I’m not a fan of using AI. I’m not a fan of paying for it.

But my FitBit watch is now Google Health. It monitors my sleep and my exercise. It talks to me, and I talk back. Yes, I know it’s an AI, but I don’t care.

You will have noticed that a lot of the illustrations here now come from ChatGPT and Gemini. ChatGPT was ahead for a while, but Gemini is now better. (ChatGPT is also starting to demand money.)

I use both and take what works. Yes, I know they’re both AI, but a “cartoon” is more descriptive than a static image, and I don’t have to worry about Getty or some other copyright holder coming after me when I use something.

I don’t use CoPilot, or I pretend not to. But when it gives me those little blue squiggles underneath my text, I react. The AI inside the WordPress editor is also trying to teach me not to use so much passive voice. Sometimes it even succeeds.

There are hundreds of other examples I could cite from my daily life. Think about it and you can think of many, too, times when you don’t even think you’re using AI, but you are.

The point is that AI is entering all our lives slowly, on little cat feet, often without our realizing it. When we decide things are better with it, we accept it, even while we reflexively reject the technology and its implications.

In this way, again, AI is different from the PC, different from the Internet. The PC changed everything. The Internet made change fun. AI is more like global warming. It’s accretive. It sneaks up on us, the way a cat worms its way into our hearts.

The WDMing of AI

Om Malik has compared what’s happening to Wide Division Multiplexing (WDM), the use of colors to turn a single optical fiber into literally thousands of them. In my book on Moore’s Law, last updated in 2021, I told of how it killed Enron, which tried to make a market in bandwidth as it had once made one for natural gas. I compared it to selling kittens, and the assumption some foolish people have that they have economic value. (They don’t.) Since the fall of Enron, DWM has kept advancing, and can now run 51.2 terabits of data down a single fiber pair. The theoretical limit is even 12 times faster.

I think that’s what is going to happen with AI. This is really bad news for the data center boys. We have reached a point where AI companies must increase the price of tokens substantially to keep paying their bills. Companies that had been tokenmaxxing are acting like drug addicts. It’s especially bad for those using AI Agents.

I would argue that this is a good thing. It’s causing developers to focus on token efficiency, or token optimization. It’s creating new measurement terms like tokens per watt. It is even causing some people to question their own layoffs, because tokenmaxxed AI doesn’t save any money at all.

As with DWM, token prices can be made to fall. There’s a race going on, between token efficiency and token pricing. It reminds me a bit of how broadband companies tried to limit video downloads 20 years ago, capping streams to conserve their bandwidth. It’s also a phase.

Beyond the Crash

The rise of WDM, or DWDM (Dense Wide Division Multiplexing), was in the background of the Internet boom in the late 1990s, and the bust as well. It didn’t prevent what happened. The impact of it took time to manifest, as bandwidth prices fell and media learned how to make money from it. In that way the dot-bomb was healthy. It brought people into lower cost development modes, like open source, and gave the technology time to mature.

Cats multiply fast, but you still can’t rush gestation and birth.

Do what I do. Relax and say Om.

Recently our local library became a prison. (Image created by Google Gemini.)

A crazy homeless man killed someone in the stacks. The library’s reaction was to close the front door, which looks out in the street, install metal detectors at the back, which looks out on a parking deck, and put all the employees behind high plastic shields. They had already replaced the comfy chairs in the reading room with hardbacks, to keep the homeless out.

This is a liberal community. I guess we should be thankful. MAGA would have just closed the library.

The point is that one bad act can easily cause an overreaction that takes everything down. This leads me to the precipitating event that might cause a market crash, and the lessons of the Ukraine War.

I have already identified three events that could cause a market crash at any time.

• A failed bond auction could make interest rates spike with no end in sight.

• The oil crisis is weeks away as the west’s strategic oil reserves run down.

• There are the IPOs of SpaceX, OpenAI, and Anthropic, sucking trillions of dollars from investors on fake numbers.

But Ukraine, and to a lesser extent Iran, offers another possibility, and with a call-back to my local library.

How This Works

A drone strike.

Drones are cheap. Even drones with bombs cost just a few thousand dollars. They’re wireless, although radio jamming means some now come with very long fiber optic cables. The point is they’re effective, they’re letting the smaller party beat the bigger one, and they’re scary as hell.

Just fire one at a data center. You will set off a panic that will take the whole house of cards down.

It doesn’t matter who does this. The Administration has been able to Horst Wessel all sorts of things, blaming “the left” for events its own supporters are responsible for. But there are lots of other people who are furious at the Administration, at the rich, at AI, and at the giant sucking sounds data centers make on their jobs, their electricity, and their water supply.

Someone is bound to do it.

What happens when they do? The risk premium for data centers skyrockets with the cost of protection. It’s like closing the front door of the library after a murder in the stacks.

The risk premium sends data center stocks down, which sends big tech down, which sends semiconductor stocks down, which sends everything down. The Administration puts its foot down on all dissent, as though that were a cause, and there’s a reaction from the majority who fear just such an outcome.

The Real Lesson

The true lesson of Ukraine is that infrastructure is vulnerable to technology, that the weak can overcome the strong with it. Money and power don’t win wars. They’re won from the bottom up, by the side that wants it most, by the people side willing to suffer, to learn, to unite, and to innovate.

It’s the client side of war, of politics, and of markets that is going to win this age. That’s what the history books will say.

Two AI “doom loops” are making the rounds right now. They’re very different, but their difference keeps us from seeing either one clearly.

One is about the ultimate destination of AI. It’s an argument between those who see AI as representing abundance and those who see it representing our ultimate doom. This is a false argument.

AI is just a new technology, like the database, or like Cobol. It’s dressed up with pretty baubles, interfaces that appear human, on both the input and output side. The interfaces sound simple. But using them and getting productivity from them is as hard as learning any other complex technology. Nothing has really changed.

The arguments over doom and boom mask an obvious reality. At some point, claims overwhelm valuations and markets collapse. This happened most recently in 2022. You remember Meta’s Metaverse? Augmented reality? People running around looking for Pokemon? SPACs? These were real things, and when they didn’t prove out, the market fell hard. Meta stock fell below $100/share. It’s now $625.

That’s the doom I’m talking about, and it’s inevitable. If I were still 35, I might sit tight, ride it out, and look over its horizon. But I’m 71. I don’t have that much time. Neither do most investors. All those pictures of traders watching a market collapse, they’re all surprised because they’re always different people.

The Three AI Icons

The Three AI Icons coming public this summer are the events most likely to cause a panic, because in at least two of these cases the numbers just don’t add up.

I wrote about the SpaceX scam back in March, and that story is now being discovered. Elon Musk claims to be the world’s first trillionaire by forcing $84 billion in stock down the public market’s throat, representing less than 5% ownership, while claiming he owns a majority stake and can’t be forced out. I’d say no thank you, but by changing the market’s rules, letting the company into the S&P 500 before it’s profitable, he forces index funds, which everyone owns, to buy the thing and hold it like it’s an investment.

I have also written here about OpenAI, which may claim to have a $800 billion valuation when it comes public in a few months. OpenAI was the first mover in this space, but that’s like buying into Netscape back in the day. That’s the thing about the “buy and hold” fallacy. You can say the market will return to its current levels in 25 years, but most people don’t have 25 years, and the participants in the market 25 years from now will be entirely different from those you’re being told to buy today. Can I interest you in some Pets.Com stock?

Then there’s Anthropic, which is supposed to repair all that damage. Anthropic is now bigger than OpenAI, and it may even be profitable (if you squint hard enough). The circular funding of models, of data centers, and of market demand may be working in this case. But at what price? Growth has value, profits have value, but these values must be grounded in reality or you’re buying tulip bulbs. (The growers there did make money for a time.)

Waiting For The Catalyst

You need two things for a crash to happen.

First, everyone must be all-in. They’re not, not right now. Skepticism, even my skepticism, creates a “wall of worry” that stocks can keep climbing longer than short sellers can stay solvent. It’s ironic, but since markets are built on psychology, the fact that there are a substantial number of bets against a proposition can keep that thing flying well beyond any financial escape velocity.

The latest sign of trouble ahead is Micron’s valuation reaching $1 trillion. Micron makes memory chips. These are commodities. They are not expensive to make. Financially, the valuation makes some sort of sense. It’s only about 10 times revenue. But memory is a boom-and-bust business. It’s not something that goes to the Moon. AI has now brought a dozen companies into the trillion-dollar club. That’s before the Three AI Icons list.

But you can’t have a market crash without a catalyst, a precipitating event that turns everyone from buyers to sellers. Back when I was an “Internet Commerce” expert (right), the catalyst was Time Warner’s “purchase” of AOL, in which AOL shareholders got most of the deal. The $165 billion valuation was clearly an upper limit on Internet valuations. If that was the limit, everything else must be worth less, the market decided. A lot of things, it turned out, were worthless.

Beyond the Event Horizon

None of this meant the Internet fizzled out. But if you were holding a broad Internet portfolio at the start of 2000, you had nothing to show for it in 2002. The game changed, it moved on, the Internet continued, but your money was gone with the wind.

This is going to happen again. Everybody knows it. We’re just waiting for some precipitating event, some extremely overpriced deal that turns bulls into bears, and starts a run on the AI bank.

I think it’s going to be the SpaceX IPO. I could be wrong. But a catalyst is coming, and I don’t want to be long when it comes.

This is the third tech boom I’ve covered in my career.

The PC boom was like a steak dinner. It was expensive, but it was also substantial. You could see, smell, and taste the value. I left the table greatly satisfied, able to do things I’d only dreamt of doing before

The Internet was ice cream. It was easy, it was fun, and everyone wanted some. Many of us wanted too much of it. It quickly became addictive. We got fat on it.

Why, then, is AI like canned spinach? It’s not just the data centers and layoffs we’re being forced to swallow. It’s that companies are forcing us to use AI whether we want it or not. Google is no longer Google, and Co-Pilot has ruined Microsoft Office.

The Pope didn’t have to write an encyclical about PCs in 1983 or the Internet in 1998. But he wrote one about AI. (The New York Times wants us to see this as an industry conspiracy. It isn’t.)

The paper is a call to put people and their needs at the heart of the technology and not just the desires of the elites building it. It’s obvious stuff when you look at it, almost amazing it must be said. But it must be said, because the AI Gods seem to think they’re real Gods, and they’re not. Some of the best criticisms of the encyclical come from the AIs themselves. But they seem as helpless to change the technology’s direction as I am. I’m just a user, they’re just the used.

But the big question, for me, remains this. If AI is so good for us, why force it down our throats?

AI By Stealth

You may say, “I don’t use AI at all,” but you would be wrong.

Most of my family in California has gotten into Duolingo lately. I have, too. I use it to learn the languages of the places I might travel to or have traveled to. Turns out Duolingo is one of the 30 largest users of AI Tokens. We’re all learning Portuguese from an AI. Small wonder everyone there speaks English instead.

I am not interested in being infirm, even at 71. The only way to delay infirmity is to become an athlete. I decided to use FitBit for that, because that’s the watch I wear.

It has gotten better, and it now costs about $10/month. Why? Because it has become Google Health, and it’s an AI. I just had a five minute “conversation” with it about getting better sleep.

I’m not a big fan of AI on Co-Pilot, but I hate to see those blue lines under words or phrases. I’ve been fighting them since Word started correcting my spelling, 20 years ago. Now the only way to stop the blue lines is to obey the AI. Even that isn’t good enough, because the AI that serves WordPress has its own strictures. It gets mad when three sentences in a row start with the same word, or when a subhead runs to over 300 words. I avoid that. I obey. (I don’t always.)

AI companies are using stealth to break down AI resistance. The advice you’re getting from your AI broker now comes from a bot. Operators are no longer standing by. None of this is driven by my choices or my desires. It’s imposed, from above.

That’s the problem with AI in a nutshell.

Many people fail to see where the Administration could still be maintaining support.

The answer is the Investor Class.

If you have money in the market, you are doing great. There are millions of people who achieved the Munger dream of $100,000. That money is making money for us, while our peers continue slaving away, worrying about where their next mortgage payment is coming from.

That is today’s class divide.

In the South, investors add God. Those who inherited from their parents, and attend an evangelical church, are completely isolated from what their neighbors consider reality. There’s cash to send the kids to college, enough to go into that sweet good night knowing they will be just like you. Isn’t that the real American dream?

But all this could come crashing down, and soon. There’s now near-unanimity among financial pundits that a crash is coming. Blame tech, blame oil, blame the debt, it’s all about to go pear-shaped and there’s nowhere you can turn.

The Investor Class has heard this before. Meta fell to below $100/share in 2022. The market crashed hard in 2008. Then there was the infamous dot-bomb. We were told to stick with our discipline, we did nothing, and we came out whole. Buy the dip.

But there are crashes and there are crashes. The Dow Jones did not get back to its 1929 high until 1954. Those who survived, like my late grandfather, were permanently broken. My mom kept an empty coffee container for bacon drippings. As she was dying of dementia she moaned, “I don’t have any money. I don’t have ANY money!” (She had money.)

Money Changes People

Money doesn’t buy happiness but try being happy without it. I don’t know who said it first, but it was my mother’s constant refrain when the subject came up.

People who know things are now repeating my call that the SpaceX IPO, due next month, will break the market. My instinct is to reposition in advance, to get out of index funds, buy bonds, and have cash, “dry powder” with which to “buy the dip.”

I own an e-bike and an electric car, but I won’t be immune to the oil shock. As petroleum reserves disappear, all prices will skyrocket. While I may not use much oil, everyone else uses a lot. Double digit inflation is coming, and that dry powder may just go to keeping the lights on.

Tech layoffs will accelerate, debt costs will climb, and the fear of default will make it worse. It’s going to get very scary this fall for the Investor Class. The fewer dollars we start with, the more of us there are. Anyone with under $1 million will be wiped out. Then investors with under $10 million will panic, and when $100 million becomes $20 million the billionaires will become everyone’s class enemy.

The Political Panic

But this won’t just be a financial panic. It will also be a political panic.

Not every investor will look toward policy to solve their problems, but when the small ones see the big ones get bailed out while they’re left holding the bag (as always happens), political winds will shift.

What we have seen so far has been incremental movement toward generic Democrats. It won’t be good enough to be a generic Democrat in November. Investors who find themselves bereft won’t be moving from Trumpism to Bidenism. Tsunamis on the coast will become tornadoes inland.

No one wants to end up like my mom, worrying over every dollar, obsessing over what was lost, until the time that time runs out for you.

ChatGPT and Claude were seen at their launch as applications. (Image from ChatGPT.)

All the Cloud Czars needed to take their lead was to create an AI layer on top of what they had, and scale would do the rest.

But what Jay Valentine, the VC and not the musician, says is that represents a profound misreading. AI doesn’t sit at the top of the stack, but at the bottom. It’s a new operating system, a new way of organizing information.

If true, that means the data center boom is based on a lie. It’s a cover for the fact that Oracle, Microsoft, and (maybe even) Google can’t re-architect their systems fast enough to meet the challenge. That’s why they insist on building giant data centers to handle applications they already produce. They need them for the added costs of running an AI layer on top of them.

Valentine’s not new to this song. Back in January they came up with the charge that centralized data centers were not where AI was going to live. Real-time decisions, they wrote, must and can be handled at the network edge. This is one of those insights that boosted stock in Apple, and that still does. The idea is that AI concepts will filter out to the edge, that Apple owns the edge. Apple is just waiting for that moment when AI comes to it.

The Insight

But what Valentine is saying now is a lot more profound. It is that the data center boom is just a cover-up for software failure. Palantir, Meta, even xAI, have conned Wall Street into letting them build enormous computing stacks that won’t be needed in a few years.

Nvidia should be fine. Nvidia has a client story to tell, and basic AI software tools in hand. But for the rest, there is literally a trillion dollars going out the door they can’t get back. Funding it forced them to fire the software developers who might repair the damage.

Hiring a few superstars won’t solve a problem that lies at the bottom of the software stack. Microsoft CEO Satya Nadella seems to know what must be done, but he may lack the time and the talent to rebuild Windows around the needs of AI. Although I think he’s best positioned to do so among the current AI Tech Gods.

As for the rest – the Ellisons, Zuckerberg, Bezos, and Elon, most of the centi-billionaire class – the coming data center bust could do what the Internet’s rise did to IBM and AT&T. They won’t collapse completely, but they’ll become just faces in the crowd.

We live in a Golden Age of Assholes.

Elon Musk is an asshole. The President is an asshole. The President of Russia is a consummate asshole.

All the tech oligarchs seem to be following the trend. They are special. They have agency. We little people are pawns they move around chessboards and can dispose of at will.

Their shit don’t stink.

We see this in Jeff Bezos, who was never an asshole before he got super-wealthy, or didn’t seem to be. We see this in Ken Griffin, the hedge fund gazillionaire who whines when New York taxes his pied a terre. (That’s a great name for second home, ain’t it? Really feeds the meme.)

The shit rolls downhill. The head of Standard Chartered, a London bank, bragged he was getting rid of “lower value people” in announcing thousands of layoffs. His friends at Fox tried to walk it back, but he meant what he said, and he said what he meant. An asshole is faithful 100%.

This is happening while people who are successful outside business are finding the value of humility. Taylor Swift seems like a good person, and her fiancée is, by all reports, a good teammate. Our top basketball players are plying their trade in San Antonio and Oklahoma City. They seem to respect their success and one another. Two words. Tom Hanks.

Maybe it’s because celebrity is so easy to lose. Blake Lively practically went into hiding after losing a lawsuit against Justin Baldoni (I’m sorry, who?), and even husband Ryan Reynolds was spattered by the fallout. (Speaking of which, what’s a Rob Mac? Sounds like a high-end burger chain with glass-like shards in the patties, like Dubai chocolates.)

Why Only Business?

Certainly, a lot of smiles in CelebrityLand are pasted-on. But scandal can leave you an empty shell by the side of the road very quickly in music, in acting, or in athletics. There’s a spotlight on those people that businessmen aren’t bothered by.

Why is that?

One reason is we’re in an economic boom. At least investors are. I won’t lie, but my money makes a lot more money than I make these days. A lifetime of saving brought me a reward, so I see why some are enjoying these days that the rest of us hate.

Another reason is that in lacking sex appeal, fallen businessmen are forgotten quickly, while successful ones can hide from the media, behind PR people and armed guards. Even the failures usually get some grace, like Chip Wilson of Lululemon.

But until recently, most rich folks didn’t go out of their way to prove just what tone-deaf jerks they were. That’s new. Well, sort of. We have had people like Chamath Palahapiya (SPACs), Travis Kalanick (Uber), and Adam Neumann (WeWork) before. They came and they went.

The Age of AI is something different. There’s a premium in the AI business for enormous expectations. Hubris drives success, even before there is success. Then there are the ginormous fortunes being made. WTF is a trillionaire, anyway?

There’s also a high wire act being played by these loons. Sam Altman could fall hard, OpenAI keeps losing money, and everyone in the business hates him. We stand around like a vaudeville crowd looking at Harry Houdini in a water tank.

We know there’s a trick, we expect him to get out of it, but what if he doesn’t? Wouldn’t that be fun?

To be in the audience when that happens, and overdose on schadenfreude?

We Have Met The Enemy

This means some of the blame for all this lies with us. Are we not entertained?

It does take enormous self-confidence to put yourself out there and pontificate on the faults of others. Whatever happened to Nate Silver? (Ask Scott Galloway.) The sell-by date of people, even in my business, is incredibly short.

In the end, I think, we all take after the Mad King. The great men (and many of the women) of our era will see their reputations in tatters once the fall comes, and we all know if will come, soon.

Just not soon enough.

That the President is an enemy of American democracy is not news.

The news is that he doesn’t care what you think.

As the Administration’s support has fallen, the President has doubled down on everything voters hate about him. Corruption has widened. Vindictiveness has increased. All the red lines of the American system are being crossed.

That’s the way it is with the mafia. You become compromised, you become one of them, and eventually you have no choice but to engage in unspeakable evil. This is an iron law, binding all devils.

While regime support has cratered, that support has become hard core. Those who are voting in Republican primaries today are not just accepting the nonsense but rooting it on.

Who are they?

Some are idiots. They’re the ones we see on TV and the ones liberals love to satirize. They are clowns. I know some and their clownishness comes from ignorance. The harder you push on them, the crazier their pushback becomes. It is as if slavishness to the cause is the measure by which they want to be measured.

It is until it isn’t. It is until it directly impacts them. But no one will cry for them. The Germans who died at the Bulge, the neighbors of Dachau and Auschwitz, those who gave the regime its cannon fodder, and then denied knowing anything about it. We don’t talk about them enough.

We tried to, after slavery fell, but then the KKK arose with new fury, we had other genocides out West, and people were making money. We covered it up, and still do, which is how this generation of demons rose from among us, calling themselves oppressed until they could oppress again.

But they’re not the most dangerous. Not even close.

The More Dangerous

he more dangerous are the ultra-religious, the followers of America’s mullahs.

There have always been Americans who see this country as an ethno-religious state. The Great Awakening, the Know-Nothings, the followers of the Moral Majority or Prosperity Gospel, they have always been part of this country. The original Puritans, the ones who burned witches, and the ones who predicted the end of the world again-and-again-and-again in the early 19^th century, they’re still here.

Life is a song. It ends when it ends. But if you believe that you have God on your side, that others will suffer forever while you’re called to glory after death, you can ignore that. The preachers know they’re talking bullshit, but their glory comes in this life, in the form of power. Just like their contemporaries in Iran, in India, in Russia and in Israel (because hate is no respecter of your religion’s claims or history), they will go on until crushed. Then they will burrow under the sand and wait for the water of hate to spread their DNA and bring them to life again. The desert always blooms after it rains.

But they’re not the most dangerous.

The Most Dangerous

The most dangerous, of course, are the ones who are funding the whole enterprise. The oligarchs.

The PayPal mafia, the AI Gods, the Wall Street crowd, and the investing class.

Once you get enough wealth, you are no longer tethered to the Earth. Or you don’t believe you are. Apparently, you become like a God, above any law, above any government. Money and power become games you play, and you care not a bit about what happens next, about who must pick up the pieces, because wealth has made you immortal.

You know the names. They don’t need to be repeated.

The President is now tethered to these men as to no others. His corruption is an effort to make him a peer, or at least assure his family become peers. But that can never happen. He may think his dictatorship makes him a God, but dictators die, and their works die with them. Oligarchs, on the other hand, believe themselves truly immortal. They may pretend to admit the idiot children to the elect, but they never will.

As support for the regime falls, everyone scrambles. The President scrambles for money, the oligarchs for the next power center. Preachers try to hold their followers, and the clowns either fade into the woodwork or resolve themselves to martyrdom.

America is going through hard times right now. We will go through worse times. But the lesson Lincoln took with him will resonate and might give you comfort in these dark days. Give me a sentence that shall be true in all times and places, the King asked his Wise Men. They came back with, “And this too shall pass away.” As the goodness of Lincoln’s party has passed away.

Artificial intelligence is not yet delivering on most of its promises.

Productivity hasn’t risen as expected. Companies are panicking, firing programmers, then hiring some back. Projects are being shelved when they don’t work. Tokenmaxxing has become a giant money wasting game.

It’s because we all assume that if we don’t “pivot to AI” right now, our competitors will, and they’ll beat us, and we’ll all be out of jobs. This is not a secret.

As recent reports from McKinsey and the Harvard Business Review have concluded, there is a critical lack of planning in AI. For every $1 spent on technology, we should be putting $5 into people, they write, but in fact it’s the reverse.

Before jumping into any AI project, these experts write, an organization should first look at itself. How must it change how it does business before putting AI to work in it? That may mean major changes to the organization chart. Plan for them. Test them before you implement them. Instead, top management is throwing aside their best people while rushing to the rowboats.

Guess who is doing AI the way the experts say it must be done?

What China Does

I’m always amused by people who call China Communist. It’s authoritarian, and power is centralized. But not all the orders are irrational. For lack of a better term, I call it a Mandarin state. Xi acts as Emperor, but bureaucracy lies beneath, making decisions unhindered. Beneath that, business is highly competitive and no lead is safe.

The 2020 “tech crackdown” applied this regime to what I had called the Cloud Emperors – Alibaba, Tencent, and Baidu. The big money went into universities, who selectively raided the American academy for Chinese natives with talent, giving them the salaries, offices, and staffing levels of their dreams.

Money flow was constricted. Creativity was required. The winners were those who made do with less. Often these were start-ups. Many were open source.

What would an AI programmer do here if Google didn’t have the money to hire everyone? The result is an industry that’s software first, with companies that are forced to prove themselves on applications before bigger checks arrive.

The country’s latest five-year plan, unlike the previous one, puts technology at its heart. Most of the American focus is on its call for self-reliance, creating systems that don’t rely on imports. But it’s more important to note that the government means to direct and control the sector’s growth.

Contrast this with the American system. Move fast and break things. Big checks in private hands based on claims, not on performance. A data center free for all, and millions of customers wasting those data centers on pictures morphing Joe Biden into James Buchanan for blog posts.

Compare and Contrast

Tokenmaxxing is a great example of what’s wrong with the American system. It incentivizes bloat rather than good hacking. It wastes money so that those engaged in the practice can claim expertise they may be getting, but that they don’t have yet.

China will let its Cloud Emperors build data centers. But they won’t be built until AI-based applications are ready to use them. Their use won’t be subsidized, and they won’t be cheap. Companies will have to plan for them. There won’t be the tolerance for failure we see here. The gains will go to the users of the system, not primarily to its makers, an approach that endorses open source.

AI is a big deal. But what we’ve seen here is that getting there first doesn’t matter nearly as much as getting it right. Many Americans understand this intuitively. But the industry seems to be reacting to criticism the way authoritarian dictators do, not the way Americans do.

American data center stocks will crash as soon as customers figure all this out and start spending only on what works for them. Everyone in the sector knows a crash is coming, they’re just looking to capitalize on picking up the pieces.

There’s no crash coming in Chinese AI. The mandarins learned that lesson from housing, which is super-abundant, debt-ridden, and still causing problems years after asset values fell below their carrying costs.

I can’t tell you why you haven’t read anyone frame AI this way before now. But AI isn’t like the PC revolution, and it isn’t like the Internet revolution. It’s bigger than that. Making AI work will require thought, testing, and planning.

We’re not doing it. China is.

The latest earnings from Alibaba Group Holding $BABA offer an opportunity to compare how America and China are doing AI.

Alibaba began at the century’s dawn as a business market, then became what I call a “Cloud Emperor” under co-founder Jack Ma. It was the primary target of Xi Jinping’s 2020 tech crackdown, but it remains a key player in the AI ecosystem, with its Qwen models and growing data center presence.

Its latest earnings, covering the year ending in March, don’t paint the full picture. Modest growth of 3%, nominal earnings. What caused the stock to pop 8% was a 38% increase in cloud revenue, firm plans for increased investment, and a statement by management that over half its cloud revenues will come from AI next year.

Right now, however, Alibaba is a minnow next to America’s AI Gods. Its market cap of $350 billion pales next to Alphabet’s $4.8 trillion, or Amazon’s $2.9 trillion. But don’t be fooled. For one thing, Alibaba now has government permission to grow. For another thing, its customers are now waiting for it, rather than having it wait for them.

While the American cloud system is built on competition and hype, the Chinese system is built on control and restraint. Since Xi’s crackdown, China’s government controls its own technology, its own market, and what gets done with it. Call that authoritarianism if you want, but at least their god-emperor has some sanity, and doesn’t start wars he can’t finish.

The Set-Up

American reporters think the government’s new drive for AI spending represents “pressure,” but it’s more like permission. Every server rack installed by Alibaba is rented profitably, not just using its own models but rivals like Moonshot. Even if Alibaba doesn’t control the software part of the stack, it’s the network, and it’s the server.

Profits are being deliberately limited. Alibaba is not facing the “AI Backlash” now coursing through the American industry. Generations of technological change prove that getting somewhere first doesn’t matter nearly as much as getting somewhere sustainably, and profitably.

There are many parts of Alibaba that are under competitive pressure. Ant Financial, once seen as the country’s dominant financial platform, is under pressure. The E-Commerce and food delivery platforms have rivals. Analysts think competition, which erodes margins, is a bad thing. It prefers monopolies. These analysts are fools. Besides, Alibaba can always dump those divisions that aren’t performing. AI is what matters.

Stability matters in Asian markets, and Alibaba has stability. That’s why Singapore chose Alibaba’s models over those of Meta and Google. Between them, East Asia and South Asia contain half the world’s population, half of the future market. Decisions on whose models to build on matter, and Alibaba now has momentum.

The Administration dragged America’s AI leaders to China as a show of intimidation. Reportedly, Nvidia CEO Jensen Huang was reluctant to go along. I suspect he’ll be avoiding the public show for quieter meetings, possibly with executives from Alibaba. He has lost most of them as hardware customers, but there’s still the software market, especially in robotics, where China has a hardware advantage and Nvidia can show itself useful.

Look Beneath the Hood

When you’re looking to see who might win a race, you look around corners, but you also look under the hood. It was easy for me to see Google overtaking Yahoo a quarter century ago, by looking under its hood, at how it was doing things, not just what it was doing.

The same thing is going to be true in AI. Alibaba now has the support of its government to invest and grow its AI infrastructure. It’s the leader within that market. The company is going to grow profitably, without creating the kind of bubble that was created in the housing market, a bubble China is just now having to reckon with.

Is Alibaba going to be worth anything like what Amazon is? Not any time soon. But if you look out five years from now, you may be surprised.

The Iran War may be the most unexpectedly good news story of 2026.

Don’t get me wrong. War is horrible. But war can also clarify.

This war has clarified the end of the War Against Oil. Oil will lose.

The supply shock here is bigger than 1973, or even 1979. But the world is handling it. There are still people predicting imminent disaster, and I’m not saying we won’t get our hair mussed. But even the International Energy Agency, which has been shilling for the oil industry since before you were born, now admits prices are reducing demand.

The industry insists this shows the resiliency of the oil complex, and it does. But a big part of that resiliency lies in the growth of renewable energy, which is now taking virtually all new demand, even in Trump’s America. While Trump has succeeded in cutting new wind production, he doesn’t rule the world.

One point I continue to make is that efficiency is the cheapest form of renewable energy. Our family bought a hybrid car in 2022 that gets 55 miles per gallon. This year we bought an electric, and we’re not alone.

Transportation is the biggest user of fossil fuel, but that’s not the only source of demand destruction. Heat pump sales are hot. Induction cooktops are flying off the shelves. Kitchens are being transformed, from spaces dominated by natural gas to spaces filled with electric gadgets that plug into the wall. Rice cookers, electric kettles, toaster ovens, air fryers, and more, they all create efficiency and reduce fossil fuel demand.

The World Turned Upside Down

If money is the mother’s milk of politics, then oil has long been the mother’s milk of power. Iran’s military government has won its war, but its exports are as limited as Iraq’s. How will it feed its people? Where will they get water from? For that matter, how will it pay its soldiers? That government rests on shaky ground.

Falling oil revenue isn’t unique to Iran. All the Gulf Arabs need hair shirts. The skylines of Dubai, Abu Dhabi and Riyadh will get awful ratty if they’re not fed, and they’re not going to be. Not as they once were. Which means a lot of the capital flowing into tech and sport will dry up over the coming year. Maybe some Saudi princelings will have to work for a living.

The oil power, or what’s left of it, is moving west. Aliko Dangote, a Nigerian who began in cement, is now worth $32.6 billion, the crisis becoming a payday for his oil operations. Angolans can also look for a payday, as can other countries in West Africa. The Atlantic Rim, which includes Brazil, Guyana, and Venezuela, can make bank picking up the slack, but it won’t be enough, thanks to demand destruction.

The biggest winner, of course, is China, which now produces 80% of the world’s solar energy components. The crisis comes at a good time for Chinese producers, which had been cutting employment due to slack demand. China also creates more wind energy than you think, and it leads in batteries, whose energy density is passing 210 watts/kilogram (still just one-fifth of gasoline) but delivering full car charges in just five minutes.

What Comes Next?

Will Xi make Trump kowtow, or will he just humiliate America a bit as Putin has? I don’t think it matters. What does matter is that the energy markets are changing, and that once you go electric you don’t go back.

The world is just starting to harvest its abundance of energy, and while the environmental movement may be politically dumb, in the end they’re right, in that there’s no alternative.

After 3½ years of Large Language Models and Agentic AI Agents failing to deliver on their promises, it’s clear that AI is neither a tech story nor a business story.

AI is a political story.

The purpose, as with all political stories, is power. That power has been gained, and then some. The question now is whether it will be maintained.

That depends on whether the fact that this isn’t about something other than what it’s about remains hidden.

To understand the truth, go back to the beginning of my reporting on it. Return to Palantir.

I wrote in 2021 that Palantir aimed to become the “God emperor of data.” It won control of government data, and later that of many private companies, by promising to get rid of pain points. These are the contradictions within systems, often created by vendors, that keep data from delivering promised value.

I explained again how it all worked in late 2024. Engineers embedded in the client find the pain points. Developers solve the problems, but in the process create software that lets it replicate that solution. In this way the client becomes dependent on Palantir, which takes its name from a magic orb in Lord of the Rings.

But the aim of Palantir’s founders, Alex Karp and Peter Thiel, wasn’t just to make money. They understood that in the modern world data is government. Control the data and you control the client. Control government data and you control the government.

That’s what Palantir’s founders got, power. I knew as soon as the votes were counted in 2024 what they’d done and I explained it to you.

The Danger Zone

Large Language Models like OpenAI are cash sinks. Running them requires massive investments in hardware, in software, and in systems. While Palantir isn’t an AI company, it is deeply embedded in this LLM ecosystem. There are tools, there is hysteria, and there is an enormous mania in AI, sucking up the global economy, spinning it into the hands of those who claim they can control it.

But who is behind the controls? Some would say Nvidia’s Jensen Huang, but he’s just a vendor. Some might say Google or Microsoft, Amazon or Meta, but Cloud Czars are just customers. A few might say Trump and the GOP, but they’re idiots.

It’s Palantir that controls it. It’s Alex Karp and Peter Thiel who control it. And when you read their political writings, it becomes clear that Karp and Thiel, to put it simply, are neo-Nazis.

I don’t use the term lightly. But read what they’ve written. They talk about controlling the world through technology they control. They separate a few “great men,” namely themselves, from everyone else, claiming only they have, or should have, agency, freedom and the ability to act. They’re Nietzsche’s Ubermensch.

One Weird Trick

Their one weird political trick was to set up a war between the people who work with their hands and those who work with their minds.

Back when I was a kid, these were called blue-collar workers and white-collar workers. As computing advanced, with those guilty of education increasingly accused of wealth, they became the working class and the Creative Class, two separate classes of people. Notice how Thiel now wants kids to go into the trades and skip college.

Politically, the heart of Trumpism is simple. Divide and conquer. Make the working class hate the Creative Class. Have billionaires and investors put their money into claiming support for the working class. Then the creative class falls and the rich can pick up society’s pieces, with all workers discarded like catalysts in a chemical reaction.

I think Thiel and Karp will be happy to see the AI Bubble collapse, with lack of productivity leading to falling demand for data centers. Let the rich suffer.

All they care about is power.

Can democracy overcome this coup? Yes, it can, because the people whom the plotters have propped up are not very bright, and because the coup itself is universally unpopular.

But it’s essential that all workers, regardless of job title and salary, understand their power and the stakes. If the divide-and-conquer strategy works in 2026, we may not get another chance against it.

Eyes on the Prize

The next months are going to see a host of distractions, from the Administration, from a compliant press, and from financial interests, against the democratic unity necessary for victory. We’re already seeing them.

Ordinary folks, and we’re all ordinary folks, need to keep our eyes on the prize, in the same way that Hungarians have, in the same way Ukrainians have, and we all need to fight like hell.

We are fighting, in the end, for agency over our own lives in the 21^st century. That’s what unites mankind against the coup.

That’s the political dynamic of the AI Era. (Note. The poster was put out by former Hungarian dictator Viktor Orban during his recent campaign against Peter Magyar, who is on the right.)

I have lived in the South since 1973. I have seen gerrymanders come, and gerrymanders go.

I’m old enough to remember when the Supreme Court mandated majority-minority districts.

At the time, Democrats were still competitive in statewide races here. White Democrats opposed the move out of fear that, if blacks were packed into a small number of districts, they would be without power.

They were right.

White Democrats disappeared. Black people came to run state parties, but they consistently lost. Power moved to Republican primaries, where a low turnout concentrated the right-wing vote.

The most extreme effort to overturn what has become normal came in 2012, when Georgia Governor Roy Barnes (right) pushed through a legislative redistricting built on “super districts,” with multiple representatives in districts carved out to create small Democratic majorities.

It didn’t work. He lost. Democrats lost, and they’re still losing.

2026

Believing that white Democrats are no longer a threat, the same justices that mandated majority-minority districts a generation ago are now calling them illegal. Democrats are moaning that this means they’ll have no representation at all, that democracy is now a dead letter.

Roy Barnes would be rolling in his grave over this, except he’s still alive.

The point here is simple.

Gerrymanders can be beaten. They often are, when they go too far and when voters get mad about it.

They’re mad about it.

Every special election since 2024, even in the South, has seen a consistent 20-point swing toward Democrats. Draw a map based on 2024 results and you’re going to lose somewhere. Get too aggressive about it, as Republicans have gotten, and you could lose all of it.

Democrats should nominate candidates in every seat and let the people do the rest. A lot will happen between now and November, and none of it is going to look good. As mad as people are now, they’re going to get a lot madder.

People in Washington who analyze these things for a living make two mistakes. They have no memory, and they think what they say matters. People change, but pundits don’t. When the smoke clears, that will be the lesson of 2026.

The 1990s brought us the commercial Internet. The 2010s brought us the Cloud Internet.

The 2020s are bringing us the AI Internet.

As with the previous revolutions, the largest players know they must either win this game or die trying. All the cash flow the Cloud Czars – Microsoft, Google, Amazon, and Meta — can scrape up is going into it.

The Cloud Internet was based on cheap chips and low-cost power. The AI Internet is based on Nvidia chips supported by chip memory, fiber cable, and reliable power.

Om Malik has written a great explanation of how it all works. The measure of success is inference, because inference, the translation of questions into answers using AI models, is where the money comes from to support the infrastructure. As opposed to transactions that supported the Cloud Internet and attention that supported the dot-com era Internet.

In previous versions of the Internet, computing happened between clients and servers. To make inference work, most of the AI Internet lives within the Czars’ own infrastructure. To make inference work at scale, fiber fabrics let thousands of Nvidia racks work together. To maintain redundancy and coherence, the Czars are building a new Internet backbone, with faster and fatter fiber cables. Microsoft added 120,000 new miles of this stuff to its network just in the last year. Google, Meta, and Amazon are doing similar things.

The idea is that inference needs can come from anywhere, and go anywhere, often untouched by human hands. Inference is where the money is. Customers are paying for results, not queries. Most of this capacity is going to what I called the Machine Internet back in 2019.

One God Above All Others

The new AI world is like fiber cable itself, both strong yet fragile. For the AI world to work, the world must have peace. Cable cuts and strikes on data centers can take the entire global economy down, because it’s so intertwined with what the Cloud Czars have built.

The biggest mistake the Czars have made is in not understanding this need. They have sought it from political leaders rather than the people. It can take them down and will take down some. (Looking at you, Elon.)

While the Cloud Czars stood alone, the Gods (and “hyperscalers” like Oracle and Coreweave that are copying them) now stand under Nvidia, which supplies them and drives them forward. While the Czars desperately need Nvidia, Nvidia no longer needs them. It’s working on home servers and Nvidia PCs that will let a lot of AI’s work bypass the Czars’ systems entirely. This is being done in the name of redundancy, and of keeping things close to the client, therefore making everything more efficient. It will also make the Czars themselves somewhat redundant.

The Czars’ world looks solid, with software stacks from Anthropic, OpenAI, the Chinese, enterprise software companies, and every enterprise riding inside those data centers. But just as PCs disintermediate mainframes, client systems can disintermediate the Czars.

This resulting AI world looks different than what came before. A lot of it remains nascent. Autonomous transportation, delivery systems, and robots remain at the bleeding edge, as do new types of interfaces to replace today’s phones. But this is where the world is going to change most dramatically, once Nvidia and its customers get it right.

They will get it right.

Beyond the Horizon

Most tech reporters, like most political reporters, and all business reporters, only look at what’s right in front of them. It’s important to get your head up and look toward the horizon, even a little beyond it, if you’re going to know where you’re going.

We’re in the early 20^th century of the AI Revolution. No one that I know of is thinking a lot about efficiency, which is necessary to make all this pay off. We’re maximizing our use of energy and tokens when we should be minimizing them. The companies that survive this era, which will end just as the 1920s did, will be those who understand efficiency.

What I mean is there’s still a lot of room for a good hack. There are still enormous needs for engineers of all kinds. Ignore the idiots saying you don’t need college, or that all jobs are going to disappear.

It’s in using AI to turn inference into productivity where the big money will be made over the next decade.

It’s clear that Ukraine is now winning against Russia because it has precision-guided drones that can hit fixed targets accurately, and from a great distance.

Drones are cheap. Missiles are expensive. Infrastructure is static.

It now seems clear that Iran has learned the same lessons. Their military government was able to knock out most of America’s military infrastructure in a few weeks, using the same methods as Ukraine. Cheap drones, precision guidance, and knowledge of where we were keeping our stuff.

Which leads to a question. What happens when we bring these lessons home? What happens if we can’t keep civil peace, and we bring these lessons home?

The Administration hates its critics, and wants us dead or, at the very least, quietly accepting. Critics are growing increasingly agitated. Mass action, by military authorities, will provoke a violent reaction.

What happens when the lessons of Ukraine and Iran come home? It’s time we had that discussion. I’ll start.

What Happens

Drones are cheap. Right-wing cranks can buy them. If they’re pressed, left wingers will as well. Buy a bunch of them and they can’t be stopped.

Precision guidance means any collection of hardware is a sitting duck. If pressed, the left can hit Cop City. If pressed, the right can hit New York’s police stations. The government, whoever leads it, is going to be outgunned, outmanned, outnumbered and out-planned.

The counter move looks just as bad. GPS systems are no longer showing any details on the Middle East. Classifying all military hardware locations may hide them for a time, but against a determined domestic enemy? I don’t think so.

Russia’s response to Ukraine’s success has been to cut off the Internet. Think that will work in this country? Think business and industry will survive it?

A committed offense can beat any static defense. Government must have static assets to operate. We haven’t had a civil war anywhere since the drone became a fact of military life.

What this tells me is that the threats of the Administration to become a Putinesque dictatorship are doomed. But the retribution promised by some Administration proponents, if they achieve power, is also doomed.

We know the endings of today’s top stories.

Ukraine will win. Trump will lose. AI will fall, then rise again.

All this is obvious. But it doesn’t bring these events one minute closer, and it doesn’t reduce the pain of getting there.

Children are dying tonight in Ukraine. Americans are dying for lack of healthcare. The AI Gods continue to trample the Earth, unhindered, while delivering zero productivity.

We know what’s on the other side of this. Putin will die. Trump will, too. Many of today’s AI Gods will become footnotes in business history books. Bulls will be broken by bears.

What no one is writing about is what comes next, because it looks horrible. We’re about to blow through all those limits Al Gore warned us about. The world is getting hotter and the climate is more vicious. The Gulf Stream is disappearing. Just because everyone has a high fence around what they consider their border doesn’t mean events are going to stay outside.

We can talk obsessively about today’s bad things, believing tomorrow’s bad things are going to be worse. When the AI market falls, the dollar collapses, and there’s no place for an investor to hide. The climate crisis will bring mass starvation to the Global South, and the next Putin is more likely to come from there than from here.

Most of the people writing about today and the near tomorrow, including me, won’t be around for the denouement. Changing times change faces. Anyone who is too closely identified with our present age is going to be left behind, and many of them will die, horrible deaths. I know this because it’s always been this way.

Look For the Silver Lining

I look around corners because I am looking for happier endings. Over my career I’ve gotten to parties too early, then left when they got going. (I asked Gemini to imagine the 2050s. How did it do?)

I began making a living online in 1985, wrote a book about portable computing in 1992, and began screaming about the dot-com crash in 1997. It didn’t help. I was dead broke for several years, early in this century, and never fully recovered from that.

What I learned is that while good times don’t last, neither do hard times. There is always something new around the corner. That’s where my hope lies. It’s what I’m looking for, and why I keep looking.

We’re about to enter a golden age for bioscience. The alternative to changing our DNA, and that of other creatures, is to watch everything wither away. AI is accelerating the pace of this change, and this is where its best applications may be found.

AI is already creating miracles in the physical world. Not all are good. War has been transformed by AI. Having the biggest budgets, the most ships, planes, and tanks, doesn’t matter anymore. Yet few are remarking on the change.

There’s a mechanical revolution underway no one is talking about. This year’s robots look nothing like those of 5 years ago, and the improvements are accelerating. Cars can drive themselves, cities can become quieter, and renewable sources can power the world.

Despite everything I believe your grandchildren, at least some of them, will survive, and will look upon us as we look upon the 1920s, as a golden time that failed to seize the advantages that were right in front of us.

Capitalism is an economic system. It is THE economic system.

Markets do their work everywhere and always have. What Adam Smith described 250 years ago was what was happening in the world, whether the mercantilists knew it or not. But his explanation of markets in The Wealth of Nations did not offer a political prescription.

The opposite of capitalism is not communism. It’s tyranny, and all tyrannies are the same. They just wear different faces. Tyrannies are also subject to the market’s rulings on their laws and their processes.

When conservatives say they believe in capitalism as a political system, they’re saying they don’t believe in a political system. A political system consists of laws, of rights and responsibilities that must be obeyed by everyone. Capitalism has no law, except that of the market, which is to say you can get away with whatever the political leadership lets you get away with.

Thus, Trumpism offers no economic system, only an excuse for various forms of tyranny. On the one hand, there is tyranny of the corrupt. On the other hand, everyone must be seen to follow the same narrow religious view. But any religion that compels belief, even the appearance of belief, is just a dictatorship operating on behalf of specific religious leaders.

Democracy is a political system. Fascism is a political system. Dictatorships of all kinds are political systems. But they’re not economic systems. They can distort the market, but the market remains.

There Is No Communist China

Whenever a politician talks about “Communist China” I laugh. China is an autocracy, an imperial system that bows to its past just as Americans bow to our past, only their past is Mao Zedong. Political choices are opaque and arbitrary, but the market still runs the economy. When President Xi “cracked down” on tech in 2020, the market slowed so he had to let up. Markets are heard regardless of the political system.

This means there is no such thing as socialism. Or, to put it more bluntly, everyone is a socialist now. Every economy is a mixed economy. Sweden is as capitalist as we are. Their political system just agreed on different taxation and regulatory schemes to manage their market than we have.

To say there are political choices isn’t to say there are various economic systems at work in the world. Whether a system is democratic or not, whether it follows its own laws or not, is a political choice. It’s not an economic one. The market continues to function, and it always has a vote, even a veto, on political leaders.

Markets run most efficiently when rules are transparent, when decisions are made quickly, and when the voices of all citizens are heard. It’s a continuum, not an either-or choice. Democrats aren’t “socialists” threatening the market economy. Republicans aren’t “capitalists” defending it.

The current Republican political project is simply fascist, full stop, government by and for the biggest economic players while everyone else gets stepped on.

What Democrats want is more democratic, with higher taxes and regulatory burdens. But these political choices don’t make it “socialist.”

All Americans support a mixed economy. They just have different ideas on how it should be controlled, and on whose behalf.

In short, Adam Smith rules. Everywhere.

I wrote last week that Ukraine might be winning its war with Russia. (ChatGPT refused to deliver an image of Putin dying, saying it violated their policy. Interesting.)

It’s not nearly as out there a view as I thought, but I still hesitated to publish it. It’s clear Ukraine has taken the initiative. Moscow’s oil export terminals are burning. Even Moscow has been hit. War is about logistics, about keeping troops armed and fed. Russia is failing to do that.

But no one, to my knowledge, has yet approached the follow-on point. Could these be the last days of Vladimir Putin, of Putinism, of Russia itself?

So much of the horror of our time is tied up in this man. Orban was his man. Trump is certainly his man. He projects power around the world, even while his own country collapses around his feet. What would it take for some general, or some collection of oligarchs, to say no more? How about the Russian people themselves?

The Russian financial system is collapsing. The war is being lost. I have watched how dictators are overthrown all my life and this is clearly another example. It happens slowly, very slowly, then all at once. As it did to Gaddafi, as it did to the Soviet Union. It’s not inconceivable.

What would happen next? Would the Russian state continue as before? Would the death of the new Stalin be followed by the rise of a new Khruschev? Is it possible Russia might break up into a dozen smaller -Stans. Could China just move in and take Siberia? Oh, and what about Russia’s nukes, and what kind of welcome might those oligarchs get as they exited?

I don’t know the answers to any of this. All I know is the question isn’t even being asked.

What of Trump?

If Trump is Putin’s man (he is), and Putin is no longer there, what then?

We saw what happened when Orban fell. CPAC and other organizations that were secretly being funded, through Hungary, by Putin sudden fell on their swords. I haven’t heard from the Heritage Foundation in weeks and weeks. Maybe I’m just not listening closely enough.

If Trump is a puppet, what happens when his strings are cut? Does he collapse? What about his movement? Take out the Russian dictator and a lot of unasked questions get asked.

What is left behind a dictator when the dictator gets taken out? History shows the answer is not very much. If Putin is gone, the war ends. This war was always existential for Ukraine and, while it didn’t seem existential for Russia, it seems to be so for Putin’s Russia, and for Putin himself.

There will be other dictators. There will be Russians who try to pick up the pieces from this dictator, as Putin picked up the pieces of the old Soviet Union. But Putin’s Russia is smaller than the old Soviet Union. It’s like a Russian nesting doll. What follows will be smaller still.

I don’t know if any of this is going to happen. But it’s past time we all started thinking about it.

America’s political reality over the last four years has seen a steady Russian advance, highlighted by the overthrow of the American government by Russian allies and tech oligarchs, followed by a marriage to oil backed by American troops.

This reality is in the process of being shattered. A stalemate is being broken, and with that will come enormous, global change.

Ukraine is not just saving itself. It seems to be saving the world. (Picture by ChatGPT.)

Through careful adaptation of drone and wireless communication technology, Ukraine has seized momentum on its battlefield. Russia can’t stop its “angry birds” from destroying the oil infrastructure on which its war depends. Logistics no longer work in the occupied territory. While Russia searches Siberia for cannon fodder, Ukraine is hiring skilled drone operators.

Russia is freaking out. Trump’s latest bark, confusing Iran with Ukraine, predicting its imminent demise, speaks volumes about the situation. Ukrainian commentators are openly discussing the full dissolution of Russia.

This is the way wars usually end, slowly, then all at once. This was true for our Civil War, for World War I, for World War II, for Vietnam and the Cold War. You grow accustomed to the slog and are stunned when it ends.

I think we’re about to see the same thing in Ukraine. The war may not be existential to Russia, but it is to its dictator. Russia is about to lose this war and, with it, the Putin dictatorship. That means Trump is about to lose his chief ally, having already lost the country’s NATO allies.

What would that world even look like? Others can argue that. My beat is tech, so what would it mean for tech?

What This Means for Tech

Putin’s fall could presage an American election that looks like the one Hungary just went through. It’s not something analysts are prepared for. They keep pretending ours is a 50-50 nation, when it’s already 60-40 and getting wider. Gerrymanders fail when their authors get greedy, and when public opinion changes decisively.

This is a curious moment where the Administration is on one side, backed by its largest industry, and the people are on the opposite side, which happens to be the winning side. But I have no doubt the tech industry will renegotiate with the new political reality. We are still waiting for the AI bubble to crack. Whether it cracks before or after political change comes to Washington will matter a lot.

Tech doesn’t need this Administration as much as it pretends, and Democrats don’t hate tech as much as it appears. Look for feelers from industry moderates, like Reid Hoffman and Jensen Huang. They won’t turn overtly on hardliners like Thiel and Musk, but figures like Zuckerberg and Bezos will tilt in a strong wind, and that wind is about to change, hard and fast. The most important truth in politics is that business will adapt to it.

What would the end of Putinism mean to the world? America’s betrayal of its former ally, and that ally’s final victory, will push a lot of chess pieces around. Europe will rise as pressure from the east declines. China will rise as damage to the global environment becomes obvious. America will be forced into a reckoning with the last 35 years of its foreign policy, and the last 50 of its domestic politics.

Are you ready for it?

AI can’t ask questions. AI can’t make creative leaps.

That’s not because it’s programmed wrong (although it often is). It’s because AI must be built with data that exists. The garbage that comes out can only be based on the garbage going in. The garbage coming out has no ability to deliver insights outside itself. Because it’s based upon data that already exists.

This should be obvious. It should have been obvious to the designers of Large Language Models, and it must be obvious to the people working on AI Agents.

Yet it isn’t.

So-called “AI Optimists” keep insisting there’s something coming called “super intelligence” that’s going to make human beings obsolete. Who then is the AI being built for? The AI Gods fire all the workers, no one has any money, and what are they left with?

They’re left with a nightmare.

This is obvious to anyone with two brain cells. Yet people like Musk, Altman, Amodei, Andreessen and Thiel keep acting like this is an outcome devoutly to be wished. Like someone is going to want to live in this dream world they’re building.

This is the insanity of our time.

But we’ve been here before.

Past Insanity

Electronic computing, as a concept, has now been around for about 80 years. Figuring the Age of Steam arrived around 1765, with Watt’s condenser making it practical, we’re now at the dawn of the Victorian Age.

Come with me into the 1840s for a moment. Propeller driven steamships were just starting to emerge. The English railroad boom was in full swing, that in America just starting. Cloth factories and trade were making the English unbelievably rich, able to afford both war and peace, but the air and the water were becoming filthy.

Dickens had just written his Christmas Carol, about how empty a man’s soul becomes when he cares only about money, and about how caring about others might redeem that soul. Marx and Engels were about to produce their Communist Manifesto, a counterpoint to the carol stating that rich men had no souls.

Maybe AI is akin to the Bessemer Process, which kicked the industrial age into overdrive by making steel cheap and abundant.

The point is that all the precedents we need to understand our current world exist. All the worries about men’s minds losing their place can be seen in the world of the 19^th century, when it seemed muscles would all be replaced by machines.

They weren’t.

People Adapt. Software Doesn’t

People will be recycled.

More to the point, they will recycle themselves. Just like my late father (right) turned himself from a TV repairman to a burglar alarm salesman in the 1970s and wound up living out his dreams in southern California rather than freezing every winter on Long Island, our imaginations will find a way through this time.

AI has no imagination. That’s its weakness. In the end it’s just a tool, like a mainframe was a tool, and a PC was a tool, and a QR code is a tool. It needs people to make it useful, and it’s useless without people using it.

The current revolt against AI has a lot in common with that of Marx and Engels, but it comes with the knowledge that their revolution was a failure that brought only new dictatorships and new suffering. We can learn from that.

There’s no need to choose between communism and capitalism. The capitalist economic model works, the communist one doesn’t, and neither is a political model. What we learned from the Industrial Revolution, in the end, is that dictatorships are bad for everyone but the dictator, regardless of who the dictator is.

What we need is a political model flexible enough to handle any popular or business or technological demand. Fortunately, we’ve already built one.

It’s called democracy. It’s worth fighting for.