Better to be a dog in times of tranquility...

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Two conversations this week got me thinking about the old Chinese saying/curse, “May you live in interesting times.” I looked it up on Perplexity and it turns out this isn’t an actual Chinese saying but made up by a British politician.¹  

But there’s an even better Chinese proverb from a 16th Century short story that possibly inspired it: “Better to be a dog in times of tranquility than a human in times of chaos.” This seems a bit over the top and it’s possible the author had never seen modern dog food. On the other hand it’s possible I’ve never lived through times of chaos.

Technological Change Causes Instability

The first conversation was Dwarkesh Patel’s interview with George Mason economist, Tyler Cowen. If most people want to listen to podcasts on 2x speed, I wanted to listen to this one on .5x so I could think through the implications of what Tyler was saying. His ideas come at you fast and furious.

One of the main focuses of the interview is AI. Cowen points out that many technologies have promised to ignite 10% per year growth and eliminate all human jobs. That never happens. General purpose inventions like electricity added at most .5-1% to yearly GDP growth in the 1920-1930s. Personal computers and the Internet maxed out a .5%.

However, small improvements compound over decades. Cowen believes AI will eventually transform our society but it’ll take a lot longer than Silicon Valley thinks. It’ll also cause much more disruption than most people think and not all of it will be the good kind of disruption.

The Increasing Pace of Disruption

In a way you can look at AI as an extension of the information revolution. It began with computers, which led to personal computers, then came the Internet, next came mobile and the Cloud, and finally AI. Whether this is the end point or not is unknown but what I see emerging is a complete technology stack that allows for personalize intelligence for everyone/at scale.

As we’ve adopted these technologies, the level of disruption has increased. The compounding effect is happening. It seems like the mass coordination/indoctrination by social media that took off in the 2010s was the beginning of the disruption. When technologies change, it threatens the current power structures. New companies, new political entrepreneurs, etc. take advantage and challenge incumbents.

Could Obama have beat Hillary without Facebook? It feels like Trump wouldn’t have won without Twitter in 2016 but he still used legacy media then, ie Fox News. In 2024 legacy media was an after thought. It was podcasts that seemed to accelerate his victory and X.com certainly helped. Some people would say that Musk spent $44.2 billion to buy a government. $44 billion for Twitter and $200 million to get Trump elected.

In The New Rules we’ve explored how our geopolitical and economic system is in transition. Add AI on top of this and we will see massive instability. This is what technology has done historically.

The printing press allowed a monk named Martin Luther to overturn the Catholic order in 1517 that had reigned in Europe for close to 1000 years. His predecessor by 100 years, Jan Hus, was burned at the stake in 1415. Because Luther could spread his ideas with printed pamphlets, he survived. That led to the 30 Years War which decimated Germany leaving anywhere between 20-40% of the population dead.

The rise of large scale commercial agriculture in England contributed to the Civil War and ended with the King’s head getting chopped off. The Industrial Revolution led to communism which led to tens of millions of deaths in the Soviet Union, China, and other nations. The rise of radio and film allowed Mussolini and Hitler to reach far more people with catastrophic results. And on and on.

The Boundaries are Widening 

The second conversation was my podcast recording with Paul Hodges, Chairman of the macro consulting firm New-Normal.com. It will air this coming week. Hodges also sees the pace of disruption accelerating for a variety of reasons; AI being one of them.

His point is that the boundaries of what is possible have widen from even just a few years ago. For example, Trump could put tariffs on the whole world or no one. He could conceivably try to seize the Panama Canal (though I think chances are below 1%). Beyond Trump we’re seeing things we haven’t seen in decades. Inflation hit 9% in 2021/2022 after being at near zero for almost two decades and declining for 40.

There’s a war in Europe for the first time since the 1990s and it involves a nuclear armed power for the first time ever. China could invade Taiwan now, in three years, start a blockade any day that could slowly choke the island into submission, or do nothing. The error bounds on predictions are wider than they’ve been in decades. God help the policy makers trying to keep up.

What Can We Do?

In my view, not much beyond staying flexible and preparing for multiple scenarios. On the investing front, I think the 60/40 portfolio is dead and investors need to look at value stocks, gold, and inflation hedges like managed futures/commodities. Stay away from traditional sovereign bonds like long term Treasuries.

Policy wise, we need to derisk our supply chains and keep the ability to manufacture critical items like those for defense and medical supplies domestically and in concert with allies we can rely on.

And we need to keep innovating. It’s true that innovation spurs the very disruption I’m talking about in this piece but there is no other choice. If we don’t do it someone else will and that will be much worse for everyone involved.

Think about it this way. Do you want to get rid of the printing press, commercial agriculture, radio, film, or any of our other inventions? I don’t think so. Everything comes with trade offs.

Clean nuclear power comes with nuclear weapons. The Internet and mobile come with toxic social media. AI medical cures come with killer AI drone swarms. Human beings are both good and bad and technology simply magnifies our inherent behaviors.

Times of change are times of instability. The error bands widen and the best and worst of humanity come tumbling out. Buckle up because the AI/Information Age is just getting started. I’ll stay human and live through the chaos. Someone else can be a dog in tranquil times.

Keep learning,

Alan

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1  Interestingly it was quoted as an ancient Chinese curse by none other than the father of appeasement and British Prime Minister, Neville Chamberlain and his brother Austen but in reality they heard it from their dad, Joseph Chamberlain who was also a politician and used a similar phrase in several speeches.