
It claims that this MADE IN THE USA “T1SM Phone” “shows some specs that would beat Apple’s biggest, priciest iPhone models”.
It headlines the story “Trump’s Smartphone Can’t Be Made in America for $499 by August”, focusing on the fact that this phone—if it exists at all—is right now being assembled in China. But it’s not just that you cannot make a smartphone in the United States with specifications that beat Apple’s biggest, priciest iPhone models and sell it at $499 this summer. It is that you cannot make a working smartphone with specifications that beat Apple’s biggest, priciest iPhone models anywhere in the world and sell it at this price.
And neither Wilson Rothman nor Ben Raab of the Wall Street Journal (a) knows this and (b) dares to say it.
Ben Raab is an intern. So he is excused.
Wilson Rothman is “deputy Tech & Media editor… [who] manages an award-winning team of columnists and reporters who cover technology in our lives and our businesses…” And Wilson Rothman also appears to lack either knowledge of shame, or both. Yet more evidence that these days there are an awful lot of people working at the Wall Street Journal who do not work for the readers.
Better to get your news from somebody else. For example, from Vox Media’s The Verge, where we find:
David Pierce: The Trump Mobile T1 Phone looks both bad and impossible <https://www.theverge.com/gadgets/687492/trump-mobile-phone-t1>: ‘It’s supposedly made in the US, cheap, and coming this fall. I doubt it all…. All we have is a website that was clearly put together quickly and somewhat sloppily, a promise that the phone is “designed and built in the USA” that I absolutely do not believe, a picture that appears to be nearly 100 percent Photoshopped, and a list of specs that don’t make a lot of sense together….
The… spec list and… image… no resemblance to any phone I could find…. Ignoring the obviously and poorly Photoshopped picture…. Where things get especially strange, though, is its supposed combination of Android 15, 5G, and a 3.5mm headphone jack. In many ways, these are opposing specs….
It seems utterly unfathomable that you could build a phone with this set of specs, at this price, to be delivered in September. Either Trump Mobile has done something truly remarkable here (and I’d bet you a T1 Phone 8002 that it hasn’t), or the phone it ends up shipping will not be the one buyers are expecting. Like we always say here at The Verge, it’s vaporware until it ships. And the Trump Mobile T1 Phone 8002 is as vapor-y as it gets…
Allison Johnson: Who is really behind the Trump Mobile T1 phone? <https://www.theverge.com/tech/687800/trump-t1-phone-suspects-revvl-ulefone-doogee>: ‘Our money’s on… the T1… be[ing] a white label device with most or all of its production handled by a Chinese ODM…. These dozen or so companies are responsible for as much as 44 percent of smartphone shipments globally, largely handling budget models while OEMs like Samsung and Huawei focus on producing their own high-end devices.… We’ve narrowed it down to a handful of devices…. Was this all a silly waste of time because this phone does not and will never exist at all? Who can say?… DOOGEE Note 58…. Ulefone Note 18 Ultra…. Revvl 7…. Blu G84…
Which points us to what looks like a very good guess:
Max Weinbach <https://x.com/MaxWinebach/status/1934632952366764447>: ‘And the answer is… Wingtech REVVL 7 Pro 5G! Same device as the T-Mobile REVVL 7 Pro 5G, custom body. Wingtech, now owned by Luxshare, makes it in Jiaxing, Wuxi, or Kunming China…
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DRAFT: Why the best-laid plans of philosophers and poets never quite survive contact with history—or the marketplace. From Arkadian simplicity to Sybaritic pleasure, what do ancient utopias teach us about the economics of “enough”? & can sufficient prosperity and technological power deliver us to the or at least a “utopia”, or can all it do is to merely sharpen our appetite for new discontents?…
I have never given this “utopia” lecture. In every course I have ever taught, it has been one single slide. Thus it has only been five minutes, a maybe a few more. It would have taken an hour. And I never had an hour.
But I wish I had, at least once.
Behind the paywall for now, as I still have hopes of revising it this summer of 2025…
In the process of economic growth, as we visionaries of a future science-based utopia see it, technological research and development is supposed to enlarge the storehouse of human capabilities to master nature and productively organize ourselves, and so lead us towards if not to peace, prosperity and utopia.
But what kind of society would a “utopia” be?
We need references: things we can point to. We need societies if which we can say: if only things were like they were in that society, only if it were more like itself. They can, perhaps, serve as intellectual bencharks—orienting us for dreams that history never delivered.
Spoiler: the answer is as complicated as human desire itself. But we can at least peer into the gap between myth and reality, and asks whether economic growth is the bridge or the barrier to the good life.
What, exactly, do we mean when we invoke “utopia”? Is it a society defined by perfect order, where every individual is meticulously trained and deployed for their social role, regardless of whether they regard what they experience as personal happiness?
If so, you are describing what the ancient Hellenes imagined as “Sparte.”
Sparte
In the view of it as seen from classical Hellas’s city of the Athenai, Sparte, the city that was the unwalled grouped villages of the Lakedaimonai, was less a real place than a rhetorical device—a foil constructed by Athenian aristocrats to criticize what they saw as the chaos and decadence of their own city: actual historical Sparte bore only a passing resemblance to this idealized version. The myth served a polemical function more than it did a descriptive one. Do not mistake the Athenian-aristocratic image for the actual on-the-ground reality of life in Laconia, in southern Greece’s Eurotas Valley underneath Mount Taygetos.
The Spartan model of utopia is not about maximizing individual flourishing or personal fulfillment. Rather, it prioritizes collective discipline, martial prowess, and the subordination of individual desires to the needs of the state. The “well-ordered society” here is one in which usefulness and conformity are elevated above all else, and where the lives of citizens—at least the male citizens, women and helots need not apply—are orchestrated in service of a higher communal goal.
If you find yourself drawn to visions of utopia that emphasize structure, hierarchy, and an almost militaristic sense of purpose, you are in distinguished company: Platon’s Politeia, for example, is shot through with Spartan undertones. But before you sign up for the agoge, recall that this vision of order comes at the expense of personal liberty and, often, of basic human joy. The “Sparte” archetype is a cautionary tale as much as a blueprint—a reminder that the pursuit of order, taken to its logical extreme, may crowd out the very things that make life worth living.
(A parenthesis: Why do I say “city of the Athenai”, “Sparte”, “Platon”, “Politeia”, and so forth; rather than “Athens”, “Sparta”, “Plato”, and “Republic”? Because the second set of words are far too familiar to us. We think that they are part of our culture. Maybe mid-1950s Oxford or Harvard students or professors. People like us. They were not. Really, they were not. We need, if we are to see clearly what they were, to distance themselves from us: to make them strangers to us and estranged from us. That is what I am trying to do here.)
Suppose your vision of utopia is not one of rigid order, but rather of people living contentedly in harmony with their environment, unburdened by the pursuit of luxury or excess?
Arkadia
This is the Arkadian ideal—a notion popularized by Virgil, who romanticized a rural Greek backwater into a symbol of pastoral simplicity and happiness. Arkadia, in the classical imagination, was a land where shepherds played their pipes, communities were egalitarian, and existence was untroubled by the corrupting influences of wealth and ambition.
Of course, the historical reality was rather more prosaic: the actual Arkadia was a marginal, mountainous region of Greece, so poor and infertile that it was left largely alone by its more powerful neighbors. Its peace was less the product of a philosophical commitment to moderation than of simple geographic and economic irrelevance. Yet for millennia now, Arkadia has served as a canvas onto which intellectuals project their fantasies of the “natural” good life—a society where happiness comes not from abundance, but from living in accordance with one’s nature, accepting limits, and eschewing the rat race of status and consumption.
In our era of relentless striving and engineered scarcity, the Arcadian model stands as a quietly subversive alternative: utopia as sufficiency, not surplus; as contentment, not conquest. But, as ever, one should be wary of mistaking the myth for the reality.
Are all material desires for comfort, entertainment, and amusement instantly and completely satisfied?
Contrary to Edward McLaren, literary Regency marriage patterns, stand-up comedy, and Homeric epic all agree: marrying Colonel Brandon is in no way a tragedy or “settling”, but rather adulting. & the real emotional sex has always been the one with the bigger army…
A very nice catch from the very sharp Edward McLaren, on the English language’s premier novelist, Jane Austen, and on a persistent ambiguity throughout her work, as her female characters make their choices and marry Darcies, Bingleys, Wickhams, Brandons, Collinses, and Willoughbies:
Edward McLaren: Jane Austen’s Rake Problem <https://www.commonreader.co.uk/p/jane-austens-rake-problem>: ‘In Sense and Sensibility Marianne, heartbroken over Willoughby… marries Colonel Brandon, who is “On the Wrong Side of Five-and-Thirty”, whereas she is only seventeen…. Willoughby has impregnated Colonel Brandon’s ward… is… engaged to a Miss Grey… [with] £50,000.… Willoughby… [admits] he did fall in love with Marianne…. Notably, Mrs. Dashwood says: “I am very sure myself, that had Willoughby turned out as really amiable…Marianne would yet never have been so happy with him, as she will be with Colonel Brandon…” To this, Elinor’s reaction is as follows: “She paused.—Her daughter could not quite agree with her, but her dissent was not heard, and therefore gave no offence.”
To me, this is a deep and important silence…. Marianne is “settling”…. Willoughby… would make a good lover… nuy be a bad husband…. [Marianne] will have a better life as Colonel Brandon’s wife…. Brandon’s cousin Eliza is said to have died of “lovesickness” for Willoughby…. So Colonel Brandon it is—but at what cost? When she is in love with Willoughby Marianne’s eyes are “bright”, or “bewitching”, whereas after her recovery she has “a rational, though languid, gaze”… [ad] can set her mind on a new “cured” rationality and… marrying Colonel Brandon… [but] the fire is snuffed out. The romantic, passionate Marianne is transformed into a happy little drone and an acceptable wife….
There are men that a woman can marry, who are willing to invest lots of time in them, and there are men that a woman can truly erotically love, who are frequently the target of other women’s conquests…. The ideal… simply isn’t real… Marriage in Jane Austen isn’t a big romantic affair, as we see in adaptations, but is a tool for a functioning society. Jane Austen was still a conservative, and she still approved of marriage, but she kept a twinkle in her eye for the rakes…
What do I think of this? Well, I definitely get off of the Edward McLaren train here. Where I get off is where he asserts that this is a truth human biology imposes on us about the way the human world has to work rather than a combination of Regency upper-class cultureandJane Austen’s not-wholly-accurate view of the world.
Technology’s greatest overpromiser & overdeliverator has met America’s chao-monkey-in-chief. The result is a Musk entangled in the Trumpian vortex and no longer able to outmaneuver failure, for he did not recognize that Trump is not a transactional politician at his core…
Last fall, I thought I understood what Elon Musk was doing.
Face it: The guy is annoying. He lies a lot. He overpromises, constantly. But there is, or there was, a but: Although he massively overpromised, nearly always, he substantially overdelivered. Tesla made cars. Starlink carried voice and data. SpaceX launched rockets. And it was not implausible to think it was his presence and actions and salesmanship and overpromising that had kept those three operations from being wound-up and wound-down. And those three operations were immensely valuable to humanity as technology-forcers, and substantially valuable to all their stakeholders from raw-material suppliers to users as globalized value-chain economy production networks. He had somehow turned overpromising into a kind of business and financial sorcery, delivering rockets, cars, and satellites against the odds, as his audacity propelled technological revolutions.
So I was surprised and disappointed when he showed up as a value-subtracting chaos monkey with Twitter. And then I was disappointed when he began spending all of his time attending on America’s chaos-monkey in chief, Donald Trump. But I was not surprised when he began spending all of his time attending on America’s chaos-monkey in chief, Donald Trump: I thought I understood what he was doing.
But now I don’t understand. It appears that he tried to arm-wrestle Washington and lost. This is the story of a man who mistook political chaos for a new frontier, only to discover that Trump’s dealmaking is not a zero-sum game.
But wasn’t this very predictable? I mean, Musk thought he was the frog and Trump the scorpion in the Russian fable of the frog and the scorpion crossing the river. But how could he not understand Trump’s nature, and not see that Trump who knows his own nature well had strapped on a jetpack?
Users are likely to gain massively from the buildout of MAMLMs—natural-language interfaces, very big-data very high-dimension very flexible-functional-form classification and regression analysis, and the rest. Or, rather, they will do so if ChatBots and their ilk become users’ servants rather than users’ masters.) But the idea that new Googles and Facebooks will arise from the disruption of incumbent platform-oligopoly tech megacorps seems, in my view at least, highly likely to be pure mirage…
The pace of technological change in the 21st century has been astonishing, but its locus is shifting rapidly from the consumer-facing edges of the tech sector to its very core: the infrastructure, the platforms, and the software development processes themselves. The old guard—Google, Microsoft, Apple, Amazon—built their empires on the back of 20th-century innovations: search, productivity software, e-commerce, and the personal computer. These platforms, for all their dynamism, are now showing their age. Their architectures, interfaces, and business models are deeply rooted in the needs and constraints of an earlier era—one in which humans, not machines, wrote the code and specified the queries.
And so this morning we find the very sharp Charles Ferguson writing:
Charles Ferguson: How AI Will Disrupt Big Tech <https://www.project-syndicate.org/onpoint/big-tech-firms-cannot-outrun-ai-by-charles-ferguson-2025-06>: ‘AI is advancing at an astonishing pace and undermining the core businesses of tech giants like Google, Microsoft, and Apple…. It is also reshaping… software development… [perhaps] render[ing] much of today’s tech sector obsolete…. The most obvious victim… Google[‘s]… revenues derive primarily from ads…. [But] OpenAI’s ChatGPT, Anthropic’s Claude, or Perplexity [are]… already vastly superior to the Google hunt-and-peck model…. [As for] the current industry’s [other] giants… AI may well supersede them [as well], and it is already opening space for new disruptors…. Microsoft and others are adding AI “copilots”…. But all of those products are burdened by history…. Wouldn’t you be better off using something designed from the ground up with AI in mind?… Amazon’s interface is cumbersome…. AI technology is improving stunningly fast…
Indeed, the rise of generative AI, this comfortable order is under existential threat. The new tools applications are new ways of interacting with information, of specifying tasks, of building software. The tyrannies of “hunt-and-peck” searching, spreadsheet cells, rigid and picky programming languages, and much more are all are being eroded by systems that can be instructed in natural language, that can generate not just code but prose and even analysis on demand, and that can automate workflows once thought to require armies of engineers. The implications are not just for consumers, but for the very structure of the technology sector itself.
But is Ferguson right in seeing tech-titan disruption by challengers as the likely outcome?
Not that I have any answers. But I do have lots of questions. And there are interesting tidbits of information out there, as we contemplate the inability of Apple Computer’s Siri to make any significant progress at threading the labyrinth of “AI”. Is there more to the story than secrecy, institutional sclerosis, & managerial overconfidence resulting in missed deadlines, internal confusion, & top executives depriving themselves of situational awareness?…
I do not know whether Mark Gurman and Drake Bennett’s source here thinks he is making Apple Computer’s Senior Vice President of Software Engineering Craig Federighi look good or is knifing him in the back here:
Mark Gurman & Drake Bennett: Why Apple Still Hasn’t Cracked AI <https://www.bloomberg.com/news/features/2025-05-18/how-apple-intelligence-and-siri-ai-went-so-wrong>: For the Siri upgrade, Apple was targeting April 2025…. But when Federighi started running a beta of the iOS version, 18.4, on his own phone weeks before the operating system’s planned release, he was shocked to find that many of the features Apple had been touting—including pulling up a driver’s license number with a voice search—didn’t actually work…. (The WWDC demos were videos of an early prototype, portraying what the company thought the system would be able to consistently achieve.) The planned rollout was delayed until May and then indefinitely, even as the features were still being promoted on commercials…
In some ways it is worse than Gurman and Bennett said: they do not remind their readers that the vibe from the commercials was not that one of “these features are coming soon” but, rather of “these features of Apple Intelligence are here now!”
And if whoever Gurman and Bennett’s sources are think that they are doing Federighi a favor by portraying him as so lacking in situational awareness that he has to open a newly released beta on his own device in order to learn that tentpole features are not shipping—that V1 is unshippable, and V2 is nowheresville—then I question their sanity.
Given that Apple Computer has been, for nearly a decade, shipping versions of Apple Siri that are far behind the competition and not up to anything one might think of as Apple Computer quality standards, it is hard to see the current Apple Computer party line that “we weren’t able to achieve the reliability in [the New Siri with its V2 architecture] in the time we thought…” as anything other than euphemism.
This is particularly so given that there seems to have been a substantial amount of schizophrenia among Apple’s leadership with respect to AI a year ago. On the one hand, back then they recognized, as Craig Federighi put it to Joanna Stern earlier this week, that “when it comes to automating capabilities on devices in a reliable way, no one’s doing it really well right now…” On the other hand, against this background, Federighi also says “we wanted to be the first. We wanted to do it best…” Moreover, they thought that they could do so. That meant producing, in nine months, without very much of a past runway, and without giving John Giannandrea’s AI team the GPU chips they thought that they needed, a context-aware agent-chain AI system that was beyond the frontier that any of the companies spending much more on the problem had managed to create. Perhaps the key problem is that Apple’s historical strength has been its insistence on “it just works”, reliably. But if we know one thing about generative AI with all its hallucinations, very recalcitrant edge cases, and inability to reliably shift from interpolation to extrapolation, the last thing it can do is “just work.
And here I am of two minds. On the one hand, this would seem crazy without having had truly extraordinary breakthroughs substantially more than a year ago. On the other hand, as John Gruber has written: “Apple’s executives aren’t crazy…” They announced that they could do it at the 2024 WWCD, and, again quoting Gruber:
Multiple trusted sources… [n]ever saw an internal build…[of] this [as of the 2024 WWDC]…. They don’t believe there was one, because… they believe that if there had been such a build, their teams would have had access to it. Most rank and file engineers within Apple do not believe that feature existed…. The first any of them ever heard of it was when they watched the keynote with the rest of us on the first day of WWDC last year. [BUT] I’m quite certain Apple’s executives believed…. Crazy to announce… if they didn’t believe they could ship it…
So just how much AI-overpromising did Apple Computer do at its 2024 WWDC keynote? And how did the Apple executives convince themselves that their overpromising was only at the margin? And why?
Lots of questions. I do not have any good answers. I do, however, have some things that strike me as highly informative:
Behind the paywall because I am profoundly dissatisfied with it. Birdbrains & human gains: intelligence, culture, & deep biocultural evolutionay roots of economic history…
The story of economic history begins with the evolution of minds, not markets. And not with the evolution of individual minds either. The story properly begins with the biocultural evolution of the time- and space-binding Mind that is humanity considered as an anthology intelligence. It is the peculiar, contingent evolution of that and its capacity for cumulative culture that sets off the possibility of the process. The “market” is merely a latecomer, a surface ripple atop the vast ocean of social learning, language, and trust that made Homo sapiens the protagonist of the coming of the Anthropocene.
The last time I taught my global economic history course, I found myself wishing that I had spent a full two weeks on humanity the coming of agriculture: one class on the jump to our intelligence, one class on our sociability and the jump to our being a cultural-evolution environment-transforming animal, one class on the jump to language as we know it and the the difference we think that made, and one class on the gatherer-hunter lifestyle, the last out-of-Africa migration, and the runup to agriculture and herding. But I do not know when I will.
So it is time to see if there is stuff in my notes that I should get out there, in the hope that somebody in the future (maybe me) will run across it and use it in some way. As Niccolo Machiavelli says, “if [my] poor talent, little experience… and weak knowledge… makes this… not of much utility, it will at least show the path to someone who with more virtue, more discourse and judgment”.
Dp birds do it much better? “It” begin intelligence?
In terms of bang for the buck, that is. As Yasemin Saplakoglu reports:
Yasemin Saplakoglu: Intelligence Evolved at Least Twice in Vertebrate Animals <https://www.quantamagazine.org/intelligence-evolved-at-least-twice-in-vertebrate-animals-20250407/>: ‘Complex neural circuits likely arose independently in birds and mammals, suggesting that vertebrates evolved intelligence multiple times…. . Ravens plan for the future, crows count and use tools, cockatoos open and pillage booby-trapped garbage cans, and chickadees keep track of tens of thousands of seeds cached across a landscape… with brains… smaller [that]… lack the highly organized structures that scientists associate with mammalian intelligence. “A bird with a 10-gram brain is doing pretty much the same as a chimp with a 400-gram brain…. How is it possible?”… The mature circuits looked remarkably alike… but they were built differently…. The mammalian neocortex and the avian [pallium and within it the] d[orsal ]v[entricular ]r[idge] developed at different times, in different orders and in different regions of the brain…. Birds and mammals independently evolved brain regions for complex cognition…. Octopuses… “evolved intelligence in a way that’s completely independent.” Their cognitive structures look nothing like ours…. Yet octopuses have been caught performing incredible feats such as escaping aquarium tanks, solving puzzles, unscrewing jar lids and carrying shells as shields…
The crow and the veined octopus are about 1 kg each, the domesticated dog about 20 kg; chimp is about 50 kg, the human 70 kg, the ostrich 110, the elephant 4000, and the blue whale 120,000 kg.
The brain of the crow is about 10g, of the veined octopus 30, of the dog 60, of the chimp 400, of the human 1300, of the ostrich 35, of the elephant 5000, and of the blue whale 8000 g.
The veined octopus has about 0.5 billion neurons—most of them in the arms—the crow 2 billion, the dog 2 billion; the chimp 28 billion, the human 80, the ostrich 2, the elephant 250, and the blue whale 15.
Perhaps the keynote at Apple Computer’s WWDC reveals less about the future of tech than about Apple’s own institutional anxieties, the ghosts of Apple-Microsoft relationships past. Perhaps Apple is pivoting—wisely—away from fake and unbelievable claims that it is at the frontier of the New New Thing, and back to its core strengths: design, integration, and developer and customer empowerment. Perhaps…
The best recent take I have yet seen on Apple Computer’s current situation, and on its currently ongoing developer conference, is from Ben Thompson of Stratechery.
His conclusion:
Ben Thompson: Apple Retreats <https://stratechery.com/2025/apple-retreats/>: ‘I understand why many people were underwhelmed… particularly in comparison to the AI extravaganza that was Google I/O, [but] I think it was one of the more encouraging Apple keynotes in a long time. Apple… needed to retreat. Focusing on things only Apple can do is a good thing; empowering developers and depending on partners is a good thing; giving even the appearance of thoughtful thinking with regards to the App Store (it’s a low bar!) is a good thing…. Tech companies promis[e]… the future… [but] a prerequisite is delivering in the present, and it’s a sign of progress that Apple retreated to nothing more than that…
Passing 50,000 total subscribers sale, for two days only:
The next such deal will have to wait until this newsletter passes 100,000…
Ben’s take, in brief:
This is very healthy…
Apple is refocusing on delivering real value in the present by making excellent products…
Apple is “retreating to safety,” focusing on what it does best: polished, integrated hardware and software…
The “Liquid Glass” design language shows Apple’s user interface-design strength…
The other WWDC 2025 tentpoles show Apple’s ability to integrate across its device ecosystem…
Apple empowers developers by opening up on-device AI models, letting third parties experiment without cloud costs…
Apple is deepening partnerships with AI leaders rather than trying to build everything in-house…
Apple may be loosening its grip on the App Store…
Legal and regulatory pressures (especially in Europe) are forcing Apple to retreat from some of its most aggressive platform control…
Apple acknowledged overpromising on AI…
Apple is no longer chasing hype…
Apple is no longer overreaching in areas where it lacks a competitive edge…
I think Ben may well be overgeneralizing from what was, after all, just one 90-minute pre-taped presentation. But, aside from my wanting to be several shaes more cautious in interpreting the tea leaves, he has said what I wish I had been smart enough to think and say.
So what else do I think? What expansion would I give?
Yes. The algorithm serves me up Kevin Hassett this morning. The pretense of economic analysis as a form of performance art; a press corps—even an élite meritocratic press corps—that pretends to take him seriously; and no attention to the cold reality of war-on-immigrants demographic headwinds and chaos-monkey governance…
The next such deal will have to wait until this newsletter passes 100,000…
Oh God! The algorithm (When am I going to get a computer smart enough to switch my feed back to “following” before I glance at it, no matter how often Mark Zuckerberg switches it to “for you”? Mark: I am injured by these cognitive DDOS attacks you keep making on me; I hold you responsible, personally; and if I ever have the chance to do you injury, I will do so) has vomited things up for me this morning. One of those things is none other than Kevin Hassett:
Kevin Hassett: ‘If we get 3% [per year real output] growth, then that increases revenue by $4T, which is WAY more than the deficit increase that CBO estimates for the cost of the bill. So, this bill by itself is going to reduce the deficit, but we're also coming after spending BIG with rescissions packages…
With respect to rescissions: DOGE was the card they were playing there: Elon Musk was to take the heat for actually destroying programs that people rely on. He was then to exit back to Tesla, SpaceX, and xAI. And in return for taking the heat, plus being the largest contributor to Trump, plus being the biggest cheerleader for Trump—well, Musk thought he had a deal with Trump, whereby he would get:
tariff carve-outs for Tesla so that it could continue to function as a globalized value-chain economy production network,
EV subsidies continued so that actually buying Teslas would make benefit-cost sense for some people, and
NASA’s budget transferred over to SpaceX.
Actually, Musk did not have a deal with Trump. Or, at least, he did not have a deal with Trump that Trump would keep. But, on the other hand, DOGE did not deliver anything except the destruction of USAID and some state-capacity hollowing-out that will be very expensive to deal with. (Parenthetically, does anyone understand the fantasy logic behind the destruction of USAID?)
Thus Kevin Hassett is lying about the big rescissions packages.
How about Kevin Hassett’s 3% per year growth forecast?
He is lying about that too.
Under Joe Biden U.S. population growth was 0.8% per year, with 0.6%-points per year of that coming from net immigration. Under Joe Biden potential output growth—potential labor productivity growth (due to technology, investment, and deepening of the division-of-labor benefits of global economic integration) growth plus population growth—was 1.8% per year.
Trump’s war on immigration is sending U.S. population growth negative. TRUMPXIT—chaos-monkey tariffs and sanctions throwing large amounts of sand in the gears of globalized value chains—is going to apply a headwind of perhaps 1% per year to U.S. economic growth, but it could be half that, and it could be double. The war on universities is going to curb technology growth. Chaos-monkey policy uncertainty is going to reduce investment as well.
Thus we have a potential output growth rate of 0.2% per year as an upper bound for the United States over the next decade if Trumpist policies continue.
Now Kevin Hassett knows all this as well as I do.
He knows the benefits of immigration, attracting go-getting entrepreneurial people willing to profoundly change their lives for economic benefit who are great assets to the country.
He knows that this holds whether immigrants are rich and well-educated or poor with few assets other than their hands, eyes, ears, mouths, and brains.
He knows the benefits of the international division of labor just as well as I do.
He sees the consequences of BREXIT, and the analogies between BREXIT and TRUMPXIT, as well as I do.
And he looks back at the consequences of the Trump-McConnell-Ryan 2017 tax cut and sees that its macroeconomic effects boosting U.S. growth were zero just as well as I do.
Moreover, back in the day, Kevin Hassett was a YUUUUGGGGEEE booster of the idea that “policy uncertainty” was a major factor that could easily hobble American economic growth, in my view overselling that point, but it did seem to be a sincerely held belief, to the extent that he has any. And he knows what the chaos-monkey administration he is part of has done:
Thus Kevin Hassett’s personal forecast of U.S. potential output growth should Trumpist policies continue over the next decade is even lower than my 0.2%-year upper bound. I know this with high confidence. I know this as well as I know that the sun here in Berkeley, California is highly likely to rise about 30° north of due east tomorrow.
And yet journalists—even excellent journalists—will continue to pretend to believe him, and report as though they pretend to believe that his words are informed takes rather than lies. And he will have a post-government career. I have seen the wicked in great power, and spreading himself like a green bay tree. Yet he passed away, and, lo, he was not: yea, I sought him, but he could not be found…
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How global capital still bets on America, and what could break the spell. Private capital, not central banks, have caused and bankrolled America’s current-account deficits over the past decade, and promise to continue to do so—until trust or returns falter. The dollar’s dominance is less a birthright than a daily wager on American institutions, markets, and myth. It is domestic political decay, not rival currencies, that pose the gravest threat to the dollar’s global reign…
The next such deal will have to wait until this newsletter passes 100,000…
The dollar’s status is not a law of nature but a fragile, continuously renegotiated contract. Over the past decade, private capital inflows driven by risk, return, and faith in American institutions have supplemented the old régime of official reserve accumulation that began with the East Asian financial crisis of 1997-1998 and George W. Bush’s 2001 greenlighting of China’s joining the WTO. Thus we need to focus on what keeps the world’s capital flowing into the United States, financing deficits that would topple lesser nations and keeping the dollar aloft. The answer these day lies less in the oft-invoked “exorbitant privilege” reserve-currency status of the dollar, but in a far more contingent, and fragile, set of expectations about American returns and reliability. The era when official reserve accumulation explained the bulk of U.S. capital inflows ended in 2014. Since then, it is has been private investors—hungry for yield, shelter, and a stake in the technological furnace of the Second Gilded Age—who have kept the dollar aloft and the capital inflow coming.
Thus I 100% endorse the extremely sharp Brad Setser when he writes:
Brad Setser: The Dollar’s Global Role and the Financing of the US External Deficit <https://www.cfr.org/blog/dollars-global-role-and-financing-us-external-deficit>: ‘There is too much talk about the dollar's role as a reserve currency, and too little talk about expectations of exceptional returns. Reserve accumulation hasn't driven the financing of the US current account deficit in recent years….
Actual data… shows that the flow into dollar assets in the last few years has largely come from private investors seeking yield, not state investors who are compelled to hold safe assets…. Reserves tracked the current account surplus almost perfectly until 2014, but have subsequently fallen well short. Portfolio outflows have made up the gap.… And if the analysis is extended to Europe, the same conclusion holds…. The U.S. exceptionalism argument… sometimes gets rolled together with the… dollar… [as]… “reserve currency flow”… [which,] in theory, [is] not a function of returns; the U.S. exceptionalism argument is directly tied to financial returns…
This pushback against often lazy shorthand tropes of economic punditry is very welcome.
It does need to be stressed that the U.S. has gained its large negative global cumulative capital account position in part because or its exorbitant structural privilege as the world’s reserve currency, but in most part not. It does need to be stressed that that cumulative capital account position is because the world’s rich expect investments in the United States to do something very important for them: preserve, protect, and substantially grow their wealth. They still see the U.S. as a (relative) safe haven for the financial property even of non-citizens, and still see investments in the U.S. as a way of participating in the immense profits from being in the furnace where the future is being forged in our Second Gilded Age.
Yet I do not expect Brad Setser’s real numbers to have much effect. I expect to continue to read, mostly, the same narrative. I expect the Economist-level narratives of the U.S. current account deficit to continue cloaked in the "exorbitant privilege" argument: America spends more than it earns, and foreign governments are content to finance that habit by pouring money into U.S. Treasuries and other safe dollar assets as reserves, and this happens because the U.S. dollar is the world’s reserve currency and because foreign governments do not want to see their currencies undergo large appreciations in value.
But as Setser points out, since about 2014, this framework has cracked. Foreign governments have not had to face the “buy dollar reserve assets or watch our export competitiveness sharply decline” choice. Central banks are no longer the main dollar financiers. Instead, it’s been private investors.
But why have private investors been doing what they have been doing? There are at least two intertwined forces behind the $8 trillion-plus in cumulative portfolio inflows into the United States over the last decade: return and risk.
U.S. equities, especially tech platforms, have delivered extraordinary returns, especially when denominated in other currencies. The dollar has been strong. Plus, for much of the period, bond returns have been not high but rather superior to elsewhere. Interest rates—even if very low by historical standards—offered a better deal than the alternatives in Europe or Japan.
Thus the United States offered financial assets that were not only deep and liquid but also unusually profitable.
But there is also risk. I keep thinking that this may be a more profound effect. I keep looking for ways to assess it. I keep coming up short.
Here is the idea. The United States remains the only country in the world where nearly everyone rich would not be unhappy to place their money. This holds even those who fear the United States. And this holds even for those who see the United States in relative decline. Have enough American partners who make large enough campaign contributions to senators, and your money in the U.S. is safe.Whether it is the billionaire flying into LAX on a Lear Jet or the oligarch's cousin arriving via a coyote and a rubber boat, the U.S. legal and financial system remains insurance—not just against inflation or depreciation, but against capricious autocracy, kleptocracy, and the systemic chaos of states elsewhere, where rule of law is at best aspirational.
Consider also the intergenerational angle: global elites are not just seeking return or refuge for themselves, but for their heirs and heiresses. If the great-grandchildren of the world’s rich plan to live in Los Angeles or New York, then buying dollar assets is part of family planning, not just portfolio management.
All of these seem to me highly likely to give the inflows a surprising durability—but only so long as the U.S. remains the preferred future.
Thus forecasting is very complicated.
If flows are driven by return, they can and will reverse. All it takes is better returns elsewhere and an end to return-chasing.
But if flows are driven by risk insurance—if the dollar is the least bad umbrella under which to shelter your wealth from the world’s storms—then they are sticky, and might even rise as global uncertainty increases.
To the extent the U.S. benefits from these flows because it is seen as a relatively stable, law-governed, opportunity-rich society, then domestic political and institutional rot—TRUMPXIT, judicial delegitimization, governance gridlock—may pose a bigger long-term threat than any rival currency.
Break the U.S. legal umbrella, and the insurance motive collapses. Should the likes of Lutnick, Bessent, Miran, or Trump manage to delegitimize the legal or financial scaffolding, the U.S. would not simply lose its reserve-currency status. It would experience a private-sector sudden stop—and these are always messy. Think Asia 1997 or Argentina, but scaled to the size of the U.S. current account deficit.
Plus, if the flows are driven by return, the risks are also acute. Returns are volatile. Tech platform oligopolists will find their positions eroding. AI and crypto booms fade. Bubbles do burst. A sharp correction could turn a rush-in into a rush-out. And once outflows start, the dollar could weaken, interest rates could spike, and the “safe haven” reserve currency status might itself look more like a mirage.
On top of this, the traditional reserve-currency story does have considerable force. It does matter that the U.S. is the only place in the world where you can park hundreds of billions of dollars in safe, liquid assets without moving the market. It matters that global trade is still invoiced in dollars. And it matters that emerging markets can be expected to build dollar reserves—not to earn yield, but to insure against financial crises and protect their currencies—as they grow.
But this backstop is not enough. A generation ago, scholars like Obstfeld and Rogoff worried about dollar-denominated liabilities and global imbalances. Those concerns were real—but the true blow came from elsewhere: housing, viruses, and political decay.
Yet the old risks haven’t gone away.
Looking at the world now and comparing it to the world of 2025, they have not even shrunk. They have grown into something larger, and more complex.
Privilege Largely Earned Earned, But Still Fragile
Setser is right. The dollar’s status is not simply structural; it is earned, daily, through return and reassurance. But privilege can become complacency. A reserve currency must be undergirded by a trustworthy legal system, a resilient financial structure, a credible commitment to rule-bound governance, a government focused on providing high-externality public investments in education, infrastructure, and technology; and a private economy focused on entrepreneurship and info-tech and bio-tech sectors growth rather than oligopolistic platform-tech attention-harvesting market position. We are moving into the attention info bio tech age, with the first of these largely zero-sum, and only the second and third capable of producing win-win growth and its associated returns.
Erode these—law, finance, state competence, state capacity, competition, and entrepreneurship—and the dollar’s exceptional role may begin to look less like a privilege, and more like a bubble.
And bubbles, as history teaches us, eventually burst.
Eichengreen, Barry. 2011. Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System. Oxford: Oxford University Press. <https://archive.org/details/exorbitantprivil0000eich>.
Gourinchas, Pierre-Olivier, & Hélène Rey. 2007. “From World Banker to World Venture Capitalist: US External Adjustment and the Exorbitant Privilege.” In G7 Current Account Imbalances: Sustainability and Adjustment, edited by Richard Clarida, 11–55. Chicago: University of Chicago Press. <https://www.nber.org/chapters/c0121.pdf>.
Habib, Maurizio Michael. 2010. “Excess returns on net foreign assets – the exorbitant privilege from a global perspective.” European Central Bank Working Paper Series, No. 1158. <https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1158.pdf>.
Obstfeld, Maurice, & Kenneth Rogoff. 2009. “Global Imbalances and the Financial Crisis: Products of Common Causes.” Asia Economic Policy Conference, Federal Reserve Bank of San Francisco. <https://eml.berkeley.edu/~obstfeld/santabarbara.pdf>.
If reading this gets you Value Above Replacement, then become a free subscriber to this newsletter. And forward it! And if your VAR from this newsletter is in the three digits or more each year, please become a paid subscriber! I am trying to make you readers—and myself—smarter. Please tell me if I succeed, or how I fail…
Leif Weatherby’s “Our Spreadsheet Overlords” argues that the fascination with LLMs like ChatGPT as harbingers of human-level intelligence obscures their actual use: reinforcing administrative digital control. These systems function as “digital bureaucracy”—attempts to automate the management of complexity that, among other things, create accountability sinks. But these data-processing complexes—like all abstraction layers—leak, concealing fallibility beneath apparent objectivity. Weatherby’s piece closely mirrors the caution that abstraction layers in cognitive strategies—whether in economics, AI, or sociotechnical systems—inevitably misrepresent reality. The enhancement of already-leaky abstractions that mask systemic failures under the guise of computational rationality is not a gain, but rather a doubling down on epistemological tools that fail precisely when they matter most.
So, at least, Weatherby’s thesis goes. His insistence that AI’s primary deployment is bureaucratic rather than cognitive aligns with a long tradition of skepticism toward technocratic rationality, including Weber’s iron cage and Hayek’s disdain for central planning’s fatal conceit. Indeed: we economists know well that the necessary simplification in models is always accompanied by the suppression of heterogeneity, of nuance. But where we (I, at least) often ask how to plug the leaks, Weatherby insists that the leaks are the point and that abstraction is less a tool than a trap.
I do not entirely agree. Without abstraction layers—leaky as they inevitably are—decision-making collapses under informational overload. Weatherby’s core critique, if valid, has to be against the claim that there is a better or at least a more cautious and humble way. Friedrich Hayek warned against the pretension of knowledge in centrally planned economies. Weatherby warns against its reemergence in decentralized, algorithmic bureaucracies. Both critiques converge on the same flaw: a faith that abstractions, once encoded, will manage themselves better than we can. Thus the true value in Weatherby’s analysis is not in condemning AI as leaky, but in insisting that we confront the consequences of acting as if it is not. Since abstraction leaks, we must institutionalize vigilance, not abdicate judgment to formulas...
Two years have passed since OpenAI released ChatGPT and the panic set in. Two years of above-the-fold headlines about “AI”—a subaltern specialty topic and the preserve of goofy sci-fi films for some 80 years prior—and two years of confusing, rank speculation about “artificial general intelligence” (AGI), a loosely defined idea of “human-level” yet machinic reasoning. Large Language Models, or LLMs, capture and generate what we have long taken to be an essentially human thing, language, shaking our historical sense of our own species to the core. But their abilities are matched by a lack of intelligence, and even a lack of the consistency we have long expected from computing machines.
As a new surge of AGI talk has taken over the airwaves in the third year of LLMs, a deeply revealing form of Actually Existing AI speaks against the hype: Elon Musk’s Department of Governmental Efficiency, a sloppy, violent-yet-banal attack on the codebase and massive personal data dragnet of the federal government.
While we wait for AGI—and while we’re distracted by endless, ungrounded debates about it—the reality of modern AI is parading in plain sight in the form of the most boring constitutional crisis imaginable. Rather than machine intelligence, AI is an avant-garde form of digital bureaucracy, one that deepens our culture’s dependence on the spreadsheet.
The discourse is providing cover for this disastrous attack. Kevin Roose, a tech columnist for the New York Times, recently explained why he’s “feeling the AGI.” (Unfortunately, Roose’s reasons seem to boil down to, “I live in San Francisco.”) Similarly, Ezra Klein, of the paper’s Opinion pages, thinks the government knows AGI is coming. And the statistician Nate Silver suggests we have to “come to grips with AI.” The internet ethnographer and journalist Max Read has dubbed this surge of AI believers the “AI backlash backlash,” a reaction to the anti-tech skepticism we’ve seen over the past few years.
The position, according to Read, is that AI “is quite powerful and useful, and even if you hate that, lots of money and resources are being expended on it, so it’s important to take it seriously rather than dismissing it out of hand.” That’s a far cry from the derisive characterization of Large Language Models (LLMs) like ChatGPT as “stochastic parrots” (which remix and repeat human language) or “fancy autocomplete.” These systems are far more capable—and more dangerous—than the skeptics make them out to be. Dispelling the myth of their intelligence does not excuse us from paying close attention to their power.
Rather than providing the much-vaunted innovation and efficiency associated with Silicon Valley, AI systems create more confusion than clarity. They are a coping mechanism for a global society that runs on digital data sets too vast to make sense of, too complex to disentangle manually. Feeding off a staggering amount of digitized data, they are a tool specified to that data and its tabular format. When we think of AI, we should think less of Terminator 2 and more of the TV show Severance, in which office workers search for “bad numbers” on the strength of vibes alone.
An LLM is nothing more than a distilled matrix of values that represent words. The models we are all familiar with now—ChatGPT, Claude, Gemini, Grok—have many moving parts, but their core element is a large set of rows and columns that is the result of billions of dollars in training. The training data are on the order of 6 trillion –to 10 trillion tokens (including words, letters, and other marks like “&,” “-ing,” and “3”)— orders of magnitude more text than humans have ever used for any purpose—and they only exist today because of the planetary sprawl of the internet. Using all this training data, you’ll be able to make a bot that responds to human questions, retrieves information, generates poetry and memos and anything else you like, and effectively feels like magic. You’ll have an AI model that feels like AGI.
If—as happened between early 2023 and late 2024—people stop feeling that magic, you can also then tweak your model. Instead of its just responding to prompts and queries, you can tell it to generate a bunch of responses and then print off its “thoughts” as it chooses the best one. This new model could do fun things, like fill an Instacart order or book a vacation. And those things are what agents do, so—after a new round of training and a new round of VC funding—everyone will be feeling AGI again.
Two tendencies, alike in error, reign over AI discourse today. The one, as Read observes, is that critics deride AI as a tool of capitalism and a con put on by tech oligarchs, failing to explain its power. The other, which I’m going to call “the performance fallacy,” confuses benchmarks for intelligence. Until we move past this pas de deux of shallow analysis, we will not be able to confront the very real problem of AI today.
In 1950, Alan Turing proposed a simple way to determine if a machine could think: Ask it some questions. If you couldn’t figure out if you were talking to a machine or not, you should concede that it is intelligent. This game became known as the “Turing Test,” and no one, to my knowledge, has ever been satisfied by it. Turing’s idea was that when we decide someone else is intelligent, it’s not that we know this, it’s that we assume it. I don’t ask to see how your brain works to determine if you’re intelligent; I just think of you as a human. The definition of intelligence that comes from this isn’t a definition at all—and that’s why AI has been permanently split between two ways of understanding what Turing meant.
The first way is according to the benchmark. Every new model that gets released today is tested on an endless series of performance thresholds with fancy acronym titles (ARC-AGI, a series of difficult puzzles, is a popular one these days). Each set of benchmark performances is compared to earlier attempts: A new model is said to score 87% where the previous best was 59%, even if no one can tell you what those percentages mean. If OpenAI’s 03 “reasoning” model scores 87% on ARC-AGI, does that mean it is 87% intelligent? Is “87% intelligent” a coherent idea? In the world of pure benchmark culture, such questions don’t matter and can’t really be asked. The system is optimizing for something that looks like what intelligent beings (humans) do, so there’s little reason for skepticism. The most extreme version of this benchmarking is arguably the Loebner Prize, a competition that ran for 30 years and awarded a large sum to the most convincing chatbot. Its benchmark for “intelligence” was taken from an offhanded comment of Turing’s: that a chatbot that fooled a human roughly two-thirds of the time would count as intelligent.
But it’s not clear that Turing really intended for this, or any other, benchmark to determine what intelligence was or who counted as intelligent. In “Computing Machinery and Intelligence,” he concocted several exchanges between himself and a fictional future computer, in which he asked the machine to do math problems, play chess, and compose a poem about the Forth Bridge in Scotland. These transcripts of an imaginary set of conversations—alongside ideas like a machine needing to “enjoy strawberries and cream”—show that Turing was thinking of intelligence holistically. This second way of framing intelligence is negative and, maybe surprisingly, not technical at all. Conversation was the un-benchmarkable threshold. And even though LLMs can’t prove that they can enjoy anything, they can certainly say that they can, and in language that scrambles the very idea of the Turing Test in its benchmark form altogether.
Benchmark culture adds to the vaudeville quality of tech today, with its demos, entertainer personalities, and gimmicks. All of the showmanship claims to be about performance. Your new iPhone is faster, better, stronger. Analytics makes everything from finance to sports better. The idea is that performance is part of a larger whole that adds up to intelligence, or something like it. But getting caught up in that question is what is distracting us from the actual effect of AI. And what if this idea of performance demonstrating substance itself is a fallacy?
Chess was an obsession of AI engineers from the father of information theory, Claude Shannon, down to the moment in 1997 when IBM’s Deep Blue beat the world champion Gary Kasparov. That machine performed what no human can: a chess game close enough to perfect. At that point, we were about four decades into the AI project. Did we decide Deep Blue was an intelligent compatriot for humans on Earth? Of course not. There is no one ability that makes up intelligence. Performance is a poor proxy for intelligence in the first place.
I think we should name the central problem with AGI—and to some extent, AI itself—“the performance fallacy.”
The performance fallacy is when we confuse optimization for intelligence itself. Instead of noticing it, AI engineers—and the media—tend to roll on to a new benchmark. Chess, after all, is highly rigid and logical! But the ancient Chinese game Go would surely require intelligence for elite play—right? When the neural net AlphaGo beat Lee Sedol, one of the world’s best Go players, in 2015, we got a new round of performance-fallacy speculation, hype, panic—but no one thinks AlphaGo is intelligent. Round and round we went, for the better part of a century.
The winter of 2023 felt different, even to those hardened to AI hype. Suddenly, we had a machine that did what Turing had, perhaps accidentally, really suggested would convince us it was intelligent. We had a machine that could produce language and write texts that responded to a human in dialogue. When Socrates decried writing, saying it would destroy the capacity for memory and leave humans cognitively impaired, it was specifically the inability of texts to speak back to their readers, to maintain a dialogue, that he counted against the then-new technology. In the LLMs, we suddenly had a competitor in an arena we had occupied alone forever: language.
Humans have defined themselves as the animal with language almost as much as they have by their intelligence—homo sapiens has to speak to be sapiens at all. Aristotle’s phrase for the human—the “animal with reason”—uses the term “logos,” which means both the spark of intelligence and the word. LLMs seem to take away our singularity in this respect. They are one of the most uncanny forms of technology in our history because they speak back to us. But what the discourse about AGI fails to recognize is that that speech is not necessarily intelligent. Even when an LLM passes the Turing Test, we cannot allow ourselves to believe in the fallacy. As the mathematician Benjamin Recht argues, LLM benchmarks largely fail to make any sense of these machines. This is because the evaluation of language drags us into the whole history of philosophy, into the metaphysics of who we are, and what intelligence is and how it is related to language at all.
It was relatively easy to resist the confusion until it turned out that AI models could capture and generate language. ChatGPT and other LLMs create the uncanny sense that the thing that separates humans from all other beings is no longer ours. It is all the more crucial to see, then, that what is taken for intelligence is instead an unimaginably large cultural document, a record of human beliefs, actions, and communications. The cognitive scientist Alison Gopnik has called LLMs a “cultural technology” for this reason, incapable of being creative in the way that human intelligence is. But much of what happens in the world, our history, and our politics, is cultural in this sense. And if we do not turn our gaze away from the ambition to “create an intelligence” and toward the real—and strange—cultural consequences of the digital bureaucracy, including the condition that AI is as powerful as it is, we will remain irrationally confined in metaphysical subtleties that obscure the actual activities of AI systems. Both the commercial attempts to build machine intelligence and the scientific attempts to model and understand intelligence obscure the fact that AI is an extension—indeed, nearly a universalization—of digital bureaucracy.
It’s notable that the new defenders of AGI—Roose, Klein, Silver—work in industries where AI stands to automate or radically change everyday work. Several major journalistic outlets, including The Atlantic, have cut deals with AI companies, and we have seen several examples already of AI-generated articles being passed off as written by humans. And there’s no question that AI will automate many jobs in data analytics out of existence. Silver himself is probably safe—he’s a major book author now—but even those who remain will see major overhauls of workflows as the models we think of primarily as chatbots intervene in the parsing and production of data and its analysis. In fact, all office work, all mental labor, from secretarial and administrative work all the way up to the C-suite, stands to change. That is because work, just like every other aspect of our lives, has been datafied.
When we speak of “data,” we tend to imagine a huge spreadsheet filled with meaningless numbers, something hidden somewhere that requires sophisticated techniques and trained experts to deal with. But every spreadsheet is about something, from your budget to the list of minors and majors I keep for the department at my university, to the prices on the stock market, and so on. The rows and columns must have names; and often enough, we put plain old English right into the boxes, rather than numerical data. Data culture is all about how we go back and forth between what the numbers mean and what the processing of the numbers tells us. Translating between math and language is, in many ways, the basis of modern society.
Think of my list of majors and minors. I cannot use any of Excel’s mathematical functions on these names, email addresses, and expected graduation dates. I use the spreadsheet in this case as a storage unit. The information stored there can’t be understood or interpreted by the spreadsheet functions. (It can be divided by category, like “first names in Row A,” but its meaning cannot be transformed in an informative way.) Only a human can do that. Enter the LLM.
We can think of all the text on the internet as being placed into exactly such a storage unit when an LLM is trained. AI’s new ability—the one we are mistaking for intelligence—is a general capacity to translate between words and data, data and words. But where you, a human, convert the results of any data processing back into real-world consequences, in language, in the past—“the Q4 returns show that we should think about pulling back distribution in the Northeast,” for example—now you have a tool that does that part of the work for you. LLMs literally supply the function of language that bureaucracy requires. We could call them a semantic spreadsheet, a tool that allows us to interact with data, and even create code, with nothing more than a prompt.
It’s no accident that by far the largest data set the internet has produced is text. LLMs today are trained on something like 10 trillion tokens of text, a staggering amount of language. This may or may not perfectly capture what language is, but what it certainly does is make data and language a two-way street. We have long been able to use software like the spreadsheet to manipulate numbers. Suddenly it’s possible to convert the numbers into language and vice versa. That solves a problem that has dogged spreadsheets—and computers themselves—since their invention.
We should not take that ability for intelligence—not commit the performance fallacy once again—because it keeps us distracted as our actual data culture enters a genuinely new, and very worrisome, phase. We could call it spreadsheet culture in hyperdrive, a world in which all data can be translated into summary language and all language into optimized data with nothing more than a prompt. But where spreadsheets had limited functionality, LLMs act as universal translators in the same arena. They have many flaws, but this core capacity is a step-change in the mundane world of modern bureaucracy.
Bureaucracy has always been about managing the relay between data and words, numbers and memos, accounting and accounts. Starting after the French Revolution, the amount of data gathered started to accelerate, necessitating devices that could help bureaucrats with the computing part of their jobs. The philosopher of science Ian Hacking places what he calls the “avalanche of printed numbers” in the 1820s and 1830s, when demographic and industry data took off, exponentially. In a way, the LLM closes this loop, one created by an imbalance of too many numbers and not enough words, not enough understanding. Computers helped us to deal with the numbers but not to interpret them. LLMs give us at least the illusion—and it’s not certain we have any better or clearer way to deal with the sheer amount of semantic and numerical data in the world—of summarizing, understanding, and re-generating from that avalanche, which has since become a flood.
In other words, for the limited but vast world of digital data and the logistical operations we entrust to it, LLMs serve as a kind of off-brand universal language, one that seems magical in spite of lacking any spark of intelligence. They are the only other system that has ever been able to carry out the types of conversations between data types that LLMs do is the human mind—thus the fallacy. Numbers and words have always been the combined channel of modern bureaucracy, and there is potentially deep insight to glean from their new relationship in AI (this is the topic of my forthcoming book on LLMs). But such insight will have to come even as we also tend to the real political consequences of the willy-nilly deployment of this technology we have already allowed.
Musk is now bringing his apocalyptic vision to federal databases that contain not just information about citizens and organizations but the power to start and stop payment to them as well. Musk is reportedly stepping back from the project, but this does not change how clearly the agency demonstrates what AI is for. His DOGE initiative is in many ways the clearest demonstration of what AI actually has been to date: a bureaucratic wolf dressed in the sheep’s clothing of innovation and “intelligence.”
As DOGE has gained access to various federal departments, part of its stated goal is to introduce “AI agents” into the systems. As the political scientist Henry Farrell has written about this process, government databases desperately do need to be updated. DOGE is promising “innovation” while Musk crows that he is simply “deleting” whole agencies and sets of payments to his political enemies. This is only possible because of the digital infrastructure we already have, and where it does not exist, DOGE intends to create it.
In the 1980s, when machine learning was just being put on its scientific feet, some of its earliest scions speculated that large databases would be parsable using neural nets. These nets, they said in a toy example, might be able to independently predict which names in a set belong to the “Jets” and which to the “Sharks,” with reference to the gangs in the musical West Side Story. This lighthearted suggestion, which came with a chart, has turned into a nightmarish reality in a world where the analytics company Palantir doesn’t just coordinate names but faces gang membership, recidivism scores, and more. The ability to associate images, text, and data—and to derive predictions about human behavior from them—should be treated with extreme caution. Yet Palantir’s open intent to work with the national security apparatuses of a government that now deports immigrants—and, apparently, citizens—without regard for accuracy suggests that AI’s “intelligence” is a cover story for something far deeper and more dangerous.
Nowhere is this intent clearer than in the recent “hackathon” that Palantir and DOGE collaborated on, with the goal of creating an all-purpose application programming interface (API) for the IRS and its data. Responding to the White House’s demand that the government “eliminate information silos,” the two groups are attempting to create a template for a way to interact with all information about citizens in a single large database—a project that makes the George W. Bush–era NSA project “Total Information Awareness,” already Orwellian, look quaint. The point of creating such an API is to release the true power of the LLM. The AI slop you see on your social media feed isn’t the point; the point, instead, is the ability to say, “Make me a list of all citizens who are Marxists, cut off their payments, and notify ICE of their whereabouts.”
If you take away all the speculative and mystical language about “intelligence” and “reasoning,” it’s easy to see that this type of task is what we would usually call bureaucracy. AI’s power, danger, and limits are all in this banal world of rows and columns. It’s easy to overlook this, because we have spent the last three decades making virtually the whole world into a giant spreadsheet. With everything from your personal daily heartrate variations and financial trends to tics of speech and culture pre-formatted for an AI model, the power of this tool becomes immense. When the Turing Award–winning AI engineer Yann LeCun took to X to describe his somewhat cool expectations for the future of the technology, Musk replied, “Our digital god will be in the form of a csv file,” ironically fusing a common data format (comma-separated values) with the science-fiction notion of an all-powerful AI.
Musk came to Washington promising innovation, but he is delivering a new, unaccountable form of bureaucracy. We cannot afford to continue to believe that anything that “AI” touches will be more efficient, its progress trending toward “smarter” systems. (By this point, we should know that “smart” does not mean “intelligent”; it just means “shiny.”) A general audit is a bureaucratic procedure, one that current AI is too limited to perform well. But so long as we believe the hype, it will sound like a good idea to inject AI models into the databases that contain our health insurance, our Social Security payments, and our tax records.
Among those who thought Trump would cause a constitutional crisis, few predicted it would occur in a form so boring as a spreadsheet. But the truth is that whoever controls the bureaucracy has power beyond even what a democratic process like voting can authorize or undermine. The pretense of handing that control over to the machines provides cover for an all-too-human political act: slashing and burning the federal government using a tool that has unprecedented power to do so.
Rather than the dream of machine intelligence, we are witnessing the disastrous political consequences of a different dream, one of a total bureaucracy that operates in the all-but-invisible interstices of the software we have come to rely on. The way that such a system breaks basic elements of our social contract is a feature, not a bug. AI systems could be used as tools to democratic ends. But that would require that we understand them and treat them as scientific objects first and commercial products second. It will take a massive, principled effort to understand the deep mathematics and cultural-linguistic forms that result to reverse the current trend of AI progress.
Leif Weatherby is the director of the Digital Theory Lab at New York University. His book, Language Machines: Cultural AI and the End of Remainder Humanism, is out next month.
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Natural-language interfaces as quite possibly the most important thing about the current wave of MAMLMs. Our frontier MAMLMs are tools that “understand” our goals without understanding our minds, or indeed having minds themelves. LLMs aren’t smart, but they are useful—and that’s enough. What are the implications of conversing with machines that simulate and mimic conversation so that natural language becomes our information-technology interface of choice. But if these tools don’t really think and converse, what are we really doing when we talk to them?…
Begin with the simple, yet deceptively deep, observation: most people are not good at computer science. They should not have to be. For most of history, we have interfaced with our tools—shovels, typewriters, assembly lines, and spreadsheets—not through formal logic or recursive abstraction, but through intuitive interaction, gesture, routine, and through one other thing. What is that one other thing? It is the most important and the most fundamental thing: language.
Thus it matters a lot that what the current generation of "AI"—specifically, the GPT LLMs that are so much of MAMLMs (the General-Purpose Transformer Large-Language Models that are so much of Modern Advanced Machine-Learning Models)—promises is the incorporation of natural language into the center of our human-machine interface.
That is, I think, a very big deal.
First, however, a parenthesis: This is not a big deal because "AI" as we now or will soon know it is smart. It is not. It is, I think, still far on the John Searle side of the "Chinese Room" divide and not on the Scott Aaronson side. What do I mean by this? Here is how Scott puts it:
In the last 60 years, have there been any new insights about the Turing Test itself? In my opinion, not many. There has, on the other hand, been a famous "attempted" insight, which is called Searle's Chinese Room.... Let's say you don't speak Chinese. You sit in a room, and someone passes you paper slips through a hole in the wall with questions written in Chinese, and you're able to answer the questions (again in Chinese) just by consulting a rule book. In this case, you might be carrying out an intelligent Chinese conversation, yet by assumption, you don't understand a word of Chinese!...
I don't know whether the conclusion of the Chinese Room argument is true or false. I don't know what conditions are necessary or sufficient for a physical system to "understand" Chinese—and neither, I think, does Searle, or anyone else. But... the Chinese Room argument... gets... mileage from... choice of imagery... sidestep[ping] the entire issue of computational complexity.... We're invited to imagine someone pushing around slips of paper with zero understanding or insight....
But how many slips of paper are we talking about? How big would the rule book have to be, and how quickly would you have to consult it, to carry out an intelligent Chinese conversation in anything resembling real time? If each page of the rule book corresponded to one neuron of a native speaker's brain, then probably we'd be talking about a "rule book" at least the size of the Earth, its pages searchable by a swarm of robots traveling at close to the speed of light. When you put it that way, maybe it's not so hard to imagine that this enormous Chinese-speaking entity that we've brought into being might have something we'd be prepared to call understanding or insight...
You start by having training data composed of word-sequences followed by their next-word continuations. You use this to construct a function from the set of word-sequences to next-word continuations via sophisticated interpolation, since your training dataset is sparse in the space of word-sequences that it the domain of your function. But the only intelligence is in the humans who wrote the things that are the training data—the word-sequences and then the next-words. This is only autocomplete-on-steroids. And then... somehow... as the system becomes more complicated it is no longer a guy in a Chinese Room but rather an AI-entity the size or the earth serviced by a large swarm of lightspeed robots, and it understands, is intelligent, thinks.
But this was just a parenthesis. It is just a marker that perhaps in a generation—but not in the next decade—I will shift my position on whether the MAMLMs of that future day are in fact “AI”.
Resuming my main argument:
MAMLMs now and for the next decade are simply software arguments that manipulate tokens in ways that mimic and simulate understanding without possessing it. But that, in itself, is the wrong standard. My desk lamp does not understand light; it produces it. And if my AI assistant can “understand” me—i.e., parse my input, interpret my goals, and produce reasonably accurate, useful, and legible outputs—it does not matter that it lacks intentionality or phenomenology. It matters that it works. The question is not whether it is conscious, but whether it is useful.
We live, after all, in a world that has become too complex for our monkey minds. Our systems of law, finance, logistics, and science have outpaced not merely our capacity to remember them, but our ability to interpret them without digital assistance. We are, already, augmented by algorithmic prosthetics—we just do not call them that. We call them “search engines”, “recommendation systems”, or “autocomplete”. But these systems are not conversational. They do not invite dialectic. They do not allow us to explore the space of our ignorance.
Natural-language AI is different. It enables a kind of Sokratic interaction, one where we externalize still more parts of our cognition in dialogue. It is not thinking, but it is an excellent mirror of thought.
That is why I launched—probably foolishly—my SubTuringBradBot project:
The idea was simple: could I offload part of my own cognitive work onto a properly tuned LLM, such that it could serve, if not as a coauthor, then at least as an intelligent research assistant? Could it tutor students in economic history better than my harried TAs? Could it compose reading questions, or help me triage my overflowing inbox of academic queries? In other words: could it serve as an interface not to machines, but to myself—both students interfacing with a cut-rate sub-Turing version of myself much more than my divided attention would allow them to grab time with the real me, and for me to interface with some other selves that are me with much less cognitive depth, but that are still good enough to sometimes produce things that make me go thumbs-up?
The results, so far, have been mixed.
The LLM is glib, articulate, and oddly plausible.
But it is not accurate.
It sounds like a version of me—if I had only half read the book I was assigned, and was very eager to impress the professor. Still, there is potential here. If the “stochastic parrot” is a good enough mimic, then perhaps, with sufficient tuning and context, it can simulate not my thought, but the shadow of it. And that may be enough, in many cases, for pedagogy, for exploration, for decision support.
But let us pull back and ask the bigger question: What does it mean to introduce natural language AI into the human symbolic ecosystem? What are we doing when we speak to machines, and they answer back?
One answer is that we are democratizing access to complexity. When a factory worker in Shenzhen or a nurse in Cleveland can ask a question about taxes, trade, or thermodynamics—and get an answer that is linguistically legible, contextually relevant, and socially calibrated—we are leveling the epistemic field. The gatekeeping of expertise is weakened. The affordances of understanding are expanded. This is not a substitute for schooling, but it is an accelerant for learning.
Another answer is that we are building new forms of social infrastructure. Consider the analogy to the anthropological gift economy—something I have meditated on at length. In traditional societies, information is often exchanged not in market transactions but in ritualized, reciprocal, socially embedded forms. So too, in a world of conversational AI, where my input is not merely data but a gift of intent, and the machine’s response is a return offering—a constructed answer shaped by millions of prior interactions. What results is not just a tool, but a kind of proto-agent, situated within a social space. It is a step, perhaps, toward the “mirror society” that science fiction has long foretold: an always-on interlocutor, one that reflects and refracts our own queries into structured outputs.
Of course, there are dangers. There is the peril of false confidence, of persuasive nonsense. There is the risk of dependence—of letting the machines not merely finish our sentences, but begin our thoughts. And there is the political economy problem: who builds these systems? Who owns them? Who governs their affordances, their training data, their biases, their blind spots? These are not technical questions, or these are not computer-science technics but rather humanity-as-an-anthology-intelligence technics. They are institutional, regulatory, and ideological.
But what is the potential? What I see, in the best cases, is a kind of cognitive co-evolution as natural-language AI becomes more capable. Just as the printing press allowed the Renaissance mind to scale, and just as the spreadsheet allowed the accountant to manipulate ten thousand rows of capital flows without tears, so too might AI allow the student, the teacher, the policymaker, and the citizen to interface with knowledge more fluidly, more dialogically, more humanely.
Of course, the printing press also brought two centuries of genocidal religious war to Europe.
It is a tool. A tool to be used for good and ill. Tools, when properly used, have always been levers by which we pry open the stuck doors of understanding. In the end, I do not expect these systems to replace us. I expect them to interface with us. And in that interface, something like progress might emerge.
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Plus ça change, plus c’est la même chose. Power, paradox, & prejudice in President Jackson’s Washington, DC, as its social-political theatre was seen through Harriet Martineau’s British eyes…
What happens when a sharp-minded British abolitionist lands in the unfinished, bustling capital of the United States? Harriet Martineau’s Retrospect of Western Travel is universally regarded as one of the most perceptive, and has always been one of the most influential, accounts of the United States in the pre-1860 pre-Civil War era. Published in 1838 after her extensive travels through the United States and Canada from 1834 to 1836, Martineau’s work is both a travelogue and a social analysis, blending vivid description with sharp, often critical, commentary on American society, politics, and culture.
As a pioneering British social theorist and advocate for abolition, women’s rights, and utilitarian reform, Martineau brought to her American journey a keen eye for the contradictions and aspirations of the young republic. This reading is only of the part of the book recording her time in Washington, D.C.—a small part of the book as a whole. This part of the book offers a front-row seat to the paradoxes of Jacksonian Washington, as ideals of democracy clash with the realities of power, privilege, and exclusion. Her observations—by turns admiring, skeptical, and deeply critical—reveal a city and a nation wrestling with its own identity.
Martineau’s time in Washington, D.C. occupies a central place in her book’s narrative. She found herself at the heart of American political life, a city that was, in her words, “the headquarters of the national government, and the focus of all the interests, hopes, and fears of the Union.” Washington in the 1830s was physically unfinished, socially stratified, and politically charged. What most struck Martineau about Washington was the way in which the city’s social and political life reflected the broader tensions of American democracy. She observed the rituals and performances of power with a mixture of fascination and skepticism, particularly attentive to the openness of American political institutions—how, in theory, any white man could approach his representatives or even the president himself—yet equally attuned to the exclusions and hypocrisies. This reading from Retrospect of Western Travel is a meditation on the then-promises and perils of American democracy as seen from its political center.
I have always looked back upon the five weeks at Washington as one of the most profitable, but by far the least agreeable, of my.residences,.in the United States. In Philadelphia I had found perpetual difficulty in remembering that I was in a foreign country. The pronunciation of a few words by our host and hostess, the dinner table, and the inquiries of visitors were almost all that occurred to remind me that I was not in a brother’s house. At Washington it was very different. The city itself is unlike any other that ever was seen, straggling out hither and thither…
Then there was the society, singularly compounded from the largest variety of elements: foreign ambassadors, the American government, members of Congress, from Clay and Webster down to Davy Crockett, Benton from Missouri, and Cuthbert, with the freshest Irish brogue, from Georgia; flippant young belles, “pious” wives dutifully attending their husbands, and groaningmover the frivolities of the place; grave judges, saucy travellers, pert newspaper reporters, melancholy Indian chiefs, and timid New England ladies, trembling on the verge of the vortex; all this was wholly unlike anything that is to be seen in any other city in the world; for all these are mixed up together in daily intercourse, like the higher circle of a little village, and there is nothing else. You have this or nothing; you pass your days among these people, or you spend them alone…
It is at first extremely interesting to hear Mr. Calhoun talk; and there is a neverfailing evidence of power in all he says and does which commands intellectual reverence; but the admiration is too soon turned into regret, into absolute melancholy. It is impossible to resist the conviction that all this force can be at best but useless, and is but too likely to be very mischievous. His mind has long lost all power of ¢ communicating with any other. I know no man who lives in such utter intellectual solitude. He meets men, and harangues them by the fireside as in the Senate; he is wrought like a piece of machinery, set a-going vehemently by a weight, and stops while you answer; he either passes by what you say, or twists it into a suitability with what is in his head, and begins to lecture again. Of course, a mind like this can have little influence in the Senate, except by virtue, perpetually wearing out, of what it did in its less eccentric days; but its influence at home is to be dreaded. There is no hope that an intellect so cast in narrow theories will accommodate itself to varying circumstances; and there is every danger that it will break up all that it can, in order to remould the materials in its own way. Mr. Calhoun is as full as ever of his nullification doctrines; and those who know the force that is in him, and his utter incapacity of modification by other minds (after having gone through as remarkable a revolution of political opinion as perhaps any man ever experienced), will no more expect repose and self-retention from him than from a volcano in full force…
At dinner the president was quite disposed for conversation. Indeed, he did nothing but talk. His health is poor, and his diet of the sparest. We both talked freely of the governments of England and France; I, novice in American politics as I was, entirely forgetting that the great French question was pending, and that the president and the King of the French were then bandying very hard words. I was most struck and surprised with the president’s complaints of the American Senate, in which there was at that time a small majority against the administration. He told me that I must not judge of the body by what I saw it then, and that after the 4th of March I should behold a Senate more worthy of the country…. The ground of his complaint was, that the senators had sacrificed their dignity by disregarding the wishes of their constituents. The other side of the question is, that the dignity of the Senate is best consulted by its members following their own convictions, declining instructions for the term for which they are elected. It is a serious difficulty, originating in the very construction of the body, and not to be settled by dispute…
General Jackson is extremely tall and thin, with a slight stoop, betokening more weakness than naturally belongs to his years. He has a profusion of stiff gray hair, which gives to his appearance whatever there is of formidable in it. His countenance bears commonly an expression of melancholy gravity; though, when roused, the fire of passion flashes from his eyes, and his whole person looks then formidable enough. His mode of speech is slow and quiet, and his phraseology sufficiently betokens that his time has not been passed among books…
I was fortunate enough once to catch.a glimpse of the invisible Amos Kendall, one of the most remarkable men in America. He is supposed to be the Moving Spring of the whole administration; the thinker, planner, and doer; but it is all in the dark. Documents are issued of an excellence which prevents their being attributed to persons who take the responsibility of them; a correspondence is kept up all over the country for which no one seems to be answerable; work is done, of goblin extent and with goblin speed, which makes men look about them with a superstitious wonder; and the invisible Amos Kendall has the credit of it all. President Jackson’s Letters to his Cabinet are said to be Kendall’s; the Report on Sunday Mails is attributed to Kendall: the letters sent from Washington to appear in remote country newspapers, whence they are collected and published in the Globe as demonstrations of public opinion, are pronounced to be written by Kendall. Every mysterious paragraph in opposition newspapers relates to Kendall; and it is some relief to the timid that his having now the office of postmaster-general affords opportunity for open attacks upon this twilight personage; who is proved, by the faults in the postoffice administration, not to be able to do quite everything well. But he is undoubtedly a great genius. He unites with his “great talent for silence” a splendid audacity…
There was no knowing, when Webster sauntered in[to the Supreme Court chamber of the Capitol], threw himself down, and leaned back against the table, his dreamy eyes seeming to see nothing about him, whether he would by-and-by take up his hat and go away, or whether he would rouse himself suddenly, and stand up to address the judges. For the generality there was no knowing; and to us, who were forewarned, it was amusing to see how the court would fill after the entrance of Webster, and empty when he had gone back to the Senate Chamber. The chief interest to me in Webster’s pleading, and also in his speaking in the Senate, was from seeing one so dreamy and nonchalant roused into strong excitement. It seemed like having a curtain lifted up through which it was impossible to pry; like hearing autobiographical secrets. Webster is a lover of ease and pleasure, and has an air of the most unaffected indolence and careless self-sufficiency. It is something to see him moved with anxiety and the toil of intellectual conflict; to see his lips tremble, his nostrils expand, the perspiration start upon his brow; to hear his voice vary with emotion, and to watch the expression of laborious thought while he pauses, for minutes together, to consider his notes, and decide upon the arrangement of his argument. These are the moments when it becomes clear that this pleasure-loving man works for his honours and his gains…. No one will suppose that this is said in disparagement of Mr. Webster. It is only saying that he owes to his own industry what he must otherwise owe to miracle…
Mr. Webster owes his rise to the institutions under which he lives; institutions which open the race.to the swift-and.the battle to the strong; but there is little in him that is congenial with them. He is aristocratic in his tastes and habits, and but little republican simplicity is to be recognized in him…. When he is [in earnest].. his power is majestic, irresistible; but his ambition for office, and for the good opinion of those who surround him, is seen too often in alternation with his love of ease and luxury to allow of his being confided in as he is admired. If it had been otherwise, if his moral had-equalled his intellectual supremacy, if his aims had been as single as his reason is unclouded, he would long ago have carried all before him, and been the virtual-monarch of the United States, But to have expected this would have been unreasonable. The very best men of any society are rarely or never to be found among its eminent statesmen; and it is not fair to look for them in offices which, in the present condition of human affairs, would yield to such no other choice than of speedy failure or protracted martyrdom…
Mr. Clay is sometimes spoken of as a “disappointed statesman,” and he would probably not object to call himself so; for it makes no part of his idea of dignity to pretend to be satisfied when he is sorry, or delighted with what he would fain have prevented; but he suffers only the genuine force of disappointment, without the personal mortification and loss of dignity which are commonly supposed to be included in it…. He is in possession of more than an equivalent for what he has lost, not only in the disciplined moderation of his temper, but in the imperishable reality of great deeds done…. The fact that Mr. Clay’s political opinions are not in accordance with those now held by the great body of the people is no disgrace to him or them, while the dignity of his former services, supported by his present patience and quietness, places him far above compassion, and every feeling but respect and admiration…
The one act of Mr. Clay’s public life for which he must be held to require pardon from posterity, is that by which he secured the continuance of slavery in Missouri, and, in consequence, its establishment in Arkansas and Florida; the one an admitted state, the other a territory destined to be so. Mr. Clay is not an advocate of slavery, though, instead of being a friend to abolition, he is a dupe to colonization. When he held the destinies of American slavery in his hand, he had, unhappily, more regard for precedent in human arrangements than for the spirit of the.divine laws in the light of which such arrangements should be ever regarded. He acted to avert the conflict which cannot be averted, It has still to take place; it is now taking re under less favourable circumstances; and his measure of expediency is already meeting with the retribution which ever follows upon the subordination of a higher principle to a lower…
The finest speech I heard from Mr. Clay in the Senate was on the sad subject of the injuries of the Indians. He exposed the facts of the treatment of the Cherokees by Georgia. He told how the lands i in Georgia, guaranteed by solemn treaties to the Cherokees, | had been surveyed. and partitioned off to white citizens of the state; that, though there is a nominal right of appeal awarded to the complainants, this is a mere mockery, as an acknowledgment of the right of Georgia to divide the lands is made a necessary preliminary to the exercise of the right; in other words, the Indians must lay down their claims on the threshold of the courts which they enter for the purpose of enforcing these claims! The object of Mr. Clay’s plea was to have the Supreme Court open to the Cherokees, their case being, he contended, contemplated by the Constitution. A minor proposition was that Congress should assist, with territory and appliances, a body of Cherokees who desired to emigrate beyond the Mississippi…. As many as could crowd into the gallery leaned over the balustrade; and the lower circle was thronged with ladies and gentlemen, in the centre of whom stood a group of Cherokee chiefs, listening immoveably. I never saw so deep a moral 1 impression produced by a speech. The best testimony to this was the general disgust excited by the empty and abusive reply of the senator from Georgia, who, by the way, might be judged from his accent to have been about three months from the Green Island. This gentleman’s speech, however, showed us one good thing, that Mr. Clay is as excellent in reply as in proposition; prompt, earnest, temperate, and graceful. The chief characteristic of his eloquence is its earnestness…
My chief interest was watching Mr. Adams, of whose speaking, however, I can give no account. The circumstance of this gentleman being now a member of the representative body after having been president, fixes the attention of all Europeans upon him with as much admiration as interest. He is one of the. most remarkable men in America. He is an embodiment of the pure simple morals which are assumed to prevail in the thriving young republic. His term of office was marked by nothing so much as by the subordination of glory to goodness, of showy objects to moral ones. The eccentricity of thought and action in Mr. Adams, of which his admirers bitterly or sorrowfully complain, and which renders him an impracticable member of a party, arises from the same honest simplicity which crowns his virtues, mingled with a faulty taste and an imperfect temper…. Between one day and another, some new idea of justice and impartiality may strike his brain, and send him to the house warm with invective against his party and sympathy with their foes. He rises, and speaks out all his new mind, to the perplexity of the whole assembly, every man of whom bends to hear every syllable he says; perplexity which gives way to dismay on the one hand and triumph on the other. The triumphant party begins to coax and honour him; but, before the process is well begun, he is off again, finding that he had gone too far; and the probability is, that he finishes by placing himself between two fires…
Martineau Life At Washington Retrospect Of Western Travel
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Matt Levine (2021): Elon Musk Picks the Money Now: Dogecoin, Bitcoin, GameStop and short ladders. A classic on Weird Finance in the Age of the Attention Info-Bio Tech Society…
Few have ever so deftly captured the surreal, self-referential theater of early 21st-century markets as Matt Levine here, being flabbergasted by not just what is going on on the front lines of speculative excess, but by the transformation of value itself in an era where there is a shift from “fundamentals” to the capricious dynamics of online social coordination, celebrity charisma, and what one might call the social-media algorithmic manufacture of belief. It is a world in which the mere proximity to Elon Musk, or indeed to any sufficiently charismatic digital avatar, can confer value upon the most improbable of assets.
Levine’s analysis is anthropological and ironic: new rituals of value creation, in which Musk’s tweets, imbued with a quasi-religious mana, have the power to animate assets as diverse as GameStop shares, obscure cryptocurrencies, or even penny stocks accidentally swept up in the slipstream of his digital utterances.
Revisiting Levine’s essay from the vantage point of 2025, one is struck by both its acuity and its lingering sense of disbelief. The piece stands as a testament to the bewilderment of an era in which the boundaries between finance, entertainment, and collective psychology have grown porous. This is a very strange world we are in. It is a world in which someone can become the richest man on earth without owning a major stake in any solidly and enduringly currently profitable business. And it is a world in which he can then leverage that status, so that he can then, with a single tweet, summon billions of dollars into at least temporary existence.
Matt Levine is a Bloomberg Opinion columnist. A former investment banker at Goldman Sachs, he was a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz; a clerk for the U.S. Court of Appeals for the 3rd Circuit; and an editor of Dealbreaker.
What next oh hey super it’s Dogecoin
My model of the GameStop Corp. trade is that it is mostly what I’ve been calling an “honest pump”: People got together on the internet and discussed it, and decided that if they all bought the stock of GameStop at the same time then it would go up and they’d like that. This was correct. There was no fraud or dishonesty involved; that is just a straightforward understanding of how supply and demand work. Nor was there all that much in the way of fundamental analysis of the underlying cash flows of GameStop’s business…. Once it hit, I don’t know, pick a number, $65.01 on Jan. 22, say, no one was in it for the cash flows. GameStop was worth $200 because more people would buy it and then it would be worth $400; it was a pure social coordination game with no connection to the business of an actual company.
One assumes that this has to end badly for somebody…. Still, you could push back on that assumption. Social coordination is actually a pretty big and robust source of value. Bitcoin has been valuable for years now because people on the internet got together and agreed to ascribe value to it; gold has been valuable for millennia for not-too-dissimilar reasons. Society could just evolve in weird ways, who knows, and perhaps GameStop stock will fill some social and monetary function and gain lasting value as a pure token. Last week I imagined a venture capitalist blogging about GameStop in 2027, writing:
The thing I like about GameStop is not its underlying cash flows, but the fact that it is a scarce digital store of value…
I was kidding, but one thing that I have learned in recent years is that everything is simultaneously a joke and serious.
Also Elon Musk tweeted about GameStop, and the way finance works now is that things are valuable not based on their cash flows but on their proximity to Elon Musk. A better anthropologist than me should probably take a look at this phenomenon. Musk is the richest person in the world, and in a dynamic, fun, traveling-to-Mars sort of way. It makes sense that his pronouncements have a certain religious character, that his tweets can endow arbitrary objects with mana. If the richest person in the world tweets “Gamestonk!” then I think that means that, if you buy GameStop stock, you will partake in his wealth and dynamism at a remove; you will get rich and have fun doing it. (Not! Investing! Advice!) Maybe that is not how it works on a conscious level—though I think that sometimes it is?—but surely at some subconscious level people want to order their lives in accordance with the cryptic instructions of a charismatic flying zillionaire.
So, “Gamestonk!” And red satin shorts blessed by Musk sell at a huge markup on Ebay. And I have written about Signal Advance Inc., a penny stock that soared 5,100% after Musk tweeted “Use Signal,” about an entirely unrelated app. That stock is still up 350% from where it was before Musk tweeted a month ago. It is an Elon Musk cargo cult; a coordination game—“if we all buy this it will go up, so let’s all buy it”—inspired by an arcane reading of apocryphal Musk scripture.
Also Tesla Inc. stock trades at 1,210 times trailing earnings, is another fact that might be relevant here.
Dogecoin, the tongue-in-cheek cryptocurrency featuring a Shiba Inu dog as a mascot, briefly touched a record Monday after billionaire Elon Musk, rapper Snoop Dogg and Kiss bassist Gene Simmons tweeted about it.
The token climbed to a peak of about 8.2 U.S. cents and a market capitalization of $10.5 billion during Asian trading hours Monday before pulling back, according to pricing data from CoinGecko. The coin was ranked among the top 10 cryptocurrencies by market value, the figures showed…
The reckless abandon of the investing world has a new fixation: a cryptocurrency that began in 2013 as a joke, was mostly forgotten, and thanks to a flurry of tweets from Tesla Inc. Chief Executive Elon Musk, is suddenly worth a total of more than $6 billion…
Mr. Markus, who no longer works on dogecoin, couldn’t believe code he wrote in three hours on a Sunday gave rise to a cryptocurrency worth billions of dollars in total market value.
“The idea of dogecoin being worth 8 cents is the same as GameStop being worth $325,” said Mr. Markus, 38 years old. “It doesn’t make sense. It’s super absurd. The coin design was absurd”…
That same article notes: “A vocal group of buyers on Reddit have made it their mantra to push dogecoin to $1.”
Dogecoin is GameStop stripped of all the distracting reality. No one on Reddit is going to publish a due diligence post about how the market undervalues Dogecoin’s cash hoard and customer loyalty. There are no Dogecoin shorts to squeeze, no Dogecoin options market makers to get caught in a gamma trap. The serious arguments for Bitcoin—its algorithmically enforced scarcity, its technological sophistication, its widespread adoption—are also conveniently missing. Dogecoin is just “if we buy this thing it will go up, so let’s buy it; also it will be fun and Elon Musk tweeted about it.”
Look, I understand that I have gotten stupider by typing all of that, and you have gotten stupider by reading it, but it’s gonna get worse. I do think it is pretty obvious that the internet is rewiring social relationships in profound ways, and that we are still in the early stages of that rewiring and the even earlier stages of trying to understand it. Money and value are artifacts of social relationships; why shouldn’t their meaning change as social media warps our brains and our society? Money and value are coordination games; what we use for money depends on the channels that we use to coordinate social activity. Once society was mediated by governments, and we used fiat currency. Now society is mediated by Twitter and Reddit and Elon Musk, so, sure, Dogecoin.
What next oh sorry it’s Bitcoin again
The way finance works now is that things are valuable not based on their cash flows but on their proximity to Elon Musk, so:
Bitcoin surged to an all-time high after Tesla Inc. said it’s invested $1.5 billion, becoming the biggest company yet to back the controversial cryptocurrency.
Bitcoin jumped as much as 15% after Tesla made the disclosure in a regulatory filing, with prices exceeding $44,000 for the first time. Tesla also said it would begin accepting the digital token as a form of payment for its electric cars. ...
“The world’s richest man allocating $1.5 billion of his company’s treasury to Bitcoin speaks volumes about the magnitude at which crypto gains institutional adoption,” said Antoni Trenchev, managing partner and co-founder of Nexo in London. “Tesla has now paved the way”…
Here’s Tesla’s 10-K announcing the move. No, uh … no mention of Dogecoin, huh.
Why would you invest (a portion of) your corporate treasury in Bitcoin?… You want attention, and pivoting from being a boring operating company to an exciting also-holding-some-Bitcoins company will get you media attention and a higher stock price. Obviously this one is true of Tesla, in the sense that Musk requires constant attention to live, and the stock was up this morning. But it is not that true of Tesla, which has a high and volatile stock price already, and doesn’t really need to put money into Bitcoin to attract crypto enthusiasts. As of about 10 a.m. today, Tesla’s stock was up 1.65% on the day; Bitcoin was up more than 13%. Clearly Tesla did more for Bitcoin than Bitcoin did for Tesla….
Another answer is that you think Bitcoin will go up, and you like to invest your corporate treasury in stuff that goes up. This one seems fine? In general, one thinks of corporate treasury funds as being invested conservatively in cash equivalents so that they’re always there for a rainy day, but if you have a lot of money, or even just a lot of ability to raise money cheaply, I suppose you can be aggressive. Instead of earning roughly nothing in a bank account, your money can earn… well, Bitcoin is up about 50% year-to-date.
Also some of that is probably because Musk has gone around talking and tweeting about it, and because of this announcement today: Musk is in the nice position of being able to spend billions of dollars buying assets in liquid anonymous markets, and then make those assets go up just by tweeting about them. If you can do that, you should! If you can buy a thing secretly, announce “I own the thing,” reliably cause the thing’s price to go up a lot, and then—if you want—sell the thing secretly, then that’s a great business right there. Talk about clean energy; that’s a perpetual motion machine….
Ordinarily Elon Musk does not do too much of this, possibly because he can also make the price of Tesla stock go up or down by tweeting about it, so if he needs money, telling people “buy Tesla” and then selling some shares is more straightforward than putting his stamp of approval on things he doesn’t control. Still it would be funny if he did more of it…
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When the rules of the game change at a tweet’s notice, the only sane prudence is near-total paralysis, saving for the frantic building of robustness. In a landscape of unknown unknowns, the only rational move is to wait, watch, and insure. Thus in the chaos-monkey economy, optionality is all—and so recession is likely, while stagflation is baked in the cake, and long-term economic relative decline nearly inevitable. And then the sanewashing media adds a fog machine to the sandstorm. And yet Mohamed El-Erian dares to hope for a Reagan-Thatcher-style rebirth. In the Holy Name of the Storm God of the Semites, and his servant the Black Man, why?
It is difficult to know what to think, let alone what to do, in the current macroeconomic moment.
We are told over and over again by the sages of the bond market and the high priests of central banking that the United States stands at a crossroads. But what kind of crossroads? The signposts are written in an unfamiliar dialect. The directions are contradictory. And is it a normal crossroads, at which one decides whether to turn left, go straight, or turn right? Or is it a different thing altogether—one that calls for crying out: “Papa Legba! Ouvri baryè pou mwen, pou m ka pase. Lè m retounen, m’a salye lwa yo!”?
My strong sense is that the uncertainty generated by Trump’s chaos-monkey policy process is less a fog than a sandstorm—one that grinds its way into every crevice of the economic machine, clogging the gears and rendering forward motion both painful and unpredictable. The closest analogy is, of course, BREXIT. As with BREXIT, the U.S. appears to have chosen, by the narrowest of margins and with the most dubious of mandates, a path that is likely have roughly the same effects on it that BREXIT has had on Britain: to leave it a good 10% poorer in a decade than it would have been had the narrow majority chosen the more technocratic and community-minded and less rage-filled and incompetent alternative.
But even if that is the road we are on, what is the path from here to there?Will the next two years bring a near-recession, or a full-blown contraction? Some stagflation, that ghost of the 1970s, appears baked in the cake. But will it manifest with a vengeance, or merely haunt the margins of the economic data? And what will Congress look like in January 2027—will it be a rubber stamp, an impediment, or an institutional casualty of the new order? Will the Supreme Court assist or resist Trump’s increasingly corrupt and authoritarian tendencies?
These are not questions that raise risks to be managed, but rather describe uncertainties. And they call not for the laying of bets vis-à-vis possible futures but rather the building of robustness and the purchase of insurance. In addition to the known unknowns, unknown unknowns infest the decision calculus of every business executive, investor, and household.
Thus the incentives to defer, to postpone, to wait and see, are overwhelming. Why make a major capital investment, hire aggressively, or commit to long-term contracts when the rules of the game may change on a presidential whim, or a late-night tweet inspired by an old episode of “Night Court”? Optionality becomes all. It amplifies the risk of recession, deepens its likely trough if it comes, and prolongs its likely duration.
And yet the very sharp Mohamed El-Erian is, against all odds—optimistic? He sees
the global economy… on a bumpy journey…. We could be hurtling toward recession, stagflation, and the fragmentation of global trade and payments systems. Or we could be in the early stages of a Ronald Reagan- or Margaret Thatcher-style rewiring that will eventually bring greater productivity gains, higher growth potential, less threatening deficits and debt, a fairer trading order, and a more stable payments system…
And I want to say, puzzled: What?! Why?! What is there that sees the possibility of a successful new political-economic order on the point of being born?
El-Erian catalogues:
the volatility in US tariff (and every single other dimension of policy,
the unpredictable reactions from other systemically important countries,
the awakening of the bond vigilantes,
the extra confusion created by Elon Musk’s DOGE, which he sanewashes as an attempted “shrink[ing] or reform[ing] the public sector… raising more questions than answers”, and
strong divergence among professional economists’ forecasts.
And yet, rather than drawing the obvious conclusion that chaos monkeys produce chaos, which is not the friend of growth or prosperity, El-Erian seems to say that opinions of the future consequences of installing Trump in the White House differ. From whence comes the suggestion that there is a good chance we might be at the dawn of something like the Reagan-Thatcher-style Neoliberal Order rewiring: a period of wrenching dislocation that, with the benefit of hindsight, will appear as the necessary prelude to a new order of higher productivity, greater growth, fiscal rectitude, and a more stable global payments system.
Why does he say this? What does he see that I do not?
Is it mere rhetorical balance, a professional deformation acquired through years of writing for a global audience that demands some glimmer of hope? Or does he genuinely discern, beneath the surface tumult, the lineaments of a transformative moment?
Four hypotheses present themselves:
The Professional Optimist’s Imperative: El-Erian, as a public intellectual and market commentator, may feel compelled to offer a “positive scenario” if only to avoid the charge of Cassandraism. His audience—investors, policymakers, the worried well—crave narratives of resilience and adaptation. To deny them this is to risk irrelevance, being shunted aside as a mere doomsayer. The world prefers its forecasters to offer a plausible path to redemption. Thus, El-Erian’s invocation of Reagan and Thatcher may be less a forecast of a possible scenario than a pure act of ritual.
Régime Change as Creative Destruction: Perhaps he genuinely does believe that the current chaos, while painful, is a form of Schumpeterian creative destruction. The Old Order—the post-1980 Neoliberal Order—had run its course. But as the old was dying whatever new thing would come appeared at risk of being stillborn. Many morbid symptoms had already appeared. And only a shock of sufficient magnitude could clear the ground for something new. In this reading, the volatility of a chaos-monkey interregnum is a necessary purgative.
The Limits of Pessimism: El-Erian may be warning against the fallacy of extrapolating from present dysfunction to permanent decline. After all, the American economy has, time and again, absorbed shocks that seemed, in the moment, to portend the end of the republic—only to emerge, battered but unbroken, on the other side. To insist on catastrophe is, in a sense, to deny the possibility of adaptation, improvisation, and institutional learning.
There is the Cynical Signaling Hypothesis. Perhaps El-Erian’s optimism is not intended for the broad public or even for me at all. Perhaps it is intended for a much narrower audience of those with the power to shape American executive-branch decision making. Perhaps it is aimed at the Bessents and Lutnicks and Wileses and their respective Affinities. By invoking the Reagan-Thatcher precedent, he may be attempting to discipline the discourse, to remind policymakers that moments of crisis are also moments of agency, and that their future reputations, comfortable livelihoods, and perhaps lives outside of federal prisons depend on their guiding the Trump administration to some sort of semi-coherent quasi-rational non-ruinous policy. If so, El-Erian would see himself now less as a diagnostician than a would-be midwife, hoping that by naming the possibility of constructive transformation, he can help bring it into being.
But, for us, here and now, the sand is still grinding in the gears, and the fog is not about to lift.
Dixit, Avinash K., & Robert S. Pindyck. 1994. Investment under Uncertainty. Princeton, NJ: Princeton University Press. <https://www.jstor.org/stable/j.ctt7sncv>.
Drezner, Daniel W. 2025. “Real Trumpism Has Not Yet Been Tried.” Drezner’s World, May 20. [danieldrezner.substack.com/p/real-tr...](https://danieldrezner.substack.com/p/real-trumpism-has-not-yet-been-tried.)
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What are the odds of Elon Musk’s personal bankruptcy over the next decade, anyway? In my view, they have just gone up a lot. Musk thought power came with a price tag. But he was wrong, and now is—I think—desperately trying to see how much veto-point power his money & his ideology can buy. For Musk failed to recognize, as many failed to recognize, that Trump charges upfront—but then does not deliver unless you give him an extra reason to do so. So we are now seeing what happens when a chaos-monkey grifter capitalist misreads a chaos-monkey grifter president. Musk thought he had a deal—he backs Trump all the way, and in return Trump would provide him with EV subsidies, tariff carve-outs, and control of the NASA budget. Musk was wrong. And so we get to watch what happens next…
‘He hasn't said bad about me personally but I'm sure that'll be next. But I'm very disappointed in Elon…’
“When Elon Musk came to the White House asking me for help on all of his many subsidized products, whether it’s his electric cars that don’t drive long enough, driverless cars that crash, or rocketships to nowhere, without which subsidies he’d be worthless, and telling me how he was a big Trump fan and a Republican, I could have said “drop to your knees and beg”, and he would have done it…’
For Elon Musk, it almost certainly seemed to him as though there was no downside. Keep your culture-war friend close, and your potential existential business-threat enemy closer. And so:
Trump agreed with Musk’s right-wing culture war priorities,
But Trump the candidate with his applause lines was a potential existential threat to Musk’s key businesses—Tesla and SpaceX.
Without those businesses, Musk was a bankrupt ex-Silicon Valley has-been
Trump was transactional.
Hence: propose a transaction:
I, Musk, will become your largest donor,
your greatest cheerleader,
the guy who takes the heat for cutting discretionary spending.
And in return:
you, Trump, give SpaceX all the NASA money,
you keep the subsidies flowing that keep consumers buying Tesla EVs,
and you give me carve-outs to tariffs, so that Tesla can be profitable and expanding as a globalized value-chain production-network operation.
Musk, however, did not recognize one thing.
He, however, was not alone. Musk’s problem now is something that a great many people who have thought that they had Trump’s number have failed to recognize.
What is it? It is this:
Trump is only transactional when he has to plunk his cash down on the barrelhead first.
When Trump doesn’t have to do that, he is not transactional at all.
As Elon Musk has now found out.
So what is Musk trying to do now?
I think that what Musk is doing now is trying to save both SpaceX and Tesla from bankruptcy. He is trying to do so by demonstrating to Trump that he, Elon Musk, has power. He is trying to demonstrate to Donald Trump that he, Elon Musk, can harm Trump. He is trying to demonstrate to Donald Trump that he, Elon Musk, has the power to assemble and maintain a Purity-Republican fiscal-conservative Senate voting bloc large enough to send Trump's tax cut bill down in flames.
Thus Trump had better back off. Trump has better give Musk his subsidies for Tesla as an EV manufacturer, his tariff carve-outs for Tesla as a globalized value-chain production network, plus all of the NASA money for SpaceX. Or else.
Does Musk in fact have this power? Who knows? It is going to be an interesting contest in post-modern political economy: How many Republican senators can Elon Musk rent, for how long, with a combination of fiscal-conservative budget-balance Purity-Republican ideology, plus cash?
And how much cash Elon Musk divert out of his enterprises? And how much more cash raise from financiers? Financiers willing to bet that then can loan money to Musk and not wind up stiffed because Musk will have tunneled all of his wealth into xAI, and the debts of his other entities are uncollectible?
Maybe that is what is going on.
But maybe Musk is just a ketamine-addled chaos monkey himself, acting out in unfocused and unfought rage right now.
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& watching the VergeCast watch The Browser Company. & watching the VergeCast say: “Imminent death of the web. Film at 11”. But this time it is really, truly, for real. The Browser Company’s Dia as an attempt at navigating the post-website era amidst the AI deluge. Yet “Chrome with a chatbot” is now merely table stakes…
Over the past year the VergeCast has become my favorite tech podcast.
Why?
Because of exchanges like this:
David Pierce: The Website-Free Future of the Web <https://youtu.be/EQNqfYs5r8c?si=yRh7VVqwIEg5fJCL>: ‘Now increasingly [Google] is: Okay, in order to take all the shitty stuff that has been created on the web to game the way the system worked, we're gonna build a new system…. And if all that stuff dies that was trying to game our old system, so be it….. [But] the question… no one will answer… [is] what happens when you also kill the good websites?… There is this big structural belief—and I think it was Demis Hassabis that said this—that we're going to… have a web… for AI agents… [that] may not even need a front end for people to look at….
Nilay Patel: One of the ways they are reckoning with it is by saying…. If you want to run a website: Great! Get your own audience. Don't be relying on Google Search to get your audience…. The media industry is addicted to Google. And there's no transition plan. It's: Oh, we're just going to kill you. And they're fine with it….
Suddenly Google is full of summaries of things that might be garbage. Or the AI itself is hallucinating. Or the good sources of information are now at war with Google, and you're not even getting them because they're in a fight. This is all just a swirl of what is going to happen….
Which brings me to like the last little piece of the puzzle, which is The Browser Company <https://thebrowser.company/>, which, David, you have talked about and profiled and covered at length. They stopped making their browser. They stopped making Arc, because there's no win there for them.
David Pierce: Right. They're in the middle of trying to figure out what the next bet is. They have this new browser called Dia, which is very much like, so far—I got into the beta; I was not supposed to get into the beta, but I got into the beta—Holy God! Is it just Chrome with a chat bot?
Nilay Patel: And the thing that's happening is, do you know what's also becoming Chrome with a chat bot?
Chrome.
And also every other browser that exists. I think, for The Browser Company, the big bet is: okay, if we can mix AI with browsing data with a device that you spend a lot of time on, that can be very powerful.
David Pierce: Agreed.
Nilay Patel: Great call, Browser Company! It turns out everybody else had that idea too….
David Pierce: It's certainly true that you can build a cool browser that a bunch of power users like me will like. I like Arc a lot. I use it all day, every day. That doesn't appear to be the next thing, but no one knows quite what that thing is yet, because it might not be showing you web pages….
Nilay Patel: I don't think it is. That Demis Hassabis comment at I/O about what kind of web do you build for agents first? It's the whole game.We're just reading the entire web…. And we're just gonna summarize it for you and give it to you and businesses will die…. We're gonna run that whole… 20 year cycle in two minutes with web apps and agents…. Now you really do have the giant worldwide interlinked application platform, but you don't have websites…. You just have a bunch of smart databases talking to each other….
I think they've come to the conclusion, after getting beat up for three years at I/O about AI and the downstream effects on the web… "We don't care. If we don't get here, someone else will get here first, and it will be better to take the hits and survive than to try to play nice and lose."
David Pierce: That's the Mark Zuckerberg Joker story. That's what happens. You get beat up enough times that you turn into the Joker, and that's what Mark Zuckerberg did.
Nilay Patel: Something massive is happening here, as Google is adding agents to Chrome…. If you believe Google, the whole premise of a search engine is going away…. All anyone will do is take that search index and build AI products…. A year from now, the New York Times will run a story about how the web changed. And I'll be like, yeah, I listened to the VergeCast. I caught that a year ago. Because this is the moment. Apple's weird weaknesses, Google's apparent strength, all kind of built around like, where do the apps come from? How do you use them? Is the user interface just gonna be a bunch of natural language? Google's vision is that you'll search for something, it will build you an app on the fly and make a new interface to data for you, which is pretty cool….
Many things have to die for that to happen. Like, the dinosaurs were cool, mammals were cooler. Like, sorry bro, like it's over. Like the asteroid is going to hit you…. I perceive that as clearly as I can now. That's the change that's coming…
Things like this do not provide me with answers. But they do raise huge numbers of very interesting questions.
But let me focus down. The thing I want to focus on right now is this exchange:
Nilay Patel: ‘The last little piece of the puzzle, which is The Browser Company <https://thebrowser.company/>, which, David, you have talked about and profiled and covered at length.
They stopped making their browser.
They stopped making [their] Arc [<https://arc.net/> browser], because there's no win there for them.
David Pierce: Right. They're in the middle of trying to figure out what the next bet is. They have this new browser called Dia <https://www.diabrowser.com/>, which is very much like, so far—I got into the beta; I was not supposed to get into the beta, but I got into the beta—Holy God! Is it just Chrome with a chat bot?
Nilay Patel: And the thing that's happening is, do you know what's also becoming Chrome with a chat bot? Chrome. And also every other browser that exists. I think, for The Browser Company, the big bet is: okay, if we can mix AI with browsing data with a device that you spend a lot of time on, that can be very powerful.
David Pierce: Agreed.
Nilay Patel: Great call, The Browser Company! It turns out everybody else had that idea too!…
David Pierce: It's certainly true that you can build a cool browser that a bunch of power users like me will like. I like Arc a lot. I use it all day. Every day. That doesn't appear to be the next thing. But no one knows quite what that thing is yet, because it might not be showing you web pages….
Nilay Patel and David Pierce appear to be willing to give long odds against The Browser Company’s staying alive for the next five years. The determining factor, they think, is that the “Chrome, but with a ChatBot, and then build out from there” space is hugely crowded. Here comes everyone. And, where The Browser Company can put one programmer building the Next Big Thing in internet interfaces:
even the Altman-Ive io can afford to put ten programmers,
Apple and Microsoft can each afford to put one hundred programmers,
and Google can afford to put a thousand programmers on the job.
As I understand it, The Browser Company is hoping to provide the easiest possible onramp in an attempt to jumpstart mass adaption. They think that, with the mass customer base, even if they get sufficient buzz for people to try their product—Dia—they have at most thirty seconds of patience from those who download-and-install, so it has to be very, very familiar indeed.
Chrome—everyone is familiar with how Chrome works, you type something and it either does a Google search or goes to a URL…
Plus a ChatBot—most people will be familiar with ChatBots, and will find putting the three options (URL, Google search, or ChatBot Q&A) on an equal footing convenient…
?????? (with apologies to the Underpants Gnomes of South Park)…
Mass adoption and a sustainable business…
So David Pierce is wrong. “Chrome with a ChatBot” is just the plan for the supereasy onramp. And then, once you are on the highway, you will then be painlessly guided to the valuable edges in managing your infolife that Dia will offer you. While, meanwhile, Jonny Ive will be designing something beautiful but irrelevant, and the Big Boys will be mired in their bureaucratic red tape.
As best as I can suss it out from the episode—which is, so far, the most thorough guide I can find to the Sekrit Plan—the hope is to:
Radical Familiarity as Onramp: Start with a very familiar interface, nearly indistinguishable from the Chrome browser, in the left pane of each tab in the Dia window. Thus new users feel instantly at home. The goal is to minimize friction and cognitive load for first-time users, making the switch as painless as possible.
Keep it very familiar by havinga normal ChatBot in the right pane of each tab in the Dia window.
Integrated Chatbot as a Core Feature: Place chatbot functionality on equal footing with traditional browser actions (URL entry, search), so users can seamlessly ask questions, summarize, or interact with web content in natural language—without feeling like they’re using a bolt-on tool.
And the ChatBot will not just do all the normal ChatBot things, but be automatically focused on the webpage to its left, plus other webpages in other tabs if you call them out as relevant as well.
Leverage Browsing Data for Personalization: Use the browser’s privileged position to integrate AI with users’ browsing data, enabling smarter, context-aware assistance that can anticipate needs, automate tasks, and surface relevant information at the right moment.
Move Beyond Web Pages to “Infolife” Management: Envision the browser not just as a window to the web, but as a platform for managing the user’s entire digital life—organizing, retrieving, and synthesizing information across tabs, documents, and services.
Continuous, Painless Guidance to “Valuable Edges”: Once users are in the door, gradually introduce them to advanced features that help them manage complexity, save time, and extract more value from their online activity—without overwhelming them up front.
Monetization via Value-Added Services: The long-term plan is to convert users into paying customers by offering premium features—likely centered on productivity, organization, and AI-powered workflows—that go well beyond what a free browser or chatbot can provide.
Differentiation from Big Tech Bureaucracy: Position Dia as nimble and user-focused, in contrast to the slow, bureaucratic innovation cycles of giants like Google, Apple, and Microsoft. The pitch is that a smaller, more focused team can deliver features that actually matter to users, faster.
Iterative Experimentation (“??????” Step): Embrace a philosophy of rapid iteration and experimentation, recognizing that the “killer feature” may not be obvious at the outset. The company is betting that, by getting users in the door and learning from their behavior, it can discover and build the features that will justify a paid subscription.
Now this may be mostly B-School blather—they may just want to have fun, and need a plan that will induce some VCs to give them money while they have fun building software.
Nevertheless, it seems to me as if The Browser Company honcho Josh Miller shares a brain with the VergeCast’s Nilay Patel and David Pierce. Only what they fear as chaos, he sees as a ladder to have a lot of fun, and maybe, maybe make a lot of money and have an influence—but, more probably, get his team hired and placed into Golden Handcuffs the moment any one of the Big Boys concludes The Browser Company’s Dia might someday gain some traction.
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The mirage of green-tech modernity, the evaporation of Tesla’s cultural capital: oligopoly, charisma, political extremism, the collapse of a psychic good, & the future of Elon Musk’s fortune…
(1) There are the patrimonialists ruling resource-rich societies:
The of Al Saud
The House of Al Nahyan
The House of Al Thani
And—perhaps—Vladimir Putin.
(2) Moving on to those without formal political power, I see seven non-tech barons:
Reliance Industries of India made $2 billion last year. As India’s most successful industrial conglomerate, its profits are rock-solid. And so Mukash Ambani and his family are, I think, worth more than $100 billion from their 50% collective holding of it.
Similarly, their 50% share of LMVH admits Bernard Arnault and family to that $100+ billion club.
Also worth more than $100 billion—each, I think—are WalMart heirs Jim, Rob, and Alice Walton. WalMart’s profits are $15 billion a year, and are also rock solid. Plus Jim, Rob, and Alice are surely well diversified by now, making their fortunes more secure.
Warren Buffett’s 15% of Berkshire Hathaway’s $100 billion a year puts him in the club as well.
There is Michael Bloomberg with 90% of Bloomberg’s $15 billion a year.
One presslord, two conglomerateers, one luxury brand, and three retail barons. That rounds out, I think, rounds out the world’s non-tech $hundred-billionaires. There are seven, I think.
(3) Then there are the ten techbros. Roughly, I think:
Michael Dell with half of its $3 billion a year;
Bill Gates and Steve Ballmer of Microsoft with wealth derived from its $100 billion of profits (even though the Gates and Ballmer shares of equity are now 4% and 1% respectively);
Jeff Bezos of Amazon with his 10% of its $30 billion a year;
Larry Page and Sergei Brin of Google with 6% each of its $70 billion a year;
Mark Zuckerberg of FaceBook with 13% of its $40 billion a year;
Larry Ellison of Oracle with half of its $10 billion a year;
Jensen Huang of NVIDIA with 4% of its $30 billion 2024 net income; and
Elon Musk of Tesla with 13% (as of now) of its $7 billion in 2024 profits.
Those ten plus the others, making twenty or twenty-one in all, are—I think—all the $hundred-billionaires the world owns today. (Yes, there are $billionaires and perhaps $ten-billionaires who make it their business to fly under the radar. But I do not think you can be a $hundred-billionaire and successfully hide, not at that scale.)
Out of all these, all except two have annual income from operations that has been consistently larger than $1 billion a year for years. But two do not.
The first of those two is Jensen Huang of NVIDIA. Consider NVIDIA’s recent profits, in billions:
Perhaps $70 for 2025…
$30 for 2024,
$11 for 2023,
$10 for 2022,
$4 for 2021,
an average of $3 for the previous five years,
And $70 forecast for 2025.
Thus Jensen Huang will pull in roughly $4 billion from NVIDIA over the two years 2024-2025, and its profits look high (if very unstable) further down the road. But his share of income from operations was only (only!) $400 million in 2024 and 2023, far below the scale of his fellow $hundred-billionaries.
Does he belong in the club? Yes, I think on balance it makes sense for Jensen Huang to be considered a $hundred-billionaire today, given his ownership stake and the amount of money people are going to pay for NVIDIA’s chips. And yet:
NVIDIA’s profits depend very much on its continuing to grab the lion’s share of the profits from what is a three-layer monopoly stack of ASML, TSMC, and NVIDIA.
ASML and TSMC have many other people to whom they could sell their machines and their fab capacity.
NVIDIA has nobody else from whom it could buy either.
And NVIDIA faces fierce competition from those who want to design equivalent chips:
AMD and Intel;
Trainium, Ironwood, and Azure for internal cloud use by Amazon, Google, and Microsoft;
plus Cerebras, Groq, Sambanova
(and perhaps Qualcomm and Apple: it depends on whether power efficiency rather than throughput per square cm. of silicon becomes the most important thing).
Jensen Huang’s membership in this club depends very much on:
NVIDIA’s ability to out-execute its rivals and would-be rivals in GPU chip design,
its ability to continue to fend off demands from TSMC and ASML for a proper share of the profit flow;
and on the AI-boom not being an AI-bubble.
Huang’s status as a $hundred-billionaire is somewhat shaky—built on cloud-castles that have not quite solidified, but that rapidly solidify with each day that the AI-boom does not collapse, and NVIDIA continues to be able to charge all that the market will bear for its chips, as its customers are unwilling to try to cut costs by going to alternative suppliers and run the risks of delay in building out their stack. (And there are risks: over at Apple Computer right now, the media whisperers love to blame relative executive outsider John Giannandrea for Apple’s disappointing performance in AI, but it seems much more likely than not that Giannandrea wanted to spend much more on NVIDIA hardware, that Luca Maestri kept him on a much shorter leash than he wanted to be on, and that Tim Cook backed Maestri.)
The EV Is Not (Yet) in Any Transportation-Services Sweet Spot:
The problem is that—outside of San Diego, Los Angeles, San Francisco, Boston, coastal Connecticut, and New York City—pure EVs are not yet in the sweet spot. The charging network is still not robust enough outside the key metropolises. If you are going to rent for outside-the-metropolis trips, then fine—but then you want a cheaper car with a 50-mile rather than a 300-mile battery range.
No. In nearly all of America, the sweet spot is still a gasoline-only vehicle or a plug-in hybrid: that’s where you get the most bang for your automotive purchase buck.
Why, then, did people buy Teslas? Why did people buy so many Teslas in 2021, 2022, and 2023?
To understand that we must look well beyond transportation utility and instead situate the EV within the symbolic economy of the early twenty-first century’s urban professional class. Four factors produced the Tesla auto sales boom—three of them having to do with demand, and the fourth having to do with opportunity cost.
Here are the three demand factors:
First, as a piece of technology, the Tesla was sui generis: an electric vehicle that did not merely compete with, but outperformed, its internal combustion rivals. With its instantaneous torque, minimalist interface, and over-the-air software updates, the Tesla was a manifestation of the Silicon Valley imaginary made manifest in aluminum, lithium, and code. To own a Tesla was to own a piece of the future—a future that promised not just improved efficiency, but a qualitative leap in the relationship between human and machine (see: McLuhan, “Understanding Media,” 1964). Purchasing a Tesla was—at least for a certain ascendant stratum of the American bourgeoisie—a performative gesture, an act of self-fashioning that drew upon the logic of technological veneration.
Second, the Tesla was a pledge of allegiance to a vision of green modernity. In a world increasingly conscious of the planetary limits of fossil-fuel civilization, the Tesla was a mobile declaration of faith in technological salvation—a bet that the arc of innovation could be bent toward sustainability without sacrificing the pleasures of speed or the aesthetics of design (cf. Latour, “We Have Never Been Modern,” 1991). To drive a Tesla was to announce one’s membership in the vanguard of the Anthropocene’s would-be redeemers. Again, a performative gesture, an act of self-fashioning and ideological signaling within a reference group that prized both innovation and progressivism.
Third, the Tesla was an instrument of conspicuous consumption, but of a particularly contemporary sort. Within the status reference group of the urban, educated, and cosmopolitan, the vehicle functioned as a positional good, its value amplified by the shared valuation of both technological prowess and progressive virtue (see: Veblen, “The Theory of the Leisure Class,” 1899; Bourdieu, “Distinction,” 1979). The Tesla was not simply a car; it was a shibboleth, an object lesson in the semiotics of aspiration, and—at least for a time—a ticket to the inner sanctum of the new elect. Yet again, a performative gesture, an act of self-fashioning that drew upon the logic of status competition within the same reference group that prized both innovation and progressivism.
Fourth—and here we get to opportunity cost—the joint action of the other automobile companies that, I think, provided Tesla Motors with the key opportunity
The global semiconductor shortage that afflicted the auto sector during the post-plague reopening boom is usually seen as a tale of misfortune. Plague-induced supply chain fragility, surging post-lockdown demand, the complexity of modern manufacturing, and the unwisdom of auto companies that had cut back their chip ordesrs in 2020. Yet look a little deeper and you can see a different—and a highly Machiavellian—pattern. Other companies are ahead of the auto companies in the line for chips. Chip deliveries are constrained. For lack of $50 worth of chips, the auto companies cannot make an extra $50,000 car. The “norma” reaction would have been for the auto companies ahead of them in the chip-allocation line, and offer to pay to jump the queue. The auto companies did not do that—with the exception of Tesla. And as long as each of the other major automakers is confident that the others are not paying to jum the queue, each can raise prices massively.
And so, by tacitly but collectively refusing to bid aggressively for scarce chip supplies, the auto companies constructed for themselves a remarkably cozy post-plague cartel.
Toyota, Volkswagen, GM, Ford, Stellantis, and their ilk—refused to engage in Hobbesian market competition. They acquiesced to production rationing, accepting multi-million-unit production losses. But in return they got to charge much higher prices to buyers (see S&P Global, “The semiconductor shortage is – mostly – over for the auto industry,” 2023; McKinsey, “Semiconductor shortage: How the automotive industry can succeed,” 2022). And the “exogenous chip scarcity” narrative provided impeccable cover for record markups and profit per unit.
From the perspective of industrial organization theory, this episode stands as a case study in the power of tacit collusion in oligopolistic markets (cf. Stigler, “A Theory of Oligopoly,” 1964; Scherer & Ross, “Industrial Market Structure and Economic Performance,” 1990). Collective restraint rather than competitive escalation was very profitable, as long as nobody broke the tacit cartel.
And nobody did, except for Tesla. It used the post-plague reopening to grab as much market share as it could, and found it could do so without offering any discounts whatsoever. Hence its shipments ballooned from 400 and 500 thousand in 2019 and 2020 to 1.0, 1.3, and 1.8 million in 2021, 2022, and 2023. At which it has plateaued: fewer Teslas delivered in 2024 than in 2023, and it looks like fewer will be delivered in 2025 than in 2024. And it was this successful ramp-up at list prices and more that drove Tesla’s profits from their $900 million in 2019 to their $15 billion in 2023. And it was that that made Elon Musk the richest man in the world.
And this boom in Tesla’s came about, as Teslas were declarations of allegiance to green high-tech modernity and conspicuous-consumption status plays, and as the cozy chip-shortage cartel of the other auto companies gave Tesla the opportunity to quintuple its shipments without cutting prices at all. This extraordinary rise from of Tesla from niche automaker to the world’s most valuable car company was, for a time, the closest thing Silicon Valley had to a secular miracle. The fragile equilibrium underpinning this was held together by the charisma of Elon Musk, who, for a time, overpromising and yet also overdelivering, managed to straddle the line between Tony Stark and Henry Ford.
Tearing Your Brand into Shreds & Gobbets, & Eating the Gobbets:
But charisma is a double-edged sword. Now that is gone. The other auto companies may not be confident about how fast the EV transition will take place. But they do know that it is quite possibly an existential threat to them if they fall any further behind BYD than they currently are.
And Elon Musk has taken Tesla-as-a-brand—just two years ago a powerful psychic-good declaration of luxury, modernity, technology, greenness, progressivism, status, and a brighter future—ripped it into shreds and gobbets, eaten the gobbets, and then vomited them up. Musk’s lurch into the political mosh pit—his embrace of Trump’s DOGE initiative, his public feuds, his erratic pronouncements, his willingness to align the Tesla brand with the most polarizing elements of American politics—has detonated a rapid exodus of precisely those customers who once served as Tesla’s most effective evangelists.
Thus the thing that made Teslas worth buying even though they were not in any transportation-services sweet spot is gone. And its natural customers—the affluent, urban, educated, and environmentally conscious—are gone, thanks to Musk. When a brand is as tightly coupled to its founder as Tesla is to Musk, the founder’s political and personal misadventures become the company’s own. It is not simply that Tesla is no longer “cool” among the urban professional class; it is that, for many, it has become actively distasteful, a rolling signifier of reaction, not progress.
Gaming-Out Tesla’s Prospects as a Production Network:
What is the prospect that Tesla will do much better than break even as a production network for useful cars over the next half-decade? Very slim. The downfall is, looking back, an incredible concatenation of self-inflicted wounds, strategic missteps, and the inexorable logic of markets and culture. And while there may be a market for Dukes-of-Hazzard “General Lee”-themed cybertrucks with the stars-and-bars painted on them, that market is small.
Do I need to say more? Do I need to say that the price cuts intended to maintain volume have eviscerated margins, the much-vaunted “moat” of the Supercharger network is being steadily breached by regulatory fiat and the rise of credible competitors, that the Model Y is no longer the object of desire it once was, that the cybertruck is a flop, that the robotaxi fleet remains all-but-vaporware, that the company’s reliance on regulatory credits to pad its bottom line is increasingly unsustainable, that the president for whom Elon Musk was the largest contributor has declared war on Musk’s product line, and that Musk in return has declared war on Trump’s legislative program?.
I think the odds are 50-50 that the Tesla production network is not making Teslas in five years—in one scenario either broken up for its components, or sold and rebranded something unconnected with Musk; in the other scenario surviving as a company, but as a near commodity producer much like other auto companies, with its margins ground down by competition, its brand equity spent, and its days as a world-historic disruptor consigned to the annals of business history.
So what happens to Musk’s status as a $hundred-billionaire? Could it be supported by SpaceX or by xAI? Or could Tesla stock continue to levitate even if the economic earnings are not there? And why should the stock levitate, anyway? Does anybody believe that profits earned either by FSD robotaxis or Optimus humanoid robots will flow to the public corporation that is Tesla rather than to Musk’s private xAI?
If someone asked me to take the “no” side of an even-odds bet on “will Elon Musk be forced into not just a corporate but a personal debt-writedown-and-workout in the next decade?”, right now I would not take that bet.
If reading this gets you Value Above Replacement, then become a free subscriber to this newsletter. And forward it! And if your VAR from this newsletter is in the three digits or more each year, please become a paid subscriber! I am trying to make you readers—and myself—smarter. Please tell me if I succeed, or how I fail…
One has factual and analytical disagreements with my office neighbor Barry Eichengreen at one’s grave intellectual peril.
But here I have one.
Barry says that in then-Chancellor of the Exchequer Winston Churchill’s 1925 decision to return the British pound sterling to the gold standard at its pre-WWI nominal parity, one important contributing factor was that “the most articulate opponent [of the return to the pre-WWI nominal sterling peg], John Maynard Keynes, had an off night when given an opportunity to make his case to the chancellor…”
I do not think that we really know this.
Our source for this is Churchill’s private secretary P.J. Grigg. As I wrote in the notes to Slouching Towards Utopia: “P.J. Grigg, Churchill’s Private Secretary at the Exchequer, claimed that Keynes’s arguments at the dinner were unconvincing…. Then again, Grigg’s hostility towards Keynes was so great that he would have been unable to recognize strong arguments had they been made, He did write on the very first page of his memoirs: ‘I distrust utterly those economists who have with great but deplorable ingenuity taught that it is not only possible but praiseworthy for a whole country to live beyond its means on its wits, and who, in Mr. Shaw’s description, teach that it is possible to make a community rich by calling a penny tuppence, in short who have sought to make economics into a vade mecum for political spivs…’” That is aimed directly at Keynes, and well captures Grigg’s total contempt for the man.
But, other than that complaint about what is essentially a single throw-away line in the piece below, I have no complaints.
I do have some comments, however, at the end.
Meanwhile, read the whol thing:
Barry J. Eichengreen: Sterling’s Past & the Dollar’s Future <https://www.project-syndicate.org/onpoint/the-us-dollar-s-fall-from-grace>: ‘Apr 10, 2025: US President Donald Trump says he wants to preserve the dollar's international role as a reserve and payment currency. If that's true, the history of pound sterling suggests he should be promoting financial stability, limiting the use of tariffs, and strengthening America's geopolitical alliances.
TOKYO – In April 1925, a hundred years ago this month, Winston Churchill, in his capacity as chancellor of the exchequer, took the fateful decision to return pound sterling to the gold standard at the prewar rate of exchange.
Churchill then, not unlike US Treasury Secretary Scott Bessent now, was torn between two objectives. On one hand, he wanted to maintain sterling’s position as the key currency around which the international monetary system revolved, and preserve London’s status as the leading international financial center. On the other hand, he, or at least influential voices around him, saw merit in a more competitive – read “devalued” – exchange rate that might boost British manufacturing and exports.
Why Churchill chose the first course is uncertain. The weight of history – British economic preeminence under the gold standard prior to World War I – pointed to restoring the monetary status quo ante. The City of London, meaning the financial sector, lobbied for a return to the prewar exchange rate against gold and the dollar. The most articulate opponent, John Maynard Keynes, had an off night when given an opportunity to make his case to the chancellor.
The effects were much as predicted. Sterling regained its position as a key international currency, and the City its position as a financial center. Now, however, they had to contend with New York and the dollar, which had gained importance, owing to disruptions to Europe from the war and the establishment of the Federal Reserve System to backstop US financial markets.
Also as predicted, British exports stagnated. At current prices, they were lower in 1928-29 than in 1924-25, when the decision to stabilize the exchange rate was taken.
Here, clearly, a strong pound and the high interest rates required to defend its exchange rate were unhelpful. But to attribute the British economy’s poor performance entirely to the exchange rate is to jump to conclusions.
For one thing, the export industries on which Britain traditionally relied – textiles, steel, and shipbuilding – were now subject to intense competition from later industrializers with more modern facilities, including the United States and Japan. The situation was not unlike the competition currently felt by US manufacturing from China and other emerging markets. Then as now, it is not clear that a weaker exchange rate would have made much difference, given the emergence of these rising powers. Nor did the tariffs the United Kingdom imposed in the 1930s revive its old industries.
Moreover, Britain had difficulty developing the new industries that constituted the technological frontier – electrical engineering, motor vehicles, and household consumer durables – even after devaluing the pound in 1931. The US and other countries were quicker to adopt new technologies and production methods, such as the assembly line. Union militancy discouraged investment. Workers with the relevant skills and work ethic were in short supply. Again, these are not unlike complaints heard today from the operators of TSMC’s new semiconductor fab in Arizona or Samsung’s chipmaking plants in Texas.
And, of course, it did not help that the 1930s were marked by trade wars and a decade-long depression.
Notwithstanding these problems, sterling’s position as an international currency survived the 1930s. In fact, the pound regained some of the ground as a reserve and payments currency that it lost to the dollar in the preceding decades. Whereas Britain was broadly successful in maintaining banking and financial stability, the US suffered three debilitating banking and financial crises. The UK maintained stable trade relations with its Commonwealth and Empire under a system of imperial preference that negated the effects of otherwise restrictive tariffs. And it remained on good terms with trade partners and political allies beyond the Commonwealth and Empire, including in Scandinavia, the Middle East, and the Baltics, where monetary authorities continued to peg their countries’ currencies to sterling.
The lessons for those seeking to preserve the dollar’s status as a global currency are clear:
Avoid financial instability, which in the current context means not allowing problems in the crypto sphere to spill over to the rest of the banking and financial system.
Limit recourse to tariffs, since the dollar’s wide international use derives in substantial part from America’s trade relations with the rest of the world.
And preserve the country’s geopolitical alliances, since it is America’s alliance partners who are most likely to see the US as a reliable steward of their foreign assets and hold its currency as a show of good faith.
The US, to all appearances, is going down the opposite path, risking financial stability, imposing tariffs willy-nilly, and antagonizing its alliance partners. What was achieved over a long period could be demolished in the blink of an eye – or with the stroke of a president’s pen. Churchill was aware of the risks. As he put it, “To build may have to be the slow and laborious task of years. To destroy can be the thoughtless act of a single day”…
However, while I have no complaints, I do have additions:
As people have been noodging me in email, it would be much better framing for those of us who want to keep the dollar's exorbitant privilege to focus discussion not on America's "trade deficit" but on its "investment surplus":
Too often, discussions about the U.S. trade balance are framed in alarmist tones: the trade deficit is presented as a sign of economic weakness, of deindustrialization, or of financial imprudence. But this is an aspect of the bag-of-words nature of language, and of the English language in particular. “Deficit” sounds weak and bad. “Surplus” sounds strong and good. However…
Current-account rade deficit = capital-account investment surplus by arithmetic necessity:
From an accounting standpoint, the trade deficit is the mirror image of an investment surplus. Dollars that foreigners earn from exporting to the U.S. are recycled into dollar-denominated assets—from Treasury securities to direct investment in U.S. businesses. These capital inflows keep interest rates low, support the dollar's value, and finance productive investment. Thus a country’s current-account trade deficit is the surplus of national investment over national saving.. These two sides of the ledger must match. Is a trade deficit a problem? Perhaps. But is there any reason to think that eliminating an investment surplus would not be a bigger problem?
If the market were perfect—which it is not—at the margin these considerations would offset each other:
A perfect market would have already pushed the economy to the point where at the margin the benefits from an additional dollar of investment surplus were exactly offset by the opportunity cost of not running a reduced dollar of trade deficit. Global production and investment would have already flowed to wherever they were most productive.
In such a world, the size of a country’s trade deficit or investment surplus would reflect the optimal allocation of global capital.
However, of course, the real world is not this tidy. Capital does not always flow to its most productive uses. There are frictions, informational asymmetries, institutional weaknesses, and policy distortions.
We must focus on those and on the balance among them if we are to think coherently.
Which, I note, absolutely nobody anywhere in the Trump administration is doing, or shows even the slightest sign of being capable of trying to do, if any of them wanted to, which none of them do.
So the key questions in deciding whether one wants the government to put its thumb on the balance here is: What, where, and how important are the externalities?:
The way economists set up the world, you need an “externality”—a cost or benefit not already captured in the market price—to justify any “interference” with the competitive market system. In the context of the trade balance, externalities might arise from the erosion of the industrial capacity to develop and deploy valuable technologies that arises as a consequence of a trade deficit. The right debate to have, then, is not whether the trade deficit is arithmetically equal to the investment surplus (it is). The right debate to have is whether the social costs of the former are greater than the social benefits of the latter. This is a question about the structure of technological ecosystems.
The big negative externality from a trade deficit springs from the erosion of the communities of engineering practice that enable the creation and deployment of product and process technologies:
When industries shrink or disappear due to import competition, the damage is not only in lost output or employment. There is also the loss of accumulated tacit knowledge, of organizational capabilities, and of the embedded skills of networks of suppliers, workers, and engineers. These are the communities of practice that are essential for maintaining and advancing a country’s technological frontier. Their decay can have long-term effects on innovation and productivity.
On the other hand, the big positive externalities from the investment surplus induced by the dollar's strong role as safe haven are two:
The first is the rent-sharing of gains from investment to stakeholders in the production, distribution network other than the investors. These are mighty.
The second is the fact that not just production but investment nurtures communities of engineering practice as well. Capital inflows into the U.S. fund productive investment in new technologies, in infrastructure, and in the kinds of high-tech and knowledge-intensive industries that are America’s comparative advantage.
These investments can generate and sustain engineering communities just as much as manufacturing can. Moreover, the global demand for dollar assets gives the U.S. a unique position: it can earn seigniorage, attract talent, and spread its economic influence widely.
Thus a country’s position as the linchpin of the global financial system is not analogous to the "resource curse". The problem with having a compared to advantage in natural resources is threefold: (a) the communities of engineering practice are elsewhere, and the knowledge externalities from their creation and maintenance (mostly) benefit those elsewhere and not you; (b) the slopes of supply and demand in the global economy make technological progress in producing natural resources primarily benefit resource consumers (which technological progress in producing manufactures primarily benefits manufacturing producers); and (c) your politics is poisoned by high-stakes zero-sum fights over resource rents. To compare the dollar’s role to a “resource curse” is one of the dumbest lights on the tree of economic ideas.
Indeed, one interpretation—the very sharp Bob Allen’—of America’s economic-industrial exceptionalism in the 1900s is that it grew out of the scale of the investment build-out of America in the late 1800s:
A build-out at a scale that Germany and Britain could not match
A build-out that induced by our open-borders policy and the resulting high rate of immigration of the entrepreneurial.
Economic historian Bob Allen has, I think, pushed this hardest. In his view, America’s economic preëminence throughout the entire 1900s century was not just a result of technological ingenuity or abundant resources. It was also about scale—about being able to mobilize vast amounts of capital and labor in a relatively open and entrepreneurial environment. Immigration brought skills, ambition, and diversity. The financial system mobilized capital on a national scale. And the government often played a facilitating role in this build-out. These elements combined to create a dynamic and resilient industrial economy.
People also refer to income-distribution externalities from a reduced trade deficit—that a smaller trade deficit would mean more good blue-collar jobs at good wages:
Yes, trade deficits can contribute to wage stagnation and job losses in certain sectors. This has distributional consequences. If import competition undermines well-paying jobs for workers without a college degree, the result is social dislocation and political backlash.
That said: That was true four decades ago. It is not true now.
The structure of the U.S. labor market has changed. The bulk of good blue-collar jobs at good wages that were destroyed were destroyed by deunionization. The bulk of the remainder that were destroyed were destroyed by labor-saving technological progress in the supply of manufactures faster than growth in the demand for manufactures. Yes, there was a “China shock”. No, there was not any such thing as a “NAFTA shock”. The blue-collar jobs we could get from import substitution are not good jobs, they are not especially at good wages, and they are few in number. to imports in the 1990s and 2000s are not coming back, and those that remain often do not pay as well or offer the same security. Today, the challenge is as much about automation, changing technology, and internal institutional arrangements as it is about trade. Focusing on the trade deficit alone, without understanding these broader forces, is to misdiagnose the problem.
Of course, Barry did not have space to make any of these additional points:
Barry Eichengreen’s piece is a nice example of high-class economic history and policy analysis. That he did not delve into these issues is not a fault, but a choice about scope and emphasis.
Perhaps I should try to compress these points, and use them for my own now-overdue Project Syndicate column this month?:
Allen, Robert C. 2014. “American Exceptionalism as a Problem in Global History.” The Journal of Economic History 74 (2): 295–317. <https://doi.org/10.1017/S002205071400028X>.
Grigg, P. J. 1948. Prejudice and Judgment. London: Jonathan Cape.
Here is Grigg’s full description of the debate, at which Keynes may or may not have had an off-day:
P.J. Grigg: Prejudice & Judgment: ‘Perhaps the most important problem which faced Winston [Churchill] in the first year of his Chancellor[ of the Exchequer]ship was whether or not this country should return to the Gold Standard.
The legend has grown up and has obtained such currency that Winston himself has almost come to believe it, that the decision to go back to gold was the greatest mistake of his life, and that he was bounced into it in his green and early days by an unholy conspiracy between the officials of the Treasury and the Bank of England. Nothing could be further from the truth. He was certainly told soon after his arrival that the Act under which gold payments were suspended would expire with the year 1925, and that he would, therefore, have to face before very long the choice between going back to gold or legislating to stay off it for another period of years. It is also the case that the Treasury and the Bank were definitely in favour of taking the final step in the continuous process of restoring the pound to parity, which had been going on ever since the first World War ended.
Here it may be as well to observe that, between the report of the Cunliffe Committee in 1918, recommending an ultimate return to gold at the old figure, and lateish in 1923 when Keynes first began to cast faint doubts on this policy, not a dissenting voice was heard. During the immediate post-war inflation, the pound had fallen to $3.20. In 1920, Austen Chamberlain had taken drastic steps to balance the Budget and arrest the inflation. The counter-measures naturally involved adjustments of wages and a considerable amount of unemployment. The unemployment was intensified by the coal strike of 1921, and at its highest point it reached a figure of about two millions. By April 1921 the era of rapid reductions in Bank Rate had begun, and by July 1922 it was down to 3 per cent, in those days regarded as a very low figure. Sterling on New York had recovered to $4.20 by January Ist, 1922, and for the whole of that year, English prices were practically stable.
The exchange at the beginning of 1923 was $4.634, unemployment was still nearly at 1,500,000, but it diminished steadily to round about 1,100,000 by December. In the second six months, prices began to rise and so, in July, Bank Rate was raised to 4 per cent. The pound had got as high as $4.734 in February 1923 but from that point it declined to $4.34. In 1923 prices rose sharply but, oddly enough, unemployment increased somewhat, while from the time the Dawes Report was published in April, the exchange rose again, and by the beginning of 1925 was once more within 24 per cent of its pre-war parity. Some contemporary calculations seemed to indicate that at this figure, sterling was over-valued by something under 5 per cent. But even so, it looked as if the last step towards the goal ought to be neither long nor difficult.
Since the Armistice in 1918, every Government, including Mr. MacDonald’s, had proclaimed its intention of working towards the restoration of the Gold Standard as soon as possible, and the course of fiscal and monetary events in these years was plainly being continuously directed to this end. It will be remembered, also, that the famous Genoa Resolutions, for which R. G. Hawtrey and the late Sir Henry Strakosch were largely responsible, urged a general return to gold among the nations of the world, though not in all, or evem in a majority of the cases, at the previous parities. In fact it can be said that, when Mr. Baldwin became Prime Minister for the second time, the opponents of the policy advocated by the Cunliffe Committee were confined to a small number of those who were susceptible to the still small voice of Keynes, and this in spite of the fact that the still small voice was already beginning to be immeasurably amplified by the multiple organ of Lord Beaverbrook.
Mr. Churchill reaffirmed the policy on February 12th, 1925. In March, Bank Rate was advanced to 5 per cent, which, to those who had eyes to see, meant that a decision had been taken. But there was no question of its having been a snap decision. The examination was careful and exhaustive. In Winston’s private circle there were a few of the Keynes-cum-Beaverbrook school who vehemently put the case for not returning to gold at all, there were others who pressed him to wait, and others again who advocated a return but at a somewhat lower gold equivalent than the one which had prevailed in 1914. All the points made by the enemies or critics were put to his official advisers, and argued out at length in written memoranda and oral discussions. Nor did his advisers ever conceal from him that a decision to return might involve adjustments which would be painful, and that it would certainly entail a more rigorous standard of public finance than any system of letting the exchanges go wherever the exigencies of a valetudinarian economic and financial policy took them.
I remember well his giving a dinner at which I was present, where there was to be a sort of Brains Trust on the subject. The proponents of a return to gold were Sir Otto Niemeyer of the Treasury and Lord Bradbury as he had now become, while the antagonists were Keynes and Mr. McKenna. The symposium lasted till midnight or after. I thought at the time that the ayes had it. Keynes’s thesis, which was supported in every particular by McKenna, was that the discrepancy between American and British prices was not 2% per cent as the exchanges indicated, but 10 per cent. If we went back to gold at the old parity we should therefore have to deflate domestic prices by something of that order. This meant unemployment and downward adjustments of wages and prolonged strikes in some of the heavy industries, at the end of which it would be found that these industries had undergone a permanent contraction. It was much better, therefore, to try to keep domestic prices and nominal wage rates stable and allow the exchanges to fluctuate.
Bradbury made a great point of the fact that the Gold Standard was knave-proof. It could not be rigged for political or even more unworthy reasons. It would prevent our living in a fool’s paradise of false prosperity, and would ensure our keeping on a competitive basis in our export business, not by allowing what I believe the economists call the ‘terms of trade’ to go against us over the whole field, but by a reduction of costs in particular industries. In short, to anticipate a phrase which Winston afterwards used in answering a sneer about our having shackled ourselves to gold, we should be doing no more than shackling ourselves to reality.
To the suggestion that we should return to gold but at a lower parity, Bradbury’s answer was that we were so near the old parity that it was silly to create a shock to confidence and to endanger our international reputation for so small and so ephemeral an easement. It was very likely that contractions of the basic industries would have to be faced, but having lost the advantage of the flying start which we gained at the time of the Industrial Revolution, we should have to do something of the sort anyhow, and the best future for this country, therefore, lay in preserving and even developing our international banking, insurance and shipping position, and in turning ourselves more and more into producers of the higher classes of goods, in whose manufacture individual skill and workmanship was of greater moment than the employment of large numbers of operatives at repetitive processes—in other words, in those forms of enterprise where the man was more important than the machine.
Looking back at this argument, it seems to me to embody all that conflict between the long and the short view and of the general and the particular, which Mr. Henry Hazlitt of the New York Times asserts in his amusing book Economics in One Lesson to be the essence of the cleavage between the classical economists and their modern successors. Certainly Keynes was a man of changing, if not of short, views. For example, in about 1923, 1 remember his writing that ‘we must cling to Free Trade as an immutable dogma’. In 1930 and 1931 he was advocating a general tariff of 10 per cent to correct the initial over-valuation of sterling which he appeared to believe had persisted ever since 1925. Of course he would have preferred to devalue sterling by 10 per cent, assuming that it would have been possible to slip quietly off one parity and settle down quickly at one 10 per cent lower. But he calculated that Mr. Snowden would never willingly agree to this and so he fell back on something which was in flat contradiction to his immutable dogma of 1923.
Needless to say, the high protectionists of the Tory party welcomed this notable new ally and loudly trumpeted his conversion. And in 1931 and 1932 they got their way, but it was not a uniform 10 per cent revenue tariff; there was a wide measure of industrial protection as well. Very soon after, they got agricultural quotas in addition.
In the meantime, of course, Britain had gone off gold, not in a genteel way, stopping short at a devaluation of 10 per cent, but with a catastrophic fall of 30 per cent or more which destroyed whatever basis of coherence and stability the world had at that time.
One thing about this argument comes back to me with crystal clearness. Having listened to the gloomy prognostications of Keynes and McKenna, Winston turned to the latter and said: ‘But this isn’t entirely an economic matter; it is a political decision, for it involves proclaiming that we cannot, for the time being at any rate, complete the undertaking which we all acclaimed as necessary in 1918, and introducing legislation accordingly. You have been a politician; indeed you have been Chancellor of the Exchequer. Given the situation as it is, what decision would you take.’
McKenna’s reply — and I am prepared to swear to the sense of it — was: “There is no escape; you have got to go back; but it will be hell.” I am confirmed in my recollection of McKenna’s attitude by reading again his speech at the annual meeting of the shareholders of the Midland Bank on January 28th, 1925. In this, he Janus-like praises the skill of those who had been managing the currency without the Gold Standard to help them, while at the same time sagely announcing that ‘as long as nine out of ten ‘people think the Gold Standard is the best, then it is the best’. The Times took this utterance as favouring an early return to gold. And in the debates in the House, not one responsible member proclaimed himself an enemy of the Gold Standard. The Labour Party wanted to be in a position to say ‘I told you so’ if things went wrong, and put down a formal resolution deploring the undue precipitancy of the step the Chancellor of the Exchequer was taking; but at no stage did they divide against the Gold Standard Bill or any of its provisions.
Others who afterwards became strident critics of the Gold Standard imitated this interesting example of having it both ways. Snowden moved the Labour motion, but it is easy to discern, even from the dead pages of Hansard, how little his heart was in it, which was not surprising, seeing how often he had committed himself to the policy of the Cunliffe Committee. Moreover, he had, in the previous June, set up a secret committee, consisting of Austen Chamberlain, Bradbury, Niemeyer, Mr. Gaspard Farrar and Professor Pigou, which was, in effect, to advise when and how the final step in that policy should be taken. The committee did not report till after he had left office. It recommended almost exactly the procedure which his successor adopted.
Winston’s speeches on the subject were extremely effective, and I still find in them an entirely valid defence of the action which he then took, and which he seems subsequently to have been persuaded to repent. Some of his metaphors were apt as well as picturesque and amusing. I have already mentioned the one about shackling ourselves to reality. Others which make me chuckle to this day are his confession that ‘we could no doubt keep our export trade continuously booming at a loss’; his comparison of those who wanted to go back at a reduced parity to grocers or tailors who in difficulties ‘take an ounce off the pound’ or ‘snip an inch off the yard’; and, best of all, his assertion that what the followers of Keynes wanted was to establish a quicksilver standard.
Incidentally, Keynes wrote in the Nation that the Treasury and the Bank of England had contrived to arrange the return of gold along the most prudent lines open to them. There could be no doubt, he went on, of our ability to maintain the Gold Standard once the decision was made. The critics had opposed the policy of returning to it because it was unwise, not because it was impracticable. It is to be noted that in 1925 Sir Henry Strakosch was an enthusiastic and public supporter of everything that had been done…
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The London Economist travels into the Heart of Darkness that is the Republican Reagan-ranch stronghold of Simi Valley in southern California. It finds strange Republican economic rituals, a landscape where inconvenient facts are ignored, the plain reality of the situation denied, and analysis disappeared and replaced by applause lines: a party united by nostalgia, grievance, and a refusal to reckon with any form of policy arithmetic as they pursue the entrenchment of plutocracy and the stoking of ethic, religious, and cultural grievance.
Economist: The fantastical world of Republican economic thinking <https://www.economist.com/united-states/2025/06/02/the-fantastical-world-of-republican-economic-thinking>: ‘FEW ECONOMICS conferences open with a burst of patriotic ceremony…. “I always wondered what the shining city on the hill looked like and it’s pretty cool to see it,” quipped Kevin Warsh, a former Federal Reserve governor. The Reagan National Economic Forum…
You get a definite sense of contempt—utter contempt—swimming an inch below the surface here—and not just from the “fantastical world of Republican economic thinking” headline-writer:
In this dreamy setting… air of unreality… clubbish atmosphere depend[ing] on an amiable refusal to engage...
Item #1:
Turning a blind eye…. Mr Warsh… and French Hill… chairman of… House financial services…. Johnson… Nixon and… Reagan all pressed Federal Reserve chairs to cut rates, they note. But they swerve the fact that Mr Trump’s public threats to fire Mr Powell… go further…
Item #2:
Stick to crowd-pleasing classics. Chris Wright… secretary of energy… red meat… fossil fuels…. Alaska, he joked, faced greater sanctions on its energy production than Iran under the Biden administration. But Mr Trump’s tariffs, which Mr Wright did not mention, are a headache for the energy industry…. The souring picture for global growth and rising production… price of oil [down] from $80 per barrel in January to just $60…. Working oil and gas rigs… at its lowest level since 2021…
Item #3:
The thickest air of fantasy lingers over the subject of tax, spending and borrowing…. The Tax Foundation… expects that the [new Trump] law will increase America’s cumulativebudget deficit by $1.7trn by 2034, even after… slightly higher growth… before any rise in borrowing costs…. [Gary] Cohn complain[ed]… spending never returned to pre-pandemic norms…. The new administration [did] inherited a deficit worth 6.3% of GDP… almost two percentage points larger than… 2019. But the deficit grew during Mr Trump’s time in office too...
And yet the reporter sees:
Veteran and insurgent wings rub[bing] along well enough when it comes to economic goals. All are excited for a combination of tax cuts, deregulation and drumming corporate wokery out of American business. Reliable lines for laughs, cheers and consternation from the audience include attacks on the antics of communists, whether those that reign in Beijing, or in San Francisco…
Blaming the Democrats will wear thin as the administration’s months in office become years. For Reagan it was always morning in America. For the modern Republican Party, it is past time to wake up…
I suppose my first reaction is to over-egg the pudding by adding to the contempt. Gary Cohn told an awful lot of lies in his day in the first Trump Administration as to what the likely growth consequences of the Trump-McConnell-Ryan tax cut were likely to be. He was one of the principal architects of a cut in taxes on capital that managed to have next to zero positive effect on the incentives to invest in America. That was an extraordinary act of policy malpractice. He was at the core of it.
And his complaint and excuse for the fact that Trump-Thune-Johnson are trying to blow up the deficit again? That Biden did not cut the deficit. In Cohn’s mind, Democrats are supposed to cut the deficit—after all, Obama did Clinton did, and Carter did. You have to go back to John F. Kennedy, assassinated 63 years ago, to find a Democratic president who did not succeed in reducing the deficit while in audience. (By contrast, every single Republican since Dwight D. Eisenhower has seen the deficit increase during their term in office.)
It’s not fair! So says Cohn. Biden was supposed to make tough choices and cut the deficit so that we could blow it up again and party! He didn’t do that!
Well: call the WAAAMBULANCE.
My second reaction is, as I wrote back in 2019:
Brad DeLong: Passing the Baton <https://www.bradford-delong.com/2021/03/hoisted-from-%C3%BEe-archives-2019-passing-%C3%BEe-baton.html>: ‘Looking to the right of the Rubin Wing of the Democratic Party, we see rubble. Then we see more rubble. And more rubble. Beyond that, rubble. And then, at the far end of the political spectrum, what former Secretary of State Madeleine Albright can only call the American version of a 21-st century neo-fascism <https://books.google.com/books?isbn=006293127X>, devoted to entrenching plutocracy and stoking ethnic and religious hatreds, with which a great many people who ought to know better are making accommodation…
That seems to be confirmed, in spades.
And yet this attracts the votes of half of Americans who bother to vote—and a larger fraction of those who do not.
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People do not last more than a week as headline writers unless they are all-in on enthusiastically making things more exciting in order to attract the eyeballs. So why is Bloomberg reporter Josh Wingrove more excited about Trump administration claims that Trump & Xi will speak this week than his headline writer? What you are doing so much sanewashing of Trump and his administration that your headline writer is saying “uh-oh” and trying to tone things down, you have gone too far…
This morning we have yet another strange story from Josh Wingrove of Bloomberg:
Josh Wingrove: Trump Team Pushes for Xi Call as Trade Tensions Simmer <https://www.bloomberg.com/news/articles/2025-06-02/trump-team-pushes-for-xi-call-as-trade-tensions-simmer>: ‘US President Donald Trump and Chinese President Xi Jinping are likely to speak this week, the White House said, as the world’s two largest economies remain locked in trade turmoil. “I can confirm that the two leaders will likely talk this week,” White House Press Secretary Karoline Leavitt told reporters on Monday. She did not provide a date for what she said was a “potential” call nor guarantee one would occur. The Chinese Embassy in Washington did not immediately respond to a request for comment…. Top Trump economic adviser Kevin Hassett signaled Sunday the White House was anticipating a call this week with the Chinese leader. “President Trump, we expect, is going to have a wonderful conversation about the trade negotiations this week with President Xi. That’s our expectation,” Hassett said on ABC’s This Week…
Is there any reason other than that the Karoline Leavitt says so to believe that Donald Trump is going to speak with Xi Jinping this week? No.
Is there any reason other than that he says so to believe that Kevin Hassett expects Donald Trump to speak with Xi Jinping this week, let alone that they will have a “wonderful conversation”? No.
Are Kevin Hassett and Karoline Leavitt known big liars? Yes.
So just what does Josh Wingrove think he is doing? Why is the first sentence not “known liars Karoline Leavitt and Kevin Hassett claim that they ‘expect’ and that it is ‘likely’ that Donald Trump and Xi Jinping will speak this week”?
The United States government is not a government. It is a TV set. Maybe there are some numbers being crunched, personally, by Kevin Hassett with his copy of Microsoft Excel. Maybe not. But otherwise the gears of the analysis and policy creation and coördination capabilities of the U.S. government are disconnected from the White House.
But the government of the People’s Republic of China is a government. Behind the actions of its leader are cost and benefit evaluations, scenario planning, public-information campaigns, expectations of what are going to be the results of individual actions and how the consequences of those actions are then going to be exploited and managed. If Xi Jinping were planning to spend any time talking to Donald Trump this week, the PRC government would already be trying to shape the perception of that call and maximize its win from it.
So far there are absolutely zero signs that this is happening.
Thus, and let me stress this: as of now there is no independent, verifiable information available that confirms either Karoline Leavitt or Kevin Hassett’s statement about an imminent Trump-Xi call; the only public evidence is the White House’s own expectation, not confirmation from China or third-party sources.
So we should approach this with the skepticism and analytical rigor that the situation demands. Hassett’s statement—“President Trump, we expect, is going to have a wonderful conversation about the trade negotiations this week with President Xi”—is, at best, an expression of hope or a public relations maneuver, not a statement of fact grounded in observable reality.
Here’s why:
No Independent Confirmation: As of now, there are no credible reports from independent media, Chinese officials, or international observers confirming that such a call is scheduled or even likely. The Chinese Embassy in Washington, for example, did not respond to requests for comment, and there’s no statement from Beijing indicating Xi’s willingness to engage directly with Trump this week.
Pattern of Strategic Ambiguity: The Trump administration has a well-documented history of using optimistic or ambiguous statements about high-level talks to influence markets and shape public perception, often without concrete follow-through. This is a classic “expectations management” tactic—float the possibility of progress to buy time or calm nerves, especially when the underlying negotiations are fraught or stalled.
Chinese Reluctance: The reporting makes clear that Xi Jinping has been notably reluctant to engage in direct calls with Trump, preferring to delegate to advisers. The last known conversation between the two leaders was months ago, and there’s no evidence of a shift in China’s approach.
Market Signaling vs. Diplomatic Reality: Statements like Leavitt’s and Hassett’s are often aimed as much at market participants and domestic audiences as at the negotiating table. They serve to project confidence and momentum, even when the actual diplomatic machinery is grinding slowly or stuck.
Bottom line: Unless and until there is corroboration from Chinese sources or independent reporting, Hassett’s statement should be treated as an aspirational message, not a reliable indicator of imminent diplomatic engagement.
And Josh Wingrove knows this.
His editors know this.
His headline writers know this.
Rather strikingly for headline writers, they have not amped-up but rather toned-down the lead:
Amping-up the lead would be: “‘Wonderful’ Trade-Negotiation Progress Seen From Likely Imminent Trump-Xi Conversation”.
Reflecting the lead would be: “Trump and Xi Expected to Talk Trade This Week”.
But the headline writers tamped it down: “Trump Team Pushes for Xi Call as Trade Tensions Simmer”.
Bloomberg News's major asset for the long run is that it works for its readers rather than for sources, owners, or advertisers. It is able to do so because it is largely a defensive flank guard, trying to keep people who pay serious money for their Bloomberg terminals from leaving their screens.
But when its headline writers are working harder than its reporters to make sure that the readers are informed rather than misled, it is a sign that the times are out of joint inside the organization.
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From clay tablets to GPT LLMs: meditating on minds & machines while knowing that "AI" is not your friend but rather your interface to a very weird library. Mental models, moral panics, why prompting is a form of wizardry, and considering MAMLMs as strange mirrors shaped by the patterns of online discourse…
I am going to try to reserve Mondays to think out loud about Modern Advanced Machine Learning Models—MAMLMs. And I am going to try to shut up the rest of the time.
And now it is Monday. So let me start with three observations I think are relevant to MAMLM’s:
The first is an example of the genus of moral panic that happens when advances in information technology shift our distributed brain processing so that more of the current state is stored in front of rather than behind our eyes:
Jim O'Shaughnessy: <https://newsletter.osv.llc/p/on-ai-writing-thought-design-and>: When I was growing up, calculators were new.... And then for a while, they banned calculators from class. Because that was cheating... [for] four years... until people realized... that moral panic was completely misguided.... I think we're... seeing the same thing with schools... banning AI.... It drives me crazy because it's like... "we just discovered how to consistently start a fire."... :You could get burned by that fire, and therefore, you may not do it."... Hey, right after we invented fire, guess what happened? We invented fire alarms, fire departments, firemen, you know, fire exits, all because fire is that powerful. It is incredibly great for us. It's responsible for our prefrontal cortex. Right. Some speculate that it was only when we started cooking our food that the prefrontal cortex emerged…
The calculator is simply one of the most recent of these. After all, in the real old days, you could not be a real scribe unless you spent at least an hour a day getting your clay into the right consistency and then smoothing it, during which time you meditated on what you were going to write that day.
The second is about how the “ChatBot” nature of our interfaces to MAMLMs is misdirecting us by casting a false illusion about what they really are:
Nathan Baschez: <https://newsletter.osv.llc/p/on-ai-writing-thought-design-and>: ‘Because [AI] takes the form... of a chatbot, it feels... like... a person.... [But] AI[s]... really contain multitudes.... A lot depends on the exact way that you tend to prompt it.... Com[ing] from... an engineering background... I'm used to... tinkering with systems until they give me the results that I want. And—rightfully so—that's not the way that we think about collaborating with other people.... If you come to AI with this mindset of... ["]I'm going to cross my arms and see how good of a job you do... from a distance["]... that's just the wrong way to approach it.... To have a tool that... within... two seconds... give[s]... you more choices that you wouldn't have thought of otherwise.... [is an] incredibly valuable thing.... And... it's about learning little tricks... to prompt it...
The way I think about it is this: You are not talking to a person. You are utilizing a natural-language interface to a summarization engine. What does it summarize? The internet, more or less: it tells you what the typical internet s***poster responds when presented with a call like the one you issue.
Why is this useful?
Because if you can poke it properly by your emitting the right calls you can guide it into a corner of the internet where this call-and-response elicits true and accurate information. And because its responses are much easier to parse for interesting tidbits than the ten blue links.
Why are its responses easier to parse?
I guess: (a) Because our minds are built/trained for call-and-response rather than archives. (b) Because its compression of the entire internet into a 3000-dimension vector space is a much finer and more effective classification scheme than <keywords> + <pagerank> or whatever Google and company are really doing these days. (c) This is especially true now that they have been polluted by so much SEO spam tuned to mimic high-quality results for a <keyword> + <pagerank> search.
How can it be so much finer and more effective a classification scheme?
Because of Deep Magic I do not understand. And I need to understand it if I am to have any chance of having even a semi-accurate Visualization of the Cosmic All going forward.
The third is Dan Davies here, talking not about MAMLMs, but rather about learning history:
Dan Davies: <https://backofmind.substack.com/p/the-valve-amplifier-of-history>: ‘“Recognising that an analogy is no good” is a relatively quick cognitive operation…. Problem solving is based on making mental models of the problem; abstracting some of the detail while hoping that you’re capturing enough of the causal structure so that if you solve the problem “in the model” the same solution will work in real life. Usually, disanalogies are quick to spot…. Creating a mental model from scratch is a very expensive cognitive operation, though. So, if you have a supply of previously existing mental models, it might be a very good strategy to just start going through them one by one, effectively running your thumb through the book going “nope, nope, nope, maybe … nope, nope, nope … nah, doesn’t work … maybe … nope, nope … hang on this might work”. Rather than taking on the expensive task of making a model that you’re certain will work because you’ve constructed that way, you’re making multiple cheap attempts. But where might you get a large supply of ready made mental models to go through in this way?…
Dan Davies: ‘Just filling your head up with stories about how things could happen means that you’ve got a catalogue to riffle through, while the constraint that they are stories about things that actually did happen once should exercise some kind of rudimentary quality control on the library of candidate solutions…
The alternatives that MAMLM GPT LLMs offer us in response to our prompts are, it is true, lacking relative to the analogies offered up to us by history. For history, after all—as long as it is true history rather than fantastic, fabulous, or romantic—is “useful to those inquirers who desire an exact knowledge of the past as an aid to the interpretation of the future, which in the course of human things must resemble if it does not reflect it…”
The alternatives that MAMLM GPT LLMs offer us are lacking in that it is unconstrained by thing like, you know, truth and reality.
But they have an edge. They can generate a huge catalogue of alternative possibilities very very quickly. And those are all clustered around the particular point you choose in the 3000-dimension vector space compressed classification of the internet that lies at their heart when they are considered as summarization engines. Thus, if properly prompted, they can get close enough to serve as a place for you to start, or at least to spark thought.
Remaining questions, at least as I see things:
Why are they so good—or are they not so good, but rather a combination of “Clever Hans” and “cold reading”?
What I call “Clever Hans” is when you put as much work into writing the prompt as you would into doing the thing.
What I call “cold reading” is when positive assessments of MAMLMs is based on their having been trained to deliver shotgunning plus Barnum statements, plus confirmation bias.
(Note that shotgunning and Barnum statements can be very useful even when wrong, if they carry other messages, like “this is close to the Python syntax for that”.)
How good can they get, considered as compression-and-summarization-and-alternative-generation engines?
When does the compression-and-summarization engine frame start to mislead, if it ever does?
What will the next thing be in MAMLMs, that does better than training a simulation of the typical internet s***poster?
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