At some point AI will need a form of governance that allows the voices of users to be heard.

Meanwhile, someone must establish and, more important, enforce basic rules. Someone must run the software police force and maintain its security lawbook.

Like it or not, that’s going to be Nvidia. With revenue that should easily top $400 billion over the next four quarters, most of which reaches the net income line, Nvidia is the undisputed King of AI. It has every incentive to be the top cop, along with the respect of all major players.

That’s money, means, and opportunity. It’s where crime fighting and governance start.

The $12.9 billion Nvidia is paying for Hugging Face is small beer. What matters is power. Hugging Face is the dominant open-source platform for sharing AI models. That means it has power within the model space. It knows what’s going on, it sees who’s doing what. Effective policing in an AI world starts with that kind of information platform.

Whether the recent attack on HuggingFace was a clash of civilizations or just rogue software, it was a compelling story and got the industry’s attention. Arguments about Dwarkesh Patel’s anthropomorphizing the story are beside the point. What matters is that a crime happened, a crime wave is coming and that someone must get in front of it.

Computer security outfits are still “pivoting to AI” and that’s going to take time. The players in this industry are either near start-ups, meaning they don’t have the scale for the job at hand, or they’re built around different eras and threats. If I might make a human analogy, there are some great detectives, and there are some big police forces, but there’s nothing out there that combines both.

Solving the Problem

Nvidia has already made a start. The Open Secure AI Alliance, founded last month, brings together security tool makers to share what they know and could deliver a governance structure that can ring alarms and coordinate when needed. Ownership of HuggingFace puts all this under the command of the biggest player in the business, the one with the most to lose.

Gary Marcus is right in that anthropomorphization (if that’s the word) can go too far. (As can words in general.) We are talking about software programs, not master criminals. But people respond to stories, and people must remain in charge of AI.

This is doubly true in that we’re facing state actors. Ukraine, Russia, Israel, and Iran are already using AI to control their drone swarms. Drones are killing people without direct human intervention. This makes AI Code security a global security issue, not just a corporate or even national one.

We don’t have time to run an election. Just as in the corporate world, someone must be in charge, their term ending either when they screw up or when problems overwhelm them. Nvidia is in the best position to become God Emperor of AI and is the company most likely to be an honest broker.

Two big stories this week. You’re going to love me for my analysis of one, hate me for the other.

But facts are facts, and I’m not going to lie to you.

Let’s start with the story you’ll love, Facebook’s “loss” in its suit over teenage exploitation on the platform.

It wasn’t a loss. Facebook won, bigly. The trial had started and the case was clearly proven. Facebook made hundreds of billions of dollars manipulating kids with its algorithm, enraging them and turning many into monsters. Social media can be harder to kick than crack, and all your children are Hunter Biden.

What Facebook agreed to, a fine of $17 billion, is a tip on that money, and a mean tip at that. As Marco Fioretti wrote, the deal also includes changes in the algorithm Facebook was going to implement anyway. The changes have the effect of freezing legislation, in both America and Europe, aimed at truly ending its most egregious practices. The deal also cements Facebook’s monopoly on social media, since no company can go into business and implement age verification at anything short of Facebook’s costs. Oh, and Facebook admits no wrongdoing.

How this is a “day of reckoning” is beyond me. CEO Mark Zuckerberg was smiling as he left the courthouse. The stock went up on the announcement. You can lie to ordinary people all you want, but money ferrets out the truth, and quite quickly. That’s why I have always covered money instead of politics. It knows, and it moves, based on the reality of a thing, not its spin.

Meta stock is up 5% since the deal, and its market cap is now $1.47 trillion. That’s the proof Mario’s right.

Venezuela

Since the Administration’s Venezuela deal was announced, lefties on Substack have been screaming bloody murder.

They need to shut the fuck up.

This deal doesn’t cover all the country’s oil. Venezuela will be paid for oil once costs to get the fields operating again are recouped. It regains its reputation in the oil market. A war with Columbia, which seemed imminent, is now not happening.

There is space here for stability, which matters a lot more to the average Venezuelan than anything else. Democracy was never on the menu.

Venezuela has more “proven reserves” than even Saudi Arabia, but we’ve proven they’re expensive to extract. You can’t just stick a straw into the ground and watch the rig explode, as in Texas. But refineries on the Gulf Coast were engineered over the last few decades to process this oil, and we’re currently exporting a lot of Texas’ crude. If engineers can lift Venezuelan heavy crude, American refineries have a steady supply to work with.

There’s also a deadline no one talks about. Renewable energy costs less to make, store and use than oil, that margin rises every day. It’s possible, even likely, that Venezuelan crude will be worthless well before much more can be pulled up.

So, let’s recap. Venezuela gets peace, with the U.S., with its neighbors, and with its people. There may be some money coming in down the road, which it needs desperately. The U.S. gets a short-term deal for one of the Administration’s friends, which the next government may just nullify.

Who really won?

I have a question. If Artificial General Intelligence (AGI) will be smarter than anyone, and if it’s just a few years away, why do we need Mark Zuckerberg? If AGI really is that capable, then what is Elon Musk supposed to do with his time?

And if intelligence is going to be a utility, like water, why shouldn’t it be publicly owned, like my water system? At minimum, why isn’t it going to be closely regulated, its profits controlled, which is the deal utilities make for their monopolies?

Oh, they say, the billionaires will still have jobs directing AGI, telling AGI what to do. Why should that be their exclusive responsibility? If AGI is to control everything, then it’s the government, and in America we have (or we’re supposed to have) this thing called democracy.

The AI Gods haven’t approached these questions because they know AGI is a lie. AI isn’t like a sage on the stage, to use the language of education. It’s a guide at your side. It doesn’t think on its own. It does calculations its users give it.

AI can be useful, even worth paying for. In my opinion, Google Health is worth paying for. It tells me what the numbers generated by my fitness watch mean. The software suggests specific exercise routines, based on data. It lets me access explanations of medical terms in simple English, when I ask for them. The software is a coach, but I’m the athlete. I can ignore it, and I’m in charge.

The Point They Ignored

AI Gods continue to get high on their own supply.

AI has never been more than a tool for generating calculations. It’s a database, which was a spreadsheet, which was a set of COBOL punch cards, which was the odds generator at Bowie racetrack. Back in the 1930s, racetracks had bookies taking bets and quoting odds. They all lost their jobs when the tote board arrived.

This is no different.

AI needs two things to do anything. It needs input and it needs a task. Its ability to do the task is limited by the quality of the input. The ability to answer a question is limited by the parameters you put around the question.

There’s no creativity here. There never was. AI needs people, but people don’t really need AI. We may like what AI creates, just as I admire the results generated by a well-made spreadsheet. But it’s nothing without us.

If it were, the AI Gods would be quitting their jobs. They know better.

AI Gotterdammerung

AI doesn’t have to be a mainframe application.

An AI Agent can run off a PC, therefore on a phone. As we have seen, making it autonomous just makes it dangerous. You should think of AI, at best, as being a very smart dog. Keep it on leash, under control, or it’s going to tramp all over your neighbor’s rose bushes looking for a bone.

The chief delusion of the AI Gods today involves demand. They see an unlimited demand for centralized compute, because everything they’re building now is being rented. They’re even taking reservations a year or three out, believing the falling costs of tomorrow’s compute is being bought at today’s compute prices. Moore’s Law will thus provide a profit margin, they think, because the costs of compute next year will be lower than this year.

That’s not the way this works.

Trouble is, compute, by itself, isn’t a product. Applications are a product. At some point, the value of applications created by compute must exceed the cost of the compute or your whole economic model falls apart.

The gap between application revenue and compute costs isn’t narrowing. It’s widening. Customers are finding savings using open-source models and creating streamlined applications. They see the bills they’re getting from Anthropic or OpenAI and cutting back. Their demand for these services is not increasing.

Everybody knows this. No one is doing anything about it. The former Cloud Czars figure they’ll pick up assets at fire sale prices once the crash comes. Everyone else figures it will be someone else holding the bag when the time comes.

The time is coming.

It was a beautiful morning in Atlanta, except for the birds.

There were none. There haven’t been any for months. We have a bird feeder in the yard, and some suet cake over the porch. They haven’t been touched. It’s quiet, very quiet. Too quiet.

I mentioned this to a neighbor the other day. She was surprised. “Where are the birds?” I asked. “I don’t know, but I’ll look,” she said, and went on her way.

The silent summer is also a hot summer. When we were younger, our ceiling fans could handle temperatures up to 90 degrees, without air conditioning. It’s been over 90 here for months now, often approaching 100. But we’re indoors, so we don’t notice.

Life goes on, as before, until it doesn’t. That’s the point. We don’t heed the warnings about health insurance disappearing until we can’t get any. The same with home insurance, and with beef. Our inclination, when changes like this happen, is to close in, to demand easy answers, and to not accept hard ones. We told you global warming would make home insurance unaffordable. We told you the Administration was killing the health insurance subsidies. It’s your own fault. That’s not a winning message.

We live our lives from day to day. I do my exercises, take my language lessons, and get food on the table. The day to day remains my focus. This is not unusual. I think it’s true for you, too.

But no man is an island. We depend on the water company, the power company, the phone company, and the gas station to keep things going. It’s only when they don’t that life sort of stops, as it does sometimes with hurricanes that drop trees on houses.

FAFO

My relatives in Texas are finding out. Droughts make cattle hard to raise. Prices were just crushed by imports. I knew this was likely, but the warnings were dismissed. This is true throughout farm country.

The strangest story to hit my desk today is this Louisiana Starbase, It’s right on the coast, near Avery Island (home of Tabasco), and it’s directly in the path of climate change. The place just won’t be there in a few decades. Hurricanes fly through there nearly every year already. No one will pay attention until disaster strikes. Then they’ll want a bailout.

The danger is beyond clear. Florida home prices are falling, and insurance no longer does what it’s supposed to do, assuming you can find any, at an average price of $8,292 per year. The state talks about “adjusting,” and claims some rates have gone down, but that’s only because coverage has gone down, or disappeared, and courts now routinely dismiss complaints about denied claims.

God only knows what’s going to happen in January, when the Obamacare subsidies expire and people find out they can’t get health insurance. I have no idea what’s going to happen to their doctors, or nurses, who won’t have jobs because people can’t afford what they’re selling anymore, and are just dying right-and-left with quack “cures” seen on Facebook and advertised by the government.

It’s crazy. But it’s what tyrants and thieves depend on. You won’t see them coming until they’re chewing your cheeks, and then it will be too late.

Sorry, Mr. Bill

All this brings me to Bill Gates.

Bill is my age, 71. His foundation is completely out of Microsoft stock. Now, with his field of fucks barren, he’s warning about AI’s risks.

He sounds a lot like me. “For as long as I can remember, I’ve wished innovation could happen faster,” he writes. “With AI, my feelings are more complicated.” Now he worries that jobs will disappear, that AI will empower evil as well as good, that it’s stunting the growth of children and damaging human relationships.

Welcome to the revolution, Bill. Here’s your Mao jacket. He suggests taxing tokens and robots, moving the burden of government from labor to capital. An interesting approach, but good luck getting Elon, Larry, and Zuck on board. The people who own the future aren’t going to give it up easily. Sergey Brin is busy keeping California from enacting wealth taxes, while Larry Page threatens to leave the state forever. Don’t be evil, indeed.

AI could do a lot of good, but it needs central planning. It’s easy to hear the response from the industry and Administration. Shut up, old man. Gates urges international cooperation instead. It’s the tell that leopards are about to eat our collective faces, but no one will notice until the birds are gone, and maybe not even then.

This ain’t going to work.

You don’t get to war against all the world’s nations, against most of your own people, against the Earth’s future itself, and expect to come out on top.

Money doesn’t work that way. Power doesn’t work that way. Science doesn’t work that way.

Yet, for “reasons,” Washington’s pundit class keeps acting like 2026 is just another election, that we’ll all be jolly good friends on Sunday talk shows when this nonsense is over.

Sorry. The world has changed. Donald Trump is the most significant person of the 21^st century, in the same way Adolph Hitler was the most significant person in the last century, and Napoleon Bonaparte the 19^th century.

Significant doesn’t mean good.

Nuremberg is coming. Those around the Mad King know this. They’re scrambling to stuff all the silverware into their pockets and grab the artwork from the walls before their White House goes up in flames.

We’re in a trade war with Canada, we are in an active war with Iran, but it’s OK that Russia is allied with Iran? We don’t like China, but their ambitions regarding East Asia aren’t worth our bothering about? Even though the heart of our economy, Taiwan, sits on China’s doorstep?

Oh, and while the global temperature climbs toward the unlivable, America is going to burn more coal, drill more oil, destroying all the world’s wild places in the process. We’re going to wreck our own currency, steal everyone’s money by making it worthless, hand all that to a select few friends, and enforce terror with a handmade Gestapo made up of out-of-shape wife-abusing piggies?

These aren’t just war crimes. They’re crimes against history, against the future of humanity, against your children and grandchildren, against the Earth itself.

It won’t work.

Who Are Your Friends? Those Guys?

It reminds me of the climax in the best movie I ever saw in a theater, The Muppet Movie. Not the second climax, with Orson Welles and the “standard rich and famous contract.” The other one, with Charles Durning, Austin Pendleton, and the fried frog’s leg chain.

“Who are your friends?” Kermit asks. “Those guys?” Because, of course, the hired thugs are hired and are just in this for the money. Even the flunky has learned he’s just a flunky. He has been helping Kermit on the sly.

When you look at the current world situation in the right way, it looks just like that.

Unfortunately, we must live with the consequences of America’s actions.

Who are this guy’s friends? Oligarchs who think no law can touch them. Religious tyrants who make Iranian Mullahs look like Unitarians. Fat, white, whiny losers of every description. Grifters, tramps and thieves with no moral center.

You think they’re going to inherit the world?

It’s very important, while we seem under the thumb of tyranny, to know that there’s a Free World that can exist without us. Canada, England, a united Europe. Those whom our forefathers helped liberate, and who believed in what we said we believed in, are now here for us.

The Free World today is centered in Ukraine. Ukraine has become the arsenal of democracy, even as it remains under bombardment from an implacable enemy whom our government supports. Ukrainian military technology is better than America’s, it’s deployed better, it costs tons less, and it’s being used in a righteous cause. When this is over, we’ll have to reckon with Ukraine, sadly from the other side of its victory parade.

What Comes Next

What no one addresses is what follows this time.

America will be less than it was. Much less. Not what Germany was after WWII. More what France was in 1817, relative to the rest of Europe.

Our economy will be shit, our bills piling up, our obligations to one another piling up with them. We will also face the second war of this decade, in many ways far more important than the current conflict.

That’s the War Against Oil.

What used to be called global warming is coming on exponentially. This was the hottest summer ever. Next summer will be worse, and the next one worse than that. Even feeding our people will be a challenge.

Renewable energy is the only answer, and we’re still on the wrong side of that conflict. America is still building suburbs, because they’re cheap to build, and still ignoring the cost of maintenance.

In the new global conflict China will be the leader. China is where the batteries and solar panels come from, the things that can drive demand for oil down toward zero. At some point, anyone saying “we can’t adapt” must be ignored, because it’s a case of adapt or die.

We talk about these last wars as ignoring borders, points of contact being hundreds of miles apart. But the next war has no borders at all. Your forests burn and my breath disappears. You dump garbage in the ocean and my fish disappear.

What is Required

What’s required is a degree of international cooperation that even Franklin Roosevelt could only dream of. The only enemies in this war are those nations that don’t know they’re in the fight.

America can no longer be the world’s policeman. That will save us money, but it’s money we’ll need for this war to save the world.

All the world’s nations must come together. There is no choice.

E Pluribus Unum. Or we can all hang separately.

The Natalie Harp story is simple, and a lot more chilling, than you’re being told. Josh Marshall of TalkingPointsMemo comes closest, but even he is not quite there yet.

I’ve seen this play out with friends and with relatives suffering from dementia. You probably have, too.

She’s not his mistress. She’s not his acolyte. Fact is, she’s his nurse, his caregiver, with a dementia patient everyone pretends is not one.

This is not a story about diapers.

At the end of our days, if we’re very lucky, we will have someone like this in our life. Most of those who do this work are immigrants, nearly all are women. They keep us calm, they wipe our asses and our mouths, they are attentive to our needs because we’re beyond explaining them.

Notice that when Sen. Ossoff mentioned her, very obliquely, the White House jumped on the idea he was calling her a sex worker. That’s an insult to her trade, which happens to be among the most important services any of us will ever need.

If you’re poor, your spouse does this. If you’re from the middle class, they’ll put you in a home that does this. It’s at this time in life that you find out if your family loves you. This man’s family does not. They’re leaving him, dangling in the wind, in full view of everyone. It’s such enormous cruelty.

Natalie Harp is the only character in this story showing any humanity. This includes the media.

Everyone in the press and the Administration continues to cover up the President’s condition, which she’s managing as well as she can. We all pretend not to see what we’re seeing.

This should be the story.

Ask why.

What Aides Fear

At some point, the man will fall hard, start crying, maybe hallucinate. He’s past the point of lashing out at those around him.

On the other hand, he might live for years. That’s what the Administration hopes. Maybe he can declare martial law, cancel the midterms, and they can fight in the shadows for the power he leaves behind, Death of Stalin style.

If martial law is unavailable, the successor will be inaugurated. For those in this Administration who have committed crimes, the horrors will be just beginning. That’s because the successor can throw them to the wolves, one by one, taking their resignations and leaving them vulnerable to prosecution. The successor will even gain popularity from these actions. They will show gravitas.

This is not about policy. It’s about each beast keeping safe, seeking a future that doesn’t end at the end of a rope. That’s why we have this enormous conspiracy. Everyone must pretend that the President is fine, as his delusions mount, and as millions suffer from them.

It’s a farce, just not played for laughs. You’re afraid of what you’re doing, but you keep doing it, because to stop is to admit what you’ve done, and that would kill you. Watch them on TV when they’re trying to explain the latest craziness. Look into their eyes, so blank, so dead, so fearful.

Stephen King never imagined anything quite so scary as what’s going on in the minds of the nation’s cabinet members and Presidential aides right now. They’re all guilty, and they’re all going to hell.

Except, of course, for Natalie Harp.

The delusion about superintelligence among the AI Gods will be seen by history as technology’s biggest mistake. It’s dumber than Clippy, and Microsoft Bob, put together.

Historically, it’s a straight line back to Tom Watson Jr. and the IBM 360. Watson assumed its development, with compatible software throughout the product line, would be a slam dunk. He put his brother Dick in charge. Dick was his heir apparent.

But the 360 wasn’t simple. It was late by 3 years, and it’s where Fred Brooks learned about The Mythical Man Month, a productivity trap that continues to haunt software development to this day. By the end of the saga Dick was out, marketing was in, and the seeds had been sewn for IBM’s decline-and-fall.

This is bigger. This is worse. It’s much worse.

AI will not produce superintelligence or anything like it. In practice, it has some great use cases. ChatGPT illustrated this story, tools can be spun-out very quickly, whole databases can be analyzed and comprehended. AI can be great.

But it’s not creative, and you don’t want it to be the boss. Not now, not ever. If Mark Zuckerberg believed his own nonsense, he’d be looking at small boats and fishing poles. He’d be thinking of a quiet house on a lake, of grandchildren coming to visit, of grilling hamburgers outside with friends and sharing a couple of beers.

In short, he’d be planning his retirement. So would Elon Musk and Larry Ellison (who, let’s remember, is 82). But is he? Are they? Heck, no. They’re just firing all the people who can make AI work, and conning Wall Street into putting those savings into their offshore accounts.

They deserve no more compassion than Andrew Tate.

Maybe China is Right

Call China communist, call it authoritarian, call it all the names you want. You will get no argument from me.

But maybe, just maybe, China has this AI thing right.

Open source for the models, limits on the build-out. Focus on applications that justify the cost. Get it right within the home market, then look at export markets. Limit investment, and returns, to a rational figure. Control the market, and you can prevent big losses.

Because there will be big losses. There will be huge losses. It’s not just pajama bloggers and Gary Marcus who are saying this. People with advanced degrees are saying it.

We ignore the warnings because we survived the last two crashes. That doesn’t mean we won’t get our hair mussed. But 10 million, 20 million jobs lost, tops. And maybe twice that number of retirements, ruined.

All the AI Gods assume that they’ll survive the upheaval, and that someone else will take the fall. Anthropic assumes OpenAI will die and they’ll make it. Microsoft assumes Oracle will die and they’ll make it.

Maybe they’ll all die and Alibaba will make it.

No one thinks about the damage being done to millions of people when the economy crashes, and there are no jobs in a sector for years. I lived through it after 2000, with no paid work for nearly 3 years. I saw it a decade later, in suburbs that became ghost towns outside Atlanta.

China will have its crashes, and China has its risks, and China makes mistakes. But maybe, just maybe, this isn’t one of them.

What You Can Do Now

Our leaders learn nothing from market crashes, because new leaders emerge after each one.

But in this case, there is something you can do. Learn. Read. Not just about AI, but about everything else. Understanding doesn’t exist in an AI’s world. Trust doesn’t exist there, either. Programmers can’t give technology a moral center.

But you can, and we must. Otherwise, this will be the last crash anyone will ever see.

There’s a crime wave in America.

It’s not on the streets. There crime continues to decline, especially in big cities. Apparently cops, prosecutors and the promise of a life behind bars worked there.

We need to focus instead on the suites, the office towers where billionaires and millionaires act with impunity, often with the connivance of the “Justice” Department and federal cops.

Right now, everything in this country that isn’t nailed down is being systematically stolen by wealthy mafiosi. For too many “business executives” ethics exist to be ignored, laws exist to be overturned, and honesty is for suckers. So long as people get away with that kind of thing, no honest business can survive.

We don’t hear about this enough from political leaders. When we do, we don’t use the right language, Instead, we hear about the President’s “billionaire friends” changing the system “for their own benefit.” As though the very idea that this is a crime wave were controversial.

People are committing crimes. We need to talk about financial shenanigans in the same way we talked about drugs 40 years ago. Big numbers are the opiate of the upper classes.

Exhibit A

Mark Walter is just one example of what’s happening. Reporters still cover this like it’s a sports story or a financial story. They pretend it’s an aberration. It’s not. The real ghettoes are in Midtown Manhattan.

What Walter did was gain control of money you paid your life insurance company, the annuity you’re retiring on, and spent it on toys like the Los Angeles Lakers, the Dodgers, and Chelsea football club. Your money, meant to keep you going beyond Social Security, was stolen by Walter, with the connivance of the insurer, to buy rodeos, sports teams, and other garbage. Worse, the crimes were designed so that if the “investments” go bad, as they will, it’s your annuity that gets stuck with the loss. When you need the money, it won’t be there.

The marriage between private equity and insurance funds is rife with conflicts of interest, with hidden entities, with one-sided contracts, and with anonymous looking crooks like Walter raking off billions of dollars. Insurance providers are meant to have a “fiduciary duty” to clients, treating our money like their own. Instead, they’re colluding with criminals.

All of them need to go to jail. Not white jail. Not Club Fed. Real jail. Law & Order: White Collar Crime.

Change the Language About Crime

We talk about “white collar crime” as if it’s not even criminal. Politicians act like these are technical violations that can be cleared up with fines and slaps on the wrist. The media acts like the “rot in private equity” is some business problem that can be cleared up by moving assets around.

They don’t do that with drug dealers, or with people who kill with guns and cars.

But there’s no difference. The victims are just as broke, and just as dead, when a private equity firm does it as when someone with a knife does it.

I think most people, regardless of their politics, understand this, and are infuriated. Crime is the issue that can sweep the board in November, if we just use the language of crime fighting to describe what’s happening.

Stop talking about fines for white collar crime. Stop talking about private equity deals as just money moving around. Start talking about what it is, laundering the proceeds of crime. Promise perp walks. Demand subpoenas in every state where an Attorney General has balls. Raise police budgets for the crime wave that’s happening. Run on doing the same at the federal level, when given the power to do so.

We look at rapists and murderers with disgust. It needs to be 10 times that with these guys. If you want an issue that will get blood boiling in any race, anywhere, start by using the vocabulary of crime fighting when it comes to crime in the suites.

There’s plenty of room in the private prisons they built for all these guys.

One thing I don’t read often in American media is that the biggest loser in the Iraq War debacle is Israel.

Netanyahu’s Israel has done just what the Biblical Israel did. It has tried to create a religious empire and drive all dissidents out of it. By going to war against the whole world, including secular Jews, it has put its own existence at risk.

America will survive Trumpism. Israel may not survive Netanyahuism. Having pushed for a war of missiles, then losing a war of drones, Israel has turned its world upside down. No one sympathizes. As it is with Trump, so it is with them.

As I wrote last week, Sunni Arabs are also losers. The sheikhs tied themselves to America and Israel, believing the size of our weapons would make them invulnerable. That bet has been lost.

It was lost because Ukraine learned how to beat the oil power with technology. It was forced to do this because America, and Europe, didn’t support its existential conflict from the beginning. This forced it to adapt, as Israel adapted in its 20^th century wars. That adaptation has proven the greatest advance in the art of war this century. It’s on the verge of total victory, despite our even going over to other side.

The world has turned upside down.

The Flip Side

All the world’s great oil powers are being decimated. All its most expensive militaries are being destroyed. In the process, what I call the War Against Oil is being won.

Technology alone wasn’t enough to win it.

Market power wasn’t enough to win it.

War has won it. War has ended the power of oil, by harnessing innovation.

It’s just in time (maybe). Renewable energy production doesn’t have to increase by a factor of 1,000 to take up the slack. Maybe it only needs to increase by a factor of 10, and that includes all those stupid data centers.

Oil propagandists like to claim that, despite electricity’s gains over the first half of this decade, burning stuff still delivers most of the world’s energy. That’s true. But a big proportion of the energy we create by burning stuff is wasted. It goes into heating the air. Thus, the increase in renewable energy needed to handle the world’s needs isn’t nearly as great as the propagandists think.

It’s also necessary for this transition to occur, like now, or your grandchildren (if any) will boil to death, as many are already boiling to death, all around the world, because the air is too damned hot. This is also why you may not have any grandchildren. Your kids know this truth and have opted out of reproduction. We, their parents, deserve this result.

Revolt Against the Oil Power

Why does America have such a huge defense establishment?

It’s to defend our oil supplies.

If we can’t defend the oil, if the war has been lost (as it has), why do we need such a big defense establishment?

Defense can be a source of immense savings. Instead of making friends by killing people, as George Marshall did during World War II, make friends by saving people, as Marshall did in the years after it. Even reforming our procurement systems to emphasize low-cost drones and AI, and hiring engineers instead of high school dropouts, will unlock huge savings. Sell Raytheon, sell Lockheed, even sell Palantir, because they’re too expensive and centralized. That’s trillions of dollars right there.

We know that any moves away from oil allow us to create denser, healthier, and quieter cities. (It’s why the Administration is fighting those moves, in all their forms.) We also know that reorganizing our health care system so that everyone can get care will save trillions of dollars more. Reform the payment system, and we’ll eventually end drug subsidies, sunset the health insurance “industry,” and create uniform standards of care. Like the rest of the world has.

Gold has twice saved America from this kind of systematic reform. The first time was in 1848, with California’s gold. Heather Cox Richardson reminded me today that the second time was in 1898, with Alaska’s gold.

Gold isn’t coming to save us this time. We must save ourselves.

The Victory of Arthur Gorman

We have a romantic view of the 1890s and have had one for nearly a century. (Watch any movie set in that time’s living past, made in the 1930s or 1940s.)

But things weren’t that way. The 1890s were a violent decade, where oligarchs ruthlessly exploited workers, where liberal movements were often put down with violence.

The reforms of the Progressive Era, when they came, were half-measures. They were made after oligarchs like J.P. Morgan realized that putting down workers cost them more money than minor reforms ever would. They also saw that minor reforms would take out smaller business adversaries, while making possible the 20^th century’s national economic scale.

But there’s a section in Richardson’s piece today that brought me up short and demands your attention. It’s an election you may have never heard about.

“In 1892,” she writes, “voters had put Democrat Grover Cleveland in the White House and Democrats in charge of Congress, giving the Democrats full control of the government,” for the first time since the Civil War. This came after Republican president Benjamin Harrison “added six new states to the Union to make sure they could control the Senate.”

Democrats overcame a gerrymander even worse than what we’re seeing today. Under Harrison, Republicans had added North Dakota, South Dakota, Montana, Washington, Idaho and Wyoming, to the Union. This was done to add 12 Republican Senators to the 78 total number previously in the chamber.

Yet the 53^rd Congress had 43 Democratic Senators, against 37 Republicans. (Shown is 1893 Majority Leader Arthur Pue Gorman of Maryland.)

Senators weren’t directly elected in 1892. They were chosen by state legislatures. Democrats had to flip hundreds of seats to win that victory.

Gerrymanders can be beaten. Reform can triumph.

Analyzing my Substack numbers over the last year, a consistent pattern emerges.

You love me most when I predict the collapse of the AI Bubble.

Over my career I’ve seen several bubbles. This one was easier to spot than most. It’s clear that the numbers sent out by the AI Gods don’t work. The back end of productivity and revenue isn’t big enough to meet the front end of investment and production. Even Nvidia promises things that are simply impossible. As in any bubble, those telling the biggest whoppers are profiting the most, and are the most vulnerable.

The trouble is that a bubble’s collapse is like the Spanish Inquisition. Its chief element is surprise. If everyone expects it then it can’t really happen. What happens in that case is you get small blowoffs against excessive speculation, like the one that recently took out Leopold Aschenbrenner.

These blowoffs happened during past bubbles. Bear Stearns blew up six months before the 2008 financial collapse. Lots of early Internet investors lost their stakes long before AOL bought Time Warner in January 2000. Savings banks were blowing up well before the Black Monday crash of 1987.

My favorite bubble memory is, of course, my first. I was young reporter in a classroom where a Houston economist showed his models for rising, falling, and steady oil prices in early 1980, predicting doom in each case. Doom arrived in 1981, while everyone in town was celebrating the arrival of Reaganism.

Point is, the AI Gods can keep this going for a while yet. We saw it in just the most recent earnings reports, Microsoft and Google zooming after big numbers, which it turned out were mostly built on future expectations for OpenAI and Anthropic.

Watch the Shorts

The “big one” happens when everyone is long, and hardly anyone is short.

The guys who were in on The Big Short were a collection of widely disparaged weirdos. This was a feature, not a bug. I remember being such a weirdo in 1999. Nobody listened. Everyone was out partying, as Prince had predicted. (He would have made a great economist.)

When there’s a lot of money waiting to pounce on a break in the market, that break can’t be caught. The dip will be bought because there are people standing by to buy it. The fact that every dip is followed by an even more pronounced advance is also a feature. These “buying opportunities” create Fear of Missing Out, or FOMO. Skeptics become buyers, they profit, and they double-down.

You see this at gaming tables as well. Gamblers win, they bet more, they win bigger, they put real money at risk, and it’s then that all is lost.

I always listen closely to commentary after a bull market “hiccup” that’s bought, like the one that just occurred. People who were skeptical insist they’re still skeptical, but FOMO has them pushing more chips into the table and seeing the lights flash green. I know this is crazy but…what the hell.

If you’re still in your 30s, go ahead and plunge. If you’re in your 40s you can probably outwait any downturn. It’s those of us in our 70s who are sitting on the edge of our seats. Note that there are a lot of us.

Is Everyone Long Yet?

A crash can have any one of several different causes.

The 2008 crisis happened when unexpected losses caused Lehman Brothers to fold. The 2000 crash happened when AOL took 60% of Time Warner, showing the highest possible value of Internet assets. A cascading set of margin calls caused the crash of 1987.

For me, the biggest danger sign is on my Schwab screen whenever I stop there to pay my bills. My broker, like a bookie, suggests margin loans on my retirement account. This is insane. You don’t take those risks with your retirement, not when it’s on top of you. That’s why I never take short positions. My potential loss is unlimited. Leverage works both ways.

It’s likely that margin calls on retirees will be a “second order effect” of what’s coming. There are lots of folks who, seeing their retirements underfunded and the end of work coming closer, suddenly become plungers. They will brag about their paper gains, counting their money before the dealing’s done.

Pro tip. You don’t have a profit until you sell the security and get cash in your pocket.

Each failure to crash leads to more people who should know better placing their toes closer to the abyss. In this latest case, it’s Nvidia and Wall Street, turning short-term spending on data centers into long-term investment opportunities.

We will never know the “precipitating event” for the next crash until after it happens. It could be loans that go bad, assumptions that aren’t met, a deal priced at a ridiculous valuation, a failed auction of stocks or bonds, or just investors deciding it’s time to get out.

Keep some cash around, and don’t put it out until there’s blood in the streets.

Every day it’s one thing or another.

Whether it’s Mark Zuckerberg’s yacht ignoring calls for assistance, or Sergey Brin spending $100 million to kill a wealth tax, each morning brings a new example of some oligarch pretending laws and norms don’t, and shouldn’t, apply to them.

It’s a culture of impunity that is the biggest threat to our capitalist system.

Capitalism represents a bargain between the holders of capital and society. You get to have a lot of money, but you also have responsibilities under the law. If you don’t meet them, you become a law unto yourself. In that case society can, and will, go to war with you and you’ll either spend all your money maintaining power over others, or lose everything.

Today’s tech oligarchs have broken the deal. I find this remarkable because I’ve met some of these dudes. They’re not that special. In many ways they’re not even very bright. They’ve just mistaken their economic liberty for political license.

It’s this impunity that Americans are rebelling against. It has nothing to do with divisions within the Democratic Party. It’s the idea that a tiny group of people, who happened to find the keys to great wealth and turn them, are now supermen that grates on us. All of us. Republican and Democrat.

The current President is not an oligarch. He’s a wannabe. He is converting political power to private wealth because he has never measured himself by any other yardstick. The oligarchs are letting him get “rich” while laughing through their fingers about just how rich he ain’t, relative to them.

The good news is his actions have revealed their game and shown us it must be ended.

Meet John Doe

Frank Capra was a Republican, but his 1941 film Meet John Doe is an eloquent statement against the impunity of power, and the conversion of economic might into political oppression. His title character is played by Gary Cooper, himself a conservative Republican, but that character is an artifice created by Barbara Stanwyck, playing a writer and the audience.

Edward Arnold was the oligarch while he was also president of the Screen Actors Guild, a union now headed by Sean Astin. His D.B. Norton, who owns Stanwyck’s newspaper, wants to use Doe’s story to become a dictator. There’s even a scene of Norton overseeing a private version of ICE, uniformed men in formation on motorcycles. This was seen at the time as a warning against Hitler, but it’s much more relevant to what’s happening today.

“The people. Try to stop that,” snarls editor James Gleason at the end, and that’s the message to those of us in 2026. The fact is that impunity can be fought, and it can be beaten, but it takes masses of people working together to do it.

I’d say we’re fortunate that the incumbent Administration is stupid and incompetent, but that’s a feature, not a bug. It’s the product of the tech oligarchs, and those on Wall Street, men who know they are above even the power of the Presidency and prefer a stooge there to someone who might trouble them.

Why Centrism is Dead

In the musical Hamilton, there’s a line that speaks to the death of centrism in American politics today. It’s repeated several times, in various ways, first as a taunt and then as a verdict. It’s the story’s political throughline. You remember it, don’t you?

“If you stand for nothing, Burr, what will you fall for?”

Politicians whose desire for power is just to be in “the room where it happens” are always cast aside when a crisis arrives. Despite his extremism, the current President is at heart a centrist. He’s satisfied with being at the center, with securing his own position, and cares nothing for the lives of those he “rules.”

That word, rules, is important, because it’s the one thing our Founding Fathers warned us to never allow. The President serves us, the government is us, and anyone who acts contrary to that commits treason against us.

What’s obvious in our politics is also true for our markets. Impunity won’t stand for long. It will be taken down. By votes, by demonstrations, by a simple refusal to cooperate, or just by sell orders.

The revolt isn’t just against the present government. It’s against a culture of impunity imposed by the oligarchs, men (and they all seem to be men) who acknowledge no one’s humanity but their own, who believe that money buys power and that power is a zero-sum game.

That may be true, for them. The ranks of our oligarchs are always shifting, changing. Men die, and new ones emerge. Companies fail, even big companies. The only things money and time can really say is goodbye.

Our legacy is what we do with our money and our time. Not the money and not the time. The oligarchs of impunity don’t see that, and it will be their downfall. Whether in the marketplace or by the ballot box, they’re going down. I just hope I have time to see it.

This is not a political story.

It’s a business story and a technology story.

But the science behind it still holds.

Nvidia and the AI Gods are trying to repeal the law of technology gravity, which I’ve written about for over 40 years as Moore’s Law. It holds that, over time, computing always gets cheaper. A PC loses value like ripe fruit when it’s sitting on a loading dock, or on a shelf in a store. Don’t buy the extended warrantee.

Nvidia hasn’t repealed this. They’ve just ignored it. Vera Rudin processors are much more powerful than the Blackwells that came before.

What the company has done instead is to use circular financing to drive demand beyond what even Huang’s Law, which holds that improvements can come even faster than Moore predicted when you ignore problems like heat can account for.

Costs go down, but circular financing, based on assumed demand from OpenAI and Anthropic, keeps demand rising faster. That’s why memory chips, the ultimate semiconductor commodity, are rising in price. As I’ve written before, the demand assumptions OpenAI and Anthropic are making are bullshit.

Huang is now caught in his own bullshit cycle. What’s worse is that Wall Street, which is always consumed by greed, has allowed itself to be caught up in it as well. They’ll underwrite the bills, then write them off, and make money on both sides. Think of bankruptcy as just evolution in action. The $500 billion deal turning “AI Infrastructure Into an Investable Asset Class” is AIG mortgage insurance.

Moore’s Law is gravity. Huang’s Law is gravity. The law of large numbers is gravity. At some point the rate of growth in demand for compute will decline.

All this deal does is stall the reckoning. It doesn’t stop anything.

What Else Could Nvidia Do?

There’s no way out of the demand crunch except through data centers.

There’s been some suggestion that robots can take up demand, that they can be the “last mile” of AI. Nvidia has been working on robots for decades.

But if humanoid robots could handle warehouse jobs, Amazon would buy them. They have lots of robots in the warehouses already. Nearly all factories have robots. But they’re Roombas, or arms with claws. They don’t look like people. Real arms and legs are complicated, they’re hard to make, and they break easily.

The economics of robots only work with large loads, or when enormous precision is required under full human control, as in a surgical suite.

Even if a humanoid robot could be produced at scale, at an acceptable price, the intelligence of the people in the warehouse costs less and will for many years. That’s because there are many different aspects to intelligence. The intelligence to pick an order? The intelligence to handle change? And people do all we do at a fraction of the energy cost of even the simplest humanoid robot.

Jensen has talked up the idea of an Nvidia PC, a “supercomputer for your desktop.” It exists. It costs $5,300, without a monitor, keyboard, or anything else. It’s a limited market. Think universities and research centers.

AI Clients have yet to get smaller than the phone. Glasses and watches exist, but they’re niche markets. They’re not delivering anything like AI capability. Apple is still waiting for something real it can pack into its phone client. It doesn’t exist.

Falling Out of the Sky

Robots and smart watches will exist someday. But that day is not today, and it isn’t even close to today. When I’m so old and infirm that I need a care home, there won’t be a humanoid AI robot that can wipe my butt and feed me my meals. It will still be a person.

Keeping financial plates spinning in hopes a miracle will happen is insanity. OpenAI and Anthropic continue to lose money. Nothing is coming that will supplant their so-called demand.

At some point gravity wins. There will be companies that emerge from the wreckage, and I believe Nvidia will be one of them. But it will be a much smaller, more humble company, run by someone other than Jensen Huang

Just a short one today.

I haven’t seen anyone mention the biggest long-term impact of Trump’s idiotic war with Iran.

That is the setting of the Sunni Sun.

The Sunni Arabs, Saudi Arabia and the Gulf kingdoms, are seeing their power and wealth systematically destroyed in this conflict. The power of Shia Islam, centered in Iran, is growing apace, although no one’s getting rich on this.

Unlike Christianity’s Protestants and Catholics, Sunni and Shia Muslims have been in conflict since the beginnings of the religion. Many of Islam’s great intellectual achievements originated in Shia Iran. Until the 20^th century, Arabia was a desert.

Then they found oil.

Now that gift is proving double-edged. They can’t export it. Even while its value is being raised by Ukraine’s successful war against Russian infrastructure, they can’t benefit.

In the long run, this is not a bad thing.

Oil is destroying this planet. Anything that cuts the power of oil, and proves to people that harvesting the cheap, abundant solar and wind energy on our planet makes sense is a good thing. The War Against Oil is being won, and we must give the devil his due.

But Gianni Infantino needs a new sugar daddy. The New York style skyscraper era of the Gulf States is over. The investments Gulf Arabs made diversifying away from oil must now be wound down, even reversed, because they need the cash to survive their own people.

Not being Muslim myself, I can’t speak to the religious significance of this. But speaking just as an observer, it’s glorious.

“Poor man wanna be rich. Rich Man wanna be King. And a King ain’t satisfied ‘til he rules everything.” – Badlands

No one since 1789 has succeeded both in making war against the world and their own citizens.

Yet that’s what the current Administration is doing, and a lot of Substackers believe they’ll succeed.

It makes no sense. Especially when its military is losing a war. Especially when its Gestapo is out of Hogan’s Heroes. They may own most of the information space, but they don’t control information. Everyone can see their own bills rising and their jobs becoming conditional.

The biggest flaw in this plan is a refusal to adapt. When things go wrong, you don’t double down on failure. Even Vladimir Putin adapts faster than these bozos. And they’re all bozos on this bus.

If the events weren’t making me cry so hard, I would have to laugh. Hey, dude. Springtime for Hitler wasn’t a documentary.

I get how they think they’ll save themselves. Keep the AI stock mania going, so Oligarchs stay loyal. Attack other religions, so the Christianists stay loyal. Keep raising the cost of betrayal rising so your own people stay loyal.

But what about the price of loyalty?

The opposition needs to make clear that there is a personal cost for violating the Constitution and your oath of office, which demands fealty to the law and not the dictator. There’s a jail cell with your name on it, a call from the Hague waiting to be placed. Think about it, little Mario. “I was only following orders” didn’t work at Nuremberg. And when this age is over there will be Nuremberg.

The Cost of Biden’s Failure

The reason we’re in this mess it that everyone associated with this Administration is betting that their personal impunity outlasts it.

This is true from the cabinet to the ICE agents on the street.

It’s true because the previous Administration, under President Joe Biuden and AG Merrick Garland, refused to charge, prosecute, and convict on the crimes in front of them. The attempted coup was allowed to stand, and so the coup succeeded.

This must change.

The danger, of course, is that stating the fact will lead those who have impunity to hang onto power tighter. They will become convinced that only their loyalty protects them and go on to commit even more ghastly crimes.

This is already happening. It’s why I don’t rate the previous Administration as highly as others. This could have been prevented by a Department of Justice that understood how the January 6 rioters, and those who led them, were in deadly earnest and committing acts of treason.

The rule of law is upheld only by prosecutors, and judges, who will administer it without fear or favor, who will commit those guilty to jail regardless of their station, and who will err on the side of justice over mercy when moved to by events.

Of course, we’re then left with the fact that a corrupted judiciary, like the one we have now, might use that need to put all the Administration’s critics in prison, or the ground. Strange because we already imprison more of our own than any other nation, even China.

How It Ends

No one knows how this era will end because there is no precedent for it.

Before the 20^th century, empires could safely exist within their own spheres of influence. It was possible, even in the 20^th century, for a dictator to control their people with police and propaganda.

Neither is true anymore. Imperialism has become a zero-sum game for everyone. The Internet fights propaganda, cameras police the police, and drones stand ready for revolution if the time comes.

The question right now is whether the time will come. The Administration can rig a close election. It can’t rig a landslide and expect no resistance. Today’s technology gives big advantages to those who resist, whether they are nations or just opponents of a government.

The fall of Trumpism is inevitable. Whether it comes the way of Hungary, an Administration going willingly into exile, Iran, an Administration going into exile at the point of a gun, or Libya, an Administration being pulled bodily from a sewer pipe while the nation descends into chaos, has yet to be seen.

The former Cloud Czars, now the AI Gods, got through the latest earnings season unscathed. (Illustrations from Google Gemini.)

Amazon, Microsoft, and Google all reported numbers Wall Street found acceptable. They all claimed that they’re re-selling the capacity they’re building for AI applications, at a profit, and thus they can continue to build new capacity at an accelerating rate.

This news helped most of the pack behind them stay in the game. Even Oracle, down 50% from its June peak, stayed alive on the news, as Michael Burry closed his short position.

But just how did Microsoft get $19.6 billion in free cash flow? People are asking questions.

For instance, Microsoft’s build out is based on a claim it has a $627 billion backlog of “remaining performance obligations” (RPO). This is computing capacity Microsoft says customers have contracted for, but which Microsoft hasn’t yet delivered.

The problem is that 45% of this comes from one company, OpenAI. If OpenAI crashes and burns, Microsoft’s RPO goes with it. I believe this has already happened. I’m not the only one. It’s an open secret the relationship between the two companies is crumbling. Which means almost half of Microsoft’s growth claim is bogus.

Question. How do you make money on what you give away? The Gemini art that accompanies this story was free, in that I didn’t pay for it. But it cost something, right? Who paid?

Bloatware Returns

A bigger point I have yet to see referenced comes from inside Microsoft software. AI demand is being forced into existing programs like Word, which is writing this piece. Word can now read this story back to me (why?), and it constantly tries to edit my stuff, in ways I find extremely annoying.

I’ve been using Microsoft software for 40 years and this forcing of new features has a name. It’s called bloatware. Microsoft is doing things with AI it could easily do in other ways, and for a lot less time, money, and compute.

How do I know they’re hurting from this? Just look at the box that now appears in the upper-right corner of an editing window. “Upgrade Your Plan.” Families are being asked for $13 more per month to support features they’re not using.

Microsoft isn’t alone. Look at the corner of your screen the next time you open Gmail. The word there is “upgrade.” Google is also creating bloatware, having AI do things it could easily do with other techniques, and just like Microsoft it wants you to pay for it.

Microsoft and Google have hundreds of millions of customers. What they’re asking for is hundreds of billions of dollars. I don’t think they’re going to get them.

Amazon has also begun to nickel-and-dime customers. Walmart’s online pricing is now a lot more affordable, for example. You may have also noticed a new streaming service, MGM+. That’s part of Amazon Prime, now repackaged at $7/month. (Believe it or not, it costs $8/month if you’re already a Prime customer.) The price for avoiding ads on Prime itself is also up, from $3/month to $5/month. Streaming bills are now cable bills.

Balance Sheet Shenanigans

The biggest lie sits deep in the balance sheet.

This is the depreciation schedule, the rate at which the Czars are writing off their investments. Microsoft has extended the “useful life” of its buildings from 15 years to 25, but more important it now claims its servers have a useful life of 6 years.

Physically, the chips should easily last 6 years. But practically? Uh, no. The year 2020 was when Nvidia first launched its Ampere cards. These claimed to be 20 times faster at AI inference than the Turing units they replaced. Since then, Nvidia has produced Hopper, Lovelace, Blackwell, and now Vera Rubin equipment with similar claimed improvements. The Rubin chipset alone is 10 times faster than Blackwell at AI Inference.

I’ve written about Moore’s Law for decades, but Huang’s Law puts it in the shade. As I have written, it does this by ignoring Moore’s limits on heat and electricity use. Fans have been replaced by water baths, which move the heat the chips produce more efficiently than air can. But that also means a lot of the electricity being put into Nvidia chips is being wasted.

Huang’s Law is inflationary, but it also makes the AI Gods’ depreciation schedules ridiculous. The nature of Moore’s Law still holds. Chips start depreciating the moment they hit the loading dock. The extraordinary demand for AI is currently keeping chip prices high, especially for memory now replacing hard drives. But it’s unsustainable.

Losing the Great Game

Microsoft, Google, and Amazon are doing all this in the name of what I call the Great Game of AI. If you don’t play, you lose. Think of it as a bike race, where each acceleration of the leading riders causes slower riders to drop back, the peloton becoming smaller-and-smaller until there is only one winner.

That’s the way everyone assumes this ends, the way previous generations of technology ended, with one winner. But there were five Cloud Czars. Why can there be just one winner in the AI game?

Or maybe, they will all wind up losers. I know investors will end up that way. I’m not playing.

Gianni Infantino’s attempt to Americanize the beautiful game failed.

But the war is not over.

The scam that began right after the World Cup is part of the existential conflict between capitalism and communism.

Unfortunately, Americans are the Communists.

You can see the result clearly, now that the world has gone home and the beautiful game has returned to its half-full bandboxes and miniscule TV ratings. Major League Soccer (MLS) is great for a few oligarchs, but it’s garbage as spectacle and unwatchable as sport.

Almost 40% of the world’s most valuable teams play in MLS, but the game they play isn’t major league. It’s barely soccer. That’s because the game has no stakes, no risk. There’s no real prize for finishing first. Half the league’s teams make its “play-offs” and mediocre ones can emerge as its champion. There’s also no way for a team and ownership to be relegated to a lower league. (Lower leagues do exist.) As a result, most games are played at half-speed. Fans can tell the difference.

MLS is allowed to exist as it does because of an exception to FIFA rules, implemented after the 1994 World Cup. The North American Soccer League (NASL) failed in the 1980s because only one club was willing to invest in the product. These were the New York Cosmos of Pele, of Beckenbauer, and of Chinaglia. The Cosmos played in huge stadiums, they got respectable ratings, but the league folded.

That is not a problem now. Americans want quality soccer. 1Premier League teams fill real stadiums for pre-season. European soccer ratings put those of MLS in the shade.

Then there’s MLS. A closed shop. Money shared equally. Franchises “sold” instead of organically created and moved if government doesn’t give owners free stadiums. The American Way.

A Better MLS

American oligarchs control MLS, and oligarchs want to control the European game, too. (Many are American.) They tried a closed “Super League” a few years ago. They’ll try again.

Instead, European soccer is pure capitalism. Leagues are associations, clubs are separate legal entities. Every game has something on the line – a championship, qualification, TV money, relegation, civic pride. Losing should hurt.

FIFA should demand U.S. Soccer creates a real football pyramid, a truly capitalist system, on pain of banishment from the global game. UEFA beat FIFA by promising to boycott the World Cup. Boycott America if we don’t play real ball.

I have a modest proposal for that.

With 32 teams, MLS can create two 16-team divisions. Play the first half of the season east and west, 15 games, then split the league based on points for the back half. The team with the most points overall is MLS Champion. The best teams in the top half go to international competitions like Leagues Cup, the CONCACAF Champions League and (who knows) Copa Libertadores and the Sudamericana. The worst performers in the second division are relegated to the USL, some after a two-sided play-off with the best USL teams, with the best USL teams promoted automatically.

MLS would transform from a single structure to an association of clubs, under U.S. Soccer. The pyramid, with regional leagues, could go down as far as you want. England’s has 9 levels.

It would be a huge money spinner and bring South American clubs into American stadiums on a regular basis. It would force MLS owners to invest in their teams. While that would mean lower profit margins, top teams would be globally competitive.

MLS Won’t Like This (But I will)

As the world discovered last month, Atlanta has one of the world’s best soccer stadiums.

But the team that plays there is pitiful.

I first became a soccer fan through an English friend who introduced me to Sheffield Wednesday, then in the Premier League. They’ve gone through hard times since, and harder times. Their stadium, Hillsborough, was once one of the game’s palaces, but it was built in 1899 and is made of wood. Their last owner nearly bankrupted them, and they were relegated this season to League One, the third tier of the English game.

But I guarantee that, with money or a trophy on the line, that team would handily beat Atlanta United. Despite everything, Wednesday still draws passionate fans from around the world. If I travel to Asia next week with two shirts, one saying Atlanta United and one from “the Wednesday,” it’s the Wednesday that will draw the interest.

As an Atlanta fan, I find this shameful. The world’s most beautiful stadium, a franchise valued at $1.1 billion, and a minor league team would beat it!

Atlanta would support a good team. United drew over 70,000 fans when it won MLS Cup in 2018. Maybe, if we had gone through a relegation since, there would be some sense of urgency. There isn’t. After all, a small winning streak might still get them in the playoff hunt.

You judge an economic system by its results. Americans love to pretend we’re a rich country, that other countries are inferior. That’s not true in football, where we’re God damned Russian Communists. If it takes a European attack to get that through our heads it will be worth it.

For most of the 2010s I was a finance writer, frequently commenting on the performance of The Walt Disney Co. $DIS.

Recently I decided to revisit the stock.

It’s a horror show.

If you put $100 into the shares in 2021, you now have $55. With capital gains having disappeared, Disney became a dividend stock in 2024. The annual payout is now almost $1.50/share, a yield of 1.59%. The share price has barely budged. The market cap is now $167 billion, a pittance next to Netflix $NFLX, valued at almost $300 billion.

Unseen Billions roasted the stock last week, blaming the board of directors, and telling the story of three crises, the last of which remains unresolved. The analysis is spot on, but I believe the cause is much simpler.

Bob Iger.

A board of directors is supposed to represent the interest of shareholders. But when a CEO is in power long enough, they have appointed the board. It’s his.

Not that there’s anything wrong with that. In theory. A company must have one person in charge. It must embrace one strategy, one message. That’s entrepreneurship.

But when things go wrong, too many CEOs go from being entrepreneurs to megalomaniacs. It’s the board’s job to stop this. But when the board consists entirely of the CEO’s people they won’t or can’t.

That means the buck must here stop at Bob Iger.

Iger’s Big Mistake

Before streaming and COVID, Iger ran a great company. Tentpole movies came out regularly, and Iger has all the tents – Lucas, Pixar, Marvel, the Muppets, the lot.

ESPN controlled the sports business, and theme parks processed the intellectual property the way Hormel does pigs. Disney grew because Iger had the money to buy all of Hollywood, not because he was a creative genius.

I’m not going to rag Iger on streaming and COVID. They happened to everyone, although buying streaming tech from major league baseball stalled Disney’s advance there by some years.

Iger said he wanted to walk off into the sunset six years ago. His designated successor was running the biggest, most successful division. That would be the theme parks, which have also added cruises. (Cruises are the growth story of Disney this decade. They have a great formula in cruises. Every cruise operator wants to sell its boats to Disney or be bought out by them.)

But Bob Chapek wasn’t an entertainment guy. He was an operations guy. He was more at sea in Hollywood than his ships. His division, dubbed “experiences,” is still 40% of the company’s gross revenue and two-thirds of its net income. Fun fact. Disney once separated TV and movie revenue. It doesn’t anymore. But the parks’ share of revenue and profit is the same. (Entertainment continues to lose ground.)

Iger fired Chapek in late 2022. He then spent nearly four years seeking a successor, while the company churned beneath him like a ship in port.

Insanity II, The Wrath of Iger

Guess who Iger finally found to replace Chapek? The guy running the theme parks!

A woman named Dana Walden now runs entertainment. She spent most of her career at Rupert Murdoch’s News Corporation, coming onboard when Disney bought Murdoch’s 21^st Century Fox movie studio to get The Simpsons. Murdoch has made his name copying others, never innovating. Walden is not an innovator.

Besides, if Walden were that good at her job, she’d be CEO. The new CEO, a person named Josh D’Amaro with executive style hair, should be a division head underneath her. That’s because creativity is the engine that keeps an entertainment enterprise moving forward, and D’Amaro, like Chapek, is an operations guy.

In short, Iger has made the exact same mistake he made four years ago. Guess who’s going to come flying to the rescue when these two screw the pooch? He’ll still be just 77.

What Should Happen

Why were only Chapek and D’Amaro available when Iger had to make the big decision?

It’s partly because he doesn’t trust anyone. An entertainment company must be run by a creative person, and there haven’t been any in Hollywood since Lucille Ball sold Desilu.

Instead, talent agencies took over Hollywood, putting movies together as packages, and packages as franchises. This is Iger’s world. This is what the entertainment industry called creativity for decades.

But now the Internet does this, seemingly by magic. Disney has no idea how it happens, like they’ve never seen American Idol. Disney needs to find someone from the Internet world and give them real power, a massive budget, and creative control.

Studios aren’t what they were. Movies are dead, TV is dying, YouTube owns everything. So why wasn’t YouTube CEO Neal Mohan in the frame for the Disney job? Or, better yet, his predecessor, Susan Wojcicki?

Does anyone have Mr. Beast’s phone number?

The Iran War and the Ukraine War have merged into one war.

That is clear.

Victory for Ukraine has meant taking the war to Russia. Its oil industry has been broken, its military and civilian logistics as well. People there are out of fuel and soon, they may be out of food. While China’s leaders sit on the sidelines, smiling.

Iran is still taking American hits, but its own drones and missiles are destroying America’s military power. Leaders here are as dumb as Russians. Maybe they’re the same people. They refuse to adapt.

True adaptation would mean cutting costs to the bone. Stop ordering big missiles and start ordering connected drones, from Ukraine. Stop pretending the current generals can get their arms around this and look for someone who can. Mykhailo Federov comes to mind.

That won’t happen. The idiots believe Iran is too far away from America to do us any harm.

Then came this warning from Dan O’Dowd, who runs a software safety advocacy group called The Dawn Project. It arrives after a leaked government memo reveals dozens of cyberattacks against Minnesota water utilities have been linked to Tehran:

“Hacking our critical infrastructure converts it into weapon of mass destruction in the hands of our enemies. The woeful cybersecurity at our power plants and water treatment plants means that we have left the keys to the weapon lying around for our enemies to pick up with a laptop.”

You don’t have to be a qualified financial analyst to know that 2+2=4.

War is Everywhere

The current Administration launched a war of choice that became existential for those we attacked. There’s no Geneva Convention in such a conflict, no rules. They will do whatever they think they need to do, or can do, to fight us.

And they have laptops.

Drones are cheap. Ammunition, at least in this country, is super-cheap. We have lots of people here who can easily be turned into Iranian assets, just as Russia has many who will do things for Ukraine.

Our oil industry is vulnerable, and our other infrastructure more vulnerable than that. AI makes bugs easy to find, and we know they’re hard to fix.

Iran doesn’t care who runs America. For their purposes, it’s fine that the incumbents run it, because they’re dumber than dogshit, especially at the top. This is a military dictatorship whose leadership has been directly targeted. It’s an existential battle for them, going back to before I was born.

Are you starting to get the picture? Is it becoming clear to you?

Don’t say you weren’t warned. The world needs peace, but there is no peace. “When the beasts like you will devour each other, then the world will belong to the little people, who give crumbs to birds.”

Business headlines are filled with talk of a “crash” in AI and infrastructure stocks.

SpaceX stock is down 30% from its IPO price. Micron fell by nearly 25% in a week. Nvidia is down 19% over that time.

Meta CEO Mark Zuckerberg tried to get in front of it with a press tour, claiming there will be “more jobs and entrepreneurship” as “superintelligence is widely distributed.” Investors treated this like the bullshit that it is, the shares down almost 10% after earnings.

But for all the wailing and rending of garments, this wasn’t “the big one.” Amazon is down just 5% over the last month. Microsoft has held steady. It should be up after earnings. Software stocks in general are surging, because their numbers were much better than the market’s initial reaction to them.

To this point, the AI sector has just blown off the fluff on its beer. SpaceX is still worth almost $1.5 trillion. The same with Meta. If you bought Micron a year ago your stock is up over 500%.

Reports of an AI crash, in other words, are somewhat exaggerated.

The more troubling news is coming in far from the trade floor. Anthropic is no longer the “good guy” in its war with OpenAI. Chinese models haven’t “caught up,” but they’re good enough for many uses, and with their modified open source licenses (they’re more sorta source than open source) they’re a lot cheaper to use.

What Happened?

What has happened is that the AI Gods stopped subsidizing their users. The users saw the bill and began economizing, and this threw a lot of assumptions into the toilet. (Picture borrowed from Gary Marcus.)

The toilet is where those assumptions belong. Zuckerberg’s talk about “superintelligence” sounds dated. At 42, he sounds like an old man, and after spending 20 years on the bleeding edge, he is. Long memories can protect you in downturns like this, but they won’t put you on a stage, let alone keep you on a pedestal.

The Great Game of AI is a vaudeville show, constantly seeking new acts and new thrills, built using trillion-dollar chips instead of the billion-dollar antes of a decade ago. What we’re seeing is a move to the classics, as when disco’s fall in the late 1970s brought classic rock back for a time. Rap and hip hop, which would define the next musical age, were still seen as secondary.

Let’s walk away from the musical analogies for a moment. The software numbers show that, beneath the surface, the AI industry is still healthy. Even after automating their production and tossing touch typing coders into the trash, companies that make and use software are still able to raise prices, deliver value, and increase corporate productivity.

Just because the leading edge of AI is bleeding out doesn’t mean the last few years have been a washout. The tools are still new. They take time to learn, to understand, and to implement. Moore’s Law of Training (there is no Moore’s Law of Training) remains intact. The big gains from the last few years’ effort are still ahead of us.

What Happens Next?

I think the current bear market has a long way to go.

Tesla is still worth $945 billion. Toyota is worth about $250 billion. That’s ridiculous.

The market is asking AI to show its work, and the maths ain’t mathing, as they say. The Cloud Czars are protected by their moats – the Amazon store, Microsoft software, Google search. But the numbers they can expect from their recent investments don’t justify the current spending, so the market will have to revalue them.

As to those on the bleeding edge, I still expect Sam Altman to be fired. The line between salesmanship and fraud is a thin one, as anyone who grew up on The Music Man knows.

Hollywood endings are for movies. The market still wants its pound of flesh.

A month ago, I wrote a piece about Apple.

It had a moderately bullish thesis. Apple is the only one of the former Cloud Czars to not go all-in on AI and data centers. Tim Cook’s last big choice was to only deliver AI that could run on Apple clients, and AI remains a server technology.

Since I wrote that piece, Apple stock is up almost 20%. (That’s about $1 trillion, kids.) Apple is nearly the only tech stock I have left in my portfolio. I have slowly dumped them all – Microsoft, Corning, Google, Cloudflare, Nvidia and Taiwan Semi. I even sold VTI, my last pure index fund, because it’s tied to the data center boom.

I’m guess you’ve now concluded I’m buying more Apple.

I’m not. In fact, I’d be more inclined to sell at this point.

Apple is a consumer device maker, worth almost $5 trillion with annual revenues that could hit $450 billion this year, and $45 billion of cash in the bank. It’s a good, strong company. But is any company worth more than 10 times sales in this market, or more than 40 times earnings?

That’s the thing about bear markets. They get everyone, the good as well as the bad. The fact they don’t hit the good as hard doesn’t mean the good don’t get hit. You’ll know this is a real bear market when Apple rolls over.

Meanwhile, where is money going? A surprising amount is going to Europe, where Vanguard’s VGK fund is up almost 15% in the last year. A lot of it is going into bonds, and bond funds, which is why the U.S. 30-year rate has barely budged despite the Trump deficits. I recently picked up some Amazon.Com bonds yielding 6%.

Whither Apple?

Right now, Apple is hunkering down, running in place, doing what it does and, seemingly, innovating not at all. Its engineers are studying AI models, wondering which might be adapted for Siri, and looking carefully at which models its customers are choosing to run.

It’s not exactly paralysis. It’s analysis. Moore’s Law isn’t working, because demand driven by Huang’s Law has overwhelmed it. Parts prices are rising, especially for memory, and Apple is not built for inflation. It’s built for deflation.

Investors continue to buy Apple stock because it’s the only tech play that looks sustainable, but is it really a tech play? Apple is all about hardware engineering, and incoming CEO John “The Chin” Ternus is a hardware guy. He can use Apple’s advantages in money, manufacturing, and in chip design to deliver high quality gear at prices lower than most competitors and let its software ecosystem make up the difference in value.

But is that a tech company?

Apple has been moving away from tech since Steve Jobs came back 30 years ago. The iPod, the iPhone, the Watch and the Ear Pods are consumer products, not tech products. Comdex is dead, replaced by the Consumer Electronics Show. But the crowd is following it as avidly as it did 40 years ago, when my late friend Tony Bove was publishing Desktop Publishing, even though it’s no longer an innovator but an implementer.

Apple doesn’t lead. It popularizes. The stock is selling because it’s safer than houses, safer in many ways than the U.S. dollar.

Whither Tech?

I’m tired of predicting the end of the data center era. Maybe because it’s here, and I always leave the ball game early (to beat the traffic).

AI will have a purpose, and it will have a value. It will just follow the path of all other tech, rising in value as it falls in cost. Right now, the industry is looking to cut costs, desperately seeking a profit, demanding a softening in prices.

That’s what the data center bust will be about. When it’s over Apple will still be standing. But will it be worth $5 trillion? I doubt it. My own decision is to hold on, take my Apple losses in stride, keep cash close, and buy only when the smoke clears.

There will be bargains. There always are. Just not at a market top.