Nobody uses it

If we were to ask people if they know about AI, they would say yes. Overwhelmingly, they have used ChatGPT, been moderately impressed, and rarely use it now.

To get the best from it requires sustained effort and most people simply will not make any sort of sustained effort to learn a new skill. Our reddit user above is talking about Claude Sonnet 3.5, which I have to tell you is absolutely brilliant. I wholly recommend it. It comes with the inherent strategic advantage that most of the world isn’t even aware.

10x more capable is quite a claim, even if it is in their own estimation. Assume this were only 2x, these tools are still giving rise to super-humans. People who can launch products, websites and marketing campaigns single handedly inside a day. A legacy business would take months to do the same .

There has been an argument that AI levels the playing field between the more capable and the less capable person. In a simple example, someone with poor writing skills is significantly aided by AI versus a person who writes well. Advantage less capable person. This is only true up to the point that current knowledge exists. A helpful AI can get you up to that level but it is very unlikely to take you to somewhere new.

What is happening here? The talented person is leaning on the AI to discuss ideas. Claude responds very strongly to these sorts of discussions, prompting new ideas for the motivated participant. The person that does not have ideas or indeed does not possess the capability to “think hard” does not gain the advantage.

This tech set is not going to level the playing field at all. It will bring the bottom towards the middle and the people truly embracing it will move out of sight at 10x the speed of everyone else. It’s scary stuff and perhaps the regulatory rush in the EU and other countries is actually designed to minimise that acceleration.

The principal difficulty investors have with this kind of thing once again is tangibility. It can be much easier to explain a tangible asset.

“We will build a hotel, people will pay to sleep there.” 

or

“We will build software which will use vectors to sift through the combined knowledge of all humanity and sometimes return answers that are hallucinogenic.” 

The BBC reported this study which was overwhelmingly more positive towards the trend than the headline suggests. It certainly was true though that not many people used AI on a daily basis. Only 2% of UK respondents said they did.

Again, to get in front of the trend, embrace it early. Use the tools and learn how to use them because they are only going to get better and more prevalent. The temptation is always to wait, it will be less risky if I wait. That will absolutely be true, but the advantage, and the outsized gain, will be gone.

It’s rather like the ‘nobody uses bitcoin’ story. Back then, the ‘new data proved it’. As a general rule though, I wonder if journalists are actually talking about themselves when they write these stories.

If nobody uses either bitcoin or AI and yet as investing trends they are absolutely destroying everything around them, why is that? Because you have to buy them and learn how to use them before everybody else.

If you are interested in the general trend this article from Ethan Mollick is well worth a read.

Down

For such a major global outage it was surprising the damage wasn’t greater. Obviously flights were cancelled across the world and supermarket tills were out everywhere but it somehow didn’t seem so bad. Fixing the issue wasn’t that hard either, reboot in safe mode, delete the bad file and restart your machine.

Perhaps more interesting was what didn’t go down. Most of Silicon Valley seemed to sail through the drama because the whole tech industry uses linux on Macintosh to develop code. It seemed to be the older industries that suffered most. Banks and airlines and those that still operate on Windows 95 for critical parts of their infrastructure because it’s too hard to change.

The problem with software like Crowdstrike is that it very often auto-updates. They push some update and the whole world updates at once, when that update has an error the outcome is terrible.

A decentralised system does not work like that. For example, if you run a bitcoin node, you must update the software yourself. It cannot be “pushed” to your machine. Accordingly, the risk of major technical outage like this is much, much lower and hence bitcoin cannot really ‘go down’ in the way legacy systems can.

As Trust Machines points out, Bitcoin is backwards compatible. Each time there is an update the old software continues to work even if you do not update it. It is not desirable to do this but the fact is it does work is very, very important.

The whole Crowdstrike incident is a terrific example of what centralisation of software means. You are moving as a group relying on a single point of contact and when the inevitable happens and that fails it brings the house down.

The whole thing was pretty innocuous and yet might rank as the most significant global economic disruption of the year.

Election update

With Biden gone, what about Harris? As far as we can tell she has never actually addressed the area of digital assets, or indeed much with regard to anything financial. What we do know though is that as a key backer of the Green New Deal (which was not great for bitcoin miners), it is unlikely she would be net-favourable to the industry.

As we stand then it remains the case that, love him or loathe him, Trump is preferred for us financially. Any non-Biden candidate is likely to hold the same or similar positions to Biden, who if we are honest about it was unlikely to have come up with his positions on the matter by himself.

Interestingly Polymarket (a blockchain/crypto driven betting platform) is coming into its own during this election. Election betting is illegal in the USA so this market technically serves only overseas participants but it is now frequently quoted in the US media as being a far more accurate guide than the polls. Even so, “Other Democrat” at 2% seems far under the money to me. Is it really 2% that some person none of us has heard of becomes the next president?

Spot the disappointment

The Ethereum ETFs launched on Tuesday to much less fanfare than bigger brother bitcoin. Across the nine ETFs they traded $1 billion in volume (of which 50% went to BlackRock) which in any other ETF is a massive success, but this industry is held to very high standards and compared to bitcoin, the numbers were quite small.

We should not be disappointed though, volume matters of course, but much more important is the legitimisation of the asset class, which continues.

Speaking of which, at the time of the ETH launch, BlackRocks Bitcoin ETF went past QQQ (The Nasdaq Tracker ETF) in year to date flows. Ranking number 4 on the global list. It’s massive and will get even more massive.

Euro-Trash

Recovering from what? Incompetence?

It was Eurozone update time. Interest rates unchanged and a ‘positive message’ from Agent Lagard that things are ‘moving in the right direction’. Wages in Europe are rising, which we are told is good news but profits are falling and the economy is ‘slowly recovering’.

I suppose the ECB would say from ‘the pandemic’ but frankly nearly everywhere else in the world recovered years ago. US GDP sailed past the pre-pandemic marker in 2021, yet somehow the EU is ‘recovering’.

Manufacturing is not doing well at all. Germany, also known as the European economy, is having a terrible time. That is mostly due to a lack of energy, an entirely self inflicted wound.

Some of you have taken the time to write in and point out that things in Europe are ‘not so bad’. Many of you will have been there in the past few weeks. My argument is not that Europe is not beautiful and wealthy, it is simply that it should be even more beautiful and even more wealthy, but it is not. The mere fact that you are having an ice-cream in front of a thousand year old fountain tells us something. Where is the new fountain? Where is the new economic wonder? What does Europe design, build and make? What is it delivering to the world in terms of intellectual property?

I don’t think much.

All I see is moralising against US tech and the rest of the world while simultaneously depleting its own massive capital stock. They are heading to the poor house. The reason coffee is “only €3” once you leave a tourist area is because the local residents cannot afford to pay anymore than that.

It cannot just be me either, European people are voting. They stopped having children because they don’t believe in the future and the pretend stories about everything moving in the right direction from the ECB et al. aren’t helping.