The Word for 2025 is Fragility

America's Dominance May Be Fleeting

In two years, America went from being the leading economic power in the world to the dominant one, all thanks to AI.

AI, the training of databases to deliver freeform answers to freeform questions, in a variety of formats, launched a boom in demand for computing resources. This created an infrastructure shortage that may take years to work off.

The infrastructure boom, in turn, created trillions of dollars in new market cap, which went to a handful of companies and, through stock ownership, to just a handful of men. This wealth, and this technology, was then used to capture political power.

But all these things are fragile. (Image from Gemini.)

Winning is easy, governing is hard, as was said in Hamilton. Power that’s easily gained can be easily lost if it’s misused. Some misuse is inevitable, as raw political power is an untamed force. In this case enormous misuse is certain, because it’s in the hands of people whose ideas about using it are those of 14 year old boys.

Then there’s market cap. Elon Musk isn’t worth $470 billion. He can’t get that money out. We see this whenever there’s even a rumor of some billionaire wanting to cash out a sizable portion of their holdings. Markets are a continuous auction. Shifts in sentiment manifest quickly. Meta Platforms lost three quarters of its value within a year, just a few years ago.

All your wealth is riding on this fragile market cap, and you can’t just cash out to be safe from a crash. That’s because dollars, or Bitcoin, are also assets, subject to rapid changes in price when too much comes to the market. The price of mansions is even more fragile than that of your home.

The Global Perspective

I think of AI software, and its economic impact, like ice cream scooped onto a plate. The center of the plate is deep and rich, but the impact quickly spreads to the edge.

Think about how quickly the Web and clouds have spread, the miracles this has made possible, then note that AI is just software. The value from its use may seem concentrated at the center, but it’s spreading rapidly. It must, because software is only valuable when it’s used.

I was struck by a recent Cloudflare study complaining about a new digital divide, with people in the “Global North” on iPhones with AI, those in the “Global South” stuck with cheap Androids and slower connections. It’s an insane perspective. There were no clouds in the 20^th century, and 20 years ago the miracle of Africa was built on women “investing” in Nokia hardware, using solar power to keep them charged, and selling the ability to make phone calls door to door. (Image from ChatGPT.)

You can buy a new Android phone in India, right now, for about $100. It makes the entire world of knowledge available to you. Fixed broadband connections are available in South Africa for the equivalent of $12.50 per month.

The people of South Asia, Africa, and Latin America are, on average, much younger, scrappier and hungrier than any American. The ones I know also have a more positive outlook on the future. They’re going to quickly take AI’s miracles, use them, and build on them. The value from this activity will accrue to them, not us, and it will create competition, which is a good thing.

Into the Future

The point is that power is fragile. Wealth is fragile. Software dominance is very, very fragile. The pace of change is going to accelerate and no one, especially those now coming to power, will have a damned clue about what’s coming.