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What, after all, is the main alternative to investing in stocks? Buying bonds. Yet these days bonds offer incredibly low returns. The interest rate on 10-year U.S. government bonds is only 0.6 percent

So buying stock in companies that are still profitable despite the Covid-19 recession looks pretty attractive.

And why are interest rates so low? Because the bond market expects the economy to be depressed for years to come, and believes that the Federal Reserve will continue pursuing easy-money policies for the foreseeable future

for a few weeks in March the world teetered on the edge of a 2008-type financial crisis, which caused investors to flee everything with the slightest hint of risk.

That crisis was, however, averted thanks to extremely aggressive actions by the Fed, which stepped in to buy an unprecedented volume and range of assets.

But back to the disconnect between stocks and economic reality. It turns out that this is a long-term phenomenon, dating back at least to the mid-2000s.

Think about all the negative things we’ve learned about the modern economy since, say, 2007. We’ve learned that advanced economies are much less stable, much more subject to periodic crises, than almost anyone believed possible.

Productivity growth has slumped, showing that the information technology-fueled boom of the 1990s and early 2000s was a one-shot affair. Overall economic performance has been much worse than most observers expected around 15 years ago.

Stocks, however, have done very well. On the eve of the Covid crisis, the ratio of market capitalization to G.D.P. — Warren Buffett’s favorite measure — was well above its 2007 level, and a bit higher than its peak during the dot-com bubble. Why?

The main answer, surely, is to consider the alternative. While employment eventually recovered from the Great Recession, that recovery was achieved only thanks to historically low interest rates. The need for low rates was an indication of underlying economic weakness: businesses seemed reluctant to invest despite high profits, often preferring to buy back their own stock. But low rates were good for stock prices.

None of this should be taken as a statement that current market valuations are exactly right. My gut sense is that investors are too eager to seize on good news; but the truth is that I have no idea where the market is headed.

The point, instead, is that the market’s resilience does, in fact, make some sense despite the terrible economic new

Rosenberg assumes stocks sink 30% in the coming months, then spend most of the next 18 months grinding higher to valuations about 10% lower than today’s levels.

Rosenberg also lays out a “best case,” which depends on a vaccine or treatment emerging in the next six to 12 months. That outlook includes an unemployment rate averaging about 9% for the next two years, a stock-market bottom of 2,500 for the S&P 500 in Q2, and a cyclical low of 29 basis points for the 10-year note in 2021.

The “worst-case” scenario is grim. It involves no vaccine, no treatment, and a second wave coronavirus outbreak next winter that severely saps business and household confidence. In this outlook, the jobless rate hits 20% — and averages 17.5% through 2021.

Outright deflation takes hold. “Think about what years of no pricing power is going to do to those corporate cash flows in the future,” Rosenberg writes. “Even government intervention is capable of suffering from the laws of diminishing demand. Japan is a classic template.”

But there’s a lot more damage done to the stock market. The S&P 500 bottoms at 1,800 in the second quarter and averages only 2,200 throughout 2021.

Over the same period, ByteDance has flourished. Its TikTok app has been downloaded a billion times, of which nearly 100 million came from the United States, and it has a jaw-dropping valuation of $75 billion.

ByteDance has also been working with Xinjiang authorities under a program called “Xinjiang Aid,” whereby Chinese companies open subsidiaries or factories in Xinjiang and employ locals who have been detained in the camps. Its operations are centered on Hotan, an area of Xinjiang considered backward by the Communist Party and where the repression has been among the most severe.

Leaked documents have previously shown how ByteDance censors content that the Chinese government disapproves of, including Tiananmen Square, Tibetan independence, or the banned religious group Falun Gong.

ByteDance has been guiding and helping Xinjiang authorities and media outlets to use its news aggregation app and Douyin to “propagate and showcase Hotan’s new image,” according to the ASPI report.

In the case of Huawei, which is locked in an existential battle with the Trump administration, there is evidence of extensive and direct work with Chinese security organs in Xinjiang, including helping authorities there with the “digitization requirements” of public security projects.

“Together with the Public Security Bureau, Huawei will unlock a new era of smart policing and help build a safer, smarter society,” a Xinjiang government website quoted one Huawei director as saying last year.

When the Xinjiang Public Security Department and Huawei signed the agreement to establish an “intelligent security industry” innovation lab in the regional capital of Urumqi last year, a local official said Huawei had been supplying “reliable technical support” for the department, according to the report

Huawei has also participated in a program called “Safe Xinjiang,” which the ASPI experts said was “code for a police surveillance system.”

“The Chinese tech companies in this report enjoy a highly favorable regulatory environment and are unencumbered by privacy and human rights concerns,” it concludes. Many are engaged in deeply unethical behavior in Xinjiang, where their work directly supports and enables mass human rights abuses.”

The Silicon Valley giant is bidding adieu to its founders, Larry Page and Sergey Brin, whose love of math and disregard for Wall Street once embodied Google’s free spirit. Mr. Page, 46, and Mr. Brin, 46, said last month that they would step down from their executive roles.

Google has also crammed more advertising onto the top of search results and squeezed money out of businesses like YouTube

Google faces other challenges. Regulators and lawmakers around the world are scrutinizing the company for vacuuming up people’s private information and chilling the technology landscape with its market dominance.

For all the changes facing Google, one constant has remained: It is essentially the sole proprietor of the internet’s most lucrative business. Google search is the on-ramp to much of the internet, and placing advertising next to key search terms is a necessity for most businesses, who risk forgoing traffic to a competitor.

Just look at the word "Google," the lawsuit said — it's become "a verb that means to search the internet." What company can compete with that?

"It's been a relationship of extremes,"

a tectonic shift is happening right now: USA v. Google is the biggest manifestation of what has become known as the "Techlash" — a newfound skepticism of Silicon Valley's giants and growing appetite to rein them in through regulation.

"It's the end of hands-off of the tech sector," said Gene Kimmelman, a former senior antitrust official at the Justice Department. "It's probably the beginning of a decade of a series of lawsuits against companies like Google who dominate in the digital marketplace."

For years, under both Republican and Democratic administrations, Silicon Valley's tech stars have thrived with little regulatory scrutin

There is similar skepticism in Washington of Facebook, Amazon and Apple — the companies that, with Google, have become known as Big Tech, an echo of the corporate villains of earlier eras such as Big Oil and Big Tobacco.

All four tech giants have been under investigation by regulators, state attorneys general and Congress — a sharp shift from just a few years ago when many politicians cozied up to the cool kids of Silicon Valley.

Tech companies spend millions of dollars lobbying lawmakers, and many high-level government officials have left politics to work in tech,

It will likely be years before this fight is resolved.

She said Washington's laissez-faire attitude toward tech is at least partly responsible for the sector's expansion into nearly every aspect of our lives.

"These companies were allowed to grow large, in part because they had political champions on both sides of the aisle that really supported what they were doing and viewed a lot of what they were doing uncritically. And then ... these companies became so big and so powerful and so good at what they set out to do, it became something of a runaway train," she said.

The Google lawsuit is the most concrete action in the U.S. to date challenging the power of Big Tech. While the government stopped short of explicitly calling for a breakup, U.S. Associate Deputy Attorney General Ryan Shores said that "nothing's off the table."

"This case signals that the antitrust winter is over,"

other branches of government are also considering ways to bring these companies to heel. House Democrats released a sweeping report this month calling for new rules to strip Apple, Amazon, Facebook and Google of the power that has made each of them dominant in their fields. Their recommendations ranged from forced "structural separations" to reforming American antitrust law. Republicans, meanwhile, have channeled much of their ire into allegations that platforms such as Facebook and Twitter are biased against conservatives — a claim for which there is no conclusive evidence.

Congressional Republicans and the Trump administration are using those bias claims to push for an overhaul of Section 230 of the 1996 Communications Decency Act, a longstanding legal shield that protects online platforms from being sued over what people post on them and says they can't be punished for reasonable moderation of those posts.

The CEOs of Google, Facebook and Twitter are set to appear next week before the Senate Commerce Committee at a hearing about Section 230.

On the same day the Justice Department sued Google, two House Democrats, Anna Eshoo, whose California district includes large parts of Silicon Valley, and Tom Malinowski of New Jersey, introduced their own bill taking aim at Section 230. It would hold tech companies liable if their algorithms amplify or recommend "harmful, radicalizing content that leads to offline violence."

That means whichever party wins control of the White House and Congress in November, Big Tech should not expect the temperature in Washington to warm up.

Editor's note: Google, Facebook, Apple and Amazon are among NPR's financial supporters.

the government in the 2010s allowed more than 500 start-up acquisitions to go unchallenged. This hands-off approach effectively gave tech executives a green light to consolidate the industry.

It may be profitable and savvy to eliminate rivals to maintain a monopoly, but it remains illegal in this country under the Sherman Antitrust Act and Standard Oil v. United States. Unless we re-establish that legal fact, Big Tech will continue to fight dirty and keep on winning.

the economists are saying, “the cure” doesn’t come at a cost at all when factoring in the economic value of the lives saved.

What these academics are doing — and what Trump’s tweet is getting at — is measuring how the extreme efforts to avoid covid-19 deaths compare to the devastating economic fallout.

They do this by putting a price tag on the deaths avoided. It’s something the federal government does all the time

Value of a Statistical Life or VSL — is the amount people are willing to spend to cut risk enough to save one life.

The VSL at most federal agencies, developed over several decades, is about $10 million. If a new regulation is estimated to avoid one death a year, it can cost up to $10 million and still make economic sense.

a cost-benefit analysis using VSL, while far from perfect, would force policymakers to confront the reality of their decisions in a much more precise way. Without it, they are left to gut feelings, educated guesses or political arguments.

“It’s missing from the discussion,” said Linda Thunstrom, an economist at the University of Wyoming, “so instead you have such loud voices on both sides — advocating that all lives should be saved or that, no, we need to open the economy. But there are trade-offs. It’s hard. But we should be talking about them.”

The economist’s answer is to ask people and observe their behavior.”

Economists use public opinion surveys on mortality risk. They look at how much more dangerous jobs pay. They study what people are willing to spend for safety devices, such as bike helmets. The information is then used to calculate VSL.

“Now we’re just trying to figure out how to balance two difficult things — lives lost and incomes lost.”

The White House’s Office of Management and Budget said it wasn’t doing a pandemic cost-benefit analysis, either

the CDC is not doing any cost-benefit analysis of the pandemic’s social distancing measures, agency spokesman Tom Skinner said.

The White House Council of Economic Advisers, through spokeswoman Rachael Slobodien, declined to comment on whether it has looked into the issue.

The Wyoming economists sent a copy of their cost-benefit study to the White House

The study estimated the U.S. economy would shrink less from an uncontrolled pandemic (GDP declines by $6.49 trillion) than a pandemic curtailed by social distancing (GDP declines by $13.7 trillion)

But social distancing would slash the peak infection rate in half, resulting in 1.2 million fewer deaths — leading to a VSL of $12 trillion

So the value of social distancing would work out to a net benefit of $5.16 trillion, the study estimated.

So far, the number of deaths has been lower than the study projected, Thunstrom said, “so social distancing has done more than what we assumed.

The Wyoming study also noted potential costs from the lack of cost-benefit analysis: The public health savings might not be well understood, so the public focuses solely on job losses and declining GDP, potentially eroding voluntary compliance with valuable social distancing measures.

It could be the pandemic’s VSL should be even higher than the traditional government number of $10 million — and thus the efforts to avoid covid-19 even more valuable.

The virus is dreaded, and studies have shown people are willing to pay more to avoid the risk of dying from cancer than an auto acciden

And it’s contagious. VSL doesn’t capture what people would pay to avoid a disease that could kill someone else.

The government’s VSL also doesn’t reflect willingness to avoid injury, such as the strokes or breathing problems associated with covid-19 cases.

The Chicago study examined this point, using a VSL that declines with age — finding that even though about 90 percent of the benefit would go to saving the lives of people at least 50 years old, social distancing still makes economic sense for the nation as a whole.

the most controversial aspect is whether older people should be assigned the same VSL as younger people. The Environmental Protection Agency in 2002 suggested a clean air rule would offer less of a benefit to senior citizens. Some academics agreed with the agency’s reasoning. But when critics decried it as a “senior discount,” it proved politically untenable.

With respect to crime, poverty and homelessness, Brown argued,One thing that may occur is that disinvestment in city downtowns will alter the spatial distribution of these elements in cities — i.e. in which neighborhoods or areas of a city is crime more likely, and homelessness more visible. Urban downtowns are often policed such that these visible elements of poverty are pushed to other parts of the city where they will not interfere with commercial activities. But absent these activities, there may be less political pressure to maintain these areas. This is not to say that the overall crime rate or homelessness levels will necessarily increase, but their spatial redistribution may further alter the trajectory of commercial downtowns — and the perception of city crime in the broader public.

“The more dramatic effects on urban geography,” Brown continued,may be how this changes cities in terms of economic and racial segregation. One urban trend from the last couple of decades is young white middle- and upper-class people living in cities at higher rates than previous generations. But if these groups become less likely to live in cities, leaving a poorer, more disproportionately minority population, this will make metropolitan regions more polarized by race/class.

the damage that even the perception of rising crime can inflict on Democrats in a Nov. 27 article, “Meet the Voters Who Fueled New York’s Seismic Tilt Toward the G.O.P.”: “From Long Island to the Lower Hudson Valley, Republicans running predominantly on crime swept five of six suburban congressional seats, including three that President Biden won handily that encompass some of the nation’s most affluent, well-educated commuter towns.

In big cities like New York and San Francisco we estimate large drops in retail spending because office workers are now coming into city centers typically 2.5 rather than 5 days a week. This is reducing business activity by billions of dollars — less lunches, drinks, dinners and shopping by office workers. This will reduce city hall tax revenues.

Public transit systems are facing massive permanent shortfalls as the surge in working from home cuts their revenues but has little impact on costs (as subway systems are mostly a fixed cost. This is leading to a permanent 30 percent drop in transit revenues on the New York Subway, San Francisco Bart, etc.

These difficulties for cities will not go away anytime soon. Bloom provided data showing strong economic incentives for both corporations and their employees to continue the work-from-home revolution if their jobs allow it:

First, “Saved commute time working from home averages about 70 minutes a day, of which about 40 percent (30 minutes) goes into extra work.” Second, “Research finds hybrid working from home increases average productivity around 5 percent and this is growing.” And third, “Employees also really value hybrid working from home, at about the same as an 8 percent pay increase on average.

three other experts in real estate economics, Arpit Gupta, of N.Y.U.’s Stern School of Business, Vrinda Mittal, both of the Columbia Business School, and Van Nieuwerburgh. They anticipate disaster in their September 2022 paper, “Work From Home and the Office Real Estate Apocalypse.”

“Our research,” Gupta wrote by email,emphasizes the possibility of an ‘urban doom loop’ by which decline of work in the center business district results in less foot traffic and consumption, which adversely affects the urban core in a variety of ways (less eyes on the street, so more crime; less consumption; less commuting) thereby lowering municipal revenues, and also making it more challenging to provide public goods and services absent tax increases. These challenges will predominantly hit blue cities in the coming years.

the three authors “revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 45 percent decline in office values in 2020 and 39 percent in the longer run, the latter representing a $453 billion value destruction.”

Extrapolating to all properties in the United States, Gupta, Mittal and Van Nieuwerburgh write, the “total decline in commercial office valuation might be around $518.71 billion in the short-run and $453.64 billion in the long-run.”

the share of real estate taxes in N.Y.C.’s budget was 53 percent in 2020, 24 percent of which comes from office and retail property taxes. Given budget balance requirements, the fiscal hole left by declining central business district office and retail tax revenues would need to be plugged by raising tax rates or cutting government spending.

Since March 2020, Manhattan has lost 200,000 households, the most of any county in the U.S. Brooklyn (-88,000) and Queens (-51,000) also appear in the bottom 10. The cities of Chicago (-75,000), San Francisco (-67,000), Los Angeles (-64,000 for the city and -136,000 for the county), Washington DC (-33,000), Seattle (-31,500), Houston (-31,000), and Boston (-25,000) make up the rest of the bottom 10.

Prior to the pandemic, these ecosystems were designed to function based on huge surges in their daytime population from commuters and tourists. The shock of the sudden loss of a big chunk of this population caused a big disruption in the ecosystem.

Just as the pandemic has caused a surge in telework, Loh wrote, “it also caused a huge surge in unsheltered homelessness because of existing flaws in America’s housing system, the end of federally-funded relief measures, a mental health care crisis, and the failure of policies of isolation and confinement to solve the pre-existing homelessness crisis.”

The upshot, Loh continued,is that both the visibility and ratio of people in crisis relative to those engaged in commerce (whether working or shopping) has changed in a lot of U.S. downtowns, which has a big impact on how being downtown ‘feels’ and thus perceptions of downtown.

The nation, Glaeser continued, isat an unusual confluence of trends which poses dangers for cities similar to those experienced in the 1970s. Event#1 is the rise of Zoom, which makes relocation easier even if it doesn’t mean that face-to-face is going away. Event#2 is a hunger to deal with past injustices, including police brutality, mass incarceration, high housing costs and limited upward mobility for the children of the poor.

Progressive mayors, according to Glaeser,have a natural hunger to deal with these problems at the local level, but if they try to right injustices by imposing costs on businesses and the rich, then those taxpayers will just leave. I certainly remember New York and Detroit in the 1960s and 1970s, where the dreams of progressive mayors like John Lindsay and Jerome Patrick Cavanagh ran into fiscal realities.

Richard Florida, a professor of economic analysis and policy at the University of Toronto, stands out as one of the most resolutely optimistic urban scholars. In his August 2022 Bloomberg column, “Why Downtown Won’t Die,”

His answer:

Great downtowns are not reducible to offices. Even if the office were to go the way of the horse-drawn carriage, the neighborhoods we refer to today as downtowns would endure. Downtowns and the cities they anchor are the most adaptive and resilient of human creations; they have survived far worse. Continual works in progress, they have been rebuilt and remade in the aftermaths of all manner of crises and catastrophes — epidemics and plagues; great fires, floods and natural disasters; wars and terrorist attacks. They’ve also adapted to great economic transformations like deindustrialization a half century ago.

Florida wrote that many urban central business districts are “relics of the past, the last gasp of the industrial age organization of knowledge work the veritable packing and stacking of knowledge workers in giant office towers, made obsolete and unnecessary by new technologies.”

“Downtowns are evolving away from centers for work to actual neighborhoods. Jane Jacobs titled her seminal 1957 essay, which led in fact to ‘The Death and Life of Great American Cities,’ ‘Downtown Is for People’ — sounds about right to me.”

Despite his optimism, Florida acknowledged in his email thatAmerican cities are uniquely vulnerable to social disorder — a consequence of our policies toward guns and lack of a social safety net. Compounding this is our longstanding educational dilemma, where urban schools generally lack the quality of suburban schools. American cities are simply much less family-friendly than cities in most other parts of the advanced world. So when people have kids they are more or less forced to move out of America’s cities.

What worries me in all of this, in addition to the impact on cities, is the impact on the American economy — on innovation. and competitiveness. Our great cities are home to the great clusters of talent and innovation that power our economy. Remote work has many advantages and even leads to improvements in some kinds of knowledge work productivity. But America’s huge lead in innovation, finances, entertainment and culture industries comes largely from its great cities. Innovation and advance in. these industries come from the clustering of talent, ideas and knowledge. If that gives out, I worry about our longer-run economic future and living standards.

The risk that comes with fiscal distress is clear: If city governments face budget shortfalls and begin to cut back on funding for public transit, policing, and street outreach, for the maintenance of parks, playgrounds, community centers, and schools, and for services for homelessness, addiction, and mental illness, then conditions in central cities will begin to deteriorate.

There is reason for both apprehension and hope. Cities across time have proven remarkably resilient and have survived infectious diseases from bubonic plague to cholera to smallpox to polio. The world population, which stands today at eight billion people, is 57 percent urban, and because of the productivity, innovation and inventiveness that stems from the creativity of human beings in groups, the urbanization process is quite likely to continue into the foreseeable future. There appears to be no alternative, so we will have to make it work.

the first hints of hell come from hubris. The self-styled “Technoking” has every reason for self-belief. Tesla is the world’s most valuable carmaker. SpaceX is literally rocket science in action. Yet for executives like him it’s a fine line from that to overconfidence. Sony’s Morita Akio crossed it. So did AOL’s Steve Case and RBS’s Fred Goodwin

The corollary of hubris is sloppy financing, another attribute of top-of-the-market megaflops. This is particularly true at the tail end of bull markets

as with many M&A deals, deteriorating markets can turn a flawed acquisition into a disaster. That possibility must haunt Mr Musk. The digital-advertising market on which Twitter depends has crumbled. Tesla’s own shares, the source of most of his wealth, have lost a third of their value since he made the bid (don’t cry for him, he is still worth $220bn). The deal financing includes $13bn of high-risk debt and spreads on this kind of instrument have soared

the repercussions are likely to be troubling. Either banks are stuck with hard-to-sell debt and suffer hefty losses or, in the unlikely event that they abandon the deal, a superhero of 21st-century capitalism faces a $44bn day of reckoning

Finally there is strategy. In Mr Bruner’s analysis, the worst M&A deals are done when the target is in an industry far beyond the acquirer’s “domain knowledge”. That is surely true of Mr Musk and Twitter

it also has a hellish side. It could pit the world’s most powerful businessman against tech regulators. It could stir up trouble geopolitically (imagine a reinstated Donald Trump weighing in, as Mr Musk has done, on Russia and Ukraine). And it could enrage China, thwarting Tesla’s prospects there. Another deal for the history books, no doubt

“Security and privacy have long been top companywide priorities at Twitter,” said Twitter spokeswoman Rebecca Hahn. She said that Zatko’s allegations appeared to be “riddled with inaccuracies” and that Zatko “now appears to be opportunistically seeking to inflict harm on Twitter, its customers, and its shareholders.” Hahn said that Twitter fired Zatko after 15 months “for poor performance and leadership.” Attorneys for Zatko confirmed he was fired but denied it was for performance or leadership.

the whistleblower document alleges the company prioritized user growth over reducing spam, though unwanted content made the user experience worse. Executives stood to win individual bonuses of as much as $10 million tied to increases in daily users, the complaint asserts, and nothing explicitly for cutting spam.

Chief executive Parag Agrawal was “lying” when he tweeted in May that the company was “strongly incentivized to detect and remove as much spam as we possibly can,” the complaint alleges.

Zatko described his decision to go public as an extension of his previous work exposing flaws in specific pieces of software and broader systemic failings in cybersecurity. He was hired at Twitter by former CEO Jack Dorsey in late 2020 after a major hack of the company’s systems.

“I felt ethically bound. This is not a light step to take,” said Zatko, who was fired by Agrawal in January. He declined to discuss what happened at Twitter, except to stand by the formal complaint. Under SEC whistleblower rules, he is entitled to legal protection against retaliation, as well as potential monetary rewards.

A person familiar with Zatko’s tenure said the company investigated Zatko’s security claims during his time there and concluded they were sensationalistic and without merit. Four people familiar with Twitter’s efforts to fight spam said the company deploys extensive manual and automated tools to both measure the extent of spam across the service and reduce it.

In 1998, Zatko had testified to Congress that the internet was so fragile that he and others could take it down with a half-hour of concentrated effort. He later served as the head of cyber grants at the Defense Advanced Research Projects Agency, the Pentagon innovation unit that had backed the internet’s invention.

Overall, Zatko wrote in a February analysis for the company attached as an exhibit to the SEC complaint, “Twitter is grossly negligent in several areas of information security. If these problems are not corrected, regulators, media and users of the platform will be shocked when they inevitably learn about Twitter’s severe lack of security basics.”

Zatko’s complaint says strong security should have been much more important to Twitter, which holds vast amounts of sensitive personal data about users. Twitter has the email addresses and phone numbers of many public figures, as well as dissidents who communicate over the service at great personal risk.

This month, an ex-Twitter employee was convicted of using his position at the company to spy on Saudi dissidents and government critics, passing their information to a close aide of Crown Prince Mohammed bin Salman in exchange for cash and gifts.

Zatko’s complaint says he believed the Indian government had forced Twitter to put one of its agents on the payroll, with access to user data at a time of intense protests in the country. The complaint said supporting information for that claim has gone to the National Security Division of the Justice Department and the Senate Select Committee on Intelligence. Another person familiar with the matter agreed that the employee was probably an agent.

“Take a tech platform that collects massive amounts of user data, combine it with what appears to be an incredibly weak security infrastructure and infuse it with foreign state actors with an agenda, and you’ve got a recipe for disaster,” Charles E. Grassley (R-Iowa), the top Republican on the Senate Judiciary Committee,

Many government leaders and other trusted voices use Twitter to spread important messages quickly, so a hijacked account could drive panic or violence. In 2013, a captured Associated Press handle falsely tweeted about explosions at the White House, sending the Dow Jones industrial average briefly plunging more than 140 points.

After a teenager managed to hijack the verified accounts of Obama, then-candidate Joe Biden, Musk and others in 2020, Twitter’s chief executive at the time, Jack Dorsey, asked Zatko to join him, saying that he could help the world by fixing Twitter’s security and improving the public conversation, Zatko asserts in the complaint.

The complaint — filed last month with the Securities and Exchange Commission and the Department of Justice, as well as the FTC — says thousands of employees still had wide-ranging and poorly tracked internal access to core company software, a situation that for years had led to embarrassing hacks, including the commandeering of accounts held by such high-profile users as Elon Musk and former presidents Barack Obama and Donald Trump.

But at Twitter Zatko encountered problems more widespread than he realized and leadership that didn’t act on his concerns, according to the complaint.

Twitter’s difficulties with weak security stretches back more than a decade before Zatko’s arrival at the company in November 2020. In a pair of 2009 incidents, hackers gained administrative control of the social network, allowing them to reset passwords and access user data. In the first, beginning around January of that year, hackers sent tweets from the accounts of high-profile users, including Fox News and Obama.

Several months later, a hacker was able to guess an employee’s administrative password after gaining access to similar passwords in their personal email account. That hacker was able to reset at least one user’s password and obtain private information about any Twitter user.

Twitter continued to suffer high-profile hacks and security violations, including in 2017, when a contract worker briefly took over Trump’s account, and in the 2020 hack, in which a Florida teen tricked Twitter employees and won access to verified accounts. Twitter then said it put additional safeguards in place.

This year, the Justice Department accused Twitter of asking users for their phone numbers in the name of increased security, then using the numbers for marketing. Twitter agreed to pay a $150 million fine for allegedly breaking the 2011 order, which barred the company from making misrepresentations about the security of personal data.

After Zatko joined the company, he found it had made little progress since the 2011 settlement, the complaint says. The complaint alleges that he was able to reduce the backlog of safety cases, including harassment and threats, from 1 million to 200,000, add staff and push to measure results.

But Zatko saw major gaps in what the company was doing to satisfy its obligations to the FTC, according to the complaint. In Zatko’s interpretation, according to the complaint, the 2011 order required Twitter to implement a Software Development Life Cycle program, a standard process for making sure new code is free of dangerous bugs. The complaint alleges that other employees had been telling the board and the FTC that they were making progress in rolling out that program to Twitter’s systems. But Zatko alleges that he discovered that it had been sent to only a tenth of the company’s projects, and even then treated as optional.

“If all of that is true, I don’t think there’s any doubt that there are order violations,” Vladeck, who is now a Georgetown Law professor, said in an interview. “It is possible that the kinds of problems that Twitter faced eleven years ago are still running through the company.”

“Agrawal’s Tweets and Twitter’s previous blog posts misleadingly imply that Twitter employs proactive, sophisticated systems to measure and block spam bots,” the complaint says. “The reality: mostly outdated, unmonitored, simple scripts plus overworked, inefficient, understaffed, and reactive human teams.”

One current and one former employee recalled that incident, when failures at two Twitter data centers drove concerns that the service could have collapsed for an extended period. “I wondered if the company would exist in a few days,” one of them said.

The current and former employees also agreed with the complaint’s assertion that past reports to various privacy regulators were “misleading at best.”

For example, they said the company implied that it had destroyed all data on users who asked, but the material had spread so widely inside Twitter’s networks, it was impossible to know for sure

As the head of security, Zatko says he also was in charge of a division that investigated users’ complaints about accounts, which meant that he oversaw the removal of some bots, according to the complaint. Spam bots — computer programs that tweet automatically — have long vexed Twitter. Unlike its social media counterparts, Twitter allows users to program bots to be used on its service: For example, the Twitter account @big_ben_clock is programmed to tweet “Bong Bong Bong” every hour in time with Big Ben in London. Twitter also allows people to create accounts without using their real identities, making it harder for the company to distinguish between authentic, duplicate and automated accounts.

In the complaint, Zatko alleges he could not get a straight answer when he sought what he viewed as an important data point: the prevalence of spam and bots across all of Twitter, not just among monetizable users.

Zatko cites a “sensitive source” who said Twitter was afraid to determine that number because it “would harm the image and valuation of the company.” He says the company’s tools for detecting spam are far less robust than implied in various statements.

The complaint also alleges that Zatko warned the board early in his tenure that overlapping outages in the company’s data centers could leave it unable to correctly restart its servers. That could have left the service down for months, or even have caused all of its data to be lost. That came close to happening in 2021, when an “impending catastrophic” crisis threatened the platform’s survival before engineers were able to save the day, the complaint says, without providing further details.

The four people familiar with Twitter’s spam and bot efforts said the engineering and integrity teams run software that samples thousands of tweets per day, and 100 accounts are sampled manually.

Some employees charged with executing the fight agreed that they had been short of staff. One said top executives showed “apathy” toward the issue.

Zatko’s complaint likewise depicts leadership dysfunction, starting with the CEO. Dorsey was largely absent during the pandemic, which made it hard for Zatko to get rulings on who should be in charge of what in areas of overlap and easier for rival executives to avoid collaborating, three current and former employees said.

For example, Zatko would encounter disinformation as part of his mandate to handle complaints, according to the complaint. To that end, he commissioned an outside report that found one of the disinformation teams had unfilled positions, yawning language deficiencies, and a lack of technical tools or the engineers to craft them. The authors said Twitter had no effective means of dealing with consistent spreaders of falsehoods.

Dorsey made little effort to integrate Zatko at the company, according to the three employees as well as two others familiar with the process who spoke on the condition of anonymity to describe sensitive dynamics. In 12 months, Zatko could manage only six one-on-one calls, all less than 30 minutes, with his direct boss Dorsey, who also served as CEO of payments company Square, now known as Block, according to the complaint. Zatko allegedly did almost all of the talking, and Dorsey said perhaps 50 words in the entire year to him. “A couple dozen text messages” rounded out their electronic communication, the complaint alleges.

Faced with such inertia, Zatko asserts that he was unable to solve some of the most serious issues, according to the complaint.

Some 30 percent of company laptops blocked automatic software updates carrying security fixes, and thousands of laptops had complete copies of Twitter’s source code, making them a rich target for hackers, it alleges.

A successful hacker takeover of one of those machines would have been able to sabotage the product with relative ease, because the engineers pushed out changes without being forced to test them first in a simulated environment, current and former employees said.

“It’s near-incredible that for something of that scale there would not be a development test environment separate from production and there would not be a more controlled source-code management process,” said Tony Sager, former chief operating officer at the cyberdefense wing of the National Security Agency, the Information Assurance divisio

Sager is currently senior vice president at the nonprofit Center for Internet Security, where he leads a consensus effort to establish best security practices.

The complaint says that about half of Twitter’s roughly 7,000 full-time employees had wide access to the company’s internal software and that access was not closely monitored, giving them the ability to tap into sensitive data and alter how the service worked. Three current and former employees agreed that these were issues.

“A best practice is that you should only be authorized to see and access what you need to do your job, and nothing else,” said former U.S. chief information security officer Gregory Touhill. “If half the company has access to and can make configuration changes to the production environment, that exposes the company and its customers to significant risk.”

The complaint says Dorsey never encouraged anyone to mislead the board about the shortcomings, but that others deliberately left out bad news.

When Dorsey left in November 2021, a difficult situation worsened under Agrawal, who had been responsible for security decisions as chief technology officer before Zatko’s hiring, the complaint says.

An unnamed executive had prepared a presentation for the new CEO’s first full board meeting, according to the complaint. Zatko’s complaint calls the presentation deeply misleading.

The presentation showed that 92 percent of employee computers had security software installed — without mentioning that those installations determined that a third of the machines were insecure, according to the complaint.

Another graphic implied a downward trend in the number of people with overly broad access, based on the small subset of people who had access to the highest administrative powers, known internally as “God mode.” That number was in the hundreds. But the number of people with broad access to core systems, which Zatko had called out as a big problem after joining, had actually grown slightly and remained in the thousands.

The presentation included only a subset of serious intrusions or other security incidents, from a total Zatko estimated as one per week, and it said that the uncontrolled internal access to core systems was responsible for just 7 percent of incidents, when Zatko calculated the real proportion as 60 percent.

Zatko stopped the material from being presented at the Dec. 9, 2021 meeting, the complaint said. But over his continued objections, Agrawal let it go to the board’s smaller Risk Committee a week later.

Agrawal didn’t respond to requests for comment. In an email to employees after publication of this article, obtained by The Post, he said that privacy and security continues to be a top priority for the company, and he added that the narrative is “riddled with inconsistences” and “presented without important context.”

On Jan. 4, Zatko reported internally that the Risk Committee meeting might have been fraudulent, which triggered an Audit Committee investigation.

Agarwal fired him two weeks later. But Zatko complied with the company’s request to spell out his concerns in writing, even without access to his work email and documents, according to the complaint.

Since Zatko’s departure, Twitter has plunged further into chaos with Musk’s takeover, which the two parties agreed to in May. The stock price has fallen, many employees have quit, and Agrawal has dismissed executives and frozen big projects.

Zatko said he hoped that by bringing new scrutiny and accountability, he could improve the company from the outside.

“I still believe that this is a tremendous platform, and there is huge value and huge risk, and I hope that looking back at this, the world will be a better place, in part because of this.”

Part of the enthusiasm behind the sky-high valuation of Tesla, where he is chief executive, comes from his predictions for the auto company’s abilities to develop humanoid robots—dubbed Optimus—that can be deployed for everything from personal assistants to factory workers. He’s also founded an AI startup, dubbed xAI, that he said aims to develop its own superhuman intelligence, even as some are skeptical of that possibility. 

Musk likes to point to another work of Sci-Fi to describe how AI could change our world: a series of books by the late-, self-described-socialist author Iain Banks that revolve around a post-scarcity society that includes superintelligent AI. 

That is the question.

“We’re actually going to have—and already do have—a massive shortage of labor. So, I think we will have not people out of work but actually still a shortage of labor—even in the future.” 

Musk has cast his work to develop humanoid robots as an attempt to solve labor issues, saying there aren’t enough workers and cautioning that low birthrates will be even more problematic. 

Instead, Musk predicts robots will be taking jobs that are uncomfortable, dangerous or tedious. 

A few years ago, Musk declared himself a socialist of sorts. “Just not the kind that shifts resources from most productive to least productive, pretending to do good, while actually causing harm,” he tweeted. “True socialism seeks greatest good for all.”

“It’s fun to cook food but it’s not that fun to wash the dishes,” Musk said this month. “The computer is perfectly happy to wash the dishes.”

In the near term, Goldman Sachs in April estimated generative AI could boost the global gross domestic product by 7% during the next decade and that roughly two-thirds of U.S. occupations could be partially automated by AI. 

Vinod Khosla, a prominent venture capitalist whose firm has invested in the technology, predicted within a decade AI will be able to do “80% of 80%” of all jobs today.

“I believe the need to work in society will disappear in 25 years for those countries that adapt these technologies,” Khosla said. “I do think there’s room for universal basic income assuring a minimum standard and people will be able to work on the things they want to work on.” 

Forget universal basic income. In Musk’s world, he foresees something more lush, where most things will be abundant except unique pieces of art and real estate. 

“We won’t have universal basic income, we’ll have universal high income,” Musk said this month. “In some sense, it’ll be somewhat of a leveler or an equalizer because, really, I think everyone will have access to this magic genie.” 

All of which kind of sounds a lot like socialism—except it’s unclear who controls the resources in this Muskism society

“Digital super intelligence combined with robotics will essentially make goods and services close to free in the long term,” Musk said

“What is an economy? An economy is GDP per capita times capita.” Musk said at a tech conference in France this year. “Now what happens if you don’t actually have a limit on capita—if you have an unlimited number of…people or robots? It’s not clear what meaning an economy has at that point because you have an unlimited economy effectively.”

In theory, humanity would be freed up for other pursuits. But what? Baby making. Bespoke cooking. Competitive human-ing. 

“Obviously a machine can go faster than any human but we still have humans race against each other,” Musk said. “We still enjoy competing against other humans to, at least, see who was the best human.”

Still, even as Musk talks about this future, he seems to be grappling with what it might actually mean in practice and how it is at odds with his own life. 

“If I think about it too hard, it, frankly, can be dispiriting and demotivating, because…I put a lot of blood, sweat and tears into building companies,” he said earlier this year. “If I’m sacrificing time with friends and family that I would prefer but then ultimately the AI can do all these things, does that make sense?”“To some extent,” Musk concluded, “I have to have a deliberate suspension of disbelief in order to remain motivated.”

Then, in March 2022, the Fed changed course, first tightening the money supply by increasing the federal-funds rate and then introducing quantitative tightening. Between July 2022 and August 2023, the M2 supply contracted by 3.9%, the most extreme contraction since 1933.

The first factor contributing to the contraction of the money supply is the Fed’s quantitative tightening

Quantitative tightening has already produced a dramatic selloff in the bond market. But just as they did ahead of the September 2019 crunch in the repurchase-agreement market, Fed officials keep repeating their mistaken mantras that quantitative tightening can operate “in the background” and “on autopilot,” implying minimal market effect

But basic balance-sheet accounting shows that unless commercial banks are creating enough “new money” through their lending activity to offset the Fed’s balance-sheet shrinkage, quantitative tightening has a contractionary effect on the money supply.

The second factor contributing to shrinking M2 is the decreased availability of commercial bank credit—the sum of loans and bank holdings of securities. With the steep rise in rates, bank lending has slowed, and banks have been selling off securities.

This brings us to the stock-market crash of 1987. In that year the key 10-year bond yield rose steeply from January onward (from 7% in January to 10% by Black Monday in October) and the money supply slowed sharply.

In 1987 growth of M2 declined by almost half, from 9.7% year-on-year in January to 4.9% in September, while M3—no longer published by the Fed—slowed from 8.7% to 3.6% over the same period

A bond-market crunch and monetary squeeze together led to a sudden, drastic reassessment of equity-market valuations. The same could happen today, particularly since the current jump in bond yields and monetary squeeze are much more pronounced than in 1987.

So far, only the remaining excess money the Fed created between 2020 and 2021—the cumulative excess savings from the Covid handouts—has been keeping businesses hiring and consumers spending. The effects of the excess money are still giving the economy a lift, but that extra fuel is almost exhausted. When it dries up, the economy will run on fumes.

In all of this, an appreciation for time lags is critical. The Fed ignored the huge acceleration in the quantity of money and thus failed to anticipate the ensuing inflation. When inflation struck in early 2021, Fed officials tried to argue it was “transitory,” caused by supply-chain disruptions.

The Fed continues to ignore the money supply, and we now face the opposite problem. The money supply has been contracting for 18 months, and soon, after the overhanging extra money from 2020-21 has been used up, spending will plunge and inflation will fall, not simply to 2%, but below—and perhaps even into deflation in 2025.

Since Fed officials pay no attention to either monetary aggregates or their credit counterparts, they are overlooking these signals

Monetary analysis tells a very different story than the measures the Fed follows. The first effect of a monetary contraction is higher market interest rates for a brief period. Then comes an economic slump. The economy goes into recession and inflation falls. This results in a second and more permanent effect of subpar money growth, namely lower interest rates and a weaker currency.

So fear creates recessions in the long run — and if we continue to have rising fear, the probability of a European recession grows and the probability of a US recession grows. Geopolitics is playing a bigger role in everyone’s equations.”

Geopolitical risk is a major component in shaping all our lives. We are having rising fear throughout the world, and less hope. Rising fear creates a withdrawal from consumption or spending more.

“When the Russian invasion occurred in Ukraine, we said that the peace dividend is over,” Larry Fink, chief executive of investment giant BlackRock, told The Sunday Times. “Now, with the instability in the Middle East, we’re going to almost a whole new future.

Dimon noted that inflation had “levelled off a little bit” overall, but said: “It’s not clear to me that long-term forces are not inflationary … And that’s why I’m saying rates could possibly go up from here. That’s life in the fast lane.”

Higher borrowing costs have started to hit debt-fuelled sectors that boomed in the zero-rates era — such as commercial property, where $80 billion (£65 billion) of assets across the US are in some form of financial distress, according to MSCI, and private equity.

[the legendary investor] Warren Buffett says you see who’s swimming naked when the tide goes out. Not everyone is really ready for 6 or 7 per cent rates, but I wouldn’t rule them out.”

Fink pointed out that the transmission of rate rises into the US economy was less direct than in the UK

“I’m a fundamental believer that we’re going to have higher inflation for longer, and it’s going to require the [Fed] to raise rates higher — probably one or two more tightenings — and that will ultimately be the way we get into recession.”

Many senior figures on Wall Street worry about the US government’s ability to finance itself in the medium term. As in the UK, the market for government debt was underpinned by huge waves of quantitative easing (QE) after the financial crisis, as the Federal Reserve, in effect, bought assets including Treasuries to boost the economy. Following a revival of the programme during Covid, it came to an end in March last year.

The withdrawal of QE, combined with lacklustre appetite for Treasuries among US banks and international investors such as China, could force the government to pay higher prices at a time of near-record borrowing.

“It might be a 20km headwind right now, but next year it’s going to be 25km and it’s going to grow,” a top investor said of the decreasing international demand for US government debt.

US stock market floats and fundraisings, the heartbeat of capital markets, slumped to their lowest level since 1998 last year as the spike in interest rates punctured valuations of growth stocks in sectors such as tech and healthcare.

The cautious mood on Wall Street comes against a backdrop of surprisingly strong US growth. The economy expanded by an astonishing 4.9 per cent in the third quart

the Biden administration is shovelling stimulus into the system via big pieces of legislation promising to accelerate America’s adoption of renewables, rebuild its advanced semiconductor industry and increase its spending on roads, bridges and broadband.

We have huge stimulus,” said Fink. “People are not factoring in the Inflation Reduction Act, the Chips Act and the Infrastructure Act, which are about $970 billion of stimulus. Those are the largest stimuluses ever when there’s not a pandemic or a financial crisis ... And it’s at a time when you can have unions win a 25 per cent labour increase … These are very inflationary, whether it’s the fiscal stimulus or these wage increases.”

It all comes back to that word. Unexpectedly high growth, massive government stimulus and now two wars that threaten to spill out into broader crises — it all spells inflation. The flurry of hope in markets that Fed and the Bank of England have reached the top of their rate-raising cycles may yet prove premature

Continued hype is necessary for the industry, because so much money flowing in essentially allows the big players, like OpenAI, to operate free of economic worry and considerations

The money involved is staggering—Anthropic announced they would compete with OpenAI and raised 2 billion dollars to train their next-gen model, a European counterpart just raised 500 million, etc. Venture capitalists are eager to throw as much money as humanely possible into AI, as it looks so revolutionary, so manifesto-worthy, so lucrative.

While I have no idea what the downloads are going to be for the GPT Store next year, my suspicion is it does not live up to the hyped Apple-esque expectation.

given their test scores, I’m willing to say GPT-4 or Gemini is smarter along many dimensions than a lot of actual humans, at least in the breadth of their abstract knowledge—all while noting even leading models still have around a 3% hallucination rate, which stacks up in a complex task.

A more interesting “bear case” for AI is that, if you look at the list of industries that leading AIs like GPT-4 are capable of disrupting—and therefore making money off of—the list is lackluster from a return-on-investment perspective, because the industries themselves are not very lucrative.

What are AIs of the GPT-4 generation best at? It’s things like:writing essays or short fictionsdigital artchattingprogramming assistance

While I personally wouldn’t go so far as to describe current LLMs as “a solution in search of a problem” like cryptocurrency has famously been described as, I do think the description rings true in an overall economic/business sense so fa

The issue is that taking the job of a human illustrator just. . . doesn’t make you much money. Because human illustrators don’t make much money

While you can easily use Dall-E to make art for a blog, or a comic book, or a fantasy portrait to play an RPG, the market for those things is vanishingly small, almost nonexistent

As of this writing, the compute cost to create an image using a large image model is roughly $.001 and it takes around 1 second. Doing a similar task with a designer or a photographer would cost hundreds of dollars (minimum) and many hours or days (accounting for work time, as well as schedules). Even if, for simplicity’s sake, we underestimate the cost to be $100 and the time to be 1 hour, generative AI is 100,000 times cheaper and 3,600 times faster than the human alternative.

Like, wow, an AI that can write a Reddit comment! Well, there are millions of Reddit comments, which is precisely why we now have AIs good at writing them. Wow, an AI that can generate music! Well, there are millions of songs, which is precisely why we now have AIs good at creating them.

Search is the most obvious large market for AI companies, but Bing has had effectively GPT-4-level AI on offer now for almost a year, and there’s been no huge steal from Google’s market share.

What about programming? It’s actually a great expression of the issue, because AI isn’t replacing programming—it’s replacing Stack Overflow, a programming advice website (after all, you can’t just hire GPT-4 to code something for you, you have to hire a programmer who uses GPT-4

Even if OpenAI drove Stack Overflow out of business entirely and cornered the market on “helping with programming” they would gain, what? Stack Overflow is worth about 1.8 billion, according to its last sale in 2022. OpenAI already dwarfs it in valuation by an order of magnitude.

The more one thinks about this, one notices a tension in the very pitch itself: don’t worry, AI isn’t going to take all our jobs, just make us better at them, but at the same time, the upside of AI as an industry is the total combined worth of the industries its replacing, er, disrupting, and this justifies the massive investments and endless economic optimism.

It makes me worried about the worst of all possible worlds: generative AI manages to pollute the internet with cheap synthetic data, manages to make being a human artist / creator harder, manages to provide the basis of agential AIs that still pose some sort of existential risk if they get intelligent enough—all without ushering in some massive GDP boost that takes us into utopia

If the AI industry ever goes through an economic bust sometime in the next decade I think it’ll be because there are fewer ways than first thought to squeeze substantial profits out of tasks that are relatively commonplace already

We can just look around for equivalencies. The payment for humans working as “mechanical turks” on Amazon are shockingly low. If a human pretending to be an AI (which is essentially what a mechanical turk worker is doing) only makes a buck an hour, how much will an AI make doing the same thing?

, is it just a quirk of the current state of technology, or something more general?

What’s written on the internet is a huge “high quality” training set (at least in that it is all legible and collectable and easy to parse) so AIs are very good at writing the kind of things you read on the internet

But data with a high supply usually means its production is easy or commonplace, which, ceteris paribus, means it’s cheap to sell in turn. The result is a highly-intelligent AI merely adding to an already-massive supply of the stuff it’s trained on.

Was there really a great crying need for new ways to cheat on academic essays? Probably not. Will chatting with the History Buff AI app (it was is in the background of Sam Altman’s presentation) be significantly different than chatting with posters on /r/history on Reddit? Probably not

Call it the supply paradox of AI: the easier it is to train an AI to do something, the less economically valuable that thing is. After all, the huge supply of the thing is how the AI got so good in the first place.

AI might end up incredibly smart, but mostly at things that aren’t economically valuable.

More than one million people have died from Covid, a once unimaginable figure

An increase in drug deaths, combined with Covid, has led overall life expectancy in America to decline to a degree not seen since World War II.

Police killings of unarmed Black men continue long past vows for reform.

“You can’t underestimate the need for belonging,” she said. When something terrible happens, people want to connect with their “in-group,” she said, where they feel they belong, which can push people further into partisan camps.

Rabbi Mychal B. Springer, the manager of clinical pastoral education at NewYork-Presbyterian Hospital, has found herself returning to an ancient Jewish writing in the Mishnah, which says that when God began creating, God created a single person.

“The teaching is, each person is so precious that the whole world is contained in that person, and we have to honor that person completely and fully,” she said. “If a single person dies, the whole world dies, and if a single person is saved, then the whole world is saved.”

We can only value life if we are willing to truly grieve, to truly face the reality of suffering

“It’s not that we don’t care. We’ve reached the limit of how much we can cry and hurt,” she said. “And yet we have to. We have to value each life as a whole world, and be willing to cry for what it means that that whole world has been lost.”

The mountain of calamities, and the paralysis over how to overcome it, points to a nation struggling over some fundamental questions: Has our tolerance as a country for such horror grown, dusting off after one event before moving on to the next? How much value do we place in a single human life?

Valuing life and working for healing means going outside of one’s self, and one’s own group, she said.

“This will require collective action,” she said. “And part of the problem is we are very divided right now.”

American culture often prizes individual liberty above collective needs. But ultimately humans are born to care about others and to not turn away,

“Human beings are born for meaning,” she said. “We have very, very large souls. We are born for generosity, we are born for compassion.”

What is standing in the way of a proper valuation of life, she said, is “our very, very disordered relationship with death.”

n the United States, denial of death has reached an extreme form, she said, where many focus on themselves to avoid the fear of death.

That fear cuts through “all tendrils of conscience, and common good, and capacity to act together,” she said, “because in the final analysis we have become animals saving our own skin, the way we seem to save our own skin is repression and dissociation.”

The United States is an outlier in the level of gun violence it tolerates. The rate and severity of mass shootings is without parallel in the world outside conflict zones.America has “a love affair with violence,”

Violence is an almost a normal part of life in the United States, she said, and valuing life takes consistently asking how am I committed to nonviolence today? It also means giving some things up, she said — many people think of themselves as nonviolent, but consume violence in entertainment.

“The question that should scare us is, what will it take to make us collectively bring about this change?

“Maybe this is our life’s work,” she said. “Maybe this is our work as humans.”

“But when I slow down I realize there is something alive in our culture that has harmed those people,” she said. “Whatever that something is, it is harming all of us, we are all vulnerable to it, it wields some sort of influence upon us, no matter who we are.”

WeRide has a valuation of $4.4 billion, according to CB Insights, with backers such as Nissan and Qiming Venture Partners. WeRide operates robotaxis and robobuses in parts of the southern city of Guangzhou, where it’s also testing self-driving street sweepers.

“Because Bosch is in charge of integration, we have to really spend 120% of our time to help Bosch with the integration and adaptation work,” Han said. WeRide has yet to go public.

picks for autonomous driving include ArcSoft and Desay SV.An outsourcing business model in China gives independent software vendors more opportunities than in the United States, where software is developed in-house at companies like Tesla, the analysts said. Beijing also plans to have L3 vehicles in mass production by 2025.“Auto OEMs are investing significantly in car software/digitalization to 2025, targeting US$20bn+ of obtainable software revenue by decade-end,” the Goldman analysts wrote in mid-March.

They estimate that for every car, the value of software within will rise from $202 each for L0 cars to $4,957 for L4 cars in 2030. For comparison, the battery component costs at least $5,000 today. By that calculation, the market for advanced driver assistance systems and autonomous driving software is set to surge from $2.4 billion in 2021 to $70 billion in 2030 — with China accounting for about a third, the analysts predict.

Mr. Bogle has some hard news for investors. The basic appeal of index funds—their ability to deliver the market return without shifting an arm and leg to Wall Street’s army of helpers—will only become more important given the decade of depressed returns he sees ahead.

Don’t imagine a revisitation of the ’80s or ’90s, when stocks returned 18% a year and investors, after the industry’s rake-off, imagined they “had the greatest manager in the world” because they got 14%. Those planning on a comfy retirement or putting a kid through college will have to save more, work to keep costs low, and—above all—stick to the plan.

The mutual-fund industry is slowly liquidating itself—except for Vanguard. Mr. Bogle happily supplies the numbers: During the 12 months that ended May 31, “the fund industry took in $87 billion . . . of which $224 billion came into Vanguard.” In other words, “in the aggregate, our competitors experienced capital outflows of $137 billion.”

That said, Mr. Bogle finds today’s stock scene puzzling. Shares are highly priced in historical terms; earnings and economic growth he expects to disappoint for at least the next decade (he sees no point in trying to forecast further). And yet he advises investors to stay invested and weather the storm: “If we’re going to have lower returns, well, the worst thing you can do is reach for more yield. You just have to save more.”

He also knows the heartache of having just about everything he has saved tied up in volatile, sometimes irrational markets, especially now. “We’re in a difficult place,” he says. “We live in an extremely risky world—probably more risky than I can recall.”

Then why invest at all? Maybe it would be better to sell and stick the cash in a bank or a mattress. “I know of no better way to guarantee you’ll have nothing at the end of the trail,” he responds. “So we know we have to invest. And there’s no better way to invest than a diversified list of stocks and bonds at very low cost.”

Mr. Bogle’s own portfolio consists of 50% stocks and 50% bonds, the latter tilted toward short- and medium-term. Keep an eagle eye on costs, he says, in a world where pre-cost returns may be as low as 3% or 4%. Inattentive investors can expect to lose as much as 70% of their profits to “hidden” fund management costs in addition to the “expense ratios” touted in mutual-fund prospectuses. (These hidden costs include things like sales load, transaction costs, idle cash and inefficient taxes.)

Mr. Bogle relies on a forecasting model he published 25 years ago, which tells him that investors over the next decade, thanks largely to a reversion to the mean in valuations, will be lucky to clear 2% annually after costs. Yuck.

Investing, he says, always is “an act of trust—in the ability of civilization and the U.S. to continue to flourish; in the ability of corporations to continue, through efficiency and entrepreneurship and innovation, to provide substantial returns.” But nothing, not even American greatness, is guaranteed, he adds

what he calls the financial buccaneer type, an entrepreneur more interested in milking what’s left of the active-management-fee gravy train than in providing low-cost competition for Vanguard—which means Vanguard’s best days as guardian of America’s nest egg may still lie ahead.

the growth of indexing is obviously unwelcome writing on the wall for Wall Street professionals and Vanguard’s profit-making competitors like Fidelity, which have never been able to give heart and soul to low-churn indexing because indexing doesn’t generate large fees for executives and shareholders of management companies.

China’s technocrats have, to date, demonstrated competence in managing the economy’s imbalances.

Mainland China has delivered significant extra returns -- 87 basis points a year more than the mighty S&P -- for anyone willing to hack the wild volatility

“On balance,” Adam sums up, “If you want to be part of history-making economic transformation, China is still the place to be.”

The third point is where we disagree. We just don’t see China as having any good options for maintaining strong growth. 

we think China’s underlying growth story is coming to an end as the country’s economic imbalances become unsustainable and global decoupling picks up steam. The volatility and low valuations, on the other hand, are likely here to stay. 

Replace bad investment with domestic consumption. 

What imbalances are we talking about? In crude summary, China’s growth has been driven by debt-funded investment, especially in property and infrastructure. The problem is that the returns on these investments are in fast decline, even as debt continues to build up.

This can’t go on forever. Eventually, you have all the bridges, trains, airports and apartment blocks you need, and the return on new ones falls below zero (How do you know that you have arrived at that point? When you have a financial crisis).

The problem is that without a healthy consumer, China’s only real options to create growth are investment and exports -- and at the same time as return on internal investments are declining, the rest of the world, led by the US, are increasingly wary of dependence on Chinese exports. 

What are China’s policy options? Broadly, there are five, as Micheal Pettis explained to us:

Stay with the current model.

Replace bad investment in things like infrastructure and real estate with good investment in things like tech and healthcare.

Beijing has policy options.

Replace bad investment with (even) move exports and a wider current account surplus.

Just quit it with the bad investment. 

we think that options 1 and 5 are not really options at all. The current model will lead to a financial crisis as return on investment falls further and further behind the costs of debt. Simply ceasing to overinvest in infrastructure and real estate, without changing anything else, will simply kill growth. 

Option 2 might be summed up -- as Jason Hsu of Ralient Global Advisors summed it up to us -- as China becoming more like Germany.

The idea is that China would steer more and more money away from real estate and towards high value-add sectors from biotech to chip manufacturing. 

The problem with option 2 is that investment is such a huge part of the Chinese economy that it is difficult to see how that the capital could be efficiently allocated to the country's tech-heavy, high value-add sectors, which are comparatively small

The most promising Chinese firms are swimming in capital as it is. And developing productive capacity isn't just about capital. It takes things the state can't rapidly deploy, like knowhow and intellectual property.

Option 3 is more promising. China could start, as Adam suggests, by building up a proper welfare safety net. But it is reasonable to expect pretty serious social and institutional resistance to this sort of mass redistribution.

why hasn’t China increased its welfare state until now? Longtime China watcher and friend of Unhedged George Magnus suggests it is because of a deep bias in the Chinese policy establishment. “It’s how Leninist systems operate: they think production and supply are everything … if you see a demand problem as a supply problem, you get the wrong answers.”

Option 4, increasing exports’ share of China’s economy even further, may be in the abstract the most appealing. But it runs directly into the fact that both China and the US and its allies have reasons to reduce mutual dependence on their economies.

The emergence of geopolitical divisions between the west, on the one hand, and Russia and China, on the other, will put globalisation at risk. The autocracies will try to reduce their dependence on western currencies and financial markets. Both they and the west will try to reduce their reliance on trade with adversaries. Supply chains will shorten and regionalise… 

Russia must remain a pariah so long as this vile regime survives. But we will also have to devise a new relationship with China. We must still co-operate. Yet we can no longer rely upon this rising giant for essential goods. We are in a new world. Economic decoupling will now surely become deep and irreversible.

In all, the most likely scenario is that China’s growth just keeps slowing. That does not mean that investors in China will necessarily lose money. But it does suggest that generic China exposure -- simply owning Chinese equity or credit indices -- is going to be a losing proposition in the long-term

AIs like ChatGPT rapidly got better in their early days, but what we’ve seen in the past 14-and-a-half months are only incremental gains, says Marcus. “The truth is, the core capabilities of these systems have either reached a plateau, or at least have slowed down in their improvement,” he adds.

the gaps between the performance of various AI models are closing. All of the best proprietary AI models are converging on about the same scores on tests of their abilities, and even free, open-source models, like those from Meta and Mistral, are catching up.

models work by digesting huge volumes of text, and it’s undeniable that up to now, simply adding more has led to better capabilities. But a major barrier to continuing down this path is that companies have already trained their AIs on more or less the entire internet, and are running out of additional data to hoover up. There aren’t 10 more internets’ worth of human-generated content for today’s AIs to inhale.

A mature technology is one where everyone knows how to build it. Absent profound breakthroughs—which become exceedingly rare—no one has an edge in performance

companies look for efficiencies, and whoever is winning shifts from who is in the lead to who can cut costs to the bone. The last major technology this happened with was electric vehicles, and now it appears to be happening to AI.

the future for AI startups—like OpenAI and Anthropic—could be dim.

Microsoft and Google will be able to entice enough users to make their AI investments worthwhile, doing so will require spending vast amounts of money over a long period of time, leaving even the best-funded AI startups—with their comparatively paltry warchests—unable to compete.

Many other AI startups, even well-funded ones, are apparently in talks to sell themselves.

the bottom line is that for a popular service that relies on generative AI, the costs of running it far exceed the already eye-watering cost of training it.

That difference is alarming, but what really matters to the long-term health of the industry is how much it costs to run AIs. 

Changing people’s mindsets and habits will be among the biggest barriers to swift adoption of AI. That is a remarkably consistent pattern across the rollout of all new technologies.

the industry spent $50 billion on chips from Nvidia to train AI in 2023, but brought in only $3 billion in revenue.

For an almost entirely ad-supported company like Google, which is now offering AI-generated summaries across billions of search results, analysts believe delivering AI answers on those searches will eat into the company’s margins

Google, Microsoft and others said their revenue from cloud services went up, which they attributed in part to those services powering other company’s AIs. But sustaining that revenue depends on other companies and startups getting enough value out of AI to justify continuing to fork over billions of dollars to train and run those systems

three in four white-collar workers now use AI at work. Another survey, from corporate expense-management and tracking company Ramp, shows about a third of companies pay for at least one AI tool, up from 21% a year ago.

OpenAI doesn’t disclose its annual revenue, but the Financial Times reported in December that it was at least $2 billion, and that the company thought it could double that amount by 2025. 

That is still a far cry from the revenue needed to justify OpenAI’s now nearly $90 billion valuation

the company excels at generating interest and attention, but it’s unclear how many of those users will stick around. 

AI isn’t nearly the productivity booster it has been touted as

While these systems can help some people do their jobs, they can’t actually replace them. This means they are unlikely to help companies save on payroll. He compares it to the way that self-driving trucks have been slow to arrive, in part because it turns out that driving a truck is just one part of a truck driver’s job.

Add in the myriad challenges of using AI at work. For example, AIs still make up fake information,

getting the most out of open-ended chatbots isn’t intuitive, and workers will need significant training and time to adjust.

That’s because AI has to think anew every single time something is asked of it, and the resources that AI uses when it generates an answer are far larger than what it takes to, say, return a conventional search result

None of this is to say that today’s AI won’t, in the long run, transform all sorts of jobs and industries. The problem is that the current level of investment—in startups and by big companies—seems to be predicated on the idea that AI is going to get so much better, so fast, and be adopted so quickly that its impact on our lives and the economy is hard to comprehend. 

Mounting evidence suggests that won’t be the case.

“Over 80 technical papers published since January 2022,” LeCun responded. “What about you?”

To which Musk posted: “That’s nothing, you’re going soft. Try harder!

At stake are the hearts and minds of AI experts—academic and otherwise—needed to usher in the technology

“Join xAI,” LeCun wrote, “if you can stand a boss who:– claims that what you are working on will be solved next year (no pressure).– claims that what you are working on will kill everyone and must be stopped or paused (yay, vacation for 6 months!).– claims to want a ‘maximally rigorous pursuit of the truth’ but spews crazy-ass conspiracy theories on his own social platform.”

Some read Musk’s “science” dig as dismissing the role research has played for a generation of AI experts. For years, the Metas and Googles of the world have hired the top minds in AI from universities, indulging their desires to keep a foot in both worlds by allowing them to release their research publicly, while also trying to deploy products. 

For an academic such as LeCun, published research, whether peer-reviewed or not, allowed ideas to flourish and reputations to be built, which in turn helped build stars in the system.

LeCun has been at Meta since 2013 while serving as an NYU professor since 2003. His tweets suggest he subscribes to the philosophy that one’s work needs to be published—put through the rigors of being shown to be correct and reproducible—to really be considered science. 

“If you do research and don’t publish, it’s not Science,” he posted in a lengthy tweet Tuesday rebutting Musk. “If you never published your research but somehow developed it into a product, you might die rich,” he concluded. “But you’ll still be a bit bitter and largely forgotten.”