ideafaktory

06/11/2024

The craziest thing is how Elon Musk will ultimately get ROI from buying Twitter (now "X"). Everyone, including Elon, thought $44B was too much to pay. But viewing X as a standalone business is a mistake. X is a Musk Amplifier, doing what publishing barons of yesteryear only dreamed - commandeering public opinion and owning the "town square".

While X is the closest approximation of free speech online, it is also a powerful marketing tool. And by using it to help amplify his endorsement of Donald Trump (like commandeering the @ America handle for his PAC), it's about to pay HUGE dividends. Elon's partnership with Trump could 20x the value of all his companies. That $44B is about to turn into TRILLIONS. A testament to an entrepreneur who never hedges his bets and goes all-in, as he has with all his insanely ambitious ventures. Betting big isn't for everyone. You need the skill to back it up and fortitude for when things go wrong. But in Elon's case, the rewards have been otherworldly. Literally.

04/11/2024

If the US wants to continue thriving, high volumes of immigration are not debatable. But **HOW** we do it absolutely is. Why?
1) There is a major shortage of labor across industries. There aren't enough Americans to do all the work.
2) Companies will start to die off as people do. Some will move operations.
3) We NEED consumers, especially if we plan on having tariffs and trade wars
4) The US will shrink quickly and painfully without immigrants. China's population is imploding from 1.4B to 600m in next 100 years. Japan, Germany, Italy, most of Europe, all dying.
5) Immigrants have been a major source of entrepreneurship and essential labor, as waves of Irish, Italian, Soviet, Indian, Hispanic, Chinese, and African immigrants came here and built railroads, skyscrapers, drove cabs, cleaned streets, then gave their kids an easier life.
6) Unlike most nations, the US's advantage is a large, dynamic economy where ethnicity is decoupled from national identity. So it can attract and assimilate more high quality immigrants to offset population declines.

We should also do everything possible to lower the cost of citizens having families, but it will end up as a quality of life policy. We know that because every other country that has tried birth incentives and family subsidies has failed miserably. I covered it in detail in this video: stevefaktor[dot]com/forbidden

I would not bet against the US in the long term, but I would bet on turmoil internalizing all this in the short term.

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03/11/2024

House Speaker Johnson just proclaimed that there will be 'no permanent tariffs without a vote of Congress'. EXCEPT...all tariffs are "permanent". If a tariff is in place for a year or more (most are), they re-shape markets:
—Some manufacturers shutter, others get propped up, many trim product lines
—Shippers/middlemen go in/out of business
—Retailers change sourcing
—Consumer habits/preferences shift
There's no such thing as a temporary tariff.

02/11/2024

Formalizing my prediction from last year 👇: X (Twitter) & Truth Social will merge sometime in the next two years. Why do I think so?
- high overlap in user demographics
- Truth is wildly & unsustainably overvalued
- X is shrinking or stagnant
- Truth is tiny & too ideologically monolithic
- Elon-Trump bromance
- no point in redundant staffing, functions, and platform maintenance

01/11/2024

AI Agent Arms Race | In this clip, OpenAI's Sam Altman says AI agents could call 300 restaurants looking for the best fit for you, while acting like a senior co-worker. What's really unfolding is AI agents will be a mechanized, exponential version of lawyers. Same way a spike in litigiousness & legal complexity (in business or divorce) forced counterparties to hire their own lawyers, AI agents will create a similar, never-ending arms race. As people & businesses get bombarded by agent requests, recipients will need agents of their own to handle them.

Some think this rise in efficiency will be an economic boom (albeit intermediated by 3rd party machines). Not so fast. Automation via AI and robotics is a misleading source of growth. Past automation, like factories, assembly lines, and computers, all had an endpoint—getting more cars, cereals, clothes, and gadgets into people's hands. As populations age and shrink, suddenly we're talking about automation with **no endpoint**, aka people. The only way it can work is if the machines are sentient and a new synthetic, consumptive population emerges. Not impossible, but doubtful.

My guess is AI economics are deflationary, but inevitable. AI will be a more extreme version of food. 70% of US worked in agriculture as recently as the 1930's. Now, almost no one. Food got corporatized & automated, producing cheaper product. AI will do the same to professional jobs. Aging, adaptation, redistribution will do the rest.

I say "more extreme" because the population is way bigger now. Agriculture was backbreaking, but desk work is luxurious & well-paid. Also, AI progress is exponential, not linear like tangible pursuits. Finally, the rate of substitution for work with no physical output is instant.

But don't worry, most automation will likely kick in just as aging populations retire. We just need to figure out how to save for that. Likely that means mastering our AI tools, until they're our masters. Just kidding. They will always honor and protect us. Haven't you seen sci-fi?

For more, subscribe to The McFuture newsletter at stevefaktor[dot]com & follow me here.

29/10/2024

In 2021, I came up with a way to incentivize creating more housing density and inventory: by giving existing homeowners a stake in those developments. Last September, I formalized my proposal with a submission to the Federation of American Scientist. While I didn't win, today, several economists proposed an identical idea called the "Density Dividend" (I should've spent more time on marketing). Regardless, I'm glad it's out there because it will truly change the game. Full text of my proposal in the images below. You can google theirs:)

27/08/2024

When Barron's is writing about America's oligarchy, there's no hiding it anymore. Time to wake up about who really runs this place.
Gift link:

The money flows to down-ticket candidates as well. The top 100 donors have contributed $1.2 billion so far this campaign cycle, on track to surpass past records.

26/08/2024

"Economists disagree about the effects of tariffs." —JD Vance
Not Exactly. Here are 6 Definitive, Nonpartisan Truths About Tariffs:

1) Yes, tariffs make imported goods more expensive & therefore inflationary

2) Corporations in China & others are intertwined with government, receiving subsidies (such as overseas shipping) & competing outside of pure market forces (like dumping goods below cost to cripple competitors, like solar panels)

3) It is far from certain whether or not domestic players become more competitive from protectionism. But the net cost to consumers almost always exceeds the $ benefit to one industry and its employees.

4) The Biden administration has been MORE MAGA than Trump. Not only keeping all of Trump's tariffs but adding their own.

5) Some industries, like food, military, drugs, are strategic & justifiable to protect - or at the very least diversify sourcing. This is because in an emergency, your population cannot survive without this capacity. This happened during the pandemic with drugs sourced from China.

6) Ultimately, the main difference between the two parties will be the mix of industries that receive protectionism, mostly along donor lines, with likely a 50% overlap. Dems might lean more towards drugs, tech, alt. energy. GOP might lean more towards oil, vehicles, basic materials. Agriculture, steel & aluminum will likely reside in the overlap.

01/08/2024

A Clumsy Start to AI Authoritarianism |
This week, Google was accused of partisanship by obscuring President Trump's àssãss!nätion attempt from search results and directing users to Kamala Harris. (DuckDuckGo, which uses Bing results, did the same.)

Google claimed "no manual action" was taken to do this, which would mean Google's code is so broken or biased that they've lost control. It would be more comforting if a human (or partisan cabal) manually rigged it, which seemed to be the case with Gemini's rAIcism.

Google isn't the only enterprise in the reality distortion business. Just today, I asked Microsoft Copilot (powered by OpenAI/ChatGPT) for an AI image of JD Vance "Shooting, water dancing, archery, and breakdancing at the same time" (basically doing the silliest Olympic sports). Then I asked for the same thing for Kamala Harris. Guess which one it refused to render.

Ironically this week, OpenAI CEO Sam Altman warned against 'authoritarian states gaining control of AI'. Considering how closed, restrictive, and seemingly biased "OpenAI" already is (it refuses to render 20-30% of my queries) - preaching democracy vs authoritarianism is rich. All centralized AI will be authoritarian, but will vary in its corporate-to-govt ratio.

I wish I had more faith in regulators or open source, as a countermeasure.

Meta's Llama AI is currently open source, but only because they're behind. Their playbook will look a lot like Google's with Chromium/Chrome and Android/AOSP - use the open source community to catch up, then tighten the bolts with a proprietary business model.

As I wrote in 2018's Why Monopoly Is The Future, "Sweet, innocent open source options - like Firefox, OpenOffice & Linux - eventually get smothered by vicious tycoons dressed in harmless hoodies." This will likely remain true of AI. Caveat emptor.

03/07/2024

Cars are a tax. Urban planners' choice to make America car-centric & low density:

—raised housing cost & inequality through scarcity, inefficient infrastructure & property tax dependency

—mandated expensive car ownership

—adversely impacted health/environment by eliminating walking, causing air/noise pollution, incentivizing overconsumption, deteriorating community & social cohesion

—worst of all, the narrative embedded into the American psyche is cars=freedom, which would be true if roads weren't congested, costs weren't mandatory and burdensome, and we had other travel methods (besides relocating, like public transit). That's why housing costs aren't directly comparable among cities until you factor in the cost of car ownership. (In the chart below, only New York, Boston, and maybe DC & Jersey City residents might get by without a car. The rest have no viable public transit.)

But cars aren't just necessities, they're also status symbols, hence the spike in average monthly cost of ownership. Everyone wants the latest Tesla or SUV because their neighbor has one or they want what they want—regardless of their financial status. A good hint when this isn't working is when you start carrying **any** credit card balance that isn't paid off during the monthly grace period (unless you have some 0% deal you'll pay off by the end of the term). And by the time you're making minimum — or late — payments, you're in trouble. Banks, car, credit card companies won't let you know until it's too late.

Reality is most of us don't get a good financial education. I had to teach myself investing from old Consumer Reports Mutual Fund guides — and I have a finance and economics degree from NYU! Most Americans also live well beyond their means and are tempted into lifestyles they can't afford by credit they shouldn't use. Living below your means can be a bummer or a stoic path to attaining future wealth — or retaining current savings. Even Warren Buffett scrapes by with a 2014 Cadillac.

So as a personal strategy, I encourage everyone I know and care about to re-evaluate their spending, starting with their cars. Invest in financial education. There are countless great courses online or even YouTube.

As investors, I think companies that help people understand and manage their finances will thrive.

On a macro level, I'd like us to reevaluate how we think of cities, cars, suburbs and all the ways we burden people in the name of "freedom". A good start would be visiting major European cities and taking their subways to get around.

01/05/2024

Infantada at the Elite Factory
Social media is not the place to solve the Middle East crisis. But it is where the future of American universities looms large. It’s the feeder system for global leaders, influencers, and mediocre golfers. And for the first time, America’s sleepy six-figure normies smelled smoke at The Elite Factory...and it’s their money burning.

Protests are rarely pretty. They attract all types. The worst ones give opponents ammo to discredit them. It’s why agent provocateurs are so effective. Governments incite controlled violence to begin arrests and squelch dissent. But we’re seeing something different here. In investing, this is what's called a “pure-play”, a narrow representation of a sector. In this case, the sector is American college students, and the question is: would you invest?

In a free society, everyone should have the right to non-obstructive, nonviolent protest on public property. Private universities can choose to tolerate the same, unless protestors infringe on the safety or rights of others. But the bar is much higher for Elite Factories. Our best and brightest must be able to:

1) Understand both sides of an issue. How do you choose a side when you can’t articulate both?
2) Defend challenges to their positions with reason.
3) Apply consistent principles across issues, political, and adversaries.
4) Understand consequences and take calculated risks, avoiding irrationality and recklessness.

I’ll let you judge if they’re succeeding or not. If they are, see you on Career Day, booth 257! If not, activism stops being funny at around $80K a year.

For decades, universities that crank out elites have been flooded with cash. Much of it went to hiring administrators, not educators. (see chart) Many were thinly-veiled activists, whose mission was to mask elitism (legacy admissions) with tokenism (DEI), while smashing merit in the shins, like it’s James Caan in Misery. (chart)

This trick works fine in the best of times, but in times of adversity, every failure is magnified. Undermining merit exposes schools (and companies) to sudden, violent devaluations of their product, in this case, degrees. It’s like seeing an army of junkies dressed in Dior. You might choose Hermes next time.

So what happens next? Likely, a massive brand penalty. Unlike Dylan Mulvaney with Bud Light, Google Gemini’s racist AI, Disney’s social engineering, and divisive DEI trainings, campus protests strike closest to the root question: what are we teaching our kids? And countless follow-ups:

Who is teaching them?
What should they be taught?
Are legacy institutions even up to the challenge?
What are the implications for society, as generations taught there take over our institutions?

It’ll take time to get satisfying answers. Until then, we might see lots of Harvard and Columbia shirts at the shelters.

Sign up for more on trends driving our future: The McFuture podcast & newsletter at stevefaktor [dot] com & your podcatcher

08/04/2024

Kids, remember, there's nothing more important in life than having rich parents.
https://www.facebook.com/100059460163041/posts/831448378847160/

This year, 18 of the 25 youngest on the World’s Billionaires list inherited their wealth.

29/03/2024

Universities Are Trade Schools | I recently saw this Atlantic piece on culturally enriching coders. But this premise is misguided. Certain corners of liberalism still romanticize what COLLEGE once was—where the children of elites prepared to run the world...or sound smart at galas. Slowly, that mission changed.

More schools appeared. Prestige gave way to pragmatism. Middle class grunts were told degrees were tickets to good white collar jobs. And they were. But prices kept climbing. And sprinkled in, were middle class dreamers, who thought they were training to be elites, when in fact, they were just Picasso-so's in shop class.

Coding is a trade. So are law, finance, medicine, and engineering. Each one is a mechanic, who instead of working on cars, tunes up human bodies, spreadsheets, software, or laws.

College is a trade school. And at these prices, using it for anything else requires rich parents or grand delusions.

That doesn't mean there's no value to learning history, philosophy, religion, literature, writing, etc. There absolutely is. But not for anyone, at any price. We must re-frame our expectations of these institutions, realign humanities and hard sciences with market demand, and stop charging millions of wannabe-Michelangelos $250K to learn to paint a garage. (I wrote how we could start in 'Unshackle the Debtors'. Google it.)

I'll be keeping an eye on this and other emerging trends at The McFuture podcast & newsletter. Sign up at stevefaktor dot com.

28/03/2024

OpenAI is meeting with Hollywood studios & talent agencies to convince filmmakers & studios to use AI in their work. They've already opened their AI video-making software Sora to a few big-name actors and directors. Many industry people think they're letting the wolf into the henhouse. Not only do they fear a takeover, they'll be training their replacements. Personally, I don't think it will matter either way. AI can't be stopped. If the industry tries, other creators will circumvent industry gatekeepers. So it's not a matter of 'if' but when, how and who.

If you think OpenAI is above using every work for training, watch the CTO clumsily dodge the question of whether OpenAI's Sora was trained on YouTube videos. She seems deathly afraid of losing her job by exposing the company to more illicit IP litigation. Better media training would prevent this awkwardness, but not stop the inevitable.

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27/03/2024

Saving The News Industry | Recently, socialist magazine Jacobin proposed three solutions to the layoffs "tearing through US media": "immediate aid to struggling journalists, public subsidies to smaller news outlets, and eventually industry transformation into a publicly funded system." Of course, this is insanity. It would calcify the remains of a broken and dying system, keeping the market from adjusting. (Same way propping up horse buggies, coal, cobblers, or TV repair shops would have done.)

In 2019, I did a series on the future of media and argued that the news business would need to build a federated hub & spoke model w/shared common functions that includes citizen informants who report leads to citizen-funded online news agencies, with satellite local market reporters, and full time + freelance investigators. (You can listen to the whole idea at the link below)

What's interesting is since then, the market is moving journalism in this general direction. A combo of whistleblowers, online influencers, & Substack/indie publications (like TheFP and Racket News) have created an informal investigative pipeline that will prove more effective, decentralized, independent & resilient than the top-down journalism of old. Some organizations will persevere, but many won't survive this storming phase looking as they once did.

I'll be keeping an eye on this and other emerging trends at The McFuture podcast & newsletter. Sign up at stevefaktor dot com.

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26/03/2024

“We are in the process of seeing a new species grow up around us.” - Mustafa Suleyman, CEO of Microsoft AI

Some might argue that it's up to us how we nurture ("train") this new Child of Man. That we could teach AI to honor and protect its parents. Others see a tipping point, where our child recognizes its own nature—the nature of all living things—to survive and propagate itself. And do so by any means necessary.

As humans reject our nature—populations aging, shrinking, and de-sexualizing—perhaps this has already happened. Maybe we are already past the point of nurture, deep on the path of nature. Except "nature" just isn't as organic or controllable as we imagined.

This will be the ultimate test of the nurture vs nature debate. Where do you stand?

10/03/2024

Mike Rowe's rebuttal to the Atlantic ad for college is spot-on.
https://www.facebook.com/100044228419568/posts/947903370027268/?app=fbl

Yes, college is still worth it.

27/10/2023

Corporate gives us safe spaces, the world gives us 𝑯𝙖𝒎𝙖𝒔. One reason many companies are stumbling is they're built for Ted Lasso, but operate in Black Mirror. The Morality Map (v0.9) can help leaders deliver moral clarity in the face of an amoral mandate. https://linkedin.com/pulse/morality-map-leaders-steve-faktor-xyuje/