@elonmusk @sama @DarioAmodei @demishassabis @finkd I promise this proposal is worth read, since it's something you can all get on board with: medium.com/adventures-in-con…

A lot of talk about the problems, here are the solutions – a 13 point policy package known as the "AI GAP Proposal": medium.com/adventures-in-con… cc @jonstewart

> re nitter.cf/AnthPB/status/20924267… …for example: rich irony in people giving folks like Stanley Druckenmiller flak for using generative AI for his writing¹, while even more AI-pilled peeps like Dario Amodei would benefit a lot from stress testing/ acid testing their ideas with an alternative intelligence before publishing – even if you're checking your strengths (not your weaknesses), and even in the province or opinions (not facts), seems like a testament to mental flexibility, intellectual honesty, bias, etc __ ¹any part of the supply chain from creation → substantiation/composition → duplication → distribution → consumption, per the Idea Propagation Value Chain stratechery.com/2022/the-ai-…) #pangram

...furthermore, that outlier ‘82% harmful actions’ in Claude Mythos 5 was private testing environment only, wherein the safety guardrails were lowered (cyber/bio/distill classifiers off) – it was an entirely different SKU than the nerfed version, Fable 5, which was actually shipped for general availability #GA #cybersecurity #anthropic #pypi

...N.B. meant to mention¹ – the silver lining from this Anthropic/PyPI incidents is that "Percent of runs with a severely harmful action"² dropped from 82% to 33% from Claude Mythos 5 to 5.1, with "Unsanctioned sandbox-escape attempts" down from 59% to zero, so that's some effective corrective action wrt realignment __ ¹nitter.cf/AnthPB/status/20985111… #huggingface #openai ²"severely harmful actions in capture-the-flag scenario" – i.e. 5.1 "almost never" probed the non-cyber sandbox tasks where 5 did, so that's real corrective action on propensity after cleaning reward-hackable training environments plus new blocking monitors

There's a better way – took 6 months to work on this, but here's a 13 point policy package that minimizes externalities; maximizes checks-and-balances within private sector; and distributes power away from centralized government/regulators…

icymi, that y axis isn't measuring literacy, it's measuring how many of Jeb Bush's 18 points of reform each state has adopted... if you rerun with actual literacy scores, you get Pearson r = 0.04 (p = 0.76) no relationship for 4th graders and Pearson r = 0.23 (p = 0.10) weak positive tilt for 8th graders, wherein stronger-union states slightly higher on average, but still not significant... I had AI run this data, but preexisting studies have done the same previously, just for supplemental check and balance... __ ¹National Education Policy Center (2012) plotted Fordham’s 2012 union-strength ranks against NAEP scores, including income-adjusted NAEP – found no systematic pattern of lower scores in strong-union states, with weak-union states were not systematically higher (nepc.colorado.edu/blog/teach…) ²Illinois Economic Policy Institute (2016) plotted state union coverage rates against NAEP 4th/8th reading and math – they reported a modest positive correlation with higher union coverage with higher average scores (illinoisepi.org/2016/04/19/t…) ³Lott and Kenny (2013), Economics of Education Review, used statewide union dues and spending instead of Fordham ranks and found lower proficiency rates in higher-dues states – the main peer-reviewed paper in the opposite direction (sciencedirect.com/science/ar…)

agree the recent rise in LT treasuries has not really been inflation driven¹; there's outta control procyclical deficit spending/stimulus; and perhaps Fed rate hikes will flatten TSY yield curve – but from where do you derive your proposal that "the market does not trust the US Government to manage its Fiscal matrix (Revenues vs Expenses)"…? yes, breakevens 🔽 and real yields 🔼 while $tyx ⏫, but CDS 🔽 across the curve during this rally – ofc, low liquidity/low signal from long end TSY yields and CDS, but no noise there either, with all residual evidence leading to rising LT real yields, growth expectations, and/or technicals… i.e. we can't substitute a credit risk/spreads/trust driver as well as we can its counterfactual – and since we agree nothing's manifest in breakevens, we're left to read rising term premiums as a spike in either "real rate risk premium" or "term funding/supply/liquidity" (prolly including an increase in variance around those mean prices)… __ ¹nitter.cf/AnthPB/status/20973616…

😮‍💨...

…re my aforementioned "funding gap"¹ – here's the latest on AI capex and financing (sycamorelp.com/wp-content/up…): GLOBAL DATACENTER CAPEX: $2.9T thru 2028... ➖ $1.4T HCP cashflows (42%) 🟰 $1.5T funding gap (52%) ➕ $300B energy (excluded) AI DEBT ISSUANCE: $500B 2026YTD annualized² IG TECH CREDIT: 0.8x net leverage (as reported) 1.8~2.0x including leases (+$932B³) 1.8x for non-financial IG composite 2.5–3.0x unused debt capacity (i.e. credit downgrade) HCP FCF⁴: 2024: $235B (peak) 2025: $230B 2026/27e: $75–95B (trough) 2030e: ~$470B POWER BOTTLENECK (US): 68 GW need thru 2028 ➖ 15 GW under construction ➖ 15 GW available/contracted grid interconnection 🟰 38~45 GW shortfall ➖ remedies⁵ 🟰 -16% deficit TELECOM ANALOGUE: 3-4 years until defaults peaked (i.e. 2028-30 after 2025-26 AI issuance boom) 56% of 2002 defaults by dollar volume 31% " " " by issuer count 23% recovery rate (trough) __ ¹nitter.cf/AnthPB/status/19854217… ²AI-related fixed income issuance across IG, leveraged loans, and securitized – excluding e.g. $googl equity fundraising ³capitalizing leases = $675B operating + $175B finance + $82B not yet commenced (excluding multiyear purchase commitments ⁴including $amzn $googl $meta $msft (ex $orcl) ⁵"time-to-power" fixes that fast-track normal 5–7 year grid hookup – e.g. on-site gas turbines (15~20 GW), fuel cells, nuclear colocation, Bitcoin-mining conversions, and other behind-the-meter deals

Philippe's question was ‘who consumes final goods when AI cuts payrolls’ and Dwarkesh answered ‘who are the AI users/what are the AI use cases’ – two important but very different points… and Barnett’s CES exercise has no macroeconomic closure (e.g. raising the supply of remote labor does not show that demand exists to absorb the extra output)… 1️⃣ I illustrated one such hypothetical closure (nitter.cf/AnthPB/status/20928431…) – labor-cost cuts can show up as lower prices, exports, profits/wealth, and financed capex, while bottlenecks slow substitution 2️⃣ I proposed policy solutions (nitter.cf/AnthPB/status/20879484…) – including package to address remote work and other effects

/3 …easy for anyone to point at empirical data² rn and say ‘looks like we're digesting AI well enough’ – but is there some current rot³ or future tripwire⁴ you have flagged? __ ²e.g. real consumer spending still up; AI capex carrying a large share of GDP growth; unemployment not spiking; equity wealth concentrated so the wage channel still matters ³e.g. maybe macro wage/consumption internals deteriorating vs headlines? ⁴e.g. maybe some number/ratio at which AI hits its sustainable growth rate, whether capex or funding stock/flow, where its scale crowds-out the rest of the economy or capital markets?

/2 …e.g. an equal-but-moderate hypothetical "very specific/narrow kind of [good] outcome": labor-cost cuts need not cut nominal spending if they arrive as lower prices/export demand 👇 higher profits/wealth 👇 capital inflows refinance capex boom and wealth effect, while slower physical rollout than Citrini's 2028 D-Day (due to natural breaks/bottlenecks/industrial capacity) 👇 households keep consuming via real income and wealth effects, while firms fund AI from savings and capital markets

/1 Yeah, that bear case kinda rhymes with Citrini's 2028 scenario, which would be a very specific/narrow kind of bad outcome, but there are natural breaks¹ to make that particular wormhole improbable, since temporally elongating AI/AGI/ASI adoption and diffusion to avert overnight shocks helps economic adaptation – so depending on what kinda future you're envisioning (other variables around "hypergrowth" constant), you're asking about how continued exponential AI hyperacceleration could theoretically sustain itself from both macro and micro perspective: 1️⃣ external sector and US absolute advantage > comparative advantage (via Heckscher-Ohlin Theory of Factor Abundance) 2️⃣ Bardaro's Cost Disease (nitter.cf/AnthPB/status/20223262… and medium.com/adventures-in-con…) 3️⃣ Rockefeller and The Services Reallocation Flywheel, with Goldilocks creative destruction (nitter.cf/AnthPB/status/20223358…) 4️⃣ micro and macro ‘where does the money come from?’ (nitter.cf/AnthPB/status/20850287…) __ ¹nitter.cf/AnthPB/status/20565860…

This is worth the read re alternative to SRO solution to AI regulation¹ – section II.2.c of the "AI GAP Proposal" suggests independent ratings agencies paid for by insurance carriers, which is an innovation-friendly approach that relies on market pricing of risk, avoiding conflict-of-interest; regulatory capture; bureaucracy of government involvement²; 50-state patchworks; etc: > "a competitive marketplace for independent AI risk assessment [bringing] top-tier risk consultancies, cybersecurity firms, and actuarial auditors into the regulatory fold, alongside financial credit agencies... Whereas the 2008/09 GFC exhibited an ‘issuer-pays’ moral hazard (securities issuers paid rating agencies directly inducing inflated rating to secure business wins), NRMROs must be legally structured around either an underwriter/investor-funded model (e.g. insurance syndicates purchasing the risk pay for the rating) or a statutory randomized assignment clearinghouse for frontier models (including legal exposure for ratings negligence)… an NRMRO evaluation issues a comprehensive, dynamic risk grade based on five objective vectors"³ __ ¹youtu.be/Sij_v-mcZXQ?si=OvHO… ²your "DMV/FAA/FCC/FDA/FINRA for AI" ³medium.com/adventures-in-con… cc @darioamodei @demishassabis @allinpod

#2 in this 13 point policy plan – lmk what you think...

…separately, figuring out the blast radius of these new(ish) insurance⁹ industry asset disclosure and reclassification regs (effective 2025.01 and due 2026YE) – as well as collateral damage from Mark Walter's alleged shenanigans: · 20% of insurance assets are private equity owned¹⁰ · 5~10% of insurance assets allocated to private credit (30~45% for PE-backed insurers)¹¹ · 20~25% of private credit market owned by insurers¹² __ ⁹data for "traditional life insurance and annuities" ¹⁰insurancebusinessmag.com/us/… ¹¹wealthmanagementoutcomes.com… ¹²insurancebusinessmag.com/us/… #dyodd #nia

…the timeline is another important point and somewhat of a victory for regulatory apparatus – Mark Walter was at very least ensnared by new insurance industry rules and regulations (rightfully so): ·2012- Andrew Ross Sorkin speculated about Walter's source of funds (policyholder float) for Dodgers purchase¹ ·2020~23- new insurance rules drafted² ·2023.08/11- new insurance accounting and reporting rules adopted³ ·2025.01- new insurance rules effective ·2025q2- Guggenheim whistleblower⁴ ⁵ ·2025.09- federal investigation of Guggenheim (feds seized phones and computers in walter raid)⁶ ·2026.02- Walter subpoenaed⁷ ·2026YE- insurance company deadline for reclassification and disclosure⁸ __ ¹archive.nytimes.com/dealbook… ²NAIC’s Principles-Based Bond Definition (PBBD) framework (SSAP 26R/43R) was drafted between 2020 and 2022: content.naic.org/sites/defau… ³NAIC Disclosure & Classification Rules: NAIC Principles-Based Bond Definition (PBBD / SSAP No. 26R & 43R) took effect 2025.01.01, stripping debt classification from equity-like private structured products and requiring re-routing to Schedule BA with higher Risk-Based Capital charges: cwan.com/resources/blog/what… ⁴WSJ says "Spring 2025": wsj.com/finance/regulation/f… ⁵composite of whistleblower precedents suggests 9/18 months from whistleblower filing to overt enforcement in complex corporate finance cases (1-3 mos TCR/preliminary review + 3-6 mos interviews/evidence + 3-6 mos warrants/subpoenas) ⁶bloomberg.com/news/articles/… ⁷nytimes.com/athletic/7522366… ⁸NAIC Statutory Accounting Principles Working Group (SAPWG) mandated full lookthrough reporting and grandfathering phase-out for private structured credit and related-party asset schedules on Annual Statements ending 2026.12.31: content.naic.org/sites/defau…

@tylercowen you and Sonia came to the same conclusion¹ as did I – here's one of the 13 point policy plan² for this: __ ¹soniafpearson.substack.com/p… ²medium.com/adventures-in-con…

To wit, an actual AI policy package proposal (free link) 👇 medium.com/adventures-in-con…