Great piece. It feels like something to explore deeply. I get the sense that there are themes in society that feel like emerging trends. For years the theme is there but not dominant. Then younger people who grew up with the theme simply take it for granted and it becomes dominant. Isn't this just part of institutional renewal. Eventually the people who accept that things need to change take over all the institutions and change them or they create new ones and the old ones shrivel? Not sure
Being a younger reader, I think our generation hasn't seen/made the mistakes that the previous generation has experienced. The current institutions will probably be torn down and new institutions arise from the chaos. Good times make weak men, weak men make weak times, etc... and why the world cycles even as technology progresses.
Interesting Read. However, your evolving investment stance toward leaning bullish AI, SOX, Tech & US Equities, in general, I think could be marking a near top. As you have argued for a long time, economic cycles rhyme and repeat (and now you appear to be distancing yourself from this long held view).
Just like the Telecom providers during dotcom bubble, the cycle ended/popped when their FCF generation inflected downward. Now look at the MAG 7/Hyperscalers, we are seeing the same thing happening right now.
More telling, As MSFT uses the equity method to account for their OpenAI stake, if you dig deep into their SEC filings from last night, you find this disclosure: "Current year net income and diluted EPS were negatively impacted by net losses from investments in OpenAI, which resulted in a decrease in net income and diluted EPS of $3.1 billion and $0.41, respectively." Thus, given their 10/28/25 stated 27% ownership in OpenAI, under the equity method of accounting this MEANS OPENAI LOST $11.5 BILLION IN THE LAST QUARTER. Given that OpenAI, according to The Information, generated revenue of 'only' $4.3 billion in the first half of 2025, this loss and implied cash burn rate is enormous. If OpenAI is still losing this type of money years after ChatGPT burst onto the seen, it appears fairly obvious to me AI is not a sustainable business model anywhere close to generating ROIC above WACC. Thow on top of that, Altman, in the past 2 days, walked back the timeline to reaching AGI to essentially maybe never and is now striving for "an automated AI Researcher by 2028" whatever an automated AI researcher is! I think you might be top ticking your tech call and this AI bubble is close to unwinding. CSCO peaked at market cap of 4% of nominal US GDP, NVDA is currently at 16+%.
You could be dead right and I am all wet sticking to old school training, but I still think economic and market cycles do rhyme only to a little different beat given over 50% of money is being managed by professional investors who never invested through a true bear market and recession (excluding the couple weeks the market was down due to Covid) and the emergence of retail and options (more leverage) along with the more prominent role of private credit/equity that is hiding a lot of the problems but are now slowly starting to show themselves.
Just my two cents - the other side. You know 10x more than I do on investing and cycles. I am just not ready to say "it is different this time" but I am 15 years older than you, so even more stubborn!
I have to smile when I hear you call yourself old. You really have to get to my age to do that (just realising, having lost so much time in the pandemic f**k-up). 😀
Good idea to get back in the Brumby saddle though, and not leave it much later.
Enjoyed this very much but can't shake the feeling you might have come away with additional/different takeaways if you had been speaking to a less elite group of "youngsters". To put it bluntly: of course they are relatively sanguine about the future and their independence within it. They are financially very secure and have careers in or immediately adjacent to the technology that is changing the world.
Not throwing shade (I also operate in these circles) but i'd suggest it would be worthwhile widening your sampling if you truly want to get out of your "older guy" head and into the heads of the next generation and what that might mean for markets, politics etc.
What I saw in Berkeley, the home of wokeness, is an ease with individual pursuit of happiness even if it degrades society as a whole.
Society as a whole if much larger than Berkeley. Will Berkeley be able to control the yahoo's using all the fancy tools? Maybe. If not - it will end up like any other philosophers republic in history. Pitchforks, flames and swords come to mind.
Sometimes I think the US has just become used to constant pitchfork,flames and swords as the price of capitalism.... higher murder and prison rate than any other developed nation....
As a black American...those institutions were never worth a shit to begin with. And were blatantly designed to rob and disenfranchise people like me while simultaneously profiting from my labor. You'll see it's only white collar, white, coastal liberal "elites" and adjacent (whom the institutions are designed to enrich) who are bemoaning the institutional destruction Trump is bringing. Nobody else is shedding a tear.
As a dyed in the wool Libertarian I cannot see the world being organized in a such a fashion. It leaves a power vacuum(s), which will/must be filled with the most exploitative, extractive menaces. All the libertarian narratives around the internet, AI, BTC, stablecoins etc., democratizing this and that, is nonsense. They are consolidation and control mechanisms. The cycles are really about how and who evolves into the current menace.
Great piece. It feels like something to explore deeply. I get the sense that there are themes in society that feel like emerging trends. For years the theme is there but not dominant. Then younger people who grew up with the theme simply take it for granted and it becomes dominant. Isn't this just part of institutional renewal. Eventually the people who accept that things need to change take over all the institutions and change them or they create new ones and the old ones shrivel? Not sure
How can you get to San Francisco for your niece's wedding? How long can the citizens of San Francisco live without any external material input?
Don't understimate the importance of physical world with its bottlenecks.
Best regards
Being a younger reader, I think our generation hasn't seen/made the mistakes that the previous generation has experienced. The current institutions will probably be torn down and new institutions arise from the chaos. Good times make weak men, weak men make weak times, etc... and why the world cycles even as technology progresses.
Interesting Read. However, your evolving investment stance toward leaning bullish AI, SOX, Tech & US Equities, in general, I think could be marking a near top. As you have argued for a long time, economic cycles rhyme and repeat (and now you appear to be distancing yourself from this long held view).
Just like the Telecom providers during dotcom bubble, the cycle ended/popped when their FCF generation inflected downward. Now look at the MAG 7/Hyperscalers, we are seeing the same thing happening right now.
More telling, As MSFT uses the equity method to account for their OpenAI stake, if you dig deep into their SEC filings from last night, you find this disclosure: "Current year net income and diluted EPS were negatively impacted by net losses from investments in OpenAI, which resulted in a decrease in net income and diluted EPS of $3.1 billion and $0.41, respectively." Thus, given their 10/28/25 stated 27% ownership in OpenAI, under the equity method of accounting this MEANS OPENAI LOST $11.5 BILLION IN THE LAST QUARTER. Given that OpenAI, according to The Information, generated revenue of 'only' $4.3 billion in the first half of 2025, this loss and implied cash burn rate is enormous. If OpenAI is still losing this type of money years after ChatGPT burst onto the seen, it appears fairly obvious to me AI is not a sustainable business model anywhere close to generating ROIC above WACC. Thow on top of that, Altman, in the past 2 days, walked back the timeline to reaching AGI to essentially maybe never and is now striving for "an automated AI Researcher by 2028" whatever an automated AI researcher is! I think you might be top ticking your tech call and this AI bubble is close to unwinding. CSCO peaked at market cap of 4% of nominal US GDP, NVDA is currently at 16+%.
You could be dead right and I am all wet sticking to old school training, but I still think economic and market cycles do rhyme only to a little different beat given over 50% of money is being managed by professional investors who never invested through a true bear market and recession (excluding the couple weeks the market was down due to Covid) and the emergence of retail and options (more leverage) along with the more prominent role of private credit/equity that is hiding a lot of the problems but are now slowly starting to show themselves.
Just my two cents - the other side. You know 10x more than I do on investing and cycles. I am just not ready to say "it is different this time" but I am 15 years older than you, so even more stubborn!
I have to smile when I hear you call yourself old. You really have to get to my age to do that (just realising, having lost so much time in the pandemic f**k-up). 😀
Good idea to get back in the Brumby saddle though, and not leave it much later.
Enjoyed this very much but can't shake the feeling you might have come away with additional/different takeaways if you had been speaking to a less elite group of "youngsters". To put it bluntly: of course they are relatively sanguine about the future and their independence within it. They are financially very secure and have careers in or immediately adjacent to the technology that is changing the world.
Not throwing shade (I also operate in these circles) but i'd suggest it would be worthwhile widening your sampling if you truly want to get out of your "older guy" head and into the heads of the next generation and what that might mean for markets, politics etc.
Great piece. But
What I saw in Berkeley, the home of wokeness, is an ease with individual pursuit of happiness even if it degrades society as a whole.
Society as a whole if much larger than Berkeley. Will Berkeley be able to control the yahoo's using all the fancy tools? Maybe. If not - it will end up like any other philosophers republic in history. Pitchforks, flames and swords come to mind.
Sometimes I think the US has just become used to constant pitchfork,flames and swords as the price of capitalism.... higher murder and prison rate than any other developed nation....
Maybe. However, if it goes this way, we are going straight towards Philip K. Dick. Not a fun direction to travel.
One of your most thoughtful and interesting pieces, containing important insights. Well done.
As a black American...those institutions were never worth a shit to begin with. And were blatantly designed to rob and disenfranchise people like me while simultaneously profiting from my labor. You'll see it's only white collar, white, coastal liberal "elites" and adjacent (whom the institutions are designed to enrich) who are bemoaning the institutional destruction Trump is bringing. Nobody else is shedding a tear.
Indeed. No one really misses them at all
As a dyed in the wool Libertarian I cannot see the world being organized in a such a fashion. It leaves a power vacuum(s), which will/must be filled with the most exploitative, extractive menaces. All the libertarian narratives around the internet, AI, BTC, stablecoins etc., democratizing this and that, is nonsense. They are consolidation and control mechanisms. The cycles are really about how and who evolves into the current menace.