“On a long enough timeline, the survival rate for everyone drops to zero.” – Fight Club
A truck filled with quinoa and a truck filled with Worcestershire sauce crashed into a charcuterie shop near my house. What was the result? It’s kind of hard to say. (meme as found)
Dr. Michael Burry has spoken again. Okay, actually more like “emailed again” but he’s on the record again saying that the the end is nigh. Is he right? Well, on a long enough timeline, entropy always wins, and the heat death of the universe doesn’t care about my 401(k) yields.
But are we close?
The S&P valuations are through the roof. We’re in the middle of the largest investment in the history of the United States outside of World War II: Artificial Intelligence.
More has been spent on A.I. than was spent on the Manhattan Project, but less than was spent on, well, insert whatever outrageous bill Congress passed last week while you weren’t looking—probably something involving green energy subsidies for gluten-free solar panels raised free-range by Antifa® Chapter 4077.
The payoff for winning the Second World War was a big one. Essentially the United States was surrounded by a smoking crater of a world. Our industries were ready to absorb all the G.I.’s returning with their war brides into job to rebuild that crater. I mean rebuild the nice parts, not India.
The world without Western Civilization. (meme as found)
Factories were humming, houses were sprouting like dandelions, and the economy was so robust you could afford a house on a single blue-collar paycheck and still take the kids to Disney World® without having to resort to Moustitution© or selling a kidney. That’s what we got for entering into the war late and avoiding any of it happening on our homeland.
But what is the prize if A.I. is successful?
Well, it’s negative jobs. It’s a profusion of information so vast it makes the Library of Alexandria look like a collection of Post-it® notes abandoned after spelling errors. Elon Musk thinks it will create a society of abundance so great that no one will have to work and everyone can have a cool penthouse and all the gold they can eat. We can be sure he’s right, because this is just how the Industrial Revolution ended.
Wait, what?
Hours worked went up? Rural agrarian lifestyles were traded for urban factory hellscapes where the owner of the factory charged extra for all the asbestos he let you breathe in? Yeah.
Every production “revolution” that the world has seen has actually increased human effort. Those leaps forward did increase material wealth, but they also led to humans having to work more. Hunting nomad chads became farming incels.
Why?
You can’t brew booze if you don’t have the grain and the place to brew it. So, just like me, the nomads decided to give up a lifestyle of hunting, fishing, sex, and leisure for all the beer they could drink. I mean, I have priorities.
As a child I never napped. I was resisting a rest. (meme as found)
I don’t expect anything different in the Thought Revolution. Nobody will get free stuff, but the world will need a lot fewer of us. This is the case if it is successful: essentially an entire civilization working overtime to create a replacement for itself.
Yikes!
But let’s say it doesn’t work.
That’s better, right? Well, maybe. A bit. If A.I. reaches some limit where it becomes economically unfeasible to get to the next level (think power generation capability required being infinite) of cognition, or the models start to get dumber the more advanced they are (there’s a fashion model joke in here somewhere, but I’m too polite to make it), then the stock market will collapse.
Collapse? Surely, John Wilder, you exaggerate. No, I meant collapse. The market has priced in that A.I. is going to work. On the recent day that Wall Street hit new highs in the S&P 500, most (55%!) stocks weren’t near their highs. The high is high, but it’s not broad. This current level of investment in A.I. is so big and so deep and so tall, there is no way it can do anything but fall.
Sorry, got a bit of Seuss stuck in my keyboard.
“Oh me! Oh my!” said the plumber named Fred,
“My pipes cost a fortune, I’m deep in the red!
I can’t fix the sink or the tub or the drain!
This copper’s so pricey, it’s driving me insane!”
This is a damned if you do, damned if you don’t scenario. Let me put on my Cassandra pants and throw out this idea: Why not both?
The economy is screwed, or at least the economy that I grew up with is screwed. We’re becoming poor at a fantastic clip. Not “poor” as in West Virginia moonshiner with a still and a shotgun, but “poor” as in living like we’re in a crowded megacity filled with unwashed brown people where the air smells like regret and curry.
Let’s look at how affordable things are compared to income from the 1970s. I found this handy chart on the Internet. You know the one: houses, cars, healthcare, education all marching upward while real wages stagnate like a sloth on Ambien. Now, I know that no one actually goes to movie theaters anymore even though it’s on the chart. There’s no point in going to the movie. I can get booze from my fridge and pause the movie whenever I want if I watch it at home, but yet it’s “indecent” if I fall asleep drunk and in my underwear in the front row at the latest Avatar™ movie.
(as found)
But everyone can still afford a place to live, right?
Well, not since we’ve opened the floodgates and let in the entire world. A massive population increase combined with a group of people that consume much more in services than they contribute is killing us. They’re actually making us poorer as each one crosses into the country.
Remember in math you can always raise per capita by lowering the number of capitas.
But, hey, they borrow money so they can create debt that produces profit for the banks, right? Win-win, except for the natives footing the bill.
Isn’t enough that our economy is as stable as a knife fight between a drunken Whoopi Goldberg and a blindfolded Jimmy Kimmel in a bikini atop a butter-coated teeter-totter on top of WTC7? Did we have to put the whole existence of humanity in the future in the balance, too?
The good news, I guess, is that Burry could be wrong. He has been wrong before. Like me, he’s predicted five of the last two recessions. But there comes a point where we won’t be able to paper over the cracks in the structure with more printed money and hopium.
Yup, been there, done that.
When all this cracks, and it will because complexity plus leverage plus narrative equals fragility, the reset won’t be gentle. It won’t be “buy the dip” and back to brunch. It will be the kind of event that makes 2008 look like a mild correction and 1929 look like a Tuesday.
So where do I want to be when it happens? I want to be listening to a twenty-something Margot Robbie describing what collateralized debt obligations are from a bubble bath.
And remember Wilder’s Rule of Humorous Collapse #6: civilizations don’t fail because they run out of money; they fail because they run out of reality.
But at least I finally understand collateralized debt obligations (warning, mildly spicy language).
Disclaimer: I am not Margot Robbie, though I would take a cameo to talk about philosophy in a movie from my hot tub while I smoke cigars, and am also not a professional anything, let alone your financial advisor, so please bang your head against the wall a dozen times before you take the advice of an unpaid Internet humorist.
