Democracy, Redefined

We understand the North Atlantic Treaty Organization is pursuing fresh initiatives in the fields of artificial intelligence, information management and cybersecurity.

Its purpose — claims United States National Security Adviser Jake Sullivan — is to:

Harness the unique strengths of highly capable democracies to address shared global challenges.

We are not certain to which “unique strengths of highly capable democracies” Mr. Sullivan refers.

Could these include their infinities of debt under which they agonizingly groan? Their unsustainable spending? Their guttering economies? Their flowering populist discontentment with elected officials?

We do not know.

Nor do we know the identities of these “highly capable” democracies under present consideration.

Nor — apparently — does Herr Egon von Greyerz. He commands VonGreyerz Gold Switzerland. From whom:

The collapse of the Western financial and political systems [are] now happening before our eyes…

Politics in the West are already a total mess. Whatever party gets into power, the deficit spending will accelerate, probably exponentially. That is certain in the U.K. with the new Labour-led government, in France with a motley coalition government and in the U.S. where one candidate might end up in jail (or become president) and the other one is too senile to stand for election. In either case, the U.S. will have an insoluble debt crisis.

Again we ask: What are the unique strengths of highly capable democracies? And which democracies are these?

We await answers.

Yet we hazard Mr. Sullivan’s understanding of democracy differs from ours — and very likely from yours.

We do not believe his priority is “the will of the people.”

We suspect his priority is instead the will of himself and that of his fellows.

Mr. Michael Benz directs an outfit bearing the title Foundation for Freedom Online.

And he is on to “elites” like Mr. Jake Sullivan. He has taken their measure, their complete measure.

These elites believe democracy dies not in darkness — but in sunlight.

They believe there is too much of it.

They must therefore work the blinds to restrict the inflow. Mr Benz:

From their perspective, if the military did not begin to censor the internet, all of the democratic institutions and infrastructure that gave rise to the modern world after World War II would collapse…

Their whole-of-society model explicitly proposed that we need every single asset within society to be mobilized in a whole-of-society effort to stop misinformation online…

Thus the Deep State presently equals democracy itself:

All of the elite establishments that were under threat from the rise of domestic populism declared their own consensus to be the new definition of democracy. Because if you define democracy as being the strength of democratic institutions rather than a focus on the will of the voters, then what you’re left with is essentially that democracy is just the consensus-building architecture within the democratic institutions themselves…

What they essentially said is we need to redefine democracy from being about the will of the voters to being about the sanctity of democratic institutions. And who are the democratic institutions? Oh, it’s us. It’s the military, it’s NATO, it’s the IMF and the World Bank. It’s the mainstream media, it is the NGOs.

We now understand Mr. Sullivan’s “unique strengths of highly capable democracies.”

Artificial intelligence — a censorious instrument of social control — is chiefly among them.

And it will be set loose to safeguard democracy… against democracy…

Who will be AI’s winners (besides the Deep State?) And who will be its losers?

“Moneyball” economist Andrew Zatlin shows you below. Read on for the answers.

The Daily Reckoning Presents: “Impenetrable, permanent, and ever more invasive”…

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AI Investing: Winners and Losers

By Andrew Zatlin

Today, I want to talk to you about the surge in Artificial Intelligence or AI. With that in mind, I want to highlight the winners and losers in AI investing — and how to position your portfolio for profit.

First off, let’s be clear: AI investing is NOT a fad. It has legs. It will create a lot of winners. But it will also create some losers because one of the primary goals of this investment is to create a reduced workforce, specifically in the service industry.

It’ll also impact a lot of white-collar professional jobs, which many white-collar professionals will learn the hard way. They may frown upon blue-collar jobs, but those jobs are actually much safer from AI.

There’s no AI plumber on the way anytime soon. But AI lawyers and accountants are definitely coming. In some ways, they’re already here. The blue-collar class, which the white-collar class likes to look down on, will be in increasing demand.

They’ll be laughing last. Their white-collar critics will be on the unemployment line, without a future, while they’ll never lack for work.

Don’t Learn to Code

Learn to code? Ha, don’t bother. AI will be doing it. Instead, learn to become a mechanic. Learn to put up drywall. Learn to fix a toilet. In other words, learn a useful trade. You won’t become a billionaire, but you’ll be pretty well off if you’re any good at your job.

But maybe you’re an investor looking to get rich from AI investments. Let’s look at AI’s likely winners — and how you can invest accordingly. You need to know that semiconductors are very sensitive to demand, so they go through this boom-bust cycle pretty fast.

For example, go back to when crypto was raging during the Trump era. It demanded raw computing power to mine for the crypto boom, a lot of servers, a lot of data centers, and a lot of semiconductor chips.

Then when we got to COVID, we had another big boom because people were sheltering in place. Not only did they need new TVs and new game toys, but they also needed new phones and new PCs to enable a lot of the Zoom meetings that were suddenly happening.

The New Wave For Semiconductors

Tens of billions of dollars are being spent on AI investing, with the lion’s share going to semiconductor companies. For example, on a year-over-year basis in the first quarter compared to last year’s, an additional $23 billion was spent on semiconductors. This is big money and it’s going to continue.

Semiconductor companies are major beneficiaries as AI requires immense computing power and chip demand.

AI investing is huge and it has a return that companies are expecting. AI is to the white-collar workforce what electricity was to lamplighters. It’s the kiss of death. More and more, companies are telling their management to do more with less.

A great example of this is Boeing. I wouldn’t be surprised if history shows us that the primary cause of Boeing’s safety problems was because someone did a cost-benefit analysis that said we need fewer workers in the safety department and bottom line.

We’re used to seeing this management of the workforce in the blue-collar space. We’re used to seeing either reducing the workforce or possibly putting in robotics so that you get better quality control.

Just Look to Call Centers

I predict that white-collar jobs are going to get gutted by AI. If you want to know how it’s going to happen, look at the history of call centers because that’s the model for what we’re going to see, except it’s going to be spreading out into more of what we consider higher-skilled white-collar worker space.

Typically in call centers, people pick up the phone and it’s very repetitive, not very skilled work. Call center workers typically answer phone calls that ask the same things. So the first step in the playbook is trying to reduce the cost of those people.

You could try to find lower-wage centers. Initially, call centers were moved to the Midwest, and when that wasn’t cheap enough, they were moved offshore to India or the Philippines.

Step two is you pursue automation. These are repetitive actions that should be automatable. You’ve probably seen this everywhere today with chatbots. But they’re not really chatbots. They’re basically quick search engines. You ask a question and it takes you to some FAQ answers that are pretty useless. Well, AI will accelerate that.

Another example is the banking sector. The banking sector followed the same model as call centers. They looked for lower wages, so they moved their operational team outside of New York, down to places where the wages would be cheaper, like Florida or Charlotte.

Step Two

That hasn’t been enough. And now they’re going to step two of the equation. They’re embracing technology like Blockchain. There’s a reason why the Citibanks of the world want blockchain, and that’s to reduce their workforce.

One of the important aspects of blockchain is it can automate the process of confirming a transaction.

Citibank has thousands of people on its payroll who are paid to do that. Can you imagine what would happen if they could get rid of thousands of people and save all those salaries? Their profits would go through the roof.

We’re seeing more and more companies embracing this technology and dabbling with it. Amazon recently tried to create an automated Amazon store without cashiers where you could purchase your stuff and it would automatically track and charge your account.

It didn’t quite work out, but you can see the direction these companies are going.

How to Play It From Here

So how do you play this shift away from white-collar workers and towards automation?

This could be a couple of years away, but you should get prepared. I don’t celebrate it. But as an investor, I should prepare for it. So should you (go here to see a brief video I recorded about AI and its hugely important implications).

AI could be used to reduce the workforce of large tech companies with bloated corporate bureaucracies.

These include Alphabet Inc. (GOOG), and Meta Platforms Inc. (META). They have plenty of people running around who are doing repetitive tasks that will be automated through AI. They’re dead weight. Which means they’re dead men walking.

But they are human, regardless of what you think of them.

By the way, the one thing I wouldn’t invest in is Harvard MBAs. They’re dinosaurs. These days they provide negative value.

We’re entering a Brave New World.