Eating Crow

Welcome to This Week’s Leyendecker View

Think of inspiration as a force not immune to the laws of entropy.
– Rick Rubin

THINKING OUT LOUD

Eating Crow

It’s always easiest to eat crow while it is still warm. The colder it gets, the harder it is to choke down.

A couple weeks ago, big tech companies knocked earnings out of the park. They made tons of money off the giant AI push.

A bunch of big tech’s earnings growth came from their cloud computing operations that support AI. AI requires a ton of data center and software support, which the big tech companies dominate.

But a few weeks ago, in my essay The Next Gold Rush Bust, I made a call that big tech had no obvious revenue model for AI. After big tech’s recent earnings releases, I must eat crow. I got it wrong, or maybe, if I’m lucky, sort of got it wrong. 

The theory behind my original essay was that big tech did not have a consumer revenue model. There was and still is no obvious reason you and I are going to shell out more money to big tech companies providing AI.

The average person is already up to their ears in streaming subscriptions, software subscriptions and the typical three-year hardware upgrade cycle. Throw inflation in, and the average Joe does not seem ready to shell out big bucks for whatever AI is going to do for them.

But companies will. That’s what I got wrong. I missed the elephant in the room. Companies are going to shell out money for AI so they can increase their operational productivity. And given big tech’s recent earnings release, companies are going all in on using AI to help them make more money.

How will AI help companies make more money?

They will use AI instead of hiring a new person, or maybe they’ll use AI to replace a person or two. This use would provide companies a short-term profit growth model. But if all companies are using AI to replace labor, there will come a day when labor may not have the money to purchase what companies are selling.

They could also use AI to get us consumers to purchase more stuff that we really “need,” which is predicated on consumers having more money to purchase more stuff.

But if AI is going to replace labor and if the next alternative job for a displaced McDonald’s worker is unknown (what about the lawyer job?), then we’re back to consumers not having the money to purchase what companies are selling.

So maybe my call in The Next Gold Rush Bust still has some credibility. Maybe what we just saw from big tech’s recent earnings blow-out was their corporate customers going all in on AI in order to make their operations more productive, which, end of the day, would not be so good for labor…which, end of the day, would not be so good for consumption…which, end of the day, would be a big bust for big tech and for a bunch of companies that thought AI was their path to the Seven Cities of Cibola. 

I’m eating crow today, but we’ll have to see what shakes out down the road.

THE ECONOMIC VIEW

Fed signals caution on rate cuts
Inflation risk remains

Coffee prices at 27-year high
Coffee futures hit a 47-year high
How about a Diet Coke?

Luxury brands continue to struggle
Is the “everything luxury” economy over?

THE LABOR VIEW

A WFH update
Four years later, 30% of work is from home.

Share of US workers who are thriving
Continues to sink

Careers that make Americans happiest
Do you have one?

MEANWHILE IN EUROPE

French markets in turmoil
Le Pen threatens government collapse

China overtakes Germany in robot use
German industry may be in trouble.

Europe-US trade surplus grows
Before Trump’s tariffs show up.

THE GLOBAL GAME

Trump plans to raise tariffs
To stop illegal immigration and drug trafficking.
Mexico gets cold feet on Chinese EV plant
Mexico threatens retaliation against US
Good luck with the cartels, Mexico
Trump has “wonderful” chat with Mexican pres

Syrian rebels launch major offensive
Taking advantage of Mideast turmoil.

The global decline in fertility.
Birth rates cut in half over last 70 years

THE UKRAINE FIRE

Russia launches huge offensive
Setting up for a negotiated peace deal?
Putin threatens to turn Kyiv into dust
Russia recruits Yemeni mercenaries

Ukraine bond values jump
On speculation that Trump will end the war?

A sky full of drones
Is changing the war.

THE GAZA FIRE

Two weeks ago, Israel pounded Beirut
Now, a cease-fire in Lebanon begins
Thousands of Lebanese head home
Will it last?
Lebanon faces a power struggle

THE SLIPPERY SLOPE

Did China sabotage undersea cables?
It’s starting to look that way.

India’s new nuclear sub base
Challenges China’s naval ambitions

Anyone can track our soldiers
Phones are tracked by data miners.

FINANCE

BlackRock to buy private credit HPS
Private equity is in the dog house.
Republican states sue BlackRock

The biggest trade ever.
A $0.25 banana that sold for $6.2MM

25% of ultra wealthy may be crooks
Suggests recent Morgan Stanley data.

REAL ESTATE

Mortgage rates are dropping
Buyers are getting more active.

A DIY sauna
Like it!

Home storage is peaking
How about RV parks?

IS TECH A WRECK?

Big tech seeks to water down kid safety bill
What will Australia’s ban teach us?

The new hatred of technology
Get yourself a teepee.

The man behind Amazon’s robot army
Wants robots everywhere

THE CHAT ON AI

Amazon challenges OpenAI
Amazon gobbles up everything.

“Absolutely there’s an AI bubble”
Says C3.ai CEO.

Don’t trust AI search engines
That’s MIT’s conclusion.

OUR GOOD FRIEND, FAILURE

5 Trump nominees receive threats at home
Hey Democrats, what’s up?

Walmart backtracks on DEI
Study shows DEI makes people hostile
NYT, Bloomberg and others bury the study

Why flying today is so miserable
So airlines can make more money, duh!

THE NEXT NORMAL

Elon Musk starts a private preschool
Education step-change is in the air.

How students can AI-proof their careers
Get ahead of the technology!

Women now use pot more than men
Not sure how to interpret this.

THE WAR ON CARBON

Texas O&G production at record high
The state gets richer.

The US’s most productive industry
Is oil and gas

China stocks up on crude
Low prices are a buying opportunity.
JPM sees crude price plunge in 2026

THE ENERGY TRANSITION

Utilities need significant investment
To keep up with insatiable power demand.

COP29 settled nothing.
Who pays for developing countries?
$300B is not enough, they say

NY State considers nuclear expansion
Pragmatism…finally?

THE EV DREAM—OR DELUSION

Biden tries to save Rivian
Good money after bad?

The world’s largest EV makers
Have a giant human rights problem
VW shuts down Chinese plant

China seeks to dominate African EVs
Can these countries get charging to work?

THE CHINA SYNDROME

Xi sacks his defense minister
Power move, or was he corrupt?

China paying BIG BUCKS for US tech workers
They want to steal all our secrets.

China recently had a bad mass killing
And then another mass killing
No guns involved.

THE WASHING-TONE

Biden wants to subsidize obesity drugs
‘Cause we have no self control, right?

FTC goes after Microsoft
Does big tech have an unfair advantage?

Trump’s FCC chair pick
Vows to challenge big tech cartel

THE DOGE

A DOGE podcast is coming
Elon and Vivek on the frontlines.
More billionaires getting involved

The federal workforce in charts
Who can we cut, and how fast?

MAKING A BETTER YOU

Overwhelmed by modern-world “noise”?
Maybe try a silent retreat

The joy of clutter
Can more be more?

Value can be captured from insomnia
Especially for women.

THE EXTRAORDINARY

The physics behind Macy’s parade balloons
What engineers figured this out?

A stray dog climbed an Egyptian pyramid
Could it be an alien or a deity?

Ten places that glow
Whoa!

MUSIC BOX

The Bill Evans trio
Lovely, long piano jazz playlist.

Keep that jazz coming…

Miles Davis and John Coltrane
Playing in Paris

“Heart Is Like a Wheel”
Linda Ronstadt’s song turns 50.

CASTING AROUND THE PODS

How to save America
Bari Weiss talks to Peggy Noonan.

The Sherwood Ten.
10 quick questions for Robinhood founder

Everyone is watching podcasts on YouTube
We love watching people talk.

VIDEOS OF THE WEEK

Moana made Disney big bucks.
Moana 2 is a sleeper.

The Senna series trailer.
For F1 addicts and more!

Bird trailer.
The real. The sweet?

FROM THE HEADHUNTER’S KITCHEN

Popular Thanksgiving leftover recipes
Post yum yum yum.

How a nutrition expert really eats
Big Macs, maybe not!

Apple rankings
The fruit, not the company.

THE RANDOMS

Given the enormous amount of stuff Americans have stored away that they may never see again, Black Friday seems like mass psychosis.

As an observer of the human condition, I make note when something unique hits my field of vision. Just the other day, when I was driving toward Austin, I passed a Subaru with a Donald Trump bumper sticker. That seems like a step change to me.

At roughly 50%, Donald Trump’s margin of victory looks to be one of the smallest in history. Since 1888, only two other presidents who won both the Electoral College and the popular vote had smaller margins of victory: Kennedy in 1960 and Nixon in 1968. Note to us: There have been contentious elections, and some not too long ago.

Trump has not yet been sworn in, yet he’s already negotiating with trade partners for a better US deal.

Someone should do a poll. Do we need more technology, or are we exhausted with technology?

I wonder how much of our economy is dependent on the consumption of luxury goods and services.

Exactly what is the utility of a suit and a necktie? Since they are more clothing than we need, which means more clothing that needs cleaning, is that not a climate negative? Yet if you look at photos from COP29, you’ll see almost every male in a suit and necktie. Hmmm…

How many choices of toothpaste do we have at the grocery store? How many choices are there when we’re buying a new washing machine? Does having too many choices create insecurity or anxiety because we don’t know if we’ve made the right decision, the best decision?

IN CASE YOU MISSED IT

Living Through Step Change
November 22, 2024

What If?
November 15, 2024