WEBVTT - The Year Ahead: Tariffs, AI and Fed Independence 0:00:00.280 --> 0:00:07.200 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.760 --> 0:00:11.680 Maybe that will be the story for the global economy 0:00:11.920 --> 0:00:15.760 in twenty twenty six. Yes, the risks are there, but 0:00:15.880 --> 0:00:19.720 actually it's the momentum and the optimism and the AI 0:00:19.800 --> 0:00:22.720 revolution which continue to dominate the narrative. 0:00:33.000 --> 0:00:36.000 I'm Stephanie Flanders, head of Government and Economics at Bloomberg, 0:00:36.320 --> 0:00:39.239 and this is Trumpnomics, the podcast that looks at the 0:00:39.280 --> 0:00:42.320 economic world of Donald Trump, how he's already shaped the 0:00:42.320 --> 0:00:45.040 global economy and what on earth is going to happen next. 0:00:49.040 --> 0:00:52.280 And this week it's a traditional Trumpanomic look ahead to 0:00:52.360 --> 0:00:55.160 twenty twenty six. As we look forward, I hope to 0:00:55.200 --> 0:00:57.800 the holidays. I wanted to take a deep breath and 0:00:57.840 --> 0:01:00.279 think a little bit about what's happened in the past year, 0:01:00.840 --> 0:01:03.280 and a lot about what it means for the year 0:01:03.320 --> 0:01:06.360 ahead and the Christmas bundle I've selected to help me 0:01:06.440 --> 0:01:09.080 with this, and I hope provide just the right amount 0:01:09.080 --> 0:01:13.800 of illumination. Are in Washington, Mario Parker, our managing editor 0:01:13.840 --> 0:01:18.399 for US Politics, amazingly joining Trumponomics for the first time. Mario, Hello, 0:01:18.680 --> 0:01:19.880 I am very happy to be here. 0:01:19.920 --> 0:01:20.280 Thank you. 0:01:20.600 --> 0:01:23.600 Also in Washington, frequent visitors to the pod. Tom Orlick, 0:01:23.720 --> 0:01:25.600 chief economists for Bloomberg Economics. 0:01:25.760 --> 0:01:27.440 Great to be a Stephanie and in London. 0:01:27.560 --> 0:01:31.920 Welcome back. Palmei Olson, a Bloomberg opinion columnist covering technology, 0:01:31.959 --> 0:01:35.959 whose book Supremacy, AI, Chat, GBT and The Race That 0:01:35.959 --> 0:01:38.720 Will Change the World was the FT's Business Book of 0:01:38.760 --> 0:01:41.360 the Year for twenty twenty four. Parmey, welcome back. 0:01:41.920 --> 0:01:42.840 Thank you for having me. 0:01:49.880 --> 0:01:52.280 I mean I wanted the three of you for various reasons, 0:01:52.280 --> 0:01:54.200 some of them pretty obvious. You've been right at the 0:01:54.240 --> 0:01:56.440 heart of the action this year, and I find you 0:01:56.800 --> 0:02:02.000 always wise about what's to come. The way we always 0:02:02.000 --> 0:02:04.040 start these things where I like to start, is just 0:02:04.160 --> 0:02:06.280 for each of us to think, what was the most 0:02:07.080 --> 0:02:12.120 memorable moment of this year? So Mary, I'll put you 0:02:12.160 --> 0:02:14.120 on the spot. What was the most memorable moment for you? 0:02:15.080 --> 0:02:18.760 I think it was in the specific to this podcast 0:02:18.880 --> 0:02:22.800 very much, which was the Liberation Day rollout where it started. 0:02:22.960 --> 0:02:24.400 There were fits and starts. 0:02:24.440 --> 0:02:28.519 There were problems with the White House's copying machine, there 0:02:28.520 --> 0:02:32.320 were typographical errors on some of the cars, and there 0:02:32.480 --> 0:02:35.160 was just a lot of confusion, and I think that 0:02:35.320 --> 0:02:38.440 set the stage for what we saw with both a 0:02:38.560 --> 0:02:41.640 teariff rollout, and the way and the many things that 0:02:41.639 --> 0:02:44.680 the administration promised it did not quite come to fruition, 0:02:45.200 --> 0:02:48.520 but also the fast pace and the chaos that we've 0:02:48.560 --> 0:02:52.480 seen wrought by the administration deliberately so where they want 0:02:52.520 --> 0:02:55.120 to move fast and quote unquote break things, and we've 0:02:55.120 --> 0:02:56.520 seen that throughout the rest of the year. 0:02:56.639 --> 0:02:59.240 So that was the most memorable moment I think, Tom. 0:02:59.720 --> 0:03:03.640 There was a moment just before the US made that 0:03:03.680 --> 0:03:08.840 faithful decision to join Israel in attacking Iran's nuclear facilities, 0:03:09.280 --> 0:03:14.920 and there was still intense speculation about whether Operation Midnight Hammer, 0:03:15.120 --> 0:03:17.720 as it was called, would go ahead or not, and 0:03:17.840 --> 0:03:21.799 President Trump took to truth social and said, I may 0:03:21.840 --> 0:03:25.880 do it, I may not do it. Only I will decide, 0:03:26.360 --> 0:03:29.000 and I expect everyone else's way ahead of me on this. 0:03:29.200 --> 0:03:32.320 But for me, that was a real clarifying moment, right 0:03:32.639 --> 0:03:38.200 and it clarified that the intense uncertainty, the kind of 0:03:38.720 --> 0:03:42.480 presidency as a soap opera with a cliffhanger at the 0:03:42.600 --> 0:03:44.760 end of every episode to keep you tuning in the 0:03:44.800 --> 0:03:48.360 next day. That wasn't a bug of some of the 0:03:48.520 --> 0:03:51.760 trade policies and security policies we'd seen in the previous 0:03:51.800 --> 0:03:55.560 few months. It was a feature, a deliberate strategy to 0:03:55.640 --> 0:04:00.840 allow the President to very successfully dominate the conversation, dominate 0:04:00.920 --> 0:04:04.360 the headlines, keep himself at the front of everyone's consciousness. 0:04:05.040 --> 0:04:06.120 Pa well. 0:04:06.120 --> 0:04:07.840 The highlight for me was actually at the very beginning 0:04:07.840 --> 0:04:10.800 of this year in January, when a little company in 0:04:11.240 --> 0:04:16.039 China called deep Seek released an AI model that caused 0:04:16.080 --> 0:04:17.960 a freak out in Silicon Valley. 0:04:18.360 --> 0:04:20.560 This was an AI model that was as good as. 0:04:20.520 --> 0:04:24.040 Chat GBT, but developed for what apparently was a fraction 0:04:24.360 --> 0:04:27.760 of the price, and it was an open model some 0:04:27.800 --> 0:04:30.080 would call it open source, so they essentially put the 0:04:30.080 --> 0:04:32.760 blueprints of this AI model on the Internet for anybody 0:04:33.200 --> 0:04:36.040 to develop on themselves. And I thought it was just 0:04:36.080 --> 0:04:40.840 such an interesting twist on this effort by the Trump 0:04:40.920 --> 0:04:46.080 administration and previous White Houses before to restrict chip exports 0:04:46.160 --> 0:04:49.679 to China to try and ensure that the US would 0:04:49.680 --> 0:04:54.680 stay ahead on tech. And yet the constraint bread innovation, 0:04:54.960 --> 0:04:58.120 the lack of chips, led this one company to try 0:04:58.160 --> 0:05:02.440 and do more with less. And since then, deep Seek 0:05:02.480 --> 0:05:05.000 isn't quite as popular as I would have thought it 0:05:05.040 --> 0:05:08.200 would be by this point in time, but other Chinese 0:05:08.279 --> 0:05:11.560 open source models are becoming much more popular, in particular 0:05:11.600 --> 0:05:14.960 Ali Baba's Quen. So lots of Silicon Valley startups are 0:05:15.120 --> 0:05:18.799 using models from China now, and I think that's just 0:05:18.839 --> 0:05:23.119 such an interesting highlight for this ascendancy we're seeing from China, 0:05:23.160 --> 0:05:25.560 both in AI and also in robotics. 0:05:26.240 --> 0:05:28.760 And it's funny for me because your slightly relates to 0:05:28.760 --> 0:05:30.880 one of mine. If I'm completely honest, if I think 0:05:30.920 --> 0:05:33.200 of what was the most memorable, I think watching in 0:05:33.200 --> 0:05:35.960 the office and watching in real time the feed coming 0:05:36.000 --> 0:05:39.160 in of that' Zelenski, the sort of car crash Zelenski 0:05:39.600 --> 0:05:42.640 session in the White House with the President, the visceral 0:05:42.960 --> 0:05:45.200 reaction we all had of oh my god, this is 0:05:45.279 --> 0:05:48.240 really very bad. But if I think about what was 0:05:48.279 --> 0:05:51.880 the most eye opening, it was when we'd all been 0:05:52.440 --> 0:05:55.839 completely focused on the US and I went to a 0:05:55.920 --> 0:05:59.360 sort of reasonably high level senior people involved in global business, 0:05:59.600 --> 0:06:03.000 some of them based in Hong Kong, were others in US, 0:06:03.520 --> 0:06:06.119 and I'd asked them on this panel, you know what's 0:06:06.160 --> 0:06:08.560 the thing that surprised you so far this year? Assuming 0:06:08.600 --> 0:06:10.920 they would all talk about Donald Trump, every single one 0:06:10.960 --> 0:06:13.720 of them pointed to a technological advance that they'd been 0:06:13.760 --> 0:06:17.000 surprised that China had made whether it was in electric 0:06:17.160 --> 0:06:19.839 vehicles or I'm sure a couple of them were talking 0:06:19.839 --> 0:06:23.000 about deep seek and it just sort of made me think, Ah, 0:06:23.480 --> 0:06:26.040 maybe China's just going to win this, even as we 0:06:26.080 --> 0:06:28.320 spend an awful lot of time watching every move coming 0:06:28.320 --> 0:06:31.000 out of the White House, so Tom partly because of that, 0:06:31.640 --> 0:06:34.560 how the rest of the world has absorbed and responded 0:06:34.600 --> 0:06:37.039 to trumpernomics has obviously been a big theme for the year. 0:06:37.800 --> 0:06:41.039 The big surprise being that countries, in many ways most 0:06:41.080 --> 0:06:43.720 almost all of them apart from China, did not retaliate 0:06:44.040 --> 0:06:47.400 to the tariffs, and that has had its own consequences. 0:06:47.480 --> 0:06:51.960 But how do you see the global ramifications of mister 0:06:51.960 --> 0:06:55.440 Trump's economic policies playing out now in twenty twenty six. 0:06:55.480 --> 0:06:58.159 We've had stage one? What's stage two going to look like? 0:06:58.760 --> 0:07:01.919 So I think if we think about trade, if we 0:07:01.960 --> 0:07:06.120 think about security, if we think about AI, if we 0:07:06.160 --> 0:07:09.920 think about the FED, the twenty twenty five story isn't 0:07:09.960 --> 0:07:13.360 over right. The consequences are still going to be playing 0:07:13.400 --> 0:07:16.680 out in twenty twenty six. On trade, I think one 0:07:16.720 --> 0:07:19.920 of the surprises is that we've not seen this enormous 0:07:19.960 --> 0:07:24.640 hike in tariffs playing out immediately in higher prices for 0:07:24.800 --> 0:07:29.360 US consumers and lower profits for US businesses. But I 0:07:29.400 --> 0:07:33.000 think that passed through of tariffs to the rest of 0:07:33.000 --> 0:07:37.280 the economy. Higher prices at the shops, lower margins for 0:07:37.440 --> 0:07:41.520 US businesses, potentially a hit to US stocks. That's still 0:07:41.560 --> 0:07:44.320 something that will play out in the early months of 0:07:44.400 --> 0:07:48.040 twenty twenty six. If we think about security, I think 0:07:48.080 --> 0:07:50.440 one of the big things we're looking for in twenty 0:07:50.480 --> 0:07:56.400 twenty six is resolution of that terrible ongoing conflict in Ukraine. 0:07:56.720 --> 0:07:59.360 If we think about the situation right now, well, it 0:07:59.480 --> 0:08:02.640 seems like that resolution could be on terms which are 0:08:02.720 --> 0:08:06.280 very favorable to Moscow, and that's something which has significant 0:08:06.280 --> 0:08:10.880 economic consequences. We're already seeing Germany and other European nations 0:08:11.200 --> 0:08:15.400 responding with a significant increase in their defense spending. Good 0:08:15.440 --> 0:08:18.960 news for growth, good news for defense stocks, bad news 0:08:19.000 --> 0:08:22.119 for countries already struggling under a heavy burden of debt. 0:08:22.520 --> 0:08:26.000 On AI, well, one of the good news stories in 0:08:26.040 --> 0:08:29.920 twenty twenty five was just the enormous optimism about AI, 0:08:30.080 --> 0:08:32.760 and I'm sure we'll hear more about that from Pami later. 0:08:33.160 --> 0:08:36.679 Big question for twenty twenty six, is that optimism going 0:08:36.720 --> 0:08:40.840 to be sustained? And on central banks, well, huge challenges 0:08:40.880 --> 0:08:44.959 to FED independence in twenty twenty five. In twenty twenty six, 0:08:45.160 --> 0:08:47.360 Trump's going to be able to pick the chair of 0:08:47.400 --> 0:08:48.280 the Federal Reserve. 0:08:49.320 --> 0:08:51.040 And I think we probably all of those things we're 0:08:51.040 --> 0:08:52.960 going to end up touching on. If I just think 0:08:53.000 --> 0:08:56.040 about China, because that was such a focus of the 0:08:56.080 --> 0:08:59.719 administration's attention at the starts of the year and has 0:08:59.760 --> 0:09:03.520 been such a dominant theme if you sort of look back, 0:09:04.080 --> 0:09:09.240 is China stronger or weaker economically going into twenty twenty 0:09:09.280 --> 0:09:11.480 six as a result of trumpnomics? 0:09:12.320 --> 0:09:15.400 So I think about it on a couple of dimensions, Stephanie. 0:09:15.440 --> 0:09:19.600 The first one is how hawkish on China is Donald Trump? 0:09:19.760 --> 0:09:22.240 And it's actually quite hard to answer that question. In 0:09:22.280 --> 0:09:26.760 one respect, he's America's biggest China hawk. Until he descended 0:09:26.880 --> 0:09:31.120 that Golden Escalator to start his presidential bid in twenty sixteen, 0:09:31.559 --> 0:09:34.920 the view in Washington, DC was, yeah, there's some problems 0:09:34.960 --> 0:09:37.440 with China. We've got some issues, but we can work together. 0:09:37.640 --> 0:09:41.000 And it was Trump who was responsible for that enormous pivot, 0:09:41.040 --> 0:09:45.080 that big reorientation saying, actually, China's not our friend, not 0:09:45.160 --> 0:09:47.960 someone we're going to work with. China's our rival and 0:09:48.000 --> 0:09:50.600 our adversary. But if you look at the details of 0:09:50.679 --> 0:09:55.640 China policy right now, well, tariffs have come down, Controls 0:09:55.679 --> 0:09:58.720 on China's access to the chips which power the Ai 0:09:58.840 --> 0:10:03.480 Revolution have been relaxed. Apparently Trump got on the phone 0:10:03.520 --> 0:10:08.000 with Japan's Prime Minister Takaichi and said, cool it on Taiwan. 0:10:08.120 --> 0:10:11.680 You don't want to upset President Shei. Right, So the 0:10:11.720 --> 0:10:15.920 big reorientation starting in twenty sixteen that positions Trump as 0:10:15.920 --> 0:10:19.720 an enormous China hawk, the details of policy in the 0:10:19.760 --> 0:10:21.880 last few months a bit less hawkish. 0:10:22.040 --> 0:10:22.280 I think. 0:10:22.320 --> 0:10:24.480 The other big question for China, the other dimension I 0:10:24.520 --> 0:10:27.160 would think about this is kind of short term long term. 0:10:27.400 --> 0:10:32.400 So short term, China's facing a crisis in its property sector, 0:10:32.679 --> 0:10:35.960 collapse in real estate, the consequences of years of overbuilding, 0:10:36.120 --> 0:10:39.160 and when you've got weak domestic demand, what you really 0:10:39.200 --> 0:10:42.720 want is strong global demand, strong exports to keep your 0:10:42.760 --> 0:10:47.199 economy going. Clearly, facing new high tariffs from the United 0:10:47.240 --> 0:10:52.160 States is not very constructive. Longer term, though, there's a 0:10:52.280 --> 0:10:57.840 narrative in China that democracy plus capitalism doesn't work. Democracy 0:10:57.880 --> 0:11:02.320 plus capitalism ends if you're going to be generous in plutocracy, 0:11:02.640 --> 0:11:05.480 if you're going to be less generous in kleptocracy. And 0:11:05.520 --> 0:11:08.360 I think when Beijing looks at what's happening in Washington, DC, 0:11:08.760 --> 0:11:12.040 that's very much their understanding of how things are playing out, 0:11:12.440 --> 0:11:14.760 and I think long term they think that can only 0:11:14.800 --> 0:11:18.440 be positive for China and China's emergence as a global power. 0:11:19.480 --> 0:11:21.480 I mean, there was quite a lot of focus just 0:11:21.559 --> 0:11:23.679 in the weeks leading up to the end of the 0:11:23.760 --> 0:11:27.960 year on trade surplus still being enormous in China and 0:11:28.000 --> 0:11:32.000 having quite successfully diverted a lot of exports that are 0:11:32.000 --> 0:11:35.000 not going to the US to other parts of the world. Pami, 0:11:35.040 --> 0:11:38.000 We're going to get into the relative strength, I would 0:11:38.040 --> 0:11:42.240 suggest of the US economy this year. Some pain may 0:11:42.240 --> 0:11:45.000 be still to come, but I think as a general 0:11:45.040 --> 0:11:48.719 feeling that the impact of AI investment has been a 0:11:48.720 --> 0:11:51.400 big part of that, supporting the economy and indeed just 0:11:51.480 --> 0:11:54.360 making it hard to read the economy. Do you see 0:11:54.720 --> 0:11:58.679 that level of capex as Tom talked about continuing next 0:11:58.760 --> 0:12:01.439 year and as we say see this rollout of AI, 0:12:02.240 --> 0:12:05.240 what are the potential bear traps there? Waiting down the 0:12:05.320 --> 0:12:07.439 road for the administration or the economy. 0:12:08.280 --> 0:12:10.320 Well, I think you're absolutely right in a lot of ways. 0:12:10.440 --> 0:12:13.280 AI boom has given the Trump administration a lot of 0:12:13.320 --> 0:12:16.120 cover because it's just made it look like everything is 0:12:16.160 --> 0:12:20.280 going so well. And in aggregate, the Magnificent seven tech 0:12:20.320 --> 0:12:25.000 stocks have seen their market valuations increase by trillions of 0:12:25.040 --> 0:12:27.880 dollars just in the last three years since chat GBT 0:12:28.000 --> 0:12:31.280 came out. I personally think there is going to be 0:12:31.360 --> 0:12:35.880 some kind of correction in twenty twenty six, and for 0:12:35.920 --> 0:12:38.400 all the reasons that people are saying, which is that 0:12:39.040 --> 0:12:44.240 there is very high risk of near term monetization not happening. 0:12:44.480 --> 0:12:48.160 In other words, there's been this huge buildout of infrastructure 0:12:48.240 --> 0:12:53.200 anticipating all this demand that probably will come in eventually, 0:12:53.600 --> 0:12:55.720 but it's just not going to come in fast enough 0:12:55.720 --> 0:12:58.040 to meet the expectations of investors. 0:12:58.400 --> 0:13:00.160 And this is exactly why we saw. 0:13:00.480 --> 0:13:04.040 Booms and bust in the dot com era early two thousands. 0:13:04.120 --> 0:13:06.320 You had this big rollout of fiber optic cables that 0:13:06.400 --> 0:13:08.840 eventually got used, but just didn't get used quickly enough. 0:13:08.960 --> 0:13:11.079 Same with the railroads in the nineteenth century. I think 0:13:11.120 --> 0:13:15.680 we'll just see perhaps that the sparks will be leaked 0:13:15.720 --> 0:13:19.040 reports from open ai showing a kind of soft demand 0:13:19.200 --> 0:13:22.640 for their enterprise AI products, or something in the earnings 0:13:22.679 --> 0:13:27.800 reports from Microsoft or Google or Amazon DAWs, just showing 0:13:27.800 --> 0:13:30.680 that it's actually been quite difficult to get businesses to 0:13:30.800 --> 0:13:33.520 adopt these AI services because that's where. 0:13:33.360 --> 0:13:34.920 All the money is. Right now. 0:13:34.960 --> 0:13:39.760 The huge success of generative AI is consumer based. You've 0:13:39.760 --> 0:13:42.920 got nine hundred million people, that's about a ten percent 0:13:42.960 --> 0:13:47.679 of the global population is using chatchbt every week every week. 0:13:47.720 --> 0:13:52.120 That's astoundingly successful from a market dominance perspective, but it's 0:13:52.160 --> 0:13:54.320 not really making money from open. 0:13:54.080 --> 0:13:56.400 Ai because very few of those people are paying subscriptions. 0:13:56.720 --> 0:13:59.400 The real money is going to come when businesses start 0:13:59.440 --> 0:14:02.160 paying for the access to that service, and that's just 0:14:02.280 --> 0:14:05.840 taking longer than these companies need. So the more signals 0:14:05.840 --> 0:14:09.040 we get that lack of demand, which I guess will 0:14:09.040 --> 0:14:11.199 happen next year, the more likely we'll have some kind 0:14:11.280 --> 0:14:14.679 of decline in the markets. But I do think ultimately 0:14:15.640 --> 0:14:18.800 that'll probably could work out quite well for the biggest 0:14:18.840 --> 0:14:22.200 tech companies because they're the ones that can weather the storm. 0:14:22.240 --> 0:14:24.000 They're so well capitalized. 0:14:24.560 --> 0:14:27.680 It's the startups and the smaller companies who will really struggle, 0:14:28.000 --> 0:14:31.080 who will see their valuations fall, and then here comes 0:14:31.080 --> 0:14:33.920 an opportunity for big tech firms to acqui hire those 0:14:33.920 --> 0:14:37.040 companies or buy those companies, acquire all their talent and 0:14:37.120 --> 0:14:40.360 IP and just become even stronger out of all of this. 0:14:41.240 --> 0:14:42.240 And that's a very good point. 0:14:42.440 --> 0:14:44.960 In your book, your award winning book, you chart the 0:14:45.000 --> 0:14:48.520 history of that crucial bits of the AI revolution, and 0:14:48.560 --> 0:14:51.120 I think in the process we're reporting very closely on 0:14:51.560 --> 0:14:54.160 the individuals in the industry. And of course the tech 0:14:54.200 --> 0:14:59.160 bros are unusually close or at least people who have 0:14:59.280 --> 0:15:02.960 the back of the AI industry, and these big tech 0:15:02.960 --> 0:15:06.280 companies are very close to the White House and sort 0:15:06.280 --> 0:15:08.360 of famously have the ear of the President. Some of 0:15:08.360 --> 0:15:11.200 the kind of inconsistencies in China policy that Tom mentioned 0:15:11.800 --> 0:15:15.720 is a reflection of that. The decision to allow Nvidia 0:15:15.840 --> 0:15:18.960 to sell some of these more advanced ships to China. 0:15:19.120 --> 0:15:23.680 If we start to see pame that AI costing jobs 0:15:24.400 --> 0:15:29.960 or being associated with other social ills like we've already 0:15:30.000 --> 0:15:33.480 seen with social media, if it starts being associated with 0:15:33.560 --> 0:15:35.800 higher electricity costs for a lot of people as they 0:15:35.920 --> 0:15:38.960 roll out these data processing centers, is there nervousness in 0:15:39.000 --> 0:15:42.000 Silicon Valley about the kind of political exposure they have now. 0:15:42.040 --> 0:15:45.240 And it's great to be influencing policy, but then means 0:15:45.240 --> 0:15:48.359 they're a bit more implicated, I suppose. 0:15:48.040 --> 0:15:49.200 But what choice do they have? 0:15:49.320 --> 0:15:51.560 I think right now their view as this is the 0:15:52.840 --> 0:15:56.680 strategy that has worked till now, which is to lobby 0:15:56.760 --> 0:16:00.880 as hard as you can to try and prevent any 0:16:00.920 --> 0:16:04.440 other regulations from coming down the pipeline that are going 0:16:04.480 --> 0:16:08.960 to affect you. So that approach seems to be working 0:16:09.120 --> 0:16:12.040 the Trump administration. As soon as Trump got into power, 0:16:12.560 --> 0:16:15.640 he rescinded the executive order that Biden had put in 0:16:15.680 --> 0:16:19.200 place on AI that calls on tech companies to do 0:16:19.240 --> 0:16:22.720 some very basic stuff around auditing of their algorithms. 0:16:22.840 --> 0:16:23.720 That was scrapped. 0:16:24.200 --> 0:16:26.560 And now there's of course talk of trying to prevent 0:16:26.720 --> 0:16:31.040 states from implementing their own AI rules because that might 0:16:31.120 --> 0:16:34.880 create this kind of patchwork effect of regulation that will 0:16:35.000 --> 0:16:40.160 hinder innovation. I'd personally find that completely exaggerated and overblown. 0:16:40.640 --> 0:16:43.040 That has not been an issue in the past. With 0:16:43.200 --> 0:16:44.200 privacy laws. 0:16:44.680 --> 0:16:48.680 Usually companies will find the state with the strictest law, 0:16:48.880 --> 0:16:52.640 like California, and then they'll just implement that across the board, 0:16:52.680 --> 0:16:55.680 it's very workable. So I think this kind of narrative 0:16:55.800 --> 0:17:00.240 spun by large companies around if you regulate US will 0:17:00.280 --> 0:17:02.040 hinder innovation for everyone. 0:17:02.440 --> 0:17:04.119 And we see this in Europe as well. 0:17:04.640 --> 0:17:07.720 It's just not true, but somehow it has really taken 0:17:07.800 --> 0:17:10.200 hold when Europe. The real issue is we just don't 0:17:10.280 --> 0:17:13.040 have enough funding on this side of the pond for 0:17:13.160 --> 0:17:13.920 tech startups. 0:17:13.960 --> 0:17:15.160 The issue is not regulation. 0:17:15.800 --> 0:17:19.440 The real problem is there's a real vacuum of thoughtful, 0:17:19.720 --> 0:17:23.760 specific regulation, rules and standards that are going to govern 0:17:23.840 --> 0:17:27.959 how this incredibly transformative technology that's addictive for some people, 0:17:28.000 --> 0:17:32.200 that is actually affecting people's mental health already, there are 0:17:32.240 --> 0:17:35.520 no rules out there to govern how that is used. 0:17:47.840 --> 0:17:51.800 Mario, you've been nodding patiently through some of this. I mean, clearly, 0:17:51.880 --> 0:17:55.000 the sort of the buzzword as we end twenty twenty five, 0:17:55.119 --> 0:17:58.520 at least in sort of politically, has been affordability. And 0:17:58.600 --> 0:18:00.440 there is a bit of a read a cross from 0:18:00.480 --> 0:18:03.480 this AI discussion. And I know people who are being 0:18:04.359 --> 0:18:07.520 told that the big increase in electricity supply that's going 0:18:07.560 --> 0:18:10.159 to be needed for their area, which everyone knows is 0:18:10.240 --> 0:18:14.000 due to data processing centers and big tech companies at 0:18:14.040 --> 0:18:17.119 least everyone in that area knows is going to double 0:18:17.240 --> 0:18:20.320 or sometimes even trouble their electricity costs. Is that going 0:18:20.400 --> 0:18:23.119 to be one of the things that could continue to 0:18:23.240 --> 0:18:26.760 stoke questions about affordability and cost of living. 0:18:27.280 --> 0:18:30.199 Absolutely, And I was nodding with just the comments that 0:18:30.240 --> 0:18:32.280 you all have been making just because I see the 0:18:32.359 --> 0:18:36.040 through line of it all politically, right, So as PARMI 0:18:36.160 --> 0:18:39.119 kind of mentioned or alluded to, you saw the influence 0:18:39.200 --> 0:18:42.600 of the tech sector on display last week two ways 0:18:42.680 --> 0:18:46.400 right with the easing the restrictions on in videos eight 0:18:46.440 --> 0:18:50.159 two hundred the chips. But then also Donald Trump, I 0:18:50.200 --> 0:18:56.160 mean almost verbatim repeated the rationale for AI not being 0:18:56.480 --> 0:18:59.359 having a patchwork with the States and that they would 0:18:59.600 --> 0:19:03.040 inherit bit the innovation of the industry as well, but 0:19:03.160 --> 0:19:05.919 also the sugar high, right that it provides in an 0:19:05.960 --> 0:19:09.480 economy that Americans are pretty sour on and giving Trump 0:19:09.480 --> 0:19:12.919 pretty bad marks. The sugar high. That one bright spot 0:19:13.320 --> 0:19:16.920 is that AIDS are showing the president the proliferation of 0:19:17.040 --> 0:19:20.639 data centers, building the data centers across the country, and 0:19:20.680 --> 0:19:23.720 he sees that as a win, appealing to his sense 0:19:23.800 --> 0:19:26.760 of that the US can lead the way with this 0:19:26.920 --> 0:19:29.720 breaking edge, this cutting edge technology as well. 0:19:30.200 --> 0:19:33.560 Now, the other part of that coin is. 0:19:33.480 --> 0:19:35.760 The fact that it leaves him vulnerable, he and the 0:19:35.800 --> 0:19:39.560 party vulnerable to arguments about affordability, even as he touts 0:19:39.680 --> 0:19:46.720 lower energy costs for gasoline, etc. Electritricity prices have skyrocketed, 0:19:46.760 --> 0:19:49.119 and we saw that play out in some of the 0:19:49.200 --> 0:19:54.560 elections that we saw in November, where Republicans lost pretty 0:19:54.560 --> 0:19:58.359 handily in several places in affordability became a salient issue 0:19:58.400 --> 0:20:02.720 and electricity prices became a salient issue. The other part 0:20:02.760 --> 0:20:05.959 of it politically is, as you all have both alluded to, 0:20:06.920 --> 0:20:12.320 Americans still don't quite understand all of the nuances of AI. 0:20:12.680 --> 0:20:16.880 The administration hasn't been able to or the industry explain 0:20:16.960 --> 0:20:20.439 it in a way that common Americans can really grasp it. 0:20:20.800 --> 0:20:23.560 They see it as something that's fun, They see it 0:20:23.600 --> 0:20:26.320 as something that can be confusing, They see it as 0:20:26.320 --> 0:20:28.720 something that could be toxic to mental health at times. 0:20:29.160 --> 0:20:31.800 They see it as a threat to their livelihoods and jobs. 0:20:31.960 --> 0:20:35.399 Right, and then you add on the affordability issue as well, 0:20:35.480 --> 0:20:38.040 and so we'll see that continue to play out in 0:20:38.040 --> 0:20:38.840 twenty twenty six. 0:20:39.040 --> 0:20:43.440 The President has been on something of an affordability tour, 0:20:43.640 --> 0:20:46.680 quite a few big events on this, and yet it's 0:20:46.800 --> 0:20:51.840 not clear what levers he's going to pull because in 0:20:51.880 --> 0:20:54.920 some ways he doesn't recognize that there is an affordability crisis. 0:20:55.000 --> 0:20:58.960 As we go into the midterms, how crucial is that 0:20:59.160 --> 0:21:01.199 going to be. Do you think that there's going to 0:21:01.240 --> 0:21:05.840 be actual moved by the administration more direct efforts or 0:21:05.880 --> 0:21:07.439 is the White House going to still feel like this 0:21:07.560 --> 0:21:10.640 is really just about messaging more than substance. 0:21:11.880 --> 0:21:13.200 I think a little bit of both, right. 0:21:13.240 --> 0:21:15.119 I think the problem for the White House is the 0:21:15.160 --> 0:21:17.439 fact that Donald Trump, went back to our interview with 0:21:17.520 --> 0:21:20.720 him in summer of twenty twenty four, has looked at 0:21:20.800 --> 0:21:23.880 tariffs and argued that tariffs don't have a material effect 0:21:23.960 --> 0:21:27.600 on consumer prices. Well, what you've seen over the last 0:21:27.680 --> 0:21:30.959 month and change or so is some of the reversals 0:21:31.080 --> 0:21:35.240 on food stuffs, right, bananas, coffee as well. So you 0:21:35.320 --> 0:21:38.320 see the administration also trying to pull levers on things 0:21:38.359 --> 0:21:41.240 like beef. So it's an acknowledgment in some ways that 0:21:41.480 --> 0:21:46.160 tariffs are having this additive cost to the consumer from 0:21:46.280 --> 0:21:49.160 the administration, even as Trump has argued, so you've got 0:21:49.160 --> 0:21:53.600 this discordant message coming from the administration, and quite frankly, 0:21:53.880 --> 0:21:56.760 if anyone saw the president's speech the rally, his heart 0:21:56.960 --> 0:22:00.679 just wasn't into this affordability message. I mean he all 0:22:00.800 --> 0:22:04.000 but said that his chief of staff, Susie wils told 0:22:04.040 --> 0:22:06.440 him you need to go out here in campaign on this. 0:22:06.960 --> 0:22:10.040 So almost sounded like someone who was grudgingly told you 0:22:10.080 --> 0:22:12.720 got to go outside and do something that you really 0:22:12.720 --> 0:22:13.280 don't want to do. 0:22:14.840 --> 0:22:17.600 It's convenient for the purposes of this podcast to feel 0:22:17.600 --> 0:22:19.880 that the economy is central to everything, we should step 0:22:19.920 --> 0:22:21.560 back and ask what is the state of the US 0:22:21.640 --> 0:22:23.840 economy going into twenty six. I mean, I know many 0:22:23.840 --> 0:22:27.400 of us, certainly a year ago, if we've been told 0:22:27.520 --> 0:22:29.480 what the administration was going to do, what was going 0:22:29.560 --> 0:22:32.479 to happen in terms of tariffs and uncertainty and other things, 0:22:32.800 --> 0:22:36.200 we probably would not have expected it to be as 0:22:36.240 --> 0:22:39.680 strong or inflation to be as low. But what does 0:22:39.720 --> 0:22:42.080 it look like now and what are you watching going 0:22:42.080 --> 0:22:45.119 into twenty six on just the strength of the economy. 0:22:46.000 --> 0:22:48.040 So I think there's quite a lot to be optimistic 0:22:48.040 --> 0:22:50.920 about on the US economy heading into twenty twenty six. 0:22:51.040 --> 0:22:53.600 Inflation's a bit higher than the FED would like it 0:22:53.640 --> 0:22:57.200 to be, but it's certainly not spiraling higher growth pretty 0:22:57.280 --> 0:23:02.480 robust looking into twenty twenty six. We've got easier monetary conditions. 0:23:02.840 --> 0:23:06.040