Investing in the Chaos: Macro Signals in a Bot-Filled World | Le Shrub

24:29Demetri Kofinas:that's just so fascinating to me, man. And just to zoom out here and hopefully we don't lose people in the course of these digressions and also just given the fact that they're political and people get hyper-triggered. But I do feel like one of the things that is most frightening, one of the most frightening facts of our times, and also as an investor, I think it's important to understand. And I think it informs some of what I've talked about with financial nihilism. And this is that we live in a hall of mirrors where people feel increasingly unmoored from objective reality. And this has colossal ramifications across the board in every single domain, whether we're talking about economic policymaking decisions, the protocols governing nuclear deterrence, how we govern our cities, manage our water treatment facilities, control the air traffic over our airports.

25:21Demetri Kofinas:It all feels like it's coming unglued because on some level, we are less connected to the physical world. And this is what prompted our conversation today, by the way, for listeners, because you and I were on a call. This is one of the benefits of having a show like this. You get to meet really smart people, become friends with some of them, and then just get to hop on a call whenever you want to pick their brains or just catch up on life. And you brought up something that was on my mind, and that was a theme of this past weekend that I spent in Tuscany at this private gathering, which included some people that our audience will already know from the podcast, including John Borthwick, who's a good friend, and Ian McGilchrist, the famous author of The Master and His Emissary, a book about the divided brain and how the left and right hemispheres interpret and experience reality.

26:08Demetri Kofinas:And I don't want to get into all the details of what we discussed because it was a private gathering, but one topic of discussion had to do with advancements in digital technology and more specifically artificial intelligence and how these advancements are occurring in the context of us having lost a sense of who we are. And what's particularly dangerous in my view about this is that when you don't know who you are, someone else is in a position to tell you. Now, whether that's AI telling us who we are, or whether that's a demagogue telling us who we are, may not matter all that much. But I think it's important to understand and meditate on this vulnerability that exists in our societies today, to understand why it exists and what we might be able to do to address it.

26:58Demetri Kofinas:which is especially consequential for Western capitalist democracies, which are dependent on the informed participation of independently minded citizens in order to function. Something that I've banged the drum on, on this podcast for many years now. So I feel like because we're increasingly out of touch with who we are, we don't know who we're building our economy for. Are we building it to satisfy the parameters of some kind of techno-feudal model, some sort of idealized structure of productivity growth? Or are we building it to improve the wellbeing of ourselves and our families? Yeah. So look, that's a great point about if we don't know who we are, then they, in quotation marks, can make us into something.

27:51So I actually think about it this way as well, that Mrs. Shrub actually pointed me to this direction. She said, what we are is our stories as well. So we are our history. And we are the stories that we were told by our parents and the stories were told by the grandparents and the history we carry. So the risk with AI is that they're rewriting those stories. And that's a very big risk that models reality in some way. but also to your point about what are we building things for let's just take one example that is close to my heart that i live through every day twitter called now x so x until a year ago or two years ago you would go on x and you and i would interact and we would interact with many friends that we know like paolo etc so you know we would interact with all the friends that we made along the way on Twitter.

28:47And I met a lot of friends with Twitter. And right now, when I post something on Twitter, whereas before I would get 100 replies from humans, now I'm going to get 100 replies from bots. And I'm going to get 10 replies from humans. And that's actually a generous ratio that I'm saying right now. And then when I search a topic that interests me, so for example, I want to search a ticker of a stock. Before I would get 100 humans, now I'm going to get 100 bots and again, less than 10 % humans. So the problem is, to your question, what are we building our capitalist society for? Let's just take the one thing that I work with every day, Twitter.

29:30Twitter right now, it has become corrupted with bots. It's like a parasite that AI has just taken over Twitter to a degree that it's become unusable for a lot of people. I mean, I'm still addicted to it, but I can see that interest and that interaction with humans actually waning in Twitter. Whereas I see, for example, on Substack, where I have the Shrubstack, where there's no bots, it feels like a safe house where I can just interact with humans and zero bots for now, thank god because i hope that never changes but i think this is a really big risk that we're facing whereby bots are going to be writing stories and who's going to be reading them like other bots like what's the point of this you see all these bots posting things and you know the problem is that the marginal cost of for them doing it is zero there is no cost in doing them so in reality they can just flood the market with with stupid tweets like and i was reading an example of one guy who uses AI to write books.

30:33So again, for him, the marginal cost of writing an extra book is zero because it's AI driven. So he writes like, you know, 10 books using AI and puts them on Amazon and just hopes that someone clicks and buys it. So again, this flooding of information, flooding of tweets, flooding of articles, it just degrades the whole thing. And it's actually going to make it more difficult for people to identify value. I mean, value will eventually surface, this, but this noise just makes it difficult to find sense in things or to find clarity in things. And our conversation started on education, but I just want to hear your view on this, and then we can move on to the education actually.

31:12Demetri Kofinas:I'm hopeful that the problem of noise and AI generated content, whether we're talking about autonomous bots or people using chat GPT to write their books, that the same suite of technologies that are making this problem worse will ultimately be used to help solve it. Because spam in one form or another has always been with us in both the digital and analog worlds. And we've always come up with ways of managing every new expression of it. So that's kind of my view on that. But you said you have a question about education you want to bring up? Yeah. So this is actually how our discussion started when we had a call earlier today.

31:48So I told you that I had a round table, informal roundtable with some professors, university. And, you know, the discussion drifted, it was a very small group, and the discussion drifted to AI, because one of the professors was a teacher of how AI will impact the business world. And so she was very honest in saying that it's a very new field, and that they're kind of writing the book as they're going and writing the coursework as they're going. But I've asked her one question that really struck me. I've asked her, how are your students getting impacted by AI? So how have you seen them change because of AI?

32:29And her answer was, you know, she stood back and, you know, she said, that's a great question because I see that my students are actually more depressed than ever. So she says, she says, I've never seen this before. Like so many students are getting depressed about it. And I've seen their confidence in some cases shattered. with one student of hers saying, look, AI can do this better than me. So that's a very concerning thing because, you know, as a father of two kids, you're thinking, well, if the university students are feeling like that, with AI still in kind of its infancy, how are our kids going to be like in 10 years, 15 years?

33:12Like if the 20-year-olds of today cannot find the purpose or the drive to actually beat AI or work with AI, then it could become scary for our kids. And that's something that is really on my mind. And I actually think this is going to be the most important question we should be asking because it will affect not only millions of jobs, but it could affect our trajectory as humanity in a way. I think people are not really thinking about it that much. And I mean, I'll give you another example from a personal life. So, you know, when I had analysts working for me, you know, the interns, you would take interns as kind of a favor to train them and hopefully become, you know, analysts.

34:01And then you would still keep working with analysts for two years in the hope that they would become good associates or good VPs to actually produce some real work. But in reality, the first couple of years, it's kind of like grunt work and they're kind of shaping them up in reality. So you're investing a lot of time and a lot of effort. And, you know, we're all busy people, but you end up spending, you know, sometimes a disproportional amount of time if you're a good leader on the young people. So, you know, right now I've been using, you know, ChatGPT or Grog. Well, it's been a year now. So, you know, I'd say like one year ago, ChatGPT felt like a first year intern.

34:38And then it became like a few months ago, it felt like a first year analyst. And now you can probably get like associate level work. out of it. So again, to how this conversation started, it's getting better. I mean, you know, I don't like to rely on it because I have a different view of how I should be working, but it's getting better to the degree that there is a concern about how they train young people going forward and how much effort they can put in it. So for example, why would I bother, as a small business, why would I bother to hire three young kids and train them and put so much effort into it until they reach a point where they're going to be producing in five years like grog right so it's a real existential question and it's something that people have to uh i think people have to be creative about it so you know if i was going to teach my kid one thing is because i'm thinking a lot about this i just keep telling him like you have to use logic and you have to think outside the box and you have to think about common sense so you know you can Memorize all you want, but actually common sense is what you have to be focused on.

35:47And then you also have to be thinking a bit outside of the box because creativity, although we see AI being creative in a way, human creativity will always have an edge, probably because of that madness of people like Zorba the Greek or Trump, to be honest, because that's kind of unpredictable. You kind of don't expect that. So there is that kind of element to the whole thing that makes me interested. That's why I kind of use like Zorba the Greek for that dash of madness, dose of madness, because it kind of makes sense. But it's certainly like the most interesting thing I'm thinking about right now.

36:24Demetri Kofinas:So I think about this a lot. And to be quite honest, I'm excited by the prospect that our educational system could change radically and it will need to change. And I get emailed all the time, and I think about this as a parent, but I also get emailed all the time by high schoolers or kids in college who are either looking for advice on what to study or are in college and are looking for advice on where to shift their attention. And I always tell people that if I were a student today, I would get a dual major in philosophy and history. And in terms of history, you find some particular vein of history that you're interested in.

37:08Demetri Kofinas:But the reason that I recommend those two is that, along with a classics education, which in some ways straddles both history and philosophy. And the reason I recommend those is because philosophy teaches you how to think. And history gives you a corpus of knowledge from which to begin to interrogate, to find the truth. And what I have found in the course of using large language models is that the most effective way to actually use them is to be very good at what's known as prompt engineering, which is basically strategically asking questions in order to get to whatever it is that you're looking for, whether that's some sort of deeper measure of the truth or whether that's some kind of inspiration.

37:53Demetri Kofinas:Because oftentimes I find that as interlocutors and thought partners, they're very helpful. I will often get ideas from actually talking with these systems. And were you at our dinner in Buenos Aires? I can't remember. No, I couldn't make that one. I think Paolo was. Okay. Right. He was. And I had talked then about how I'd used Chachipiti for one of my interviews about Argentina with Federico Sturzenegger because there were no good books in English on the Argentine economy, hardly any. And all the great ones were in Spanish. So I got them translated and then I sat down and I started talking to the LLM about these books.

38:36Demetri Kofinas:And it was amazing, man. And I can say I've done this now often a number of times on my episodes where let's say I've already read a book, but then I sit down and I talk to the LLM about that book or about a bunch of other books. And I do think that they are very valuable if you already have knowledge and you already know how to think. Where I think it's very dangerous is going to be for the vast majority of people who don't already have those skills and are tempted by the immediacy of just going to the LLM and asking it for answers. And that's sort of, I think, the big opportunity for us. And again, these are society-wide challenges that require a serious country with a serious political system, which we don't have right now.

39:28Demetri Kofinas:But in an ideal setting, I would try as a policymaker to tackle the problem of education. I think it's right up there along with the problem of social media and information. And I would try to help build some foundations into the K through 12 educational pipeline to give people the skills to be able to actually do this. Because I think to your point about the workforce, the danger is that these systems become increasingly good at doing the things that you used to hire people to do who you wouldn't otherwise hire. And what they got out of that was not a lot of money, but they did get the work experience.

40:09Demetri Kofinas:And then they eventually built themselves up to get to where you are. And when I see guys like Mandani, the recent self-proclaimed socialist who is likely to become mayor of New York because he's gotten the Democratic nomination and New York is a heavily Democratic city, it seems to me that the economics of the country are amenable to the rise of a socialist. Guys like him, I have not deeply investigated his agenda, but I've seen reports just like everyone else about publicly operated and funded grocery markets that have subsidized food prices, rent control on like 2 million apartments or something.

40:49Demetri Kofinas:Some of these ideas are clearly not going to work. Rent control doesn't work. If you want to solve the problem of housing affordability, figure out a different way to do it. That's not the way to do it. But I worry that we are set up right now, dude, for even more political crises. And there's a situation where I definitely see the left having its own death and resurrection like the right did, and that we get a much more socialist left-wing candidate to address what may be a giant wave of joblessness that's coming our way, not just for young people, but for the white color workforce. And I'm curious how you think about that specific vector through which this might emerge, which is the unemployment of lots and lots of young people and people who previously weren't displaced during the wave of losses that happened to the blue collar workforce in the 80s and 90s.

41:37Absolutely. Look, unfortunately, politics is a cycle. And if there's one country where we experience these cycles in their extremes, it's Greece that I've lived through. So we always shift from a very left-wing to a right-wing melee style. Well, not as much as melee, but right-wing capitalist system. But we go to the extremes because we tend to be more passionate. So I just keep that in mind when I think about what's happening in the US right now. And the way I'm thinking about it is this. There was always grift. And now we're in the golden age of grift. There's a lot of special things happening.

42:14And my biggest concern is that if we think about cycles, what comes after grift is a rebellion of the lower middle classes. Because the grift benefits the top layer. I mean, even if you see the big, beautiful bill, you know, all the benefits are going to the top. The bottom guys are going to suffer through like they are. so couple that with our discussion on ai where people might actually suffer to find a purpose along with a you know social decline in moral standards you know with the rise in so many girls being in only fans for their pocket money right now so put all that together and there is a risk of that happening i don't know if it's going to be in the next five years or 10 years.

43:03But the biggest risk is that after the end of the golden age of grift, we have a rise of the left. And this guy, the New York guy, Madani is going to be a very interesting case to follow. And I actually hope that he gets elected and that he fails miserably. That's the best thing that can happen to the US. You want this guy who's coming, you know, he comes from a well of family, right? So you want that guy, but he comes from a well family but his agenda is like so empty it's just listening to the old greek politicians who were a complete failure blew up their country so you listen to the guy and you're like you actually hope that you get elected and that you destroy the place so that everyone else just looks at you as an example to avoid and they just have a wake-up call quickly instead of the him spreading to other places because i gotta tell you like i was in the uk um a couple of times the last month and I went to a place called Birmingham.

43:59I went to Birmingham to see the final show of Black Sabbath. Otherwise, I would have never gone there. But, you know, you see a place like Birmingham and like, why would you go to Birmingham, right? But you see like a place like Birmingham. It's the second biggest city of the UK. And man, the place is like, I haven't felt as bad about a town as the last time I was in like Sao Paulo in 25 years ago when it was actually a really dangerous place. But that's how bad it was. like I was in a place where in Aston where the locals told me I was going to walk back from the stadium to the hotel and the locals told me no no you shouldn't do that because you have the wrong skin color it's like what I'm green it's like no no you're white I'm just joking but you know point is the whole place just feels dilapidated you know they have a leftist socialist agenda to it I mean London as well went through the whole thing to a degree because of Brexit but you know You can feel these bad things happening, but I just feel like places like Birmingham is almost too late for them.

45:02So that's why I'm just bringing Birmingham to the equation just to compare with New York. I mean, New York is a great city. It's kind of tough for it to dissolve into chaos and not be reversible, but you kind of want people to feel like a wake-up call in the rest of the US.

45:21Demetri Kofinas:Yeah. Well, cities are very resilient. You know, there are cities on the planet that have been around for more than 10 ,000 years, but they can go through very difficult times. And you know, it's funny that you brought up New York and your experience going to Birmingham, because we just got back from a trip to Italy, as I mentioned. And my wife commented on this. We were in the car and there was crazy traffic. We landed basically at rush hour. And the driver took us through some local traffic through Queens to get out of the JFK area towards where we live. And man, dude. Actually, it isn't just, this started, quite frankly, when we got to JFK.

46:01Demetri Kofinas:You're always struck by this when you go to a country like Argentina, where my wife is from, where we were in Italy, same thing with Italy. In these other countries, first of all, they're much more kid-friendly. If you're traveling with kids, they actually let you get ahead of the line. They try to make your life easier. People smile at kids. That's just one thing you notice right away when you come back to New York. Another thing is just the sort of oppression of the police state in America, and also the way in which people live. It's hard. And I know that this is something that we get used to.

46:28Demetri Kofinas:I mean, I get used to this as well in America. For a lot of people who live in Europe and other parts of the world, when they come here, they're shocked because they're like, this is supposed to be the richest country in the world. But it seems like you guys, so many people here live in squalor. And I think that it's hard to appreciate for those of us who have been lucky in life, especially, just how much tinder, how much dry wood there is that could go up in flames very quickly. And I don't know that the election of Mandani would actually, even if it went really badly, that people would draw that causal line of connection.

47:07Demetri Kofinas:Because I think part of the problem is that we've hollowed out, we've done things to lower the quality, the mental and cultural quality of the electoral base. So we're actually living with people who are less capable of appreciating or valuing the country, understandably in some cases. And this is, again, this is something I've brought up maybe on the show, maybe in other places, but the founders of this country, people like Thomas Jefferson, for example, and he's actually a great example of it because he was also ambassador to France. Jefferson was especially concerned about rebellion and revolution in this country, driven by people who felt they had no stake in the country, which is one of the reasons that he advocated for property rights as being a prerequisite for voting.

47:52Demetri Kofinas:He didn't want what happened in France to happen here. Mobs of people basically overthrowing the government with no clear direction. And this is something that I think is very much a concern, but the question is at what point and what would be required to get a working consensus in political power that is able to thread this needle between the elites in society who have effectively captured policymaking and are constantly kicking the can down the road, not to address the larger social problems because there are too many benefits to being able to continue the system as it is, and actually addressing the problems.

48:30Demetri Kofinas:I think this is something that we'll have a chance to explore even more in the second hour, where I really want to focus in on your investment process, what you've been looking at recently, some of the trades you've been putting on. I know rare earths will factor into this conversation. As I imagine, though I'm going to ask you about it, Trump's recent 50 % tariffs on Brazil and on copper will factor in as well. For anyone new to the program, Hidden Forces is listener supported. We don't accept advertisers or commercial sponsors. The entire show is funded from top to bottom by listeners like you.

49:09Demetri Kofinas:If you want access to the second hour of today's conversation with LaShrub, head over to hiddenforces.io slash subscribe and sign up to one of our three content tiers. All subscribers gain access to our premium feed, which you can use to listen to the rest of today's conversation on your mobile device using your favorite podcast app, just like you're listening to this episode right now. LaShrub, stick around. We're going to move the rest of our conversation onto the premium feed. If you want to listen in on the rest of today's conversation, head over to hiddenforces.io slash subscribe and join our premium feed.

49:45Demetri Kofinas:If you want to join in on the conversation and become a member of the Hidden Forces Genius community, you can also do that through our subscriber page. Today's episode was produced by me and edited by Stylianos Nicolaou. For more episodes, you can check out our website at hiddenforces.io. You can follow me on Twitter at Kofinas, and you can email me at info at hiddenforces.io. As always, thanks for listening. We'll see you next time.