Diminishing Jobs. The Future of Work, Innovation, and Economy

1. Are We Really Ready for an Economic Revolution?

You know, it's fascinating to see how the economic landscape is shifting beneath our feet, and a big part of that story is the national deficit . While we've seen a small improvement, with tariffs beginning to impact it positively, running at about a $400 to $500 billion annual rate , the deficit still hovers around 4.7% to 4.8% of GDP . Here's the thing: many view the high interest payments, which are already higher than the defense budget, as an overwhelming drain . But I've found that focusing solely on this can miss the bigger picture of what's truly underway.

What's interesting is that while tariffs will chip away at the deficit , the real game-changer we're looking at is real GDP growth . We believe that starting later this year and into 2026, coinciding with the midterm elections, real GDP growth is going to significantly surprise on the high side of expectations . This isn't just a hopeful forecast; it's what truly helped bring the deficit down in the Reagan and Clinton years, eventually leading to a surplus . We might even see a surplus within the next four to five years, largely thanks to this potential growth . This optimistic outlook is heavily dependent on the five innovation platforms—robotics, energy storage, AI, multiomic sequencing, and blockchain technology—all being powerfully catalyzed by AI itself . It’s a wild ride, isn't it?

2. Is Deregulation the Secret Sauce for American Innovation?

You know, it's fascinating to see how different parts of the world approach economic strategy. While I recently traveled through Asia and noticed a clear focus on tariffs , what's truly striking is the massive deregulation that's quietly but powerfully unfolding in the United States . This isn't just a small adjustment; we're seeing big legislative, court system, and regulatory changes, particularly in the crypto space . This push for less regulation is designed to truly free up innovation, setting a stage for unprecedented growth.

Let's look at AI and nuclear energy, for instance; the deregulation here is huge . There was even a Biden executive order on AI that was rescinded to specifically free up innovation in that area . And in nuclear energy, we're finally rectifying a 50-year problem caused by regulation , embracing small modular reactors to meet the immense power needs of AI and data centers . This is a counterintuitive insight: while China is busy building 28 large-scale nuclear reactors, the US, which isn't constructing any, is now rapidly progressing with these smaller, more nimble solutions . What do you think about that shift?

Beyond deregulation, significant tax changes are also fueling this economic engine . New rules are encouraging manufacturing, allowing companies to depreciate what would normally take 30 years in just one year if their structures are finished within three years . That's massive tax savings! This is expected to cause an explosion in manufacturing capacity and other investments, attracting huge foreign direct investment, especially with the current strong stance . Even domestic R&D and software can be fully expensed in year one, with these changes now made permanent and squarely aimed at innovation . I've found that these combined efforts are truly pushing our five innovation platforms into overdrive, which is incredibly exciting for future growth .

3. Can Innovation Really Drive Down Inflation to Zero?

Here's a thought that might seem counterintuitive at first: while many fret about inflation, I believe we're on the cusp of something truly transformative. We've been saying for quite some time that technologically-enabled innovation is inherently deflationary . This isn't just wishful thinking; it's because innovation follows learning curves, which directly translate into significant cost declines . It's all about boosting efficiency, and this powerful force could drive inflation down to zero, or even into negative territory, despite tariffs currently aggravating the situation . Isn't that something?

What's also fascinating is how policy changes are boosting our global competitiveness. The effective corporate tax rate in the U.S. has been adjusted, primarily through those depreciation schedules we discussed earlier, bringing it down to roughly 12% . This is incredibly significant; it's lower than Hong Kong's corporate tax rate of 16.5% and on par with Ireland's 12% . Ireland, as you know, has historically attracted enormous investment, particularly in pharmaceuticals and tech . I've found that this competitive tax environment, coupled with innovation, is a powerful magnet for investment, potentially drawing a lot of capital back to the U.S. .

Now, let's talk about money supply growth . We've seen an unprecedented drop in money supply in recent years, though it had boomed during COVID . While some worry that the current 5% growth, when mapped against inflation with an 18-month lag, could signal a rise in inflation , there's a strong reason to believe this won't happen. The velocity of M2 money, which is how fast money changes hands, has actually been falling for the last 25 to 30 years, peaking back in 1997 . This secular decline, linked to a decreasing labor force participation rate , suggests that even with increased money supply, the turnover rate is slowing, which inherently diffuses its inflationary power . It’s a wild ride, isn't it?

4. Why is Everyone So Afraid of Losing Their Jobs to AI?

You know, it's completely understandable why so many people are afraid of losing their jobs to AI and automation . It's a question I hear all the time when traveling around the world: will robots and AI displace and destroy jobs? This fear is particularly prevalent in higher-income households worrying about AI, and in manufacturing concerning automation . But here's the thing: from a secular point of view, our answer is always that technology is a net job creator . While there might be short-term displacement of mundane, boring, or tedious jobs , there are two major phenomena happening right now that will more than offset this.

First, baby boomers are retiring at an accelerated rate . Think about truck drivers, for example; many are baby boomers, and there are already significant shortages in that sector . This is where autonomous trucking becomes incredibly important, alleviating that labor shortage . Second, we've seen a substantial number of people leaving the country for immigration-related reasons, potentially in the range of one to two million . Many of these jobs are also in mundane areas like paperwork or leisure and hospitality, which automation can help improve . So, in many ways, these demographic shifts mean this technological revolution couldn't be happening at a better time .

It's truly exciting to consider the entirely new spaces being created by AI and blockchain. Have you ever prompted ChatGPT or Groq to list the jobs automation and AI will create, consulting science fiction, futurists, and technologists? The output is a very long list . Take asteroid mining, for instance—it's a literal new space creating a whole new category of jobs . Or consider blockchain technology and the digital world, where we now have immutable digital property rights . Young people are deriving social status from owning digital assets, like a Gucci skin in a game, and this is a whole new world just beginning to be monetized . From my experience, platforms like Roblox are flourishing because they're not just social or gaming sites; they're places where young people are coding, starting businesses, and learning to run them without even realizing it . It's a wild ride, isn't it?

5. Is the Economy in a "Rolling Recession" or on the Brink of a Boom?

You know, when we look at the economy, it feels like we're navigating through a period of mixed signals, and it's led to this concept we call a "rolling recession" . We've seen manufacturing contract for the past three years, housing decimated, and low- and middle-income consumers struggling with higher interest rates, food prices, and housing affordability . It's been a tough ride for many. But what's truly interesting is that this "rolling recession" might just be its final leg , potentially setting the stage for something quite different.

What's particularly surprising is the underlying deflationary narrative that seems to be building into the yield curve since 2008-2009 . Despite periods where the Fed flooded the economy with money, the yield curve trended towards flatness, not returning to previous steep levels . If the yield curve doesn't steepen significantly even with interest rate cuts, it would strongly suggest that this deflationary narrative is indeed correct . This perspective challenges the common fear of inflation, pointing instead to a potential future where prices are held down by powerful economic forces.

Speaking of inflation, there's a lot of fear swirling around it . However, when you look at true inflation CPI, which measures tens of thousands of goods and services in real-time, it was at 1.9% . This is even with tariffs reflected in the rate, defying expectations of a big inflationary burst . Consumer inflation expectations, as measured by the University of Michigan, are quite high at 3.5% over five years , but I've found that this particular metric might be less reliable at turning points this time around due to changes in survey methodology . We actually expect both the Michigan and Fed's three-year expectation of 3% to come down dramatically in the next few years , all due to the reasons we've been discussing about the powerful deflationary forces at play. It's a wild ride, isn't it?

6. What's the Real Story Behind Housing and Consumer Behavior?

You know, the housing market right now is truly a story in itself, and it's quite a compelling one . We're seeing pending home sales deteriorating again, actually falling below levels seen in 2008-2009 . This isn't just a minor dip; it highlights a significant affordability problem, essentially depriving an entire generation of their first homes . Both new and existing home sales are at historically low levels , signaling that something fundamental is shifting.

What's particularly striking is the increase in new home inventory; it's almost as high as it was before the 2008-2009 crisis . Carrying these homes is expensive, which means builders are likely going to have to cut prices . They've already been trying to "buy down" loans by subsidizing mortgage rates, but that strategy isn't really working . I believe that actual price cuts are on the horizon, and this will significantly impact the CPI, surprising many on the low side of expectations .

If you look at the year-over-year change in home prices, existing home prices that surged up to 25% during COVID are now down to low single digits . We expect them to decline further, especially if new home prices start falling faster . This ties into a broader picture of consumer behavior where, for instance, auto sales are coming back down after a pre-tariff buying binge . Also, personal savings, while up since the Fed started raising rates in 2022, are still low by historical standards . I've found that as more people become fearful about employment, we could see savings rates go up further , further influencing consumer spending and reflecting a cautious stance in the economy. Isn't that something?

7. Are We Just at the Beginning of the Next Big Tech Boom?

You know, it's truly thrilling to consider where we are right now with AI and large language models (LLMs). Our chief futurist, Brett Winton, drew a comparison recently that really makes you think: the current uptake of LLMs and chatbots in the consumer space is akin to where the internet was in 1995 . And remember, 1995 through 1999 was the biggest burst in the growth sector of the market in history . While that period ended badly with too much capital chasing too few opportunities , we're just at the very beginning of this new AI revolution, and it feels incredibly exciting .

Here's a surprising fact that often gets overlooked: while some studies, like the MIT study featured in the Wall Street Journal, initially suggested no productivity gains from AI in enterprises , the reality is more nuanced. It’s hard to see these gains right away because of how companies often approach new technology. I've seen firsthand how a pilot program, like with Palantir, might be pulled back for extensive internal studies, only for productivity gains to emerge much later, after significant restructuring and overcoming internal resistance .

However, once enterprises fully engage, the productivity gains that Palantir is helping them achieve are truly astounding . If you listen to their quarterly calls, you'll get a real sense of just how powerful this impact is . This isn't just about small improvements; it points to a very powerful productivity cycle emerging from these innovations . This makes me incredibly optimistic that we are indeed at the precipice of a significant tech boom, driven by these groundbreaking technologies. It's a wild ride, isn't it?