The Crises Yet to Come

"Controlling the narrative" to justify destabilizing asymmetries won't change the consequences.

That the Trump Reformation / Counter-Reformation is disrupting various nodes of the status quo is viewed as an existential crise by many. The choice between Reformation / Counter-Reformation seems to cleave on this basic perception: the status quo in its 2024 configuration was ably serving the common good, or the the status quo in its 2024 configuration had veered from the basics of accountability, efficiency and transparency into self-serving self-righteousness, defending its sclerosis and inefficiency via political correctness and narrative control.

The Trump Reformation / Counter-Reformation isn't the crisis, it's the symptom of a status quo approaching crisis. The real crises are still ahead, and while the nature of the polycrisis gathering force over the horizon is open to debate, its basic dynamics are already visible.

Longtime readers know I have discussed cycles and historical waves over the past 20 years. We can dismiss the timing pf previous crises as coincidence, but it would be unwise to dismiss the dynamics that generate cycles and waves of crisis and collapse.

Correspondent Bruce H. recently posted this summary of a core dynamic in long-wave cyclical crises:

"We are in the midst of a wider historical pattern, I think.

During the expansive, formative stage of an empire, there is a dynamic approach to each new problem, finding solutions, overcoming obstacles, and building on success. Genius comes from every level of society and frequently climbs from the lowest group to the top. Society is in flux, with people moving up and down the social strata. The poorest experience increased wealth, but there is not too much disparity between them and the very top.

At a certain point, the elites begin solidify into a relatively fixed group, the flux of people between strata begins to slow. The dynamic creative approaches to new problems begins to wane. Those at the top in the final stages of any empire, which scholars have noted tend to have a median life of 250 years, the elites develop a mental sclerosis wherein they cannot conceive of any new ways of doing anything. They only collectively remember what brought them to the top, and, instead of finding novel solutions to new issues and problems, prefer to redefine the problems in such a way that the old solutions become the way to address them. Of course this does not actually solve the underlying real issues, which then metastasize into intractable crises.

The proletariat loses faith in the system and begins to abandon it.

Usually, a charismatic figure arises, promising to reform the system and returning to a glorious past time, but who suffers a crisis which finally splinters the whole polity.

Does this pattern sound at all familiar?"

I would add this: the system first abandons the working class, who then abandon the system. I call this abandonment opting out, and it has a great many variations.

The status quo's core hierarchy isn't political, as most imagine: it's the economy rules all, and finance and technology rule the economy. The economy gathers up the resources, capital and labor, and distributes them according to the incentives embedded in finance and economic structures. Society picks up whatever crumbs fall off the economic wagon, a nameless, ignored beggar.

While finance and technology attract the best and brightest and savor the glory of endless euphoric worship, the forgotten fabric of the status quo--the social order--is unraveling. In broad brush, society and the economy interact in two ways: the Pareto Distribution (the 80-20 rule) and the relative ease / porousness of social mobility.

Pareto found that over time 80% of the wealth ends up in the hands of the top 20%. This same distribution is found in the top 20%: 20% of 20% is 4%, 80% of 80% is 64%, so the top 4% hold roughly 64% of the wealth. Income is also concentrated in the top 20%, but to a lesser degree than capital / wealth.

The question of economic abandonment (and thus of social stability) boils down to: how is the wealth / income distributed within these broad parameters? In the U.S., over 90% of all financial wealth--stocks, etc.-- is held by the top 10%. As expected in the 4/64 distribution, the top 5% own the lion's share of this wealth.

This exceeds the expected 20/80 distribution, meaning the bottom 80% aren't even holding 20% of the income-producing wealth. Their "wealth" is in assets that cost money rather than generate income: vehicles, the family home, student loans, etc.

This extreme asymmetry undermines the social order, and as Bruce outlined, it ossifies social mobility, the flow of individuals and households sliding from the top 20% into the bottom 80% and ascending from the bottom 80% into the top 20%.

Again in broad brush, if the top 4% have moated their position at the top and the bottom 64% have little opportunity to rise into the top 20%, the social order will fray and unravel even as "the economy" generates vast profits for the few. In other words, the economy can appear robust while beneath the surface the asymmetries built into the economy are dismantling society.

The majority of commentators are looking at financial, political, geopolitical or environmental sources for a global crisis. Few seem to notice that the economy has effectively abandoned the bottom 64% of the citizenry, who no longer have the means to buy a "middle class" life of homeownership, a family with resources to invest in children, and some modicum of financial security.

While the media glorifies finance and tech, our social order in unraveling. I have family and friends who were police officers, so I have some familiarity with the rigors and pressures of what is often an impossible job.

That the police are now the frontline of America's mental healthcare system--if it even deserves to be called a system--is proof-positive that our social order is well on the way to a collapse few reckon possible, much less inevitable.

The Invisible Man: We see right through the unshowered soul living in a car by the beach, or by the Walmart, or by the side of the road. But he's there, and he used to be somebody. He still is. A firsthand account of homelessness in America.

It isn't just the bottom 4% who have been abandoned--the bottom 64% have been abandoned, too, and the Reformation / Counter-Reformation isn't going to change that enough to matter. As long as the economy is our real-world religion stewarded by the priesthoods of finance and tech, the abandonment will continue to the point of social dissolution.

This snapshot of the bottom 50% reflects the abandonment of the bottom 64%. Yes, mainstream economists slave away to find arcane ways to mask this reality and glorify their masters' dominance, but this is the reality the top 20% is desperate to ignore, explain away or obfuscate.



When the concentrations of wealth and income in the top few exceed the Pareto distribution, and those at the top have dug a wide, deep moat around their position at the top, the center of the social order cannot hold.



Yes, we all worked hard over the past 50 years. My Social Security work record is 54 years and counting. But "working hard" is no longer enough to open the doors of social mobility, and our denial of present-day realities only accelerates the unraveling.



Political reforms don't change anything if the economic-financial asymmetries remain firmly in place or become even more asymmetric. Humans excel at self-justification, explaining away uncomfortable truths and weaving all the threads of narrative control.



Controlling the narrative to justify destabilizing asymmetries won't change the consequences. The crises generated by these immense asymmetries are rumbling over the horizon. Few see the storm front because it threatens the security of their worldview. But turning a blind eye to wholesale abandonment that favors the few at the expense of the many isn't going to make the storm go away, or change the seating at the banquet of consequences.

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

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Lots of Solutions, But for Which Problems?

If the "solutions" being offered are features of self-liquidating systems, they aren't solutions, they're problems.

Problems, problems, problems. No worries, we have solutions. Solutions abound, but the question is: are they actually resolving the core problems, or are they "solutions" that leave the real problems untouched so the status quo remains safely intact?

We've become so accustomed to top-down "solutions" in the contexts of Big Government, Finance and Technology that we risk misdiagnosing the key problems in favor of defining "problems" that are ready-made to be "solved" by the current toolbox of top-down "solutions" offered by Big Government, Big Finance and Big Tech.

By way of analogy, it's like being told the "solution" to our problem is a new prescription for eyewear when the actual problem is a potentially fatal melanoma skin cancer. Yes, maybe getting a new prescription would be useful, but in the context of the problem being left unaddressed--a cancer threatening to metastasize throughout the entire system--this "solution" is revealed as a solution that leaves the real problem in a run-to-failure trajectory.

What are the core problems we face? There are many candidates, but these two top my list. Unsurprisingly, they're not even on the conventional lists of pressing problems needing solutions.

Problem #1: an industrial economy needs most participants to have ample discretionary income left after paying for essentials to consume the vast output of non-essentials produced by the economy. If the lion's share of income and capital accumulation flow to a relatively narrow elite--in the status quo, that's around 5% of households--then the industrial economy collapses as there are not enough consumers with sufficient discretionary income to buy all the goods and services being produced at a profit for the producers.

Such an economy is neofeudal in structure as a nobility can consume luxuries but not the enormous output of an industrial economy. This neofeudal economy is self-liquidating, as producers shut down production due to lack of demand, laying off their workforce, who no longer have insufficient discretionary income to spend freely, further reducing demand.

We've filled the hole of declining discretionary income with money borrowed from future income (debt) and "free money," the pool of liquidity/excess capital created by central and private banks out of thin air that can be lent at interest.

If the rate of interest is near-zero (or better yet, lower than the rate of inflation), consumers can borrow and spend freely despite a decline in their discretionary income because the cost of servicing their rising debt remains low.

Regardless of the rate of interest, the cost of servicing debt eventually consumes the discretionary income. Unable to borrow more, discretionary spending collapses, taking the economy down with it.

Analyst Tim Morgan described an important feedback in his work on Contracting discretionary affordability:

"Contracting discretionary affordability doesn't just mean that the individual has to spend a rising proportion of his or her income on necessities, and can afford progressively less non-essential purchases.

It also puts increasing pressure on the ability of the household sector to carry a greatly enlarged burden of debts and quasi-debts."

These are the dynamics of depressions: debt is substituted for income, fueling speculative demand for assets that pushes asset valuations to the moon, expanding the collateral for more borrowing, which pushes consumption higher. Everything is splendid until:

1) the cost of servicing all this new debt consumes discretionary income, and 2) as this reduces new borrowing, asset valuations fall, reducing collateral and forcing banks to tighten credit, which 3) leads to marginal borrowers defaulting on debt, resulting in loans being called, assets seized and sold off for pennies on the dollar, and the collapse of consumption, asset bubbles and employment.

IN other words, filling the gap opened by declining discretionary income with debt is self-liquidating, as servicing the debt eventually consumes all discretionary income, resulting in the decline and eventual collapse of 1) credit, 2) asset bubbles, 3) income and 4)spending, which leads to the collapse of the industrial economy.

It's unclear how the conventional bag of "solutions" can change the self-liquidating dynamic of declining discretionary income being offset with soaring debt. That this is the core dynamic of our economy is papered over or denied, suggesting that even recognizing this dynamic is potentially destabilizing to the status quo of mainstream economists and pundits.

Problem #2: the cost of extracting, processing and shipping the resources consumed by the Waste Is Growth Landfill Economy is rising as the easy-to-access supplies have been exploited and global demand has soared. History is rather definitive in this regard: all organisms, humans included, expand their population and "economy" to consume all available resources.

The conventional "solution" is clever engineers will find ways to keep extracting more of everything, or conjure unlimited substitutes for whatever has become too costly to extract, process and ship at prices the bottom 80% can afford. If we need 20% more of everything every year to sustain "growth,", we'll find "solutions": we'll go deeper, farther afield, etc. to get 20% more of everything we need to expand consumption indefinitely.

The unspoken corollary to this "solution" is we'll use financial trickery to fund this endless expansion. The core financial trick is to conjure "money" out of thin air by borrowing it into existence. The hitch to this perpetual motion machine is the newly created money demand payments of interest.

The "solution" is to just create the "money" without interest, and the hitch here is when "money" is created in excess of the production of goods and services, the value of the "money" declines accordingly. Again, history is definitive about this, regardless of the claims of Modern Monetary Theory (MMT) that governments can create money in unlimited quantities without any ill effect. No historical examples of this claim exist.

Given the grip of "growth" in our The Mythology of Progress, the idea of having a nice life while consuming less is taboo. By way of example, as an experiment here at home we made a few simple modifications of behavior and reduced our electrical consumption by 20%. We made no sacrifices in comforts or convenience, we simply reduced completely useless waste.

Few seem to ask, growth of what? Is growth of waste, growth of debt, growth of planned obsolescence, growth of forever chemicals and microplastics--are all these forms of growth essential for advancing our quality of life, or are they all manifestations of Anti-Progress that actively reduce our quality of life?

There are no definitive solutions, there are only experiments that generate feedback which we can use to refine adaptions or we can ignore, increasing our peril. Some solutions might help alleviate some problems, but the danger here is we're focusing on getting a new prescription for eyewear and ignoring the fast-growing cancer.

It's not always easy to diagnose first causes, and we can start by asking cui bono--to whose benefit?--of every solution being offered.

If the "solutions" being offered are features of self-liquidating systems, they aren't solutions, they're problems being piled on an expanding mass of inter-connected problems. This graphic depicts the nature of sorting problems from solutions, problems masquerading as solutions, faux solutions, and problems being redrawn to fit "solutions" that leave a self-liquidating status quo profitably intact.



Someone asked how my scribblings help readers. It seems to me that correctly identifying the core problems is helpful, as is an informed skepticism that top-down policies / financial tricks / technologies will fix everything so we don't have to change anything in our own lives.

In conclusion: if the problem is limitless growth, then all the "solutions" are self-liquidating. If the problem is the quality of life, then the set of solutions will be completely different. I think it's helpful to focus on solutions to quality of life issues that are within our control, rather than Anti-Progress "solutions" to the imaginary "problem" of pursuing eternal expansion of consumption.


New podcasts:

SPECIAL REPORT: Did China's DeepSeek Just Pop The AI Stock Bubble? (56 minutes)

CHS on Geopolitics and Empire: Anti-Progress, Resource Constraints, & Digital Neofeudalism (1:29 hrs)

KunstlerCast417: Charles Hugh Smith, Progress and Anti-Progress (1 hour)

Charles Hugh Smith on the Extremes in the U.S. Economy and Markets. (26 min)

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, James ($7/month), for your wondrously generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, Ric G. ($7/month), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Shin K. ($70), for your magnificently generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Douglas H. ($7/month), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Read more...

Begging Bowl '25: I'm Looking for Two Readers Willing to Help Me Buy a New Thrift-Store Shirt

The goal is to move incrementally toward a kind of happiness that actually makes us happy. That's the goal of my work.

I admire unvarnished honesty, which is scarce. And like everything else that's increasingly scarce, it behooves us to hoard our stash. In the unvarnished honesty box, I keep "When it becomes serious, you have to lie," (Jean-Claude Juncker, May 2011); "You'll own nothing and you'll be happy" (World Economic Forum - WEF, 2018), and the evergreen classic, Goldman Sachs bankers are "doing God's work." (Lloyd Blankfein, 2009).

Making a living as a writer is hard, and getting harder. There are few middle-class jobs (whatever that is--please remind me) with conventional paychecks and benefits for writers of any stripe, and fewer crumbs spilling out of the free-lance basket as AI chatbots churn out content in near-infinite quantities.

Writers produce a product that has a cost but no price tag because it has no value in the marketplace. It takes labor to produce an essay or analysis, but since all content that isn't artificially scarce (i.e. content that requires a streaming/digital subscription to access) is "free," then our product is competing for visibility / value in an Attention Economy with a super-abundance of content, generated not just by mainstream and alternative media but by hundreds of millions of social media participants and commentators, and of course AI chatbots.

The value proposition of supporting individual creators is a tougher sell than a subscription to streaming services with essentially unlimited content. With the collapse of advert revenues flowing to individual creators--only those with millions of views collect a living from adverts now--we're reliant on individual supporters like you for our livelihoods.

The competing content is near-infinite, while attention and paying supporters are scarce. The competition for visibility, income and subscribers is driving a perverse incentive to create more of what makes it near-impossible to gain visibility--clickbait titles and endless streams of tweets, Notes, comments, etc., in a manic reach for attention that reminds me of a mass of swimmers whose struggles threaten to drown us all.

(The selling of sex is of course a much more lucrative realm, as 20-year old Sophie Rain proves by earning $43 million on OnlyFans. Impressive by any measure.)

It seems to me that stripped of niceties, we're all beggars now, asking for "spare change" from supporters. The street corner has been replaced by Substack, Patreon, Kickstarter, Medium and the rest of the creators-supporters-income-platform universe.

Please excuse my shredded work shirt. Being a beggar is not exactly high status, and so we try to cloak the unvarnished truth of the matter with niceties, much like unfortunates who have just been laid off saying "I'm exploring other options," which include any means to avoid, well, begging.



As a "creator", ahem, I'm a beggar. I feel no shame, as begging for your support is now part of the writerly profession, and why put on airs? I am of peasant stock, and rather proud of it, as the peasants do the hard, tiresome work of growing the food and keeping the status quo glued together, while the knights and nobles (in today's world, the RIF-RAF -- Rich Internet Financiers and the Rich and Famous)--get the glory and the wealth.

I have a craft, wordsmithing and analysis, but what benefit does my craft offer you in exchange for spare change? Two things come to mind.

1. Consider the beggar who offers you a blessing for the coins you drop in the battered copper bowl.

A blessing has a peculiar nature: it is both "worthless" as it is intangible, and potentially life-changing, along with the act of giving. A blessing can be empty or it can become a powerful force in our life.

2. My focus is on actionable insights that prompt us to change our lives for the better. It's not easy to modify the trajectory of our lives, and the world we inhabit seems designed to distract us from changing course.

If a hard rain's a-gonna fall, then time no longer stretches lazily into the distant future. The future is now, or we've already lost control of it.

So here's my value proposition: a blessing for changing your life starting now via actionable insights into the world and the messy, uncertain, inherently risky process of change. Change comes in all sorts of forms; it can be internal or incremental, barely visible, or surprising and visible to all.

Here is a list of this year's Musings Reports that are reserved for those who toss a few coins in my begging bowl.

What's Actionable in AI? 2/1/25

Where We've Been, Where We're Going 1/25/25

Is Digitization Catastrophic for Civilization? 1/18/25

Is the World Becoming Uninsurable? 1/11/25

Six Dynamics That Will Shape Our Future 1/4/25

OK, we've reached the rattling the begging bowl denouement: I'm looking for two readers who are willing to help me buy a new thrift-store shirt to replace the one that's shredded from toil and time.

My work slippers are also approaching the point where replacement becomes necessary, and if you're willing to toss a few quatloos in the bowl to fund this, I would be very grateful.



Two final thoughts. It's gratifying to earn the praise of readers, but uncomfortably self-congratulatory to post whatever praise drifts my way. I'm swallowing the discomfort because this is, after all, me rattling the begging bowl:

Thomas1760:
"I listened to your interview with Adam Taggart twice. I sense calm wisdom... need to be specific in my reading and research, so when I come across a resource with calm wisdom (wisdom is making the complicated simple) for a fair price it helps me to organize my intake properly. This area A.I. is obviously extremely important to understand. Now, I have a good resource and I don't need to shotgun it."

Secondly, the point of changing one's life is to increase our security, prospects and happiness. The French writer Michel Houellebecq's observation strikes me as a succinct summary of the status quo: "I have the impression of being caught up in a network of complicated, minute, stupid rules, and I have the impression of being herded towards a uniform kind of happiness, toward a kind of happiness that doesn't really make me happy."

The goal is to move incrementally toward a kind of happiness that actually makes us happy. That's the goal of my work.

There are multiple ways to toss a few coins in the begging bowl ($7/month or $70/year):

1. Subscribe to my Substack

2. Become a patron via patreon.com

3. PayPal or US mail.

To those who toss caution to the winds and subscribe: thank you. It's going to be an exhilarating ride.




New podcasts:

SPECIAL REPORT: Did China's DeepSeek Just Pop The AI Stock Bubble? (56 minutes)

CHS on Geopolitics and Empire: Anti-Progress, Resource Constraints, & Digital Neofeudalism (1:29 hrs)

KunstlerCast417: Charles Hugh Smith, Progress and Anti-Progress (1 hour)

Charles Hugh Smith on the Extremes in the U.S. Economy and Markets. (26 min)

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Stracy ($7/month), for your wondrously generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, Icebox ($7/month), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Jason R. ($7/month), for your magnificently generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, James ($7/month), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Read more...

AI Is a Digital Parrot: Word-Traps, False Logic and the Illusion of Intelligence

Word traps and false logic don't lead to dominance of the future or monopolistic grips on limitless profits.

The heart of the current euphoric expectations for AI is a simple but problematic proposition: the equivalence of function equals intelligence. If using natural language requires intelligence, and a computer can use natural language, then it's intelligent. If it takes intelligence to compose an essay on Charles Darwin, and an AI program can compose an essay on Charles Darwin, then the AI program is intelligent.

The problem here is this "equivalence is proof of intelligence" is a function of word-traps and false logic, not actual equivalence; what is claimed to be be equivalent isn't equivalent at all. In other words, the source of confusion is how we choose to define "intelligence," which is itself a word-trap of the sort that philosopher Ludwig Wittgenstein attempted to resolve using koan-like propositions and logic.

Imagine for a moment we had twenty words to describe all the characteristics of what we lump into "intelligence." We would then be parsing the characteristics and output of AI programs by a much larger set of comparisons.

The notion of equivalence goes back a long way. As science developed models for how Nature functioned, the idea that Nature was akin to a mechanism like a clock gained mindshare.

The discoveries of relativity and quantum effects blew this model to pieces, as Nature turned out to be a very strange clock, to the point that the "Nature as a mechanism" model was abandoned as inadequate.

We have yet to reach the limits of the "equivalence is proof of intelligence" model, which is as outdated and nonsensical as "the universe is a mechanism" model. We keep finding new examples of equivalence to support the idea that a computer program running instructions is "intelligent" because it can perform tasks we associate with "intelligence" because we're embedded in a mechanistic conceptualization of the entirety of Nature--including ourselves.

So there is much excitement when an AI program exhibits "emergent properties," meaning that it develops behaviors / processes that weren't explicitly programmed. This is then touted as an "equivalence proving intelligence:" this "ability to create something new" is proof of intelligence.

But Nature is chockful of emergent properties that no one hypes as "proof of intelligence." Ant colonies generate all sorts of emergent properties, but nobody is claiming that ant colonies have human-level intelligence are are poised to take over the world.

AI programs parrot content and techniques generated by humans. Since they use natural language, we're fooled by equivalence into thinking, "hey, the program is as smart as we are, because only we use natural language."

The same conceptual trap opens in every purported equivalence. If an AI program can find the answer to a complex problem such as "how do proteins fold?", and do so far faster than we can, we immediately project this supposed equivalence into "super-intelligence."

The problem is the AI program is simply parroting techniques generated by humans and extrapolating them at scale. The program doesn't "understand" proteins, their functions in Nature or in our bodies, or anything else about proteins that humans understand.

Defining anything by equivalence is false logic, a false logic we fall into so easily because words are traps that we don't even recognize as traps.

Wittgenstein concluded that all problems such as "is AI intelligent?" were based in language, not the real world. Once we become ensnared in language and its implicit byways and restrictions, we lose our way. This truth is revealed by words that have no direct equivalent in other languages.

One example of this is the Japanese word aware (a-waar-re), which has a range of nuanced meanings with no equivalent in English: a sweet sadness at the passage of time, a specific flavor of poignant nostalgia and awareness of time. This word is key to understanding Japanese culture, and yet there is no equivalent word in English, either in meaning or cultural centrality.

In other words--what if there is no equivalent, and the supposed equivalence is nothing more than a confusion caused by word-traps and false logic? The entire supposition that we can model human intelligence with mechanistic equivalences (intelligence is a mechanism) collapses, along with projections of "super-intelligence."

The temptation to keep trying to equate "intelligence" and programs with mechanistic equivalence is compelling because we're so embedded in the mechanistic model we don't even realize it's a black hole of false logic that has only one possible output: nonsensical claims of "intelligence" based on some absurdly reductionist equivalence.

The temptation in this mechanistic conceptual trap is to reckon that if we only define our words more carefully, then we'll be able to "prove equivalence is real." This too is false. Wittgenstein eventually moved away from the model of the imprecision of language is the source of all our intellectual problems. It isn't that simple: more precise definitions only generate more convoluted claims of false equivalences.

The book The Myth of Artificial Intelligence: Why Computers Can't Think the Way We Do (via B.J.) lays out the false conceptual assumptions holding up the entire edifice of AI.

Michael Polanyi's classic Personal Knowledge: Towards a Post-Critical Philosophy explains that knowing is an art, a reality explored by Donald Schon in The Reflective Practitioner: How Professionals Think In Action.

The reality is the art of knowing cannot be reduced to programmable equivalents, as there are no programmable equivalents. Comparing outputs (mechanistic equivalence) proves nothing about the nature of the systems generating the output; this is a leap of faith, or perhaps more accurately, a leap of hubris: we are gods who have created a machine in our own image.

This can perhaps best be understood by reading The Unknown Craftsman: A Japanese Insight into Beauty, which will clarify the falsity in mechanistic equivalence: if an AI program and robotics can duplicate an exact replica of a hand-thrown pot made by a craftsperson, it doesn't follow that the program "knows" what the craftsperson knows, or is in any way, shape or form the equivalent of the craftsperson.

Hubris, the illusions of precision and mechanistic equivalence, and false logic are the unrecognized air holding the myth of AI aloft. No one claims a parrot who repeats a human phrase--or creates a new phrase from the bits and pieces of human-generated content--is therefore as "intelligent" as a human, but when we program a mechanism to slice and dice human-generated content, then we declare it not just "intelligent" but on its way to "super-intelligence."

And to what point, other than valuations for AI enterprises in the range of $300 billion and up? Until very recently, the point was to lock down the monopolistic powers of Big Tech even more securely, via brute-force computational power, and champion some version of national dominance of the future.

Word traps and false logic don't lead to dominance of the future or monopolistic grips on limitless profits. All this mumbo-jumbo will only get us in trouble.



I've explored the pitfalls and limitations of AI in my books The Mythology of Progress (2024) and Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (2019).

Here are two accounts of long-running debates about mechanistic equivalence, intelligence and AI:

Chinese room.

Stochastic parrot.


New podcasts:

This is a wide-ranging discussion of DeepSeek with Adam Taggart of Thoughtful Money: SPECIAL REPORT: Did China's DeepSeek Just Pop The AI Stock Bubble? (56 minutes)

CHS on Geopolitics and Empire: Anti-Progress, Resource Constraints, & Digital Neofeudalism (1:29 hrs)

KunstlerCast417: Charles Hugh Smith, Progress and Anti-Progress (1 hour)

Charles Hugh Smith on the Extremes in the U.S. Economy and Markets. (26 min)

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

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The AI Fad Just Burned to the Waterline

Sometimes wide moats and billions of dollars to blow lead not to glory but to hubris, which beckons Nemesis.

While everyone was busy reassuring themselves the stock market was still A-OK, the driver of the market--the AI fad--just burned to the waterline. Yes, the current euphoric expectations for AI are a fad, the latest in the endless stream of "gotta have" status signifiers and cultural frenzies.

The core dynamic in all fads is Human Wetware 1.0. Though we glorify our individuality--The primacy of the Individual is the key characteristic of Modernity--we remain a herd animal, alert to every twitch in the herd's emotional state and anxious to join the herd when it starts running, lest we're left behind or lose status.

CEOs are just as prone to fads as the rest of us, and this is how the AI fad gathered momentum. A decade ago the warm-and-fuzzy tech fad that enamored every corporate HQ was fuzzy logic, one of the long line of precursors to the current AI mania. So labels touting "fuzzy logic" were slapped on rice cookers as everyone scrambled to cash in on the latest tech fad.

And so now every package of Kroika Cookies is emblazoned with "powered by AI!" Indeed. The leaders of the herd are especially keen to study every shift in the zeitgeist and the pecking order, as the greatest sin for CEOs is to be revealed as incompetent / clueless by missing the latest boat in corporate fads.

Here is one example of the catastrophic consequences not of missing the boat but of blindly climbing on board. On a flight to Shanghai in May 2000, shortly after the NASDAQ dot-com bubble had peaked, my seatmate was a senior engineer working for a Silicon Valley semiconductor equipment maker. Over the course of the long flight, he recounted the domino-like chain of disastrous results of the CEO jumping on the "gotta offshore production" fad that was sweeping through Corporate America.

The net result of moving production to Southeast Asia and China was 1) the wholesale theft of intellectual property (IP) and 2) the collapse of quality, requiring technicians to be flown in to fix all the quality problems.

But to not move production overseas would have been perceived as "missing the boat," so everyone rushed to join the thundering herd, whether it made any sense or not.

The second dynamic in play now is this: monopolies don't care about efficiency or quality, as the user / consumer has no real alternative. The tech world is brimming with stories of corporate wealth being squandered on teams developing efficiencies that are shelved upon completion. The more money gushing into the corporate coffers, the less interest there is in efficiencies.

Keeping the Good Ship Status Quo on course is good enough--until the Status Quo burns to the waterline. Then the scramble is to cover the disastrous mis-allocation of corporate capital and identify the next fad to join.

The third dynamic is: this isn't about one company. It's about a toolbox that's already infected the entire tech world. It doesn't matter if DeepSeek disappears tomorrow: the toolbox of software structures they've released has already entered the bloodstream of global tech and has already transformed the DNA. There's no going back to brute-force processing as any sort of competitive advantage. Rather, it's a cost anchor that will drag any denialist laggards to the bottom.

The fourth dynamic is: there's nothing investable in this disruption because everyone can now develop the same open-source tools and approaches. there is no monopolistic moat to guarantee profits, and no revenue stream to milk. Rather, like deploying billions of dollars on data farms to improve search, there is no revenue at all. Nobody's paying a single dollar for AI enhanced search.

As I've noted before, when the tools and techniques are freely available to all, there's no scarcity value to any of it. And with no scarcity value--no value proposition so mighty that people will pay a premium for it--then profits are thin to zero.

The "smart money" has noted the AI fad has burned to the waterline, and has been frantically assuring "dumb money" that the stock market bubble is still intact and poised to bubble higher, so there's no reason to sell, and every reason to "buy the dip" so the "smart money" can sell, sell, sell near the top and let the "dumb money" absorb the coming 80% decline as a fad that was poorly conceived from the start has burned to the waterline, and the tiniest wave will send it to the bottom.

The "safe bet" was on heavily moated tech behemoths dumping billions of dollars into the "competitive advantage" of energy-ravenous processing power. That "safe bet" is now in Davy Jones' Locker. The reality that "AI has no revenues and no profits" is lingering above the burned-out hulk as a haze of doubt and confusion.

What's the next fad? Stay tuned. It might just be a retro revival of the time-tested fad for cost-cutting and "return to basics," starting with mass layoffs and slashing capex budgets.

Sometimes wide moats and billions of dollars to blow lead not to glory but to hubris, which beckons Nemesis.




New podcasts:

This is a wide-ranging discussion of DeepSeek with Adam Taggart of Thoughtful Money: SPECIAL REPORT: Did China's DeepSeek Just Pop The AI Stock Bubble? (56 minutes)

CHS on Geopolitics and Empire: Anti-Progress, Resource Constraints, & Digital Neofeudalism (1:29 hrs)

KunstlerCast417: Charles Hugh Smith, Progress and Anti-Progress (1 hour)

Charles Hugh Smith on the Extremes in the U.S. Economy and Markets. (26 min)

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Venkat ($7/month), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, Philip K. ($7/month), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.

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Welcome to the DeepSeek Disruption (DSD)

In summary: bloated headcounts, no new sources of revenue from AI, and limitless content with no scarcity value. Welcome to the DSD: DeepSeek Disruption.

I've been fruitfully engaged in a lively dialog with readers on my Substack regarding my post yesterday Is DeepSeek a Sputnik Moment? (titled Is (Chinese) Software Suddenly Eating The World? on Zero Hedge) and my conversation with Adam Taggart on his Thoughtful Money channel: SPECIAL REPORT: Did China's DeepSeek Just Pop The AI Stock Bubble? (56 minutes).

I can't summarize all the topics discussed on the thread, but these two comments and my responses illustrate the tremendous range of dynamics now in play in the DSD: DeepSeek Disruption. (One favor to ask: since a bunch of folks borrowed my "Sputnik Moment" phrase without crediting me yesterday, if you use DSD - DeepSeek Disruption, please credit me. Thank you.)

Although the reader comments are only visible to paid subscribers, I post my own comments as Notes on Substack, which are visible to everyone.

Comment posted by Brad M.:
"I've always had a hunch that there are simpler methods to achieve high performing artificial intelligence. Of course, we should note that the chips China did this on are vastly superior than anything prior to the year 2000 lets say. And China does have decades of manufacturing experience and a literal army worth of engineers to throw at the problem. So we shouldn't say that what China did was easy. It was just easier than throwing a mountain of money at the problem. You can't fake scarcity that easily and the Mag 7 as you call them will continue to struggle while the smaller teams given freedom to try anything with their limited resources will continue to find success.

Or that mountain of money might end up working. Who knows for sure until it happens?"

My response:

Brad, those are very interesting points for exploration.

I'm reminded of various stories in TechLand about small teams developing the breakthroughs while thousands of employees in the corporation generated little value beyond maintaining the status quo. So each Big Tech has (for example) 175K employees, all smart, all dedicated, but a much smaller team blew the 175K teams of the Mag 7 away. Steve Jobs famously kept the Macintosh team isolated from Corporate Apple and exerted obsessive control over the development team. He knew better than to let Corporate do the Corporate Thing to the team.

Since finance and tech dominate the economy now, the big question is: how do I make a killing by investing in DeepSeek? This is a koan because there is no "owner" of the software techniques DeepSeek has shared with the world.

To Brad's question, so what do the tech monopolies / behemoths do with their 175K "teams" now? For sure they can try to replicate DeepSeek, but does that require 175K employees? And since everyone else has access to the same concepts, techniques and approaches, then where is the scarcity value that generates revenues? There is none.

This all leads to a sobering conclusion: there is little justification for these huge headcounts going forward.

Comment posted by Simple John:
"I'd appreciate correction if I'm wrong. I believe I've read that the DeepSeek models are strongest on math and physics. In fact, aren't LLM and image generating AI playing in a universe that is immensely less specific than math and physics and thus really just playing with words and images without any real insights?"

My response:

This is very insightful, as the examples of DeepSeek (or competing tools) solving math problems are "problems" where the "correct answer" can be determined. The "answer" to the "question" *write an essay on Charles Darwin for my class assignment" has no equivalent "correct answer." The AI Bot can hallucinate a response that might pass muster if the hallucination is not too wild.

I've played around with Big Tech free AI tools for generating podcasts, essay summaries, etc., and have watched developments in the video-creation space. These are examples of brute-force processing working with templates assembled from "machine learning," i.e. sampling human-generated videos, stories, essays, etc. As John noted, this kind of extrapolation of existing content is a different kind of "answer" to a different kind of "problem."

So there are video-generation tools where you enter text instructions such as "a young man is walking through a 4th of July party holding a beer," and the program generates a video clip of this scene based on its vast database of 4th of July clips, people holding a beer, etc. This is fascinating and fun, because there is no "correct answer."

But what's the value proposition here when everyone (or anyone with a keen interest) can access the same tools and generate limitless AI content? Who's going to watch all this in an Attention Economy that's already saturated with content?

Based on my limited understanding of the many software techniques DeepSeek employs, it seems likely that these structures may well be superior ways to solve "problems" that have testable "correct" answers.

Without going too deeply into specifics, a key concept in high-end machine learning (Google's DeepMind, etc.) is estimating the accuracy of the answer, i.e. the probabilities of various potential solutions being correct. The "wait a minute, maybe this isn't the best path, let's start over" function of DeepSeek is based on the same idea, which is extremely valuable when the "correctness" of the answer actually matters.

In summary: bloated headcounts, no new sources of revenue from AI, and limitless content with no scarcity value. Welcome to the DSD: DeepSeek Disruption.

There is much more to explore in the DSD, which I'll lay out tomorrow. In the meantime, let's check in on HAL 9000's conclusions:




New podcasts:

I just recorded a wide-ranging discussion of DeepSeek with Adam Taggart of Thoughtful Money: SPECIAL REPORT: Did China's DeepSeek Just Pop The AI Stock Bubble? (56 minutes)

CHS on Geopolitics and Empire: Anti-Progress, Resource Constraints, & Digital Neofeudalism (1:29 hrs)

KunstlerCast417: Charles Hugh Smith, Progress and Anti-Progress (1 hour)

Charles Hugh Smith on the Extremes in the U.S. Economy and Markets. (26 min)

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, David B. ($70), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, William T. ($70), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Evan C. ($70), for your magnificently generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Peter U. ($7/month), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Read more...

Is DeepSeek a Sputnik Moment?

I'm not sure that "software will eat the world," but it could consume the stock market bubble in a single gulp.

Is DeepSeek a Sputnik Moment? Let's break it down. The Soviet Union's October 1957 launch of the world's first artificial satellite, Sputnik 1, stunned the U.S., which reckoned it had a commanding lead in "the Space Race." (It turns out the U.S. had the capability of launching a satellite before Sputnik, but held off for various reasons.)

That a geopolitical rival had reverse-engineered advances and leapfrogged the U.S. shocked America into a multi-decade response that culminated, at least in the public perception, in America winning "the race to the Moon" by landing the first humans on the Moon in July, 1969 in the Apollo 11 mission.

The shockwaves generated by a Chinese company's release of a suite of AI tools called DeepSeek last week may well rival the Sputnik shock, as the DeepSeek AI tools appear to meet the same benchmarks as AI tools such as those issued by OpenAI and other companies, but requiring far less computing resources.

DeepSeek achieves its capabilities not from expensive hardware (processors) but from advances in software that can be used on smartphones. The software innovations embedded in DeepSeek have profound financial implications for the companies that manufacture the costly processors needed by conventional AI data centers--Nvidia is the dominant chipmaker in this market--and the Big Tech companies spending billions of dollars (called capex in the financial realm, short for capital expenditures) to create AI tools that they can eventually sell via the subscription model.

DeepSeek software evaporates 1) the need for super-energy-hungry, super-expensive processors, 2) vast quantities of electricity and 3) the market for paid subscription AI tools, as DeepSeek's software runs on standard processors and it's been released as open-source software which can be downloaded and run offline on local resources such as PCs or smartphones.

In effect, the AI hardware monopoly and quasi-monopoly of AI software has been broken, and like Humpty-Dumpty, it can never be put back together again. I was skeptical of DeepSeek, but correspondent Cheryl A. sent me this article, which changed my mind. The author is careful to delineate his chops in the fields of AI and investing, and to dismiss this as uninformed is very likely a mistake.

The Short Case for Nvidia Stock

I read the "Theoretical Risks" section carefully and concluded that what the DeepSeek developers did was take the loss of precision performed at the end of conventional AI via compression and move it into the learning / reward process, where it did the work with less precision but with 45X less CPU/memory/cost.

Necessity is the mother of invention: unable to get NVDA chips in big numbers, the Chinese programmers were forced to innovate in software much like programmers on deep-space missions like Voyager 1, which carried extremely limited CPU and memory onboard. DeepSeek's developers made clever use of software to avoid needing super-duper processing power.

Voyager 1, launched in 1977 with three tiny computers packing a mighty 69 kilobits of memory (one low-resolution JPEG photo) in total and 8k per second processing power, is still functioning 47 years later, as programmers worked around a component failure with clever software.

Some of the clever software techniques used by DeepSeek reminded me of the workarounds deployed by the Voyager team last year when the spacecraft stopped responding. It's worth reading this brief account of their workaround:

NASA's Voyager 1 Resumes Sending Engineering Updates to Earth:

The team discovered that a single chip responsible for storing a portion of the FDS memory -- including some of the FDS computer's software code -- isn't working. The loss of that code rendered the science and engineering data unusable. Unable to repair the chip, the team decided to place the affected code elsewhere in the FDS memory. But no single location is large enough to hold the section of code in its entirety.

So they devised a plan to divide the affected code into sections and store those sections in different places in the FDS. To make this plan work, they also needed to adjust those code sections to ensure, for example, that they all still function as a whole. Any references to the location of that code in other parts of the FDS memory needed to be updated as well.

The team started by singling out the code responsible for packaging the spacecraft's engineering data. They sent it to its new location in the FDS memory on April 18. A radio signal takes about 22 1/2 hours to reach Voyager 1, which is over 15 billion miles (24 billion kilometers) from Earth, and another 22 1/2 hours for a signal to come back to Earth. When the mission flight team heard back from the spacecraft on April 20, they saw that the modification worked: For the first time in five months, they have been able to check the health and status of the spacecraft.

I was also skeptical of the possibility--suggested to me by Adam Taggart, host of Thoughtful Money--that DeepSeek could conceivably prove to be the Black Swan that pops the AI bubble. This now strikes me as less of a possibility and more of an inevitability. There is simply no longer enough advantage generated by super-energy-consuming, costly chips in terms of generating a product that is worth paying for when equivalent tools are already available for free that can run offline on free-standing devices--which means there can't be any back-door stealthy "calling home" by the software.

And given that the Mag 7 stocks, most of which are heavily invested in AI, are almost 40% of the total market capitalization of the U.S. stock market, and the global concentration of equity wealth in the U.S. market, then the AI bubble popping will pop the entire global stock market bubble--and with that reduced to rubble, the entire global Everything Bubble in risk-on assets.



The potent phrase software is eating the world may manifest in ways AI investors did not reckon possible when they projected billions of dollars in high-margin profits from AI chips and tools. Whatever we think of DeepSeek's approach, others will quickly reach onto its open-source toolbox and develop their own innovations based on its core structures.

We can be sure that the smart money has already overheard the discussion between Dave and HAL 9000 about the need for power-hungry chips and stiff monthly fees for AI tools:



I'm not sure that software will eat the world, but it could consume the stock market bubble in a single gulp.




New podcasts:

KunstlerCast417: Charles Hugh Smith, Progress and Anti-Progress (1 hour)

Charles Hugh Smith on the Extremes in the U.S. Economy and Markets. (26 min)

---

My recent books:

Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site.

The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF)

Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF)

The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF)

When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF)

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $3/month patron of my work via patreon.com.

Subscribe to my Substack for free

---

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, David B. ($70), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.		Thank you, William T. ($70), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Evan C. ($70), for your magnificently generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Peter U. ($7/month), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Read more...