The Next Gold Rush Bust

Welcome to This Week’s Leyendecker View

There is something noble in defeat. You cannot find victory unless you first understand defeat.
– Duane Thomas, RIP

THINKING OUT LOUD

The Next Gold Rush Bust

Hey, AI, what’s the revenue model?

According to Goldman Sachs, big tech companies have plans to invest over $1 trillion dollars in AI. Wowsville! That is one giant number. But if you’ve been reading my recent Randoms, I have yet to figure out the revenue and profits model that is going to pay off, much less create a return for all this invested capital.

What exactly are you and I going to pay for AI? Who are we going to pay it to? And most importantly, why are we going to pay for it?

Are we ready to pay Apple, Microsoft, Google, Meta and Amazon more money for their AI?

What value are these tech behemoths going to provide that induces us to pay them?

Are we going to pay them because their AI will make us more money? Are we going to pay them because we’ll get even more or “better” technology services and/or media content? Are we going to pay them because their AI will save us money? Are we going to pay them because AI will bring us greater happiness?

Where is the consumer revenue model? Where’s the iPhone or Microsoft Office or Google search product and/or service for which we will happily shell out lots of money? Returns for the new AI pin, which was going to change our lives, are now outpacing purchases.

Will AI mow our lawns, cook our food, do all our shopping, take care of our children, get us from point A to point B faster, increase our wages at work? Which of our costs will it decrease and why?

If there is no obvious consumer market, then maybe the business world will drive AI’s revenue. Companies will pay for AI because it will supplement and make workers’ jobs easier, right? Given the following research, the answer here seems to be the opposite—AI is creating more work, not less, for workers.

AI increases workloads for workers

Yeah, let me pay some big bucks so AI can “better run” my business.

Okay, we’re just in the AI breaking-in period, right? Maybe. But maybe not. Even if we are,  neither B2C nor B2B companies have given insight about their AI revenue models. Is this because they haven’t figured it out themselves?

Here’s a reasonable clue that all this AI investment is mostly a gold rush: It’s the “picks and shovels makers” like Nvidia and the data center companies that are making all the money. All the big tech behemoths have yet to find a revenue model.

There seem to be worthwhile AI applications in media through the creation of content without having to pay artists, writers, musicians, actors and all the various people who have historically brought content to the market. But, so far, this use case appears to be copyright infringement. Training AI on copyrighted content to make new content will keep the courts busy for a long time and is going to retard AI-generated media content.

AI’s ability to analyze gargantuan volumes of data and reach conclusions far faster than any human could be promising in science and medicine. This may be AI’s best and most valuable application. But does it justify the $1T+ that big tech is throwing at AI to “keep up with the Joneses”?

Does it justify the billions of dollars added to big tech’s valuation?

Many AI startups are struggling so much that they’re licensing their applications and lending their people to big tech. This may be because big tech is itself scrambling to find a revenue model.

What other practical applications do you see for AI? Applications that consumers will willingly pay the big bucks for? Applications that companies will willingly pay the big bucks for?

It sure seems like big tech has put the cart before the horse with AI. This gold rush could end really fast, with tech companies having to write off billions in sunk costs.

THE ECONOMIC VIEW

Monetarists still see recession coming.
It’s all about money supply contraction

Fed may not be there for rate cut
Suggests Fed governor.

The consumer boom is fading
Will it return with the same force?
Fast food sales are flat at best
Travel and leisure spending is tepid

INFLATION, DEFLATION OR BOTH?

A slower economy means cheaper gas
Will a faster economy make gas more costly?

Disney raises streaming prices over 10%
Now that’s entertainment!

Home prices hit record high
No inflation here, right?

THE LABOR VIEW

Bosses want workers to use AI.
Workers say it increases their workload

US jobless claims FALL
WTF, wasn’t the labor market in trouble?

Tech jobs still leaving California
The best industries for WFH
Financial and professional services, for sure.

MOUNT OLYMPICS

The ancient Olympic Games
Fun story, fun read!

She was named after a Steely Dan song.
Now she’s a women’s basketball juggernaut

Dennis Rodman is a proud father.
Trinity Rodman scores big time

MEANWHILE IN EUROPE

UK immigration in the hot seat
The global melting pot is struggling.

German economy is contracting
Europe’s workhorse stumbles.

Tariffs on Chinese EVs are coming
Trade war, real war, war is everywhere.

THE GLOBAL GAME

The seduction of power
Defines Venezuela’s rigged election

Global automakers are stumbling
Waning EV and Chinese demand.

Kazakhstan is loaded with minerals.
Is China trying to control them?

THE UKRAINE FIRE

Ukraine has invaded Russia
Battle rages on Russian soil
Did Putin expect this?

Ukraine says they sunk a Russian sub
Now how did they do that?

Russia hikes interest rates to 18%
As inflation grows.

THE GAZA FIRE

He planned the October 7 attacks.
Now he’s the new Hamas leader

Iran vows to punish Israel
Will Israel punish them more?
Iran seeks Russia’s support in war
US sends destroyers closer to Israel

Lebanon, the next war
Countries tell their citizens to leave.

THE SLIPPERY SLOPE

Vietnam and Philippines set maneuvers
Building allyship.

We celebrated the prisoner swap.
But forgot some Americans remain in Russia

Greece to buy 20 US F-35s
Preparing for what?

FINANCE

Was the yen responsible for market meltdown?
If so, brace for more

Private credit is wobbling.
As creditors pay interest with more debt

Investors move to big name funds
Has a PE shake-out started?

REAL ESTATE

We all know office loans are toxic.
Many apartment loans are, too

Mortgage rates are tumbling
But are a far cry from 3%.

The new real estate dinosaurs
Are department stores

TECHNOLOGY

Google and Meta teamed up.
To prey on kids

The business world’s favorite laptop
Has barely changed in 30 years

Google’s search biz is a monopoly
So says the DOJ.

THE CHAT ON AI

Young AI darlings are now struggling.
Big tech is bailing them out

Digital immortality is around the corner
Is humanity ready for it?

Google eats crow!
They pull controversial Olympic AI ad

OUR FAILURE, FAILURE

Online since birth.
42% of Gen Z have mental health problems

Lahaina’s 150-year-old banyan tree is thriving
After surviving that terrible fire.

Boeing can’t get their astronauts back.
NASA may ask SpaceX to do it

THE NEXT NORMAL

Is Ozempic the next statin?
Doctors want older folks to take it

The future of junk food
Could actually be healthy

The US is investing billions in manufacturing
But is still way behind China.

THE WAR ON CARBON

Global greenhouse emissions are falling fast.
Thanks to US LNG

As green energy flops.
More money moves to natural gas

AI power demands are huge.
Utility stocks are the new darlings

THE ENERGY TRANSITION

The solar industry is stumbling.
Needs cheap money and subsides to remain afloat

Renewables generate poor profits.
So big oil doubles down on hydrocarbons

AEP CEO wants more gas-fired power
To keep up with AI and data center boom

THE EV DREAM—OR DELUSION

China challenges EU EV tariffs
They’ve filed a case with the WTO.

Chinese battery makers consolidate
World battery spending plunges
Will EVs become the next Edsel?
Behind the scenes, it appears so.

Forget renting an EV.
Rental companies want rid of them

THE CHINA SYNDROME

Consumer inflation rises in China
While its export goods prices fall.

Fearing a trade war
Companies are stockpiling Chinese goods
Is this why US trucking is busy?

As the West backs away from China
They pursue the Southern hemisphere market

THE WASHING-TONE

America has too many laws
Suggests SCOTUS Judge Neil Gorsuch.

Democrats join Republicans to ban masks
Now akin to the KKK hood.

Have American politicians
Always been total weirdos?

THE ELECTION DISTRACTION

Put private sector folks in next administration
Says JPM CEO Jamie Dimon.
Is Dimon planning to join the Trump team?

What happened to RFK, Jr.’s campaign?
Too many brain worms and dead bears?

With vice presidents now on both tickets
The center might still be up for grabs

MAKING A BETTER YOU

10-minute workout
For people who don’t like working out.

There’s a sweet spot for stress
How can we find it?

Don’t underestimate the power of a walk
Maybe the very best physical and mental exercise.

HOW ABOUT A BREAK

Global alcohol preferences
Who drinks what and where?

Cold plunges are the hot new trend.
Here are the best pools

Our sun makes up 99.8% of solar system mass
Humans don’t matter diddly.

PLANNING VACATION?

The past may become the future.
There’s a tourist cabin resurgence

Is summer overrated?
Are we trying too hard to have fun?

Time’s World’s Greatest Places special
Vacation inspiration.

MUSIC BOX

How about a little Norah Jones?
In a Tiny Desk concert

“Dance the Night Away”
Hilarious video of a hit Van Halen song.

CASTING AROUND THE PODS

Larry Summers on the market meltdown
Honestly gives Larry the mic.

VIDEOS OF THE WEEK

Timothée Chalamet as Bob Dylan.
In A Complete Unknown.

The Instigators
A Matt Damon-Casey Affleck buddy flick.

Nosferatu with Willem Dafoe.
The newest Dracula movie.

FROM THE HEADHUNTER’S KITCHEN

The royal summer tomato…

Easy gazpacho
Creamy tomato bisque
Tomato grilled cheese
Balsamic bruschetta
Homemade tomato sauce
Pico de gallo
Caprese salad
Fried green tomatoes
Tomato Caesar salad
Ragu bolognese
Tomato galette
Huevos rancheros with tomato-chili salsa
Shakshuka
Greek stuffed tomatoes

THE RANDOMS

The stock market correction, and then the correction of the correction, seems to suggest there are a whole lot of gamblers out there.

Why don’t we learn from history? It is because we did not live that history. All we really know comes from our own personal experience. Each personal experience leaves an emotional imprint. History we did not live does not—at least not with nearly the same salience or power to influence our own decisions and perspectives. This is why humans make the same mistakes over and over again.

I was at a restaurant the other day. On the TV, they had two Olympic female boxers bashing each other. It made me think: What’s up with women trying to beat each other up? Why is that even remotely interesting or culturally important?

The wealth effect of an ever-higher stock market, ever-higher Bitcoin, and ever-higher home values has been a great source of consumption capital. Watch out below, if those financial assets lose too much value too fast.

There is no way AI and robotics will ever be as beautiful and amazing as the athletes we’re seeing in the Olympics. NO WAY!

Are we measuring productivity incorrectly these days? For many years, productivity was defined as the amount of labor involved in production. But now that technology is replacing labor quickly, the old metrics may need an update. We can see this playing out as productivity increases while wages can’t keep up with inflation.

Now that interest rates are likely to be higher for longer, who is going to buy all the McMansions built over the last twenty years, when interest rates were lower for longer? 

What’s the difference between outlaws and criminals?

IN CASE YOU MISSED IT

Fixing the Debt
August 2, 2024

Lessons Learned, Maybe
July 26, 2024