The Job Loss is the Plan | Ben Hunt on the Risks of World War AI

The story being presented to us a year ago and six months ago was that all of this money, all of this electricity, all of this effort going towards AI, it

wasn't because there's some threat out there is because of all the good stuff that would come to us from making this effort. It was never going to be

effort. It was never going to be successful in the long term because it just ain't true. It just ain't true. I I

mean I we're all working harder today. The US

government will increasingly present AI capex AI development as a national security arms race

war footing in competition with China as a mortal enemy. All that money today going

enemy. All that money today going towards AI data center buildout. That's

investment that does not go to anything else. In particular, it doesn't go to the consumer economy.

You're watching Excess Returns. Ben Hunt

is back with me. We're talking about his latest epsilon theory essay that's moving very, very, very fast into reality. World War AI. Welcome back,

reality. World War AI. Welcome back,

Ben.

>> It's great to be back, Matt. Thanks for

having me.

>> So, what's crazy is that when you wrote about this a week ago, and we're recording, it is November 25th, about 11:30 in the morning. The White House just just released not long ago, this

Genesis mission statement, AI accelerated scientific discovery at a Manhattan project scale, a week after you wrote this note. And even if people are watching this and going, I'm sick of

talking about the NASDAQ. I'm sick of talking about Mag Seven. I don't want to hear about AI anymore or these like handful of names. I think you really have to understand what's going on here

because this is a giant policy political markets coordinated effort. You're

writing about it in this piece. Uh

Persant Pro, you've got a bunch of trackers. Could we just for a second

trackers. Could we just for a second what's on Persant Pro? Why should people look there if they're want to see under the surface of the story?

>> Absolutely. So what what we think we have in addition to you know whatever my opinions are about things we think we've

got a technology to actually measure the storytelling the narratives we call them the semantics of

the world right markets for sure but also politics also society AI is a fascinating topic and it's so important

because it it traverses all three of those, right? It absolutely traverses

those, right? It absolutely traverses markets and the economy. It traverses

politics.

It our society, our roles as humans, our jobs. It it it covers all of that. And I think we've

got a really good technology to measure the way the reality is being presented to us.

We don't have any secret sauce for understanding what reality is. You've

got your ideas. I've got my ideas. But I

think we've got something very special to accurately and truthfully describe how reality is being presented

to us. And honestly, I think for markets

to us. And honestly, I think for markets and politics and the way we lead our lives, that presentation is at least as important, I kind of feel

like it's maybe more important than the reality itself. So, we do that in a

reality itself. So, we do that in a couple of different ways. We publish

epsilon theory, which puts out articles like I I wrote the World War AI. We have a totally free

version we call panoptica where we write about narratives and sports and personal finance and media. And then we have

Persiant Pro which is for as the name implies professional investors. So we're

we're trying to hit all the audiences here.

We're not communists. We're capitalists.

But we we wanted to to to to run the gamut from information for a professional investor,

Perciant Pro, information for a casual investor, epsilon theory, and then information if you're not even really

thinking about investing at all. And

that's panoptica. So that's our goal and that's what we're doing.

So, if you're watching this and what we're going to dive into here, I can't suggest enough. Look up Perciant Pro

suggest enough. Look up Perciant Pro Percel Theory website to to get your link or go to panoptica.ai. It'll get you a link

to panoptica.ai. It'll get you a link because what's wild is we have these these pulses and these storyboards that are tracking these categories and these stories bubbling up. So, if you want to

know how Ben is basically on top of this story seemingly in advance, it's because this is the tool that's helping him get there. Ben, you ready to dive into this

there. Ben, you ready to dive into this piece? I think we got to dissect this

piece? I think we got to dissect this together a little today.

>> I am. And and let me start with this and it connects with what you just said, Matt. The reason I wrote this piece,

Matt. The reason I wrote this piece, World War AI, the thesis of the note is that our government, the US government, will

increasingly present AI capex AI development as a national security arms race

war footing in competition with China as a mortal enemy.

very similar to the mobilization of the economy around World War II.

And crazy as it sounds, at essentially the same scale in terms of capital, in terms of energy allocation, in terms of consumer

sacrifice as we experienced during World War II.

So the reason I came up with this was that we were seeing in our technology clear signs of an uptick and that sort

of narrative that sort of presentation of the AI buildout as being necessary for national security, national survival,

moving towards a war footing visav China on the the race for AI. I

and it's it's crazy. Let me just get out of the way. It Yes, China is a competitor, an adversary of the United States.

This is not an AI arms race. This is not an AI war. But that is how it is being presented.

And we ain't seen nothing yet. That's

the point of the note.

>> Explain the carrot metaphor. explain

this idea of why the carrot wasn't going to work because in inside of this this is a key distinction that you lead off with.

>> Yeah. Well,

this World War AI that AI development is a national security issue. This is kind of

new. This wasn't the story being

new. This wasn't the story being presented to us about AI a year ago or even six months ago. The

story being presented to us a year ago and six months ago was that all of this money, all of this electricity, all of this effort going towards AI,

it it wasn't because there's some threat out there is because of all the good stuff that would come to us from making this effort. We were presented with a

this effort. We were presented with a carrot, not a stick. We are presented with the carrot of a golden age of

productivity and leisure and wealth will be ours if only we make this sort of

enormous effort and investment in AI.

the carrot.

It It was It was I did my personal view was the carrot was never going to be successful in the long term because it just ain't true. It just ain't true. I I

mean I we're all working harder today.

Not Not less. We're all working harder.

>> There's more gas on the fires, but we're working harder.

>> Yeah. Exactly. Exactly. I'm not kicking back. enjoying some the early stages of

back. enjoying some the early stages of AI productivity. I'm working harder than

AI productivity. I'm working harder than I've ever worked and everyone I know is working harder than they've ever worked.

There's no we the story with or so the story was is that we'd have an employment boom from

AI. Really? Are you seeing unemployment

AI. Really? Are you seeing unemployment boom? I'm seeing the opposite of an

boom? I'm seeing the opposite of an employment boom. We were told, "Oh,

employment boom. We were told, "Oh, well, we'll have AI friends."

Really? You think that's a good thing?

You think that, you know, we're all doing better in our social lives because we have AI friends?

We We think, you know, news and entertainment is better because of AI content. It's

content. It's there's this old saying, you know, don't piss down my back and tell me it's raining, right? We

right? We they're pissing on our back and telling us, oh, it's just a gentle spring rain.

The carrot doesn't work.

I think so many people are understanding that it's not some golden age of prosperity for us people.

It may be a golden age of prosperity for the AI owners or as I like to call them the the techno

oligarchs. It may be great for the Peter

oligarchs. It may be great for the Peter Teals and the Sam Almans of the world, but it ain't great for us. I mean, I've

looked at my utility bill. It this is not good. This is not good at all. And I

not good. This is not good at all. And I

think we all see the trajectory of this.

is for it to get worse. So the carrot doesn't work. So they got to move to the

doesn't work. So they got to move to the stick. And the stick is a threat. And

stick. And the stick is a threat. And

the threat is, oh my god, we have to keep on this course because if we don't, China will win whatever the

hell winning means. And then they will conquer us or whatever that means.

We have to move towards this war footing.

We saw early signs of this in our research. I wrote the note and then this

research. I wrote the note and then this week the White House announces, "Yep, it's a war footing, a Manhattan project

to develop AI before the bad guys do.

Couldn't script it any other way. This

is happening."

When you look at this and and I think it's what you hinted at with the utility bill right there, it's shortages of energy.

There are shortages of capital which is part of where I want to take this next and the way that you fund this because this is what has far far far reaching market implications of engaging in this

type of a policy. So you said for example the the Treasury is already at World War II debt to GDP levels before this starts and now with Genesis I mean we have basically a biblical name and

the Manhattan project invoked in a single thing from the White House.

>> Yeah.

>> How do we even start to begin how much runway this even gives us?

>> Well I think the way to start is to look at the projections bottomup projections announced projects.

what is it going to cost and what's it going to cost both in money and what's it going to cost in terms of power to

run these AI data centers. So that's

what I try to lay out in the note and I can give you the numbers really quick but the the the punchline is going to be

that the numbers are roughly the numbers that we spent on World War II. I mean I

mean in truly insane numbers. So in

terms of money, something north of $4 trillion over the next four years. So even the same time frame as World War II, which is basically four years for the United

States, we spent was a little less than $300 billion on World War II.

That translates into today's money at right at $4 trillion.

It's the same amount of money. Same

amount of money. And that money's got to come from somewhere.

It comes from companies. It comes from

companies. It comes from investment, from loans. It comes from the government, from our tax dollars, and from the government's borrowing.

That's what we did in World War II.

And we borrowed. the government borrowed enormous sums to pay for it. So at the end of World War II, our debt to GDP,

which is how you often look at these things, what's your debt amount relative to your productive capacity? And there's this

productive capacity? And there's this kind of famous and meaningful line of if you borrow as much as your

annual GDP is, that's problematic. Well,

we got there in World War II. We're

starting there. We're starting there with the US government today. Now,

that's for US government spending.

That's not counting the private spending and investment. So

and investment. So the 4 trillion, some of it's got to come from the government.

Most of it will come from private sources.

All of it is money that is not being invested in other things. And that's the point of the note, which is that just

like in World War II, with all the capital from the government, from corporations,

from individuals, you know, war bonds and loans, all that stuff.

All that money going towards World War II production, all that money today going towards AI data center buildout.

That's investment that does not go to anything else. In particular, it doesn't go to the consumer economy.

We're already seeing that happening where consumer credit, capital and con intensive consumer services like health insurance,

homeowners insurance.

All these things are going up in price because there's not as much capital being invested in them.

This is all happening now. I'm not

projecting something to the future. I'm

saying this all happened before during World War II. It's all happening now, early stages, and it's all going to get a lot worse.

The other crowding out effect. So, one

one aspect of this is all the money that gets invested into AI data centers, trillions of dollars, is money that doesn't get invested in other places.

The other impact of this though is on the borrowing by the government to support this.

that raises it. Government can always borrow its money because it's the safest investment.

But the more they borrow, especially once you get over that 100% of GDP line, the more you got to pay in interest.

So this has two effects. When there's less money being invested in, I'll call it the consumer economy. And second, the

price of money, interest rates, those go up.

That's the two impacts from this massive World War II level amount of capital reallocation

into the AI data center world.

What do you make of and I remember I think a Bank of America chart floating around from the COVID response >> where they pointed out that the COVID response was basically going to be a

World War II level response in fiscal stimulus >> to offset the impacts the perceived impacts of the COVID pandemic for the US and it feels that's part of why we're starting here.

>> Is that an incorrect statement or how do you interpret the statement of why we're starting where we are today? No, it's a it's a very accurate statement. It's

accurate in two respects. One, we

borrowed a lot of money and we plowed it into the consumer economy mostly.

It gives us a new higher starting point for debt and spending that we take on from now. So that's that crowding out

from now. So that's that crowding out effect where the price of money interest rates goes up because we're starting from a much we're starting from a point where World War II ended basically.

Yeah.

>> Right. But here's the other thing that infusion of money about $4 trillion World War II levels into the real

economy in 2020 and 2021.

It blew up our world with inflation. It

blew it up. You can't reallocate trillions of dollars, whether it's for a COVID response or whether it's for an AI

data center buildout, without having enormous repercussions in the rest of the economy. It's always these, I'll

the economy. It's always these, I'll call them unintended consequences because I think they are largely.

But what it really is is that we focus so much on the problem we're trying to solve. Oh my god, we got to build out AI

solve. Oh my god, we got to build out AI data centers. Let's put $4 trillion into

data centers. Let's put $4 trillion into it. What does that mean for the rest of

it. What does that mean for the rest of the economy?

That or with co Oh my god, people are shutting down their businesses. It's

we've got to put $4 trillion into the to support the economy.

What does that mean for the price of goods and services and supply chains and everything like that?

It's it's always the rest of the economy, you know, when we get we get and because we are we are so focused on AI right now and I get it. I'm a big AI

fan, but we shouldn't be focused on it and investing in it at World War II levels that make it impossible for us to

invest or support the rest of the economy. But that is what's happening.

economy. But that is what's happening.

>> So, one of my crazy recollections of the COVID pandemic is oil going to zero or negative.

>> Yeah. and going to the gas station and some guy chuckling from behind a gas like across the thing from me, you know that, oh, like they're going to pay us for this, right? And

>> yeah, >> spoiler, we still paid for our gas.

>> Yeah.

>> You know, that's that's not the way this thing works. But these unintended

thing works. But these unintended consequences happen when we look at energy now and we look at the resurgence from those negative oil prices to where we are today and think about especially

electricity in the US going forward. you

wrote in the piece I think it was 22 to 25% of electricity usage for AI by 2030 like there's >> yeah that see that's the other part of this >> massive reallocations here

>> yeah so again the same thing happened in World War II because energy is well it it's it's used in everything

right energy is the most fundamental physical resource so you can talk about energy in the form of gasoline to fuel your car

because energy is what drives all of transportation in an economy is what drives all of manufacturing in an economy. It's really what drives all of

economy. It's really what drives all of agriculture. I mean, agriculture is a

agriculture. I mean, agriculture is a function of the energy you put into it.

Uh it drives all of mining and materials. Again, it's just a function

materials. Again, it's just a function of the energy you want to put into it.

So, when we're talking about energy, yes, we're talking about electricity, but we're also talking about everything else because energy goes into everything. And

if you are reallocating not just money, not just capital, but if you're reallocating electricity and energy to these AI data centers, which

we are, it creates shortages of energy.

Again, everywhere else, we're looking at shortages of capital and we're looking at shortages of energy across all the

nonI data center aspects of our economy.

What that leads to, and the exact same thing happened in World War II, is what's called cost push inflation.

We experienced it in this country in the COVID response. Remember how all the

COVID response. Remember how all the supply chains got wiped out and we had all these shortages

that led to the cost of things going up.

Well, this is that. But to use kind of modern parliament on steroids, right?

This is that but spread across everything because energy and capital go into everything. And if you've got

into everything. And if you've got shortages of energy and capital, then the price of everything goes higher just like in World War II.

In World War II, the main focus was on food. The price of food just skyrocketed

food. The price of food just skyrocketed in World War II. So the government's response to that,

it's our response today.

First, you try to ration it through price. That's what a market economy

price. That's what a market economy does. When things get scarcer, the price

does. When things get scarcer, the price of that thing goes up. So it takes more money to buy that thing. Ultimately

though that becomes politically impossible with things like food, with things like electricity, with things like gasoline. So the government moves

like gasoline. So the government moves to price controls just like they did in World War II.

Set up a system of price controls on everything that the consumer uses and needs to survive. In World War II at least, and this is a pretty common

occurrence, sometimes even price controls aren't enough. There's too much cheating.

enough. There's too much cheating.

There's too much getting around it. So

ultimately, like in World War II, the government has to move to actual physical rationing. So you get your

physical rationing. So you get your ration book of food, your coupons, so that it doesn't matter what you're willing to pay, and it doesn't matter

what the price controls are. you only

get, you know, a pound of butter a week.

That's your physical ration.

That's where this is going. And I know that sounds alarmist. I know that sounds stupid. Well, it doesn't sound stupid.

stupid. Well, it doesn't sound stupid.

It sounds alarmist, but this is what happens when you have capital and energy reallocated in such a

massive way. It leads to today it being

massive way. It leads to today it being rationed through price. So, our utility bills go up. Tomorrow, it goes towards rationing by just you don't have it

available. So, you're starting to see

available. So, you're starting to see that in insurance today. You can't get homeowners insurance. You can't get

homeowners insurance. You can't get health insurance. Pretty soon, we'll

health insurance. Pretty soon, we'll have rolling brownouts. We're already

experiencing some of that in some places where electricity is rationed out. Yeah,

that I think can make sense if you are in fact fighting a war with Nazi Germany. I don't think it makes sense at

Germany. I don't think it makes sense at all for this fake AI war with China.

But that's but that's where we're going.

That's how it's that's how reality is being presented to us.

Let's turn the attention for a second to to corporations and and more specifically jobs, the people who work for these corporations. Part of AI, part of this pitch was, you know, margin

expansion.

It's going to increase productivity or it's going to reduce headcount. You

don't need as many people. That helps

with margin. That helps with margins if you're letting people go or if you're increasing productivity. But if these

increasing productivity. But if these patterns hold, I mean, where's where's this going on the employment front knowing that these pressures are also being added to the economy?

>> Yeah. Well, the saving grace for World War II from an economic perspective, the thing that saved the United States

economy from horrible stagflation, right? So the capital shortages meant

right? So the capital shortages meant that there was no money available to for I'll call it main street businesses for small and medium

businesses. There was no credit

businesses. There was no credit available to expand your bakery or anything like that. So there was no

growth in the US economy from small and medium businesses. None

at all. the same time you had this cost push inflation that I'm describing. Put

those together, stagflation, no growth, persistent, pretty terrible inflation.

The saving grace was the United States government created millions of jobs.

And so the money was spent on building factories and transforming existing factories into war production.

Rosie the Riveter, right? So women entered that workforce,

right? So women entered that workforce, millions of jobs created, real economic growth.

That's, you know, growth was actually fine in the United States because we created a ton of jobs to fight the war.

That's what's really different this time. It's the same as World War II in

time. It's the same as World War II in terms of capital, massive amounts of capital going towards the AI data

centers, massive amounts of energy going to the AI data centers.

But there are no new jobs here. In fact,

the avowed purpose of AI data centers is to reduce jobs. When people talk about productivity, they're talking about labor

productivity. They mean doing more,

productivity. They mean doing more, producing more with the same number of people or producing the same amount with fewer people.

And let me suggest that every person listening to this show, their company is having that experience.

You you all these AI projects that I know your company is running.

They're not opening up some new revenue opportunity.

They're not creating some new economic vista. Oh my god, we've got this

vista. Oh my god, we've got this opportunity. we can hire people and do

opportunity. we can hire people and do all this stuff and make lots of money and sell this product. That's not it.

You're getting operational efficiencies.

You're getting especially junior people being essentially replaced.

Most companies I know have slowed down their hiring plans, especially at the junior level.

Maybe they've been be able to let some people go.

There are no new jobs here. There are no net new jobs for sure. And this is the old saying about a, you know, how many people do you have to employ for a for a

for a data center? I mean, it's, you know, one guy and a dog, you know, to kind of patrol around and make sure nobody's breaking in. That's it. These

things don't require or create new jobs.

On the contrary, they're designed for labor productivity, which means elimination of jobs.

And it's just getting started. The whole

notion of robots, as Elon Musk says, the embodiment of AI, is not just to replace the

white collar symbolic manipulation jobs, the thinking jobs that are being replaced today. The goal is to replace

replaced today. The goal is to replace the physical manipulation, the bluecollar jobs tomorrow.

They're not confessing these techno oligarchs. They're bragging. It's the

oligarchs. They're bragging. It's the

whole point.

So this is what we're fighting the war for. It's not to compete or win versus

for. It's not to compete or win versus China. That is What this war

China. That is What this war is for is to replace human labor.

That's it. That what that's that is what we are. we humans are being asked to

we are. we humans are being asked to make these sort of sacrifices for and

that's what I'm committed to stopping.

Not in the sense of getting rid of AI. I I'm a big fan, but it needs to be subordinated to humans,

not elevated to something more important than humans by the techno oligarchs.

That's what I want us to try to understand.

>> Do you see any willingness or desire or expression of acknowledgement for the job situation yet? Is that showing up in any of the narratives? I mean, we have

Peter Atwater writing about the K-shaped economy for a reason. That feels like it's worse. I think about Kyla Scandlin

it's worse. I think about Kyla Scandlin and the vibe session. I think about all these topics that are trying to describe this feeling of what's going on. Is it

popping up anywhere where we're talking about this in a here's a plan to grow out of or beyond this or is it >> barely >> just just very barely. It's it's it's

it's you see kind of little inklings of some people talking about it but it it absolutely has not entered the popular

narrative structure.

And I'll and I'll tell you why why and you'll hear this all the time.

I hear it all the time when you talk to people about AI and where are the jobs.

The comeback is always always some variation of the the following statement. Well, new technology always

statement. Well, new technology always creates new jobs. We just don't know what those new jobs are going to be yet.

That is what you will hear. And my

response to that is this is a different kind of technology.

This is a different kind of technology.

It is intentionally it is designed to be a replacement for human labor.

That's the whole point. The only jobs that remain in an AI uber ales future, the only jobs that remain and even that

I'm not so sure if Elon Musk has his way. The only jobs that really remain

way. The only jobs that really remain are the meat, taking care of the meat.

It's health care. It's elder care. It's

nursing, which by the way are the only human jobs that are expanding in this current regime. It's the meat taking care of the

regime. It's the meat taking care of the meat.

And that that doesn't work for me as a human being. It really doesn't. So I I I I

being. It really doesn't. So I I I I think there's a path out of this, Matt.

I really do. But the path is growing narrower and narrower by the day, especially as the government moves forward

with characterizing, presenting the AI buildout and the power generation buildout that will be sucked up entirely by the thinking machines.

Presenting this as a national security war effort, this is the worst possible path we could be going down.

>> I want to call out some of the persient signatures.

You've got a chart and we'll see if we can share some of this here too.

Tracking confidence that hypers scale builds will continue growing at a zcore of 5.07 while skepticism about these projects simultaneously hitting an

all-time high Zcore of 5.91.

But then that >> let's let's let's let's describe what a zcore is first, >> right? So

>> right? So >> say what it is. Say how you interpret this. It's important.

this. It's important.

>> A zcore is a way of saying, well, how unusual of this? It's basically a if you're familiar with the concept of standard deviations, you know, how unusual is it that you see

this? How unusual is it that you would

this? How unusual is it that you would flip a fair coin, it would come up heads 12 times in a row? How unusual is that?

Well, that's what that's what the concept of standard deviation is. That's

the concept of zcores. So when we say, "Oh, it's got a

zcores. So when we say, "Oh, it's got a zcore of 5.9 or whatever the number is," what we're saying essentially is that's

5.9 standard deviations away from what's normal, away from the historical level of

narrative volume on this topic, which if you know anything about standard deviation, I mean, two standard deviations away is a ton. Three standard

deviations is like, oh, you're in the top percentile.

Six standard deviations.

Well, this is extremely rare. And what is showing is that this is in high rotation both sides of the coin. People saying

yes, this capex is going to continue and people saying this can't possibly continue. This is what everybody's

continue. This is what everybody's talking about. This is where the

talking about. This is where the attention is on that topic.

But to your point earlier, the arguments against capex and the AI buildout are not that it's antihuman.

It's not that it's going to suck up every bit of energy. It's not that it's going to suck up every bit of capital that's going to starve the rest of the

economy.

That's not the why that people are arguing against capex. And that's what I want to try to get that message out there. I want people to understand that

there. I want people to understand that the reason why capex capital expenditures on AI should not

advance the way that they're being planned. That we should not be putting

planned. That we should not be putting this on a war footing. The why why not?

because it starves the rest of the economy of money,

energy, and jobs.

And so I am I am against that.

It's not that I'm against AI. It's I am against of this overinvestment that starves the rest of our economy from what it needs to th to survive,

much less thrive.

How do you interpret this environment of the hyperscaling growth will continue relative to the skepticism that these will generate a positive return in some

way because both of those flashing is a really interesting contradiction to me.

>> I think it depends on your time frame. I

think that because that's where I am as well. I am I both think this is nothing

well. I am I both think this is nothing stops this train.

I mean, when when when you've got the White House, when you've got Wall Street, when you've got every talking head, when you've got corporations with

all the money in the world pushing this vision and pushing it away of our national security and our national survival is at stake.

This isn't stopping.

This isn't stopping. And and I believe there become there comes a point and that point is not far off when people

vote and they say this ain't working for me.

I am having shortages. My utility bill goes up. I'm we're having rolling

goes up. I'm we're having rolling brownouts.

So I can have an AI friend.

Are you freaking kidding me? This this

this isn't it?

And so it gets cashed out in politics.

And that's when we'll have a moment, right? We'll either have I like to call

right? We'll either have I like to call it the the AI authoritarian moments where if the techno oligarchs and their money

and their political support says, well, if the problem here is democracy, if the problem here is people voting, I guess that's what we have to do away with,

right? Or you could have the, you know,

right? Or you could have the, you know, an AI backlash and a real political populace come to power. Both of those

outcomes to me are really poor. I I I neither want proconsul Vance acting on behalf of

Peter Teal and the techno oligarchs. I

don't want that. And I also don't want, you know, comrade Manny as the, you know, as our leader either through some

populist backlash against AI.

I want to try to avoid those two extremes. I think it's harder and harder

extremes. I think it's harder and harder to avoid those two extremes. But I think if we can get the word out to get people to recognize it's not just that

this should not this isn't a war with China over AI. It's that these data centers are sucking up every bit of capital and energy that we need for our

own economy.

I think if people start thinking that they'll see it. They'll

see it. They'll see it in their own lives.

And I think it's not too late, but it's getting close to being too late from those two outcomes of either AI authoritarianism

or AI backlash through political populism.

I want to avoid both of those. I'm

probably crazy to think we can avoid them, but we need to get people to recognize the problem.

before we can take any steps to try to avoid those two bad political outcomes.

>> Okay. So, you laid out three policies here. And I want to go through these

here. And I want to go through these together, too. Policy one, rapid

together, too. Policy one, rapid domestic reshoring of manufacturing.

Policy two, rapid buildout of all power generation. And policy three, a hard 10%

generation. And policy three, a hard 10% electricity cap for data centers. You

said policy three, the cap, that that's the big one that will be fiercely fought because it actually bites and actually contains them.

>> It doesn't bite today with most states and where they are. What

>> Yeah.

>> What's the What's the political economy change? How do we get there?

change? How do we get there?

>> Let's let's start with the first two.

>> Okay, >> let's start with the first two because I I think it's so important to be for something. It's it's I can sit here and

something. It's it's I can sit here and say, "Oh, it's, you know, the Sam Altman's and the Larry Ellison's and the

Peter Teals and the Elon Musks of the world that these techno oligarchs, I mean, gr and just be against them."

And that's a mistake because I'm not anti- AI. I'm not anti-technology.

anti- AI. I'm not anti-technology.

I'm not anti-progress. I'm certainly not anti-national security. I am for all

anti-national security. I am for all those things.

So, I want to but I want to tell people what I'm really for, which is for the health of the United States of America and its people. So, policy number one, I

really do think we need more jobs. And I

think the way to get jobs is to bring back manufacturing.

I am I am all for requiring Apple I'll pick on Apple for a second to bring back manufacturing jobs to the United States.

I think that is long overdue. I think

the the Trump policies to cajol encourage force companies to bring manufacturing back to the United States

long overdue you. Amen. 100% for it.

100%.

And I don't want to hear the arguments about neoliberal this and oh the iPhone cost will go up. Don't care. You know what?

Apple will eat most of that price increase from the higher labor cost in the United States just the way they ate tariffs.

So I'm not scared off by coming say oh we can't we can't do this back in the United States. Yes you can. So I am all

United States. Yes you can. So I am all for bringing manufacturing back to the United States because bringing those manufacturing,

bringing those industries back to the United States, that's good growth. That

creates small medium businesses supporting those organizations creates entrepreneurialism around those efforts.

They're not data centers off in the middle of nowhere with their own little energy supply unconnected to the rest of us. just there for the thinking

us. just there for the thinking machines.

Those are an engine of economic growth that I am entirely behind. That's what I am for. So I'm for that number one,

am for. So I'm for that number one, manufacturing back into the United States. Number two thing that I'm for,

States. Number two thing that I'm for, we got to have more energy.

You know, there's this, and I love it, the abundance philosophy that you see a lot in democratic political circles, Ezra Klene, some other folks. And and I

think it's great. And again, it's based on you got to you got to be for something. You can't just be anti-Trump.

something. You can't just be anti-Trump.

You can't just be, oh, grievance politics. What are you for, man? I'm for

politics. What are you for, man? I'm for

growth. I'm for abundance. I'm for

having more. more liberty, more money, more more for that.

Well, the answer for abundance is you got to have more energy because like I say, energy goes into everything. You

want more housing, you want more health care, uh you want more of a social safety net, you want more jobs, you want

more incomes. My friends, the key to all

more incomes. My friends, the key to all of that is more energy. Do more energy and all of those things will happen. all

of them. So, yes, we need nuclear. Of

course, we need nuclear. Yes, we need wind and solar. Yes. Yes. Yes.

Yes, we need natural gas. Yes, we need coal. We need it all. Am I worried about

coal. We need it all. Am I worried about carbon emissions? Of course, I'm worried

carbon emissions? Of course, I'm worried about carbon emissions. I am more worried about this bladeunner future that we're creating with a permanent

underclass and a permanent masterclass of the techno oligarchs and their thinking machines. I'm a lot more

thinking machines. I'm a lot more worried about that.

So the key to all of this and I am for a war footing on this is we need more energy

period from all sources.

But here's the third part.

Let's say we do these things. The the

new the new manufacturing that we're reshoring, we're bringing back to the United States, it's going to take a lot of energy.

Our consumer economy takes a lot of energy.

Well, right now, even if we build whatever energy we're building, every watt of that new energy is being sucked out of the the system by the data

centers.

So, it's not enough to build more energy if the data centers are going to take all of that growth and more, which is what's happening today.

And this is this is the part that I'm having the hardest time communicating, which is that it's it's not just that we have to build more energy generation. We

also have to keep the data centers from taking every bit of that.

We have to keep them from getting a bigger slice of the pie because every projection we've got, they're going from a rounding error of

energy consumption couple of years ago to like a quarter of our energy being consumed by the data centers. That's what kills us. That's

centers. That's what kills us. That's

what kills us. So it's that third policy that I'm for is to

now before it's a problem put a cap on state by state grid by grid region by region put a cap on how much energy can

be how much electricity can be consumed by data centers. My my proposal is a 10% cap. No more than 10% of the electricity

cap. No more than 10% of the electricity that's generated can be consumed by data centers. Now, I'll give you a little

centers. Now, I'll give you a little variance on that. If you build out a new big data center, new big electrical generation plant, you could it's not all yours. Some of

that's got to go to the grid because this is a national effort. But sure, you want you build a new energy plant, you can have half of it. I'll give you that,

right?

But we got to work together to not only build out the energy generation capacity of this country, but to keep the data

centers from eating that all up. That's

what policy number three is for.

Let's talk a little bit then about the investment implications of this because each of those scenarios lay out different things that will work, will

not work, will compete, will not compete and I I I have to believe there's there's some opportunities inside of this from what you're seeing.

What are you excited about? What areas

do you think there's actually growth that's coming that can be harnessed?

What signs do we look at for that we're we're getting through that there's actually a a future on the other side and who's going to win? Not specific

names. I'm just interested in how you're thinking about this in the economic sense.

>> Yeah. And and this this is a tough one.

And and I'll describe why it's a tough one. See, the path we're on right now is

one. See, the path we're on right now is the the the classic boom bust cycle of a market myopia.

And what I mean by that is that these data centers, each individual project, it pencils out. What I mean by that when we say something pencils out is a it

makes economic sense on an individual.

You look you look at the project that you're being presented, you're the funer or you're being asked to give money to this and you you know you ask the tough questions, you go through it, you dig

through it, you say, "Okay, you know what? This deal makes sense. positive

what? This deal makes sense. positive

positive value. I check some box.

>> Yeah. Yeah. Yeah. I can I can look at it and say, "Okay, I'm gonna I've got I I see the risks, but here's my return.

Here are my protections. You know what?

This pencils out. I'm going to go. Yes,

this deal makes sense."

What what you don't see though is the 500 other deals that also make sense on an individual basis. Because when you

put all 500 deals together, it does not make sense. All 500 of these deals don't

make sense. All 500 of these deals don't work in the aggregate. They all work individually. And so you say, "Yeah, I

individually. And so you say, "Yeah, I think I'll go forward with that investment, but they don't work in the aggregate." This is the this is market

aggregate." This is the this is market myopia and it happens all the time and it is what generates boom situations

because every one of those 500 projects goes through and then they get to a point where the projects stop working because they

don't work in the aggregate and then you have a terrible terrible bust.

This is this is this is what a boom and bust cycle is. It's driven by market myopia.

What I'm proposing is that we step back.

We see that in the aggregate this doesn't work. We can't have an economy

doesn't work. We can't have an economy where a quarter of our electricity is gobbled up by AI data centers and where four to five trillion dollars is spent

on that to the exclusion of everything else. it. The bust there is horrific.

else. it. The bust there is horrific.

By putting a cap on the energy consumption of data centers, a lot of these deals, a lot of those 500

deals on an individual basis no longer pencil out. They no longer make economic

pencil out. They no longer make economic sense. The money that has already been

sense. The money that has already been invested in them, that money is lost.

There are losses, but you are deflating this bubble before it gets to the point where it totally goes boom and takes everything down with

it. So that's what I'm advocating. I'm

it. So that's what I'm advocating. I'm

I'm advocating taking air out of the expansion, the bubble expansion here.

You do that by putting political risk here. You say there's a regulatory cap

here. You say there's a regulatory cap on the electricity that can be consumed.

And so the projects, they're still in the planning stages. They no longer pencil out, which means the capital doesn't go there. And so the capital's

got to go somewhere else. Where does it go? Well, I'd love for it to go to

go? Well, I'd love for it to go to reshoring manufacturing and building out energy generation for everything, not

just the AI data centers. So like I say, it's a long putt. It requires losses to be taken and the bubble to be deflated slowly

on the AI capex buildout. The

opportunities where does that capital go to get a return goes to manufacturing reshoring and energy generation just not

only for data centers. That's where I see where I hope this all can go. So for

investors, a key part of this becomes just watching. Are we running it hot

just watching. Are we running it hot without any awareness of caps, without any awareness of spending and pretending it doesn't exist? Or do we gradually or suddenly start to have some

acknowledgment that we need some type of protection on not letting this just absorb the whole economy until we run into a giant bust? Is that kind of where that's

>> that's exactly where it is? We we need a balance. We need AI growth to be

balance. We need AI growth to be subordinated to our national economic goals.

The difficulty we have today is that they are not being subordinated. They

are being elevated into a war effort into this genesis project.

That's so it's not going my way, right?

It's it's not going our way is how I'd rather describe it. It's right now it's going the techno oligarch's way.

I hope that by getting the word out there, by getting people to step back and say, you know what, this doesn't work in the aggregate and the rationale,

the presentation they're using of a war effort.

That's not right. I'm hoping that I get enough people to step back so that we can start making a political effort state by state to put some caps in place. I think if we can do that, I

place. I think if we can do that, I think it can build on itself and I think we can actually change change the course of this mighty river

of capital and energy that's currently only flowing towards one end that being the AI data centers.

Okay. So, part of this and this is part of why I really wanted to sit get you to sit down and just talk about this essay because as somebody in the financial space talking to people at various

levels of awareness, I don't want to say intelligence, it's not intelligence, it's just there's a whole class of professional investors who are just sick of talking about why they're underperforming the index and if they

have enough mag seven. And there's a whole sector of people at my local pizza place and bar who are just sick of my utility bills went up again.

>> Yeah.

>> And they're not all connecting this to that they're talking about much of the same story. Not maybe not the

same story. Not maybe not the underperformance relative to a benchmark for some hedge fun, >> right? Maybe not that, but this reality

>> right? Maybe not that, but this reality of this buildout is just starting to pick up steam and a lot of people in a lot of layers of society are worried about the exact

same problems. But though, it's not being covered this way. It's not being discussed this way.

>> What do we do aside from like sharing an article like this with somebody or explaining it, share a podcast episode like this with somebody?

>> What else do we do to just try to have this conversation? Because I don't think

this conversation? Because I don't think people are threading that needle that this AI buildout is actually attached to all these fundamental inputs for everything that makes our country operate.

>> Well, that's why I think it's it's important to be four things, right? It's

I I think I I think that if you just do a a head-long attack on the techno oligarchs and the AI data centers, I I

don't think that works, right? I think

the vested interests are too great. You

know, what's the old line? You know, you you know, you don't if your pocketbook requires it, you don't see things. You

know um >> where you stand is a function of where you sit. All these expressions and you

you sit. All these expressions and you know Yeah.

I think it's I think it's important to to to have to bring positive energy to this and to not be against AI, but to be

for energy expansion, to be for jobs coming from

industrial and manufacturing reshoring.

And I think that we can start talking about putting caps on electricity use by AI data centers. I

think there is a political will for that particularly in some states and some groups of states. I mean I even saw in my home state of Alabama which you would think would be the last place or one of

the last places you'd get some sort of cap. you know, our Katie Britt, our

cap. you know, our Katie Britt, our senator, our junior senator, or maybe she say, I don't even remember.

Tommy Tubberville is the other one. So,

that I can't even talk about him. But,

um, Senator Brit's talking about, you know what, these data centers here in Alabama, they're using too much electricity.

Katie Brit's talking about this.

So I think there is the kernel

the germination of this idea that there should be limits on data center usage of electricity not

trying to take us back to you know pre LLM days still allowing for growth but allowing going for growth in the rest of the

economy too.

I think there's a potential to be for that particularly if it's coupled with well where's that what is all that electricity going to go for? What's

going to go for jobs through other manufacturing and reshoring of industrial facilities?

What are we going to you know can we build more energy? Yes, we can. We want

to build more energy from all sources.

No more woke left, you know, anti-energy policies and no more woke right anti-energy policies. We

need it all. We need it all and we can really move towards abundance.

So I look, like I say, it's a long putt. is

going to be a difficult path but I think there is a path and importantly is a path of for of positive energy as

opposed to just being a path of fighting something like AI and the techno oligarchs. I want to be for something.

oligarchs. I want to be for something.

I like the sound of that. I like that when I read this piece the first time through I had a positive feeling coming out of it. I had the positive feeling of I

it. I had the positive feeling of I actually see the upward path of >> people understand this issue. Here's how

you create jobs alongside this growth.

>> And that's a really exciting path out that's not just here we have to go running off this cliff.

>> It is >> and I hear it in what you're saying in Alabama too. So, a crazy thing that I

Alabama too. So, a crazy thing that I saw in Pennsylvania was the Amazon Web Services or whoever the data center was goes to the nuclear power plant goes to the power company and says,

>> "Here's our growth for next year. Here's

how much we're going to need."

>> The state regular regulator came in, state regulated entity, and they were like, "Sorry, but no."

Like that line was put up. This is I think close to a year ago at this point.

They're like, "We can't we can't do that. we can't we can't give you all

that. we can't we can't give you all your growth because then there's no more energy. And I think that that appetite

energy. And I think that that appetite is there. I just think it hasn't made it

is there. I just think it hasn't made it to any headlines yet. I don't think people know it's an option and I don't think people know how to do this politically yet.

>> People don't know it's an option. I love

that Matt. People don't know it's an option and it has to be an option and we have to start talking about it.

>> This World War AI piece, I think, lays out those options better than anything that I've read yet. So, I want to suggest people go find it. I want to suggest people check out if you're in markets, especially Persians Pro. You

want to see these, you want to see these storyboards, you want to see these pulses, you want to see how they're highlighting these stories in advance.

And of course, if you want to be for something, I think that's what Panoptic AI is pretty much all about, right, Ben?

>> Absolutely. Positive energy. That's how

we get through this together.

>> All right. Anywhere else you want to send people? We're going to put all the

send people? We're going to put all the links in the comments before I let you go.

>> We got a lot of links. I mean, but obviously, you know, you can always just do epsilon theory. Epsilon theory is kind of the hub for for for for all of this and hope to see you there.

>> All right, come say hi. I'm going to have Ben back again in a month. We're

going to update on this because this is a breaking and moving story as we well know. Hey, if you write a note and

know. Hey, if you write a note and there's a giant government intervention every time within days, uh, we're going to have a lot to talk about this year, Ben.

>> No doubt. No doubt.

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