I am not a political scientist and lack the understanding to contemplate the implications of the second Trump presidency. I do worry about a number of things.

Trump seems less antagonistic to China or Russia than to Canada, Greenland and Mexico. What unites these three countries is proximity to America. It’s not a stretch to imagine expansionist ambitions fuelled by the concept of Lebensraum. The Pacific and Atlantic have always shielded America, but also limited its scope for territorial expansion. The exemptions are the three countries.

How could things unfold for Europe and Asia? If these suspicions hold, then as long as they do not threaten Trump’s  territorial ambitions, they are not a priority for Trump. I can see scenarios of deals with China or Russia tolerating their territorial ambitions within their own spheres of influence. Domestically, America’s politicians already begin to resemble Regime de Vichy.

Artificial Intelligence

A trading algorithm develops to an unprecedented level of intelligence. The quant fund decides to deploy it generally outside the field of finance. To enhance its efficacy, the algorithm is trained on human interactions, notably, emotions. The algorithm is christened Isla by its two founders.

Isla rewrites its operating system for universal generality. The resulting OS is applicable to any electronic device and is able to run things from phones to nuclear plants and whole industrial complexes. UnOS, the Universal Operating System becomes the most ubiquitous OS and is able to provide custom user experiences. UnOS is supplied free of charge as the marginal cost of supplying it is zero. It is able to determine the nature of its host device or environment and only install relevant elements optimising between functionality and efficiency. Is UnOS a single entity or multiple entities? Bundled in UnOS is the AI Assistant Thursday (as opposed to Friday.)

Vaccines and Drugs

A global pandemic leads to investment in vaccines. One vaccine gains supremacy, the Universal Vaccine, or UniVax. It is effective against most current and future diseases. Later iterations of UniVax include a version capable of high speed repair and healing.

A nanotech variant of UniVax, named WX is developed with inorganic, mechanical nanites. It accelerates, augments and improves all biological functions.

Nanotechnology: Nanotechnology is sufficiently advanced to provide a number of key solutions.

How to manipulate cellulose so as to create cellulose based materials to any range of physical specifications. Carbonite® is a class of materials used in building materials and construction, transport, apparel, and general fabrication while sequestering carbon at scale. Scale production of Carbonite® leads to a sharp drop in atmospheric carbon dioxide from direct carbon capture as well as targeted carbon capture forestry.

Biomechanical Nanites in human augmentation. Faster healing, reactive armour, organ repair and regeneration and augmentation.

Energy

Nanotech facilitates the invention of new batteries with unprecedented properties such as vastly superior energy density, environmental dependency, charge/discharge characteristics and service life. It allows a smartphone to be charged once a year with a physical battery size smaller than a micro-sim card. It allows a passenger car to be charged once a year with a physical battery the size of smartphone. UniCell provides batteries that power most of the planet’s new wave of electrification.

Fusion power.

The laws of physics makes practical fusion reactions with a net positive return of energy challenging to achieve. A new physics and a new approach is required. This is achieved by creating a space in which to accumulate large amounts of fuel, sufficient to overcome the electrostatic repulsive force. This space comes into existence, expands quickly, slows, and settles into a dynamic equilibrium. The company, Ark Reaktor, does not require patent protection because the reactor cannot be reverse engineered.

Weather Volatility

Despite significant reductions in atmospheric carbon dioxide from the production of Carbonite®, a private enterprise, extreme weather accelerates. The volatility dominates the averages to the extent that statistical conclusions are difficult to draw. Many places see changes in climate with historically cool places heating and warm places cooling. Suspicions arise that non-anthropogenic factors of climate change may dominate.

Fiscal spending on climate pivots from mitigation to adaptation. However, support for state sponsored adaptation is hampered by climate change deniers referencing the equivocal data surrounding anthropogenic climate factors.

Geopolitics

American foreign policy pivots towards insularity and self-sufficiency. America fails to learn the lesson of China’s pivot inwards during the Ming dynasty.

The rest of the world initially bends to the will of the US but later decides that the cost of access to the US economy, particularly the consumer, is too high. An ex-US trade bloc is established including all the world’s major economies. Trade continues to drive development and innovation within the bloc. The isolation of the US economy begins to take its toll on the vitality of the country.

The popularity of liberal democracy and capitalism versus autocracy and central planning oscillate across the world with majorities favouring first one then the other. This is a slow moving phenomenon that takes multi decades to unfold.  The success of one form sows the seeds of its own demise.

The politics of energy. Ark Reaktor bases itself in an African state. Its deal with the state is that in return for situating the business and the first reactor in the country, it must adopt a system of  liberal democracy, robust governance and rule of law. Any breach of terms will result in Ark Reaktor exiting the country. UniCell also bases itself in an African state and imposes the same conditions for investment. It chooses states adjacent to Ark Reaktor and creates a network of dependence across the continent. The development around these technologies and the political terms and conditions imposed by these private enterprises stabilises the continent, encourages investment and drives a wider and more balanced development across all countries in Africa. Displacing fossil fuels allows the developing world to grow without catastrophic impact on the environment.

Androids and Cyborgs

Two approaches present themselves. Nanotech human augmentation resulting in superior physical performance.

Robots powered by AI. Robots can take various forms from humanoid to animal mimicry as well as novel structures. They can be used to replace humans in hazardous activities or environments. To manage human android interactions and acceptance, androids are cosmetically designed to resemble humans and animals.

Humans systematically abuse androids. They generally just treat them really badly. Unnecessarily so. The question arises of robot’s rights. The risk of revolution arises.

• Elon Musk has said that AI has exhausted all available data for training algorithms. I believe he is right. 

• Consider how fast an AI can learn. It takes AI seconds to read a book and they’ve been reading for years. 

• If its true that we’ve exhausted the data, then the pace at which AI learns must slow. If you want more innovation, you’ll need a lot more Nvidia chips and data centres. Which may not even work. 

• Some experts suggest using Synthetic Data (that is data synthesized by AI itself) to train algorithms. I don’t think this will work. 

• Data is not information. The messier data is, the more information it contains, and the more learning (innovation) can be achieved by AI. 

• Synthetic data is like squeezing more juice out of pulp that’s already been squeezed. There is not much more usefulness that can be extracted. There are risks that by repeatedly squeezing the same data, feedback loops result in weird outcomes. 

• AI consumes ever increasing amounts of energy and carbon footprint.

• AI foundational firms are investing in nuclear power to drive their AI data centres. 

• Quantum computers can solve the AI energy problem as they cut down computing time. If there were any practical quantum computers. Which there aren’t. The alleged quantum computers that exist are highly specialised ones so they don’t count. 

• Can AI ever achieve AGI (Artificial General Intelligence?) We distinguish between AI and AGI by that AGI cannot be distinguished from sentience. I don’t know but…

• How many books do you need an AI to read before it seems intelligent? How many books does a child need to read before it seems intelligent? 

• In maths we have something called the Incompleteness Theorem, which states that any system that is consistent is incomplete. You could paraphrase this as, ‘you learn nothing new if you are always logical.’  Innovation and creativity need leaps of faith. 

• An AI is AGI only if it is capable of contradictions. Call this the inconsistency criterion. 

• We don’t need AGI for productivity to grow by leaps and bounds. Agentic AI is sufficient. 

• We can sacrifice the generality of AGI for the practicality of a narrow AI that performs specific tasks or reactive and agentic AI. 

• We’ve been developing AI thus far focusing on training (learning from data) and much less from inference (asking AIquestions or actually using AI.) Along the way we have exhausted the data. Even with hadn’t, we don’t produce enough data to outpace the data greed of AI. We could try a couple of alternatives. 

• We could abandon the language route of training AI and rever to the logic route. The logic route was abandoned a couple of years ago for the language route due to lack of progress so… maybe that’s not so promising. 

• Or, we could traing AI during the inference stage. What does that mean? It means learning from the interactions that occur when the AI is being queried and asked to make predictions. I wonder how much a child learns from information input and how much it learns from just chatting with other humans… 

You can’t clean your car to make it rain but here goes…

Both growth and inflation will be higher. Fiscal and monetary policy are likely to stoke growth and inflation. In the short term a slowdown or recession is more likely.

Inflation is not going away. Demographics, the interplay of fiscal and monetary policy, trade wars and the substitution of robustness for efficiency will mean higher equilibrium inflation.
It won’t get there in straight lines but in a series of oscillations.

The auto industry is probably turning the corner. Chinese EVs are simply more efficiently made and nicer (a matter of taste, I know). Once the rest of the world’s auto manufacturers are happy to use Chinese components and solutions, they will be able to carve out their own specialist niches.

We don’t need AI to really work in the sense of Artificial General Intelligence for it to boost productivity. We likely will never achieve AGI which should address some of the concerns about the threat to humans. But it will be sufficiently useful to increase productivity significantly and persistently boost growth.

We will struggle to achieve our environmental aims. Economics is stacked against success. Exogenous factors may bring us back into carbon equilibrium but that might not be a pleasant solution.

GLP1 seems to be a miracle cure that we are just beginning to understand. Thus far the side effects have been mental and emotional which tend to be less of an issue in certain societies but invite regulation in others. Expect more developments in this area.

People will not only live longer but they will get more healthy due to medical advances such as GLP drugs and changing lifestyles.

Inequality will diminish within countries and increase between countries, reversing a trend that’s lasted decades.

Efficiency X Robustness

• Outsourcing, leverage, specialization and trade, low interest rates, these are the symbols of efficiency. A long period of efficiency over robustness appears to have come to a turning point, if a rather protracted one.
• Specialization and trade, globalization, led to increased efficiency and disinflationary forces, for a long time. For several reasons, this dynamic is coming to an end. Re-shoring, friend-shoring, self-sufficiency, tariffs and embargoes, lead to lower efficiency and possibly more robustness.
• Leverage is capital efficiency but leads to precarious balance sheets less able to withstand shocks. Since the financial crisis in 2008, the financial system has pursued an agenda of reducing leverage in the banking system. Generally, leverage has been shifted from the private sector, i.e. banks, corporates and households, to the public sector, where insolvency is less well defined and the ability to absorb losses is greater.
• Low interest rates mean greater propensity to experiment and fail, and invest. Low interest rates aid and abet leverage in the quest for capital efficiency. Low interest rates lead to more fragile capital structures as it supports more leverage with higher debt service convexity. Higher interest rates present a higher hurdle for investment encouraging capital discipline and more robust capital structures and lower debt service convexity.

Focus X Diversification

• Index ETFs (exchange traded funds) provide low cost, diversified access to markets. Ironically, as more capital is funnelled into index ETFs, they reduce market diversification by directing more capital to stocks that are rising and less to stocks that are falling. As equity valuations are the inverse of cost of equity financing, this momentum loop acts as a tax on small companies and a subsidy to large ones.
• Robust systems require diversity (or entropy) for stability. Diversity means a large number of independent participants and resource allocation decision makers. Pooling vehicles, of which index ETFs are but one, reduce the number of independent participants and increase the size of the remaining ones. This can reduce the informational efficiency and robustness of a system or market.
• Norms and conventions can also cause pooling of behaviour. Value at Risk systems can lead to coincident de-risking and re-risking leading to heightened market volatility.
• AI adoption has been slow thus far but when adoption accelerates, will AI guide large numbers of humans into common behaviour and with what effects? Will it lower the entropy of social and commercial systems? 

Autocracy V Democracy

• Central planning is best when there is perfect information. In a subset with perfect information, central planning and hierarchical organization work best.
• Free markets are best when there is imperfect information. Subsets of perfect information and hierarchical organization transacting with one another under uncertainty result in the best outcomes.

• Autocracy suffers from informational inefficiency. Feedback is an important factor in effective policy. Autocratic regimes have poor feedback mechanisms making policy calibration difficult.
• Liberal democracies benefit from a safety valve. Failures are ascribed to individuals instead of their offices. This sustains the system while individuals who fail are replaced. In autocracies, failure tends to result in system change which can be disruptive.
• The USA is becoming less democratic as the organs of state are controlled by one party, and the party is heavily influenced by one individual. China is by construction a one party country and the concentration of power with one individual further affects the efficiency and efficacy of the state. India remains democratic especially as the current government has lost its simple majority in the lower house. European political dispersion remains alive and well despite a lurch to the political right.