Tuesday, February 17, 2026

"Canadian Housing Market Faces Years-Long Price Decline, BMO Economist Warns"

Again we ask: Where did all the drug money go?*

From Canada's The Deep Dive, January 20:

A prolonged real estate downturn will drag Canadian home prices lower throughout 2026, according to Bank of Montreal‘s senior economist who accurately predicted the market’s current trajectory years ago. 

BMO senior economist Robert Kavcic forecasts a “long and slow grind” toward affordability, warning buyers and sellers against expecting any near-term recovery.

Canada’s national benchmark home price dropped 4% year-over-year in December, extending losses to 18.6% from the early 2022 peak. The Greater Toronto Area showed detached homes selling for 8% less than the previous year in November, with condo prices down 3.8% over the same period.

Kavcic warned investors in 2022 that unwinding the market’s speculative excess would require years, not quarters. His prediction came as real estate speculation surged and interest rates fell below inflation.

Market fundamentals have shifted dramatically since then. Central bank policymakers delivered seven consecutive rate cuts from June 2024 through March 2025, bringing the benchmark rate into neutral territory. Ottawa has curtailed immigration flows. Investor activity has virtually disappeared.

Annual home sales volumes fell 1.9% in 2025, marking the third-weakest year of the past decade, according to BMO’s monthly housing monitor.

“Incomes still need to catch up and that takes time,” Kavcic said.

Regional performance varies sharply. Southern Ontario struggles most severely, particularly in new condo sales where investor absence has dried up activity. Vancouver faces elevated inventories and buyer’s market conditions, with both condo and detached prices down roughly 5% year-over-year.

Markets in Quebec and Atlantic Canada remain tight. Quebec City led national gains with prices jumping 17% annually, while Montreal rose 5.8% and Moncton increased 4.7%.

Calgary has cooled after strong early-2025 performance, with sales down 14.8% from the previous year and prices declining 3.4%.

Developers continue building smaller condo units even as buyers seek larger single-family homes, creating an oversupply that threatens further condo price erosion. Pre-construction buyers who committed to purchases years ago now confront mortgage rates near 4%—more than double the 1.75% they expected. Many cannot afford to close or sell profitably, forcing them to become landlords in a weakening rental market....

....MUCH MORE
*
Previously:

April 2024 - "Amid Canada’s Huge Immigration Surge, Population Growth Hits 3.2%, Fuels 10% Rent Inflation, even as Home Prices Drop"  

August 2025 - Canadian Condo Crash

I wonder where all the drug money went? Canada used to be swimming in the stuff, from the B.C. bud crowd in Vancouver to the Fentanyl cowboys across the plains to Toronto to the old skool Mafias in Ottawa and Montreal. See for example "The Montreal Mafia Murders: Blood, Gore, Cannolis, and Hockey Bags" or at Sky News: "Mafia in Canada: How the ’Ndrangheta built a Toronto empire". 

September 2025 -  Meanwhile In Canada: "No One Wants to Buy a Condo"

Electric Utilities Are Spending A LOT Of Money On Infrastructure (GEV; PWR; PRY:milan)

Two From Utility Dive. First up, February 13:

Transmission drives Exelon’s capital spending plan to $41.3B 

Exelon has a “line of sight” on $12 billion to $17 billion of transmission buildout over the next 10 years that isn’t included in its current capital plan, a company official said. 

Exelon expects transmission investments will be a key driver for its capital spending in the coming years, company officials said during a fourth-quarter earnings conference call on Thursday.

At the same time, Exelon continues to seek a pathway for deregulated utilities to help supply new generation in the PJM Interconnection, Calvin Butler, Exelon president and CEO, said.

“We firmly believe it’s going to require an all-of-the-above strategy that includes utility-generated, demand side and merchant solutions,” he said....

....MUCH MORE 

And February 12:

At $103B, Duke claims largest spending plan of any regulated US utility 

The company is already deploying more than $1 billion in capital every month, CEO Harry Sideris said. Its North Carolina utility has a rate case pending.

Duke Energy has added another $16 billion dollars to its five-year capital plan, which at a current total of $103 billion is now the largest spending plan on file at any regulated U.S. utility, company officials said during a Tuesday morning earnings call.

The company is already spending more than a billion dollars per month in order to keep up with demand and it expects the rate of growth to accelerate in 2027 and 2028, when many new data centers are expected to connect to the grid, Duke Energy President and CEO Harry Sideris said.

Duke’s electric utilities serve 8.7 million customers in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky. Regulators in South Carolina recently approved its rate increases in that state. Its rate case in North Carolina, where it is also seeking increases, is pending. The parent company is pursuing a merger of its Carolinas utilities

Duke Energy has signed 1.5 GW in new data center customers since last November, bringing the company’s running total of data center service agreements to 4.5 GW. The company’s data center deals pipeline of potential customers has topped 9 GW, according to executive vice president and CFO Brian Savoy....

....MUCH MORE 

The symbols in are headline are Prysmian S.p.A. the world's premier manufacturer of electrical cables; Quanta Services, America's largest contractor specializing in laying (or stringing) that cable and GE Vernova which will generate electricity pretty much any way you want: nuclear; natural gas; wind, and will sell you all the electrical transformers you need to get that electricity to the end user. Along with Cameco (CCJ) uranium miner and 49% owner of Westinghouse nuclear they comprise a hyper-concentrated mini-portfolio.

"The world’s most common vegetable is enjoying a great year"

Probably not so great for the growers but they'll adjust.

Either voluntarily or through bankruptcy. That's how commodities markets work.

From The Economist, February 16:

Culture | Playing the tuber
Like chips and pancakes? Lucky you 

THEy are calling it the Kartoffel-Flut: the potato flood. Germany, the largest producer of spuds in the European Union, is enjoying the biggest harvest in a generation, owing to optimal growing conditions and increased tuber cultivation. Last year’s yield was 17% higher than the long-term average. Belgium, France and the Netherlands have also had a bounty.

In fact, there are so many potatoes—one farm near Leipzig had a surplus of 4,000 tonnes—that they are being given away. Some 200 distribution points have been set up across Berlin. Gasthaus Mutter Hoppe, a restaurant, had a tonne of taters to dish out; a waitress says they “ran out within days”. The Berliner Tafel, a food bank, took 22 tonnes. Schools, homeless shelters and even the zoo have stocked up.

If you were to have an abundance of any crop, you would pick the potato. Not only does it store well, but it is filling and calorie-dense relative to other vegetables. It also lends itself to an extraordinary variety of meals. Germans are making potato dumplings and pancakes. The organisers of the giveaway have launched a recipe challenge to inspire Kartoffel cooks, sharing tips for soups, salads and plenty more. As Sam memorably says in “The Lord of the Rings”, you can “boil ’em, mash ’em, stick ’em in a stew!”....

....MORE 

You can order up some Pommes Duchesse, just be sure to have a defibrillator nearby. 

Possibly also of interest:
"How Antoine Augustin Parmentier Tricked The World Into Loving Potatoes"

Infrastructure: "Overhauling Air Traffic Control Involves 5,000 Locations And 600 Radar Systems..."

We are usually reluctant to link to the Epoch Times because not only are they anti-Chinese government, which is fine, you can be pro or anti anything you want but because they have given their big platform to a guy named Gordon Chang who has been predicting China's fall since the year 2000. He's been just plain wrong and the Epoch Times (along with the WSJ, NYT and many others) has allowed him to keep making the pitch for going-on three decades.

Anyhoo, here's the ET via ZeroHedge with an interesting piece of reporting, January 11:

Authored by Jacob Burg via The Epoch Times,

The federal government is embarking on what Transportation Secretary Sean Duffy has called “the most important infrastructure project that we’ve had in this country for decades.” It is attempting to modernize and upgrade the nation’s entire air traffic control system within a timeline of roughly three- and-a-half to four years.

Multiple aviation experts, ranging from former pilots and controllers to professors and an aviation lawyer, say the changes are needed and long overdue.

The entire project is projected to cost at least $32.5 billion, according to the Federal Aviation Administration (FAA), with the initial $12.5 billion downpayment funded by President Donald Trump’s spending bill in July 2025. Duffy has asked Congress for an additional $20 billion to complete the project by the end of the president’s term.

This is what the FAA has said it plans to do in this multi-year modernization project, which portions of the project experts say are most critical, some of the obstacles the federal government might face, and background on the company chosen to lead the endeavor.

What to Expect
The FAA’s plan to “deliver Americans a state-of-the-art air traffic control system” will involve replacing telecommunication lines, radar systems, software, hardware, and other core U.S. aviation infrastructure.

The agency said it will replace copper lines with fiber optics—a project that Duffy recently said is already more than 30 percent complete—and will swap outdated communication hardware with wireless and satellite technology.

These changes will be made at nearly 5,000 locations, alongside implementing more than 25,000 new radios and 462 new digital voice switches, according to an FAA fact sheet.

The agency said more than 600 radar systems that “have gone past their life cycle” will be replaced. Some U.S. radar systems, particularly ground-based radar, date back to between the 1940s and the 1970s.

“The primary radar system—that goes back to World War II, and that’s still in use. And that’s basically detecting that there is something in the air. You can’t always tell what it is,” said Margaret Wallace, a former military air traffic controller and an assistant professor of aviation management at Florida Institute of Technology.

In the decades since World War II, the FAA has “added layers of technology … and if a lower level has an issue, then that’s going to create issues in all the other layers of technology,” Wallace told The Epoch Times.

Additionally, the FAA is increasing the number of airports that deploy the “Surface Awareness Initiative” (SAI). SAI is a ground-based monitoring system that allows air traffic controllers to see all aircraft traversing runways, taxiways, and other surface movement areas at airports.

As of March 2025, SAI was operational at 18 airports. The FAA aimed to install it at 50 airports by the end of 2025 and a total of 200 airports overall. An FAA spokesman told The Epoch Times on Jan. 6 that the system has now been installed at 52 air traffic control towers.

Modernizing air traffic control will also involve building a new consolidated air route traffic control center for the first time in six decades and replacing multiple control towers and one Terminal Radar Approach Control (TRACON) facility.

TRACON facilities manage air traffic for several airports in specific regions, such as the New York City or Tampa metropolitan areas....

....MUCH MORE 

Endowments/Portfolios: "The Ivies Are Having Second Thoughts About Investing in Private Equity"

 From Financial News London, February 15:

A crowded field and subpar returns have frustrated America’s wealthiest universities, some of private-capital firms’ most-loyal clients 

Private equity is on academic probation.

Princeton University is lowering expectations for its endowment’s returns because its private-capital investments have disappointed. Yale trimmed its portfolio of leveraged buyouts for the first time in a decade. Harvard says cashing out of some private-market investments early is now part of a long-term strategy.

Private equity has counted America’s wealthiest universities among its largest and most-loyal clients since the industry’s formative years. But the market for private-company investments has turned more crowded, and returns now struggle to match broader stock-market benchmarks such as the S&P 500.

University endowments grew to lean on the once-juicy returns of private equity to cover a larger slice of their overall budget. That strategy faltered when the long lockup investments returned an annualized 7.4% in the three years ended June 30, according to Cambridge Associates—much of it paper gains. Over that same period, the S&P 500 rose 19.7% a year.

It was a terrible time for the Ivy League’s golden goose to stop laying eggs. The Trump administration’s decision to revoke federal funding rippled through their campuses, forcing cuts on research projects and leaving schools scrambling. Settlements and court orders have since restored much of that money. But beginning next fiscal year, some of the richest schools expect to pay hundreds of millions of dollars annually in additional taxes on endowment income.

“They are looking at their underperforming private-equity portfolios, which for 30 years were supposedly the gold standard, and they’re worried,” said Charles Skorina, a recruiter in university investment management.... 

....MUCH MORE 

Also at fnLondon, BigLaw Feb. 12:

Kirkland & Ellis scraps 24-hour concierge service

Oddly Satisfying Architecture

From Dezeen, February 14:

Ten examples of oddly satisfying architecture

Tired of doomscrolling? Why not take a five-minute break to browse through this roundup of strangely pleasing architecture.

https://static.dezeen.com/uploads/2025/07/shanghai-grand-opera-house-spiral-staircase-roof-snohetta_dezeen_2364_col_18.jpg 

The Shanghai Grand Opera House by Snøhetta is nearing completion

https://static.dezeen.com/uploads/2021/10/syn-architects-the-hometown-moon-chapel-china-architecture_dezeen_hero1.jpg 

Syn Architects tops wedding chapel in China with illuminated "moon" 

MUCH MORE 

"Fei-Fei Li and Andrej Karpathy Back a New A.I. Use Case: Simulating Human Behavior"

From Observer, February 13:

Backed by Fei-Fei Li and Andrej Karpathy, Simile aims to model how real people think at scale. 

Every three months, public companies brace for analyst questions during quarterly earnings calls. But what if firms could predict these queries in advance and rehearse their responses? That’s one of the capabilities touted by Simile, a new A.I. startup spun out of Stanford and backed by acclaimed researcher Fei-Fei Li and OpenAI co-founder Andrej Karpathy

Simile emerged from stealth yesterday (Feb. 12) with $100 million in funding from a round led by Index Ventures. Alongside Li and Karpathy, the startup—which hasn’t disclosed its valuation—also counts investors including Quora co-founder Adam D’Angelo and Scott Belsky, a partner at A24 Films.

Li and Karpathy both have close ties to Simile’s founding team, which includes Stanford researchers Joon Park, Percy Liang and Michael Bernstein. Li is the co-director of Stanford’s Human-Centered A.I. Institute and advised Karpathy during his Ph.D. study at the university. She is widely known for foundational work such as ImageNet, a large-scale image database that helped drive major breakthroughs in computer vision. Karpathy and Bernstein also contributed to that project....

....MUCH MORE 

"Okay, when the analyst says 'Great quarter', you say..." 

Monday, February 16, 2026

"Altman and Pichai among tech CEOs heading to India for major AI summit in a key market"

From CNBC, February 15:

  • India will host the AI Impact Summit this week in New Delhi.
  • OpenAI CEO Sam Altman and Alphabet CEO Sundar Pichai are all expected to attend.
  • India presents a lucrative market of young, tech-forward consumers and a huge pool of talent which could be key to the continued development of AI. 

Big technology executives descend on India this week for an AI summit in New Delhi as the world’s largest companies aim to expand their presence in what is seen as a critical growth market.

India this week will host the AI Impact Summit, the latest in a series of government-hosted events focused on artificial intelligence that have taken place in the U.K., South Korea and France.

Among the key attendees are OpenAI CEO Sam Altman and Alphabet CEO Sundar Pichai. Anthropic boss Dario Amodei and Google DeepMind CEO Demis Hassabis are also slated to be there. Nvidia CEO Jensen Huang, who was earlier expected to attend, reportedly withdrew on Saturday due to “unforeseen circumstances.”

Indian Prime Minister Narendra Modi will roll out of the red carpet which tech CEOs will happily walk down as the country presents a lucrative market of young, tech-forward consumers and a huge pool of talent which could be key to continued development of AI.

“The summit ... is a huge validation of the potential of the market. Everyone’s coming in because they realize that this is the place to be in and India just cannot be ignored,” Lalit Ahuja, CEO of ANSR, a company that helps businesses run offshore teams in India.

The AI Impact Summit also comes amid a reset in relations between India and the U.S. as the two nations push toward a trade deal.

India strives to be a major tech hub
Modi’s government has made its intentions clear in the last few years — it wants India to be one of the world’s tech superpowers. India has approved $18 billion worth of semiconductor projects as it looks to build a domestic supply chain.

The government has pushed major companies, including Apple, to manufacture more of its goods in India.

Venture capital investors are betting on India’s startups while the country’s stock exchanges are seeing a surge in initial public offerings....

....MUCH MORE  

KUNG HEI FAT CHOY—CLSA Feng Shui Index 2026: Year of the Fire Horse

From CLSA:

Welcome to the action-packed Year of the Fire Horse! Following tradition, we temporarily step away from investment research to present our annual tongue-in-cheek Feng Shui guide for your entertainment. Gracing this year’s cover is the thrilling spectacle of Olympic showjumping, a sport of split-second changes in speed, direction and strategy that mirrors the fiery energy of the Horse year. The phrase shì rú bÄ“n mă 勢如奔馬 - charging forward like a galloping horse - captures the essence of 2026 beautifully. Bold moves, rapid momentum and sharp turns define the energetic waves we expect to ride in the year ahead....

....MUCH MORE  

https://www.clsa.com/special/FSI/2026/images/fengshui-index2026-3000x800.png 

  Leading by a horse’s head

With the Fire Horse being predictably unpredictable, we have locked ourselves into a safe, fireproof and soundproof room with all of our prognostic tools to divine the relative movements of our favourite Earth Rooster, the Hang Seng Index....

....MUCH MORE 

So You Want To Be An Algorithmic Trader

Lifted in toto from efinancialcareers, February 16:

The quiet intensity of algorithmic trading jobs in finance 

When people think of intense jobs in finance, they tend to imagine the 120-hour weeks worked by investment bankers. Algorithmic trading jobs slip under the radar in this regard, but can be just as exacting.

Andrew Courtney, formerly head of international ETF trading at Susquehanna International Group (SIG), recently appeared on a podcast to discuss quant trading careers. He said that quant traders typically spend "all day" looking at "multiple monitors covered with numbers, signals, flashing lights... your eyes are flittering across those screens trying to extract meaning and signal from those patterns." Courtney's experience isn't unique to SIG; at Jane Street, tools are optimized for individual traders to the point where UI elements can be as little as six pixels tall. 

The role requires such focus and intensity that Courtney said he'd "never had a lunch break in [his] career." The trade-off is that traders generally work around the times that markets are open, but that doesn't mean the work is inherently safer than a banker working until 4am. Around the time that Bank of America associate Leo Lukenas infamously died of heart complications, Adnan Deumic, an algorithmic trader at the bank, also sadly passed. While Lukenas was allegedly working 120-hour weeks in its investment bank, Deumic was working half that. The New York Post reported at the time, however, that the work was incredibly intense and Deumic didn't have time to leave his desk for a coffee.

A career in quant finance can also have long-term (but not necessarily bad) psychological effects. Courtney said that "thinking in bets is [such] a part of the culture at SIG that I can't not do it." He said that, whenever faced with uncertainty, he will "think of everything as a bet... I kind of don't understand how you talk to normal people, and they don't do that." 

efinancial careers front page.  

If interested see also: 

"George Washington Fought for America’s Independence—and Its Booze Industry"

 A repost from 2025.

From Barron's, February 22:


George Washington ran one of the country’s largest distilleries.
A whiskey barrel from the George Washington Distillery.
- Courtesy Mount Vernon

George Washington wasn’t just the father of his country. He also helped give birth to its liquor industry.

Washington’s distillery at Mount Vernon, Va., was one of America’s largest, producing more than 10,000 gallons of rye and corn whiskey in 1799. He sold it by the barrel as part of a postpresidency retirement scheme.

“Two hundred gallons of Whiskey will be ready,” Washington wrote to a nephew, “and the sooner it is taken the better, as the demand for this article (in these parts) is brisk.”

Demand for alcohol was brisk throughout the young nation, and it remains so today—even if our annual average consumption of around 2.3 gallons of absolute alcohol pales next to the 7.1 gallons quaffed in 1830.

We drink less for many reasons, among them ready access to safe drinking water. But age-old concerns about alcohol’s dangers, to both body and soul, followed drinking to the New World. Modern science has made the risks clear, most recently in a report from the Surgeon General that ties alcohol consumption to cancer.

This has taken a toll on U.S. liquor sales, which fell 1% last year to $112 billion, punishing the shares of brewers, distillers, and vintners. More people than ever express concern about drinking’s health hazards.

Yet, there are no calls for renewing prohibition. From New Year’s bubbly to beers at the ballgame and rum drinks at the beach, liquor remains central to our celebrations.

As ever in America, it’s always 5 o’clock somewhere.

“By 1770, Americans consumed alcohol, mostly in the form of rum and cider, routinely with every meal,” wrote the historian W.J. Rorabaugh, author of The Alcoholic Republic. “Many people began the day with an ‘eye opener’ and closed it with a nightcap.”

During the Colonial period, most alcohol was imported. Washington was partial to Madeira wine and English porter. After the Revolution, America became a nation of small brewers and distillers; cultivating the grape proved more challenging.

Alcohol became such big business that, in 1794, the government’s attempt to tax it triggered a Whiskey Rebellion by Pennsylvania farmers.

Washington rode at the head of 13,000 federal troops to put down the rebellion, enforcing the government’s right to collect taxes. There were personal ramifications: In 1798, Washington paid a tax of $332 on 616 gallons produced at Mount Vernon....

....MUCH MORE 

Milestones: "Ford Falls Behind China’s BYD in Global Sales For the First Time"

From Bloomberg, February 10:

Ford Motor Co. lost out to BYD Co. in global vehicle sales for the first time last year as the Chinese manufacturer continued its climb up the rankings of the world’s largest automakers.

Ford’s wholesales dropped almost 2% last year to just shy of 4.4 million, short of the 4.6 million vehicle sales BYD reported in January. The figure the US automaker disclosed Tuesday confirms BYD has moved up to No. 6 in the global sales ranks, one spot ahead of Ford.

While Ford’s US sales rose last year, it has lost ground in Europe and particularly China, where domestic manufacturers like BYD, Xiaomi Corp. and Geely Automobile Holdings Ltd. have grabbed market share from foreign automakers with affordable, tech-laden EVs. 

Ford has weathered a difficult EV transition, announcing $19.5 billion in charges to overhaul its strategy. 

BYD has also made inroads into markets in Europe, South America and Asia, with exports reaching 1.05 million in 2025. It aims to increase that to 1.3 million this year....

....MORE 

"Topology of 'China AI'"

From the Concurrent substack, September 11, 2025:

On circles, misconceptions, deep infrastructure, founder archetypes, state's role, memes, AGI. A conversation about the topology of China’s AI world for you.  

H is an AI engineer at one of China's largest tech companies, leading an open-source project. A few weeks ago, I met him in Shenzhen during a self-organized "China AI/tech tour" with several US tech writers.1 After peppering him with questions—the most obvious one being "What's Silicon Valley's biggest misunderstanding about China's AI?"—I discovered someone so thoughtful and genuinely bilingual.

His daily routine reveals the paradox: wake up, doomscroll X, debate on LessWrong, drive his NIO to work, then use English more heavily than when he studied in California. He loves watching Westworld and treats Gödel, Escher, Bach as AI scripture. Apart from geography, H could be any engineer at Anthropic or Google. He represents the global open-source AI community: following identical cultural patterns, reading the same viral posts, grappling with the same technical problems, laughing at the same memes. He just happens to work in China.

"'Chinese AI' is merely a geopolitical label," H said. "All LLMs fundamentally compress and regenerate collected data." Yet despite this universalist perspective, he articulately mapped the profound topological differences between Chinese and American AI ecosystems while understanding the China model's essence with surgical precision....

....MUCH MORE 

Books: Nordic Noir Has Spawned A New Sub-Genre: Arctic Noir (plus Russian oil)

Moving on from AI-generated romance novels... 

From High North News, January 30:

Greenland Is Shaping the Next Crime Fiction Genre, Says Professor Annemette Hejlsted 

Nuuk, Greenland: The dark, gloomy, and cold surroundings of the North have provided fertile ground for the Nordic Noir genre in both literature and film. In recent years, a subgenre has emerged, Arctic Noir, featuring both the natural and societal characteristics of the Far North, says Professor Annemette Hejlsted.

The cold nights, the long dark days, and the melancholic ambience of the Nordic region have been made world-famous by countless Scandinavian writers and producers in the crime genre, Nordic Noir.

Like other crime genres, Nordic Noir revolves around a crime, usually a murder, and its investigator. The investigator is often attempting a cumbersome balancing act between the heavy burden of the work and their personal demons. Often, the investigator is female and morally complex.

At the same time, the genre sheds light on social issues in the North, revealing cracks in the picture-perfect Nordic social democracies. 

Now, a new subgenre is emerging under the name Arctic Noir, characterized by an even harsher climate and bleaker environment, which first developed in Greenland. But it's not just about the environment, says researcher Annemette Hejlsted at Ilisimatusarfik, the University of Greenland.

"It allows the writer to play with new elements, such as how everyone knows each other in small communities. In addition, it often includes Indigenous culture, which is unique and has kind of developed on the outskirts of the dominant Western culture."

She says this is one of the ways Arctic Noir differs from Nordic Noir: the portrayal of the clash between traditional and modern cultures and knowledge, which is so often found in the Arctic.

"Arctic Noir provides a new setting, not just in terms of climate, but also in the uniqueness of Indigenous cultures that have developed across mainstream cultures," says Hejlsted.

"Greenlandic culture is naturally similar to a lot of other cultures. We study at the university, go to the swimming pool, and drink coffee at cafes. Yet, there is another unique element present here."

https://image.highnorthnews.com/1101666.webp?imageId=1101666&width=2116&height=1208&format=webp 

True Detective Night Country provided a global audience with a peak into Arctic Noir.

Not necessarily meant for a local audience
In 2024, HBO's acclaimed True Detective's fourth season was set in Alaska, showcasing the global appeal of the Polar Night and the allure and mystique of Indigenous knowledge and ways of living....

....MUCH MORE 

Also, the article at High North News that I was originally going for, February 13:

Russia announces new Arctic oil discovery

Russian energy major Gazprom Neft has discovered a new oil field on the Yamal Peninsula that is the largest discovered in the region in three decades, according to a company release....

....MUCH MORE 

Now, if we can get the AI to write a Russian - Norwegian - Sami mashup of the two stories... 

A.I. Use Case: Using Chatbots To Write Romance Novels

From the New York Times, February 8:

The New Fabio Is Claude
The romance industry, always at the vanguard of technological change, is rapidly adapting to A.I. Not everyone is on board.

Last February, the writer Coral Hart launched an experiment. She started using artificial intelligence programs to quickly churn out romance novels.

Over the next eight months, she created 21 different pen names and published dozens of novels. In the process, she discovered the limitations of using chatbots to write about sex and love.

Some programs refused to write explicit content, which violated their policies. Others, like Grok and NovelAI, produced graphic sex scenes, but the consummation often lacked emotional nuance, and felt rushed and mechanical. Claude delivered the most elegant prose, but was terrible at sexy banter.

“You are going to get hammering hearts and thumping chests and stupid stuff,” said Ms. Hart, who lives in Cape Town in South Africa. “At the end of every sex scene, everyone will end up tangled in the sheets.”

Chatbots were also bad at building sexual tension — the slow-burn, will-they-or-won’t-they plotlines that romance readers crave. When told to craft a love scene, the bots usually jumped straight to the obvious narrative climax.

Ms. Hart found Anthropic’s chatbot to be the most versatile, and developed ways around Claude’s prudishness. Among her techniques: feeding Claude very specific instructions and a list of kinks, and stressing that sex was not gratuitous, but crucial to the plot.

A longtime romance novelist who has been published by Harlequin and Mills & Boon, Ms. Hart was always a fast writer. Working on her own, she released 10 to 12 books a year under five pen names, on top of ghostwriting. But with the help of A.I., Ms. Hart can publish books at an astonishing rate. Last year, she produced more than 200 romance novels in a range of subgenres, from dark mafia romances to sweet teen stories, and self-published them on Amazon. None were huge blockbusters, but collectively, they sold around 50,000 copies, earning Ms. Hart six figures. 

While we spoke over Zoom, an A.I. program she was running ingested her prompts and outline and produced a full novel, about a rancher who falls for a city girl running away from her past. It took about 45 minutes.

Ms. Hart has become an A.I. evangelist. Through her author-coaching business, Plot Prose, she’s taught more than 1,600 people how to produce a novel with artificial intelligence, she said. She’s rolling out her proprietary A.I. writing program, which can generate a book based on an outline in less than an hour, and costs between $80 and $250 a month.

But when it comes to her current pen names, Ms. Hart doesn’t disclose her use of A.I., because there’s still a strong stigma around the technology, she said. Coral Hart is one of her early, now retired pseudonyms, and it’s the name she uses to teach A.I.-assisted writing; she requested anonymity because she still uses her real name for some publishing and coaching projects. She fears that revealing her A.I. use would damage her business for that work.

But she predicts attitudes will soon change, and is adding three new pen names that will be openly A.I.-assisted, she said.

The way Ms. Hart sees it, romance writers must either embrace artificial intelligence, or get left behind.
“If I can generate a book in a day, and you need six months to write a book, who’s going to win the race?” she said.

Romance at the Vanguard
Whenever the publishing industry is rocked by a technological shift, it usually hits romance first. Romance writers are prolific and their readers are voracious, so they’ve been early adopters of e-book subscription services, self-publishing, social media networking and online serial releases.

Romance is also the publishing industry’s best-selling genre. It accounts for more than 20 percent of all adult fiction print sales, according to Circana BookScan, and has continued to grow in recent years even as overall adult fiction sales have stagnated....

....MUCH MORE 

Sunday, February 15, 2026

Wrapping Up Our St. Valentine's Weekend: Italy's Torre Sant'Andrea, the "Love Arch", Has Collapsed

First up, from the Daily Mail, February 15:

Italy's famous 'love arch' collapses on Valentine's Day as storm lashes the country 

Italy's famous 'love arch' collapsed overnight on Valentine's Day as storms continue to rip through the country.

The Torre Sant'Andrea in Puglia was a rock formation in the sea that had become a popular tourist destination, attracting couples seeking eternal love.

According to local legend, pairs who kissed underneath the rock would have a love that lasted forever.

However, the iconic arch collapsed during storms on Saturday night, following days of high winds and heavy rain.

Pictures showed the bridge of rock between connecting the two stacks in the sea had eroded away....

https://i.dailymail.co.uk/1s/2026/02/15/22/106410257-15562479-image-a-1_1771193545999.jpg 

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And from The Telegraph, February 15:

Italy’s ‘love arch’ collapses on Valentine’s Day
Loss of storm-hit Torre Sant’Andrea ‘is a devastating blow to the heart’ 

https://www.telegraph.co.uk/content/dam/world-news/2026/02/15/TELEMMGLPICT000463976751_17711762917010_trans_NvBQzQNjv4Bq6OSVDLJdG-ypfVsRFKR-mLAGLIqw3-UGQfihKkRs-p8.jpeg?imwidth=680 

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Earlier this weekend: 

"The Mega-Rich Are Turning Their Mansions Into Impenetrable Fortresses:

To clarify: nothing is impenetrable, it's just a question of the cost of getting in.

From Dow Jones' Mansion Global, February 11:

Anxiety over high-profile violence has the wealthy spending big on armed security, bunkers and even moats to keep themselves safe from intruders 

British music producer Alex Grant was living in an under-construction mega-mansion in Los Angeles when, one morning shortly after 9 a.m., an armed intruder burst into the home.

“He came in and we had a tussle,” recalled Grant, formerly known as Alex Da Kid. Grant managed to call his manager, who phoned the police. Soon, officers and helicopters were on the scene.

He briefly considered abandoning the project after the 2017 break-in but ultimately finished the 24,000-square-foot home, which has eight pools, a car elevator and a nightclub. But, he doubled down on security features, installing a guard house, tall gates and a security system with retina scanners that alert the homeowner to movement in the home. “Later, I found out he had these knives on him,” said Grant, who recently listed the mansion and a neighboring house for $85 million after moving to New York.

In an era of high-profile violence—including the suspected abduction of Savannah Guthrie’s mother from her Arizona home just over a week ago—the wealthy are investing heavily in their personal security, particularly when it comes to their homes.

Security measures once reserved for presidents and royalty—safe rooms, biometric access controls, laser-powered perimeter defenses—are now mainstream items in luxury homes. Executive-protection teams and armed guards patrol gated enclaves and suburban estates, while tech startups are rolling out predictive threat-detection systems built for the ultra-wealthy. The shift reflects a hardening view among the affluent: Traditional policing and communal safety are no longer enough, so security is being privatized, customized.

This new emphasis is reflected in sales data. Roughly 45% of luxury homes sold in 2025 included a reference to privacy or security, according to Coldwell Banker Realty, up from 38% in 2024.

Why the wealthy are on edge
Break-ins at the homes of celebrities and professional athletes have been putting the wealthy on edge. A group of Chilean nationals was indicted last year for stealing items worth more than $2 million from sports stars including Kansas City Chiefs players Travis Kelce and Patrick Mahomes.

The break-ins, which took place when the players were not home, put fellow athletes on notice. Miami Dolphins player Tua Tagovailoa said he hired personal security to monitor his house when he’s on the road. “Let that be known, they are armed, so I hope if you decide to go to my house you think twice,” he said at a December 2024 press conference. The homes of celebrities like Brad Pitt and Nicole Kidman have also been broken into.

Miami real-estate agent Danny Hertzberg of Coldwell Banker Realty said he began noticing an increased emphasis on security in 2020, when high-profile executives were migrating from New York to Miami during the early days of the Covid pandemic, but it’s ramped up ever more since the ambush killing of UnitedHealthcare CEO Brian Thompson on a Manhattan sidewalk in 2024 and the shooting of Blackstone executive Wesley LePatner and several others in July 2025 at a Park Avenue office tower.

The sheer volume of personal information now available online has heightened anxiety among the wealthy. And the ubiquity of social media has stripped away a layer of anonymity the wealthy once relied on. “Prior to the wide use of social media, most CEOs—whether they’re in private equity, finance or tech—no one knew their names or what they looked like, with few exceptions,” Hertzberg said. “Now, people are tracking them.”

Private jet tracking websites—which allow anyone to monitor private aircraft movements in real time—in particular have “sent chills through the high-net worth community,” he said. Corporations are taking note. Companies offering personal security benefits for CEOs increased by 10% in 2025 compared to 2023, according to a Goldman Sachs Ayco survey. And 27% of respondents offered home security benefits to CEOs, the highest level since 2003.

Building the modern fortress
One entrepreneur capitalizing on this growing demand is David Widerhorn, who got into real estate after selling a tech company in 2017. Widerhorn, 38, recently built an heavily-secured home in Scottsdale, Ariz., that he is trying to sell for $15 million.

In early December, Widerhorn walked through the roughly 8,600-square-foot house, pointing out 32 casino-grade cameras with AI-powered facial and vehicle recognition capabilities. There is also a laser intrusion detection system around the perimeter/

Pausing at a steel double gate in front of the house, he warned that the security system kicks in even before visitors reach the front door, which is fashioned out of three-inch thick solid steel and has 13 deadbolts. Widerhorn said even the landscaping was designed to be a deterrent: There are sour orange trees with four-inch spikes in concrete planters on the edge of the property; just beyond those trees, separating the house and street, is a moat.

“If you try to run through that bush, it will be a bad day for you,” Widerhorn said. Should anyone get past the trees, lasers will detect motion and the system will call the police. Inside the house, three ear-piercing alarms will go off and a fireplace surround in the great room—which is made out of cristallo quartzite and can change color—turns red.

The home’s most fortified feature lies hidden behind a wood-paneled wall: a reinforced concrete safe room with a 2,000-pound door and an air filtration system built to U.S. Army Corps of Engineers standards.

Widerhorn declined to share specifics but said it cost more than $10 million to build the house. About $1 million was spent on bullet-resistant smart glass. And the front-entry security features cost more than $1 million.

In Las Vegas, clients of luxury design-build firm Blue Heron are spending between $100,000 and $1.5 million on security features, including safe rooms and bunkers, said Andrew Kennedy, director of innovation and strategy. Blue Heron is working on new ways to incorporate architecture with security, such as exterior window shades that could be closed with the touch of a button to protect the home’s occupants.

In Surfside, Fla., the developer of the Delmore, a planned 37-unit ultra-high-end condominium project designed by Zaha Hadid Architects and with units priced at up to $200 million, has tapped a Washington D.C.-based security firm to design the building’s security. The firm, Active Security Consulting, was founded by former U.S. Marine Scout Sniper Walter Hasser and has provided specialized protection for the U.S. Department of Defense as well as the current and former Presidents of the United States...

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China To Deploy Humanoid Robots At The Border With Vietnam

The Chinese seem to think there may be something to this AI/humanoid robot mashup stuff. 

From Earth.com:

Disturbing video shows humanoid robots preparing for border patrol duties in China 

China is about to send humanoid robots to work at a busy border with Vietnam. UBTECH Robotics has won a $37 million contract, to deploy its Walker S2 machines there starting this month.

The assignment is led by UBTECH Robotics Corp., a Shenzhen-based company that builds full-size humanoid robots for industry and public services. 

Its engineers focus on embodied intelligence, which is artificial intelligence that controls a physical robot body, so these machines can handle messy, real-world environments.

Fangchenggang is a coastal city in Guangxi near the border with Vietnam, where cargo trucks, coaches, and day travelers constantly cycle through.

Chinese planners see a border crossing as a tough, real-world test, because schedules are tight and inspections cannot easily stop.

If these robots perform reliably there, it will be easier to argue for similar deployments at airports, seaports, and crowded train stations.

Inside the Walker S2 robots
Walker S2 is an adult-sized humanoid machine with jointed legs, a torso, and arms, designed to move wherever people already walk.

It uses autonomous battery swapping, which involves robots changing battery packs without human help, so that it can work with very little downtime.

To stay balanced and avoid collisions, the robot combines cameras, depth sensors, and force feedback in its joints to monitor nearby movement.

That mix of hardware and software makes Walker S2 closer to a general purpose worker than many single-task factory machines.

What Walker S2 units can do
At the Fangchenggang project, Walker S2 units will help border staff guide passenger queues, direct vehicles, and answer simple questions from travelers.

Some robots will patrol corridors and waiting areas, watching for blocked exits or crowd patterns that might require human officers to intervene.

Others will move between cargo lanes to support logistics teams, checking container IDs, confirming seals, and relaying status updates to dispatch centers.

Away from the border itself, the fleet is expected to inspect steel, copper, and aluminum facilities, walking structured routes through hot industrial yards....

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The Interesting Engineering article this story is based on really stresses the autonomous battery-swapping feature: 

The agreement was signed with a humanoid robot centre in Fangchenggang, a coastal city bordering Vietnam. The deployment will involve UBTech’s Walker S2, a model launched in July and described as the world’s first humanoid robot capable of autonomously replacing its own battery.  

"Google's year in review: 8 areas with research breakthroughs in 2025" (GOOG)

This was posted on December 23, 2025 so some of the points made have already been superseded by events but it is a good overview of what Google wishes to share/highlight.

From the Google blog, The Keyword:

This was a year of AI agents, reasoning and scientific discovery. 

Delivering breakthroughs on world-class models
This year, we significantly advanced our model capabilities with breakthroughs on reasoning, multimodal understanding, model efficiency, and generative capabilities, beginning with the release of Gemini 2.5 in March and culminating in the November launch of Gemini 3 and the December launch of Gemini 3 Flash.

Built on a foundation of state-of-the-art reasoning, Gemini 3 Pro is our most powerful model to date, designed to help you bring any idea to life. It topped the LMArena Leaderboard and redefined multimodal reasoning with breakthrough scores on benchmarks like Humanity’s Last Exam — a fiendishly hard test for AI models to see if AI can truly think and reason like humans — and GPQA Diamond. It also set a new standard for frontier models in mathematics, achieving a new state-of-the-art of 23.4% on MathArena Apex. We followed shortly with Gemini 3 Flash, which combines Gemini 3's Pro-grade reasoning with Flash-level latency, efficiency and cost, making it the most performant model for its size. Gemini 3 Flash's quality surpasses our previous Gemini 2.5 Pro-scale model's capabilities at a fraction of the price and substantially better latency, continuing our Gemini-era trend of 'the next generation's Flash model is better than the previous generation's Pro model'.

Learn more about our progress on our world-class AI models this year:

Gemini 3 Flash price & benchmark table. 

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ICYMI: "Waymo is paying DoorDash gig workers to close its robotaxi doors"

From CNBC, February 12:

  • Waymo is paying gig workers from companies like DoorDash and Honk to help close the doors of its robotaxis.
  • When a rider leaves a vehicle’s door ajar, it prevents the car from departing until a human closes it.
  • Waymo, which is owned by Alphabet, plans to expand into several new U.S. cities this year. 

Waymo’s cars are driven without humans. But when a departing passenger leaves a door open, the car won’t move until a person closes it.

For that task, Waymo is turning to gig workers from companies like DoorDash

The Alphabet-owned self-driving car company confirmed on Thursday that it’s running a pilot in Atlanta to compensate delivery drivers for closing Waymo doors that are left ajar. DoorDash drivers are notified when a Waymo in the area has an open door so the vehicles can quickly get back on the road, the company said.

That acknowledgement came after a Reddit post showed a DoorDash driver in Atlanta was offered $11.25 to close the door of a nearby Waymo.

Waymo and DoorDash said in a joint statement to CNBC that they are always looking for new and flexible ways for DoorDash deliverers to earn money, adding that future Waymo vehicles will have automated door closures. Waymo didn’t say when that capability will arrive....

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Love And Fraud

FICO.com defines application fraud thusly:

Application fraud is a form of deception where individuals misrepresent information or illegitimately use someone else's personal information (PII) to obtain various benefits, typically financial, such as opening bank accounts or applying for credit cards. 

And from the always interesting Biometric Update, February 11: 

Trust as a target: The parallels between application and romance fraud

At National Hunter’s annual conference, many experts reflected on the parallels between romance and application fraud. Sharing one of the key takeaways, Dave Rossi, Managing Director at National Hunter, highlights: comparing these mechanisms and learning from them is essential if individuals, lenders and banks are to combat these threats effectively.

Romance scams aren’t only heartbreaking. They are big business for criminals.

Every year in the UK, there are more than 9,400 reports of romance fraud. This equates to a loss of more than £106m or around £11,200 per victim on average. The reports of romance fraud continue to rise at a time when identity fraud as a whole is surging. The common thread tying them together? Trust is exploited and identities are misused.

Romance scams are often seen as personal crimes rather than financial ones. However, behind this emotional narrative sits an uncomfortable truth. The same social engineering techniques used to extract money and information from victims increasingly feed application fraud and identity misuse.

By looking at the tools and tactics used in both of these scams it is quickly made clear that misplaced trust remains fraudsters’ most effective tool. Learning how to combat this effectively is critical.

How criminals turn trust into a weakness 
Social engineering tactics are commonly used across several types of fraud, but are arguably most effective in romance scams. The criminals committing romance fraud are experts at identifying the right person to target. These victims are not careless. Warning signs are simply harder to spot, especially when emotions are involved. Additionally, advances in AI-generated images and deepfake videos have made it increasingly difficult to distinguish between what is real and what is fake. These fraudsters rely on two key ingredients: turning trust into a weakness and creating urgency as they move from emotional to financial exploitation.

The parallels with application fraud begin to emerge at this stage. While romance scams exploit emotional trust, application fraud exploits procedural trust. Financial organisations rely on identity data appearing accurate and consistent across applications. In both cases, the deception succeeds when the individual or financial institution accepts the details at face value.

The transition from emotional to financial fraud 
This overlap becomes increasingly prominent when romance scams move beyond conversation to emotionally driven and coerced action. At this point, criminals request financial help or access to accounts or identity details. Financial help is often positioned as temporary or practical support. Requests for identity or account details are framed as a necessary step to move the relationship forward.

Criminals’ success rate is increasing rapidly, with TSB’s latest romance fraud report showing that money sent to scammers jumped by 37% in a year, with a 15% increase in case volume. Once a fraudster has your details, they will keep them even after the relationship ends and use them to open new accounts, transfer money and create fraudulent applications....

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"Why China’s central bank won’t save the country from deflation"

From The Economist, February 12:

It’s not about the exchange rate any more 

FOR DECADES Americans have fretted that China might dump its vast holdings of Treasuries, undermining the dollar. Global investors therefore snapped to attention when Bloomberg, a news agency, reported on February 9th that China’s regulators have warned commercial banks against holding too many American government bonds. Some banks have been told to cut their exposure. In response to the news, the dollar fell against China’s yuan and Treasury prices wobbled.

Are fears of Sino-American financial warfare finally coming true? Thankfully not. In guiding its banks, China was not making a fresh geopolitical threat. At most, it was trying to limit the banks’ vulnerability to the many geopolitical threats that already exist. Dollar bonds have been a tempting asset for Chinese lenders, offering higher returns than similar securities at home. But any hit to the dollar could inflict heavy losses on overexposed lenders.

No wonder China’s authorities feel nervous. As well as hurting the banks, a weaker, more competitive dollar will curb the appeal of China’s exports, a vital source of growth. Together with cheaper imports, that could also worsen China’s deflationary tendencies. According to figures released on February 11th, consumer prices rose by only 0.2% in the year to January. The falling cost of pork (down by 14%) offset the rising price of bling (gold jewellery increased in price by 77%). An alternative measure of prices as charged at the “factory gate” has been falling for years.

Although recent currency movements could worsen this problem, they remove a troublesome constraint on the central bank. In the past, worries about the yuan have prevented the People’s Bank of China from aggressively cutting its policy interest rate, which has remained at 1.4% since last May (see chart). It feared that monetary easing would add to downward pressure on the currency. Now that would probably be welcome. “The exchange rate doesn’t pose a strong constraint overall,” said Zou Lan, deputy governor of the central bank, at a press conference last month.

Unfortunately, another obstacle remains: bank profitability. Banks make money by borrowing cheaply and lending more expensively. But in China the margin between deposit rates and lending rates is at a record low of 1.4%, far below the 1.8% recommended by regulators. To win business, banks are sometimes tempted to underprice their loans and overcompensate their best depositors. The central bank worries that disorderly competition (or “involution”, as the Chinese call it) now afflicts the country’s financial institutions, just as it plagues manufacturers, e-commerce firms and high-school exam-takers.

Mr Zou hopes that this pressure will ease this year. Many three- and five-year deposits will mature in 2026, allowing banks to reprice them at lower rates. That should allow the central bank to reduce its own policy rate, but not by much. Most economists expect it to make just one or two cuts of 0.1 percentage points each.....

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There is a very good chance that sometime in the future I will purloin the line "Bloomberg, a news agency." 

Chicago Biglaw Firm Baker McKenzie Cuts Hundreds of Jobs Amid Rising AI Influence in Legal Sector

Via Legal News Feed, February 14: 

As the legal industry grapples with the rapid integration of artificial intelligence (AI), Baker McKenzie has announced a considerable workforce reduction, shedding hundreds of jobs. This move underscores the evolving role of technology in reshaping traditional law practices. According to Bloomberg Law, these layoffs are part of a broader trend as firms reassess their operational models amid increased AI adoption.

Baker McKenzie’s decision reflects a growing sentiment in the legal sector that technological advancements can deliver efficiency and cost savings, particularly in automating routine tasks. AI is increasingly employed for tasks such as legal research, document review, and predictive analytics. This shift not only reduces the need for personnel dedicated to these activities but also challenges firms to rethink their staffing strategies.

The trend towards AI-driven solutions is not confined to Baker McKenzie. According to insights from Reuters, many law firms are adopting AI tools to stay competitive in a market where clients demand both innovation and lower costs. This transformation necessitates a change in the skill set expected from legal professionals, who must now be proficient in both law and technology....

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 Baker McKenzie is the world's eighth or ninth largest law firm with revenue of around $3.4 villion.

Saturday, February 14, 2026

"The Thermodynamic Margin Call"

Possible band name? Contact the writer for licensing info.  

From Michael Green (you may know him as https://x.com/profplum99) at his Yes I give a fig substack, January 18:

Why Wall Street is Long the Wrong Singularity 

My apologies for the one week gap. Occasionally, the attic receives an inflow of new information that requires additional reorganizing. And this is why I love writing on Substack. In response to my scarcity posts, I received a research package from Hudson Bay Capital that perfectly crystallizes the “Optimism” narrative currently sweeping Wall Street. The papers, titled Tech Trumps Tariffs” (Nouriel Roubini) and No, Stocks Aren’t in a Valuation Bubble” (Jason Cuttler), are sophisticated, compelling, and arguably the most dangerous documents I have read this year. Please read them.

Their argument is the highest-conviction version of the “Soft Landing” consensus. They posit that we are on the precipice of a “positive supply shock” driven by AI that will raise US potential GDP growth to 4%, crush inflation, and justify an S&P 500 target of 9,000. Their thesis is elegant: Technology (AI) enables us to dematerialize growth, rendering physical constraints such as labor shortages and tariffs irrelevant.

It is a beautiful theory. Unfortunately, it violates the laws of physics — specifically, the physics of our infrastructure networks. And, as the latest research from Jones and Tonetti identifies, it violates the “laws” of economics. Using their projections, it also assumes a catastrophic path for wages vs capital that will not be tolerated:

Fortunately, it will not come to pass. The Hudson Bay thesis rests on a fatal accounting error. It assumes that Machine Labor is infrastructurally equivalent to Human Labor. It assumes that replacing a worker with an AI agent is a 1:1 swap in the economic ledger.

It is not. Per-capita productivity equals throughput divided by population only if capital scales at least proportionally with the population. Wall Street assumes the numerator (throughput) scales infinitely, while ignoring that the denominator (capital stock) is physically capped. This isn’t a Malthusian tale of inevitable collapse—I’m not predicting an endpoint where growth hits zero forever. It’s about the path: the short-run thermodynamic penalties and ergodicity errors that Wall Street’s linear models miss, turning a ‘productivity boom’ into a margin call unless we adapt.

I spent the last week auditing the energy books, and the results are stark. We are not facing a “Productivity Boom”; we are facing a “Thermodynamic Margin Call”. The transition from a human-led economy to a machine-led economy carries a specific topology penalty that Wall Street’s linear models are missing.

This is the Growth Wedge. And it implies that the “Cost of Capital” isn’t going back to zero—it’s going to track the cost of rebuilding the entire US energy grid from scratch.

The Optimist’s Delusion

To understand why the consensus is wrong, we must first steelman their argument. Hudson Bay posits that US exceptionalism is strengthening. They argue that the productivity gains from AI (estimated at 0.5–1.5% annually) will outweigh the stagflationary drag of protectionism.

In their model, AI acts as a deflationary force. By substituting capital (software/compute) for labor, we lower unit costs and expand margins. This justifies a “Sentiment Spread”—a premium valuation multiple—similar to the 1985-2001 period.

The mistake in the AI-optimist model is treating machine substitution as “Hicks-neutral (a technological change that doesn’t alter the ratio of capital to labor). In reality, this transition is energy-biased and capital-deepening.

The Ergodicity Error

More fundamentally, the AI-optimist model commits an ergodicity error: it confuses the ensemble average with the time average.

Wall Street implicitly assumes that because capital can flow and equilibrate in the long run, it will do so smoothly over the short run. But we do not live in an ensemble of possible economies. We live in a single, path-dependent timeline.

If the copper wires, transformers, and gas turbines cannot be built fast enough to support the AI load in 2027, the system breaks long before it ever reaches the hypothetical 2035 equilibrium.

They see “The Cloud” as a place where value scales infinitely with near-zero friction. But “The Cloud” is not a place. It is a physical infrastructure of aluminum, copper, and megawatts. And unlike the software boom of the 1990s, which ran on the “stranded capacity” of office buildings and efficiency gains from the death of the incandescent bulb, this new boom requires Net New Industrial Capacity (a replay of the DotCom fiber buildout).

 

Revisionist History: The Decoupling of Throughput

To understand the trap we are in, we have to rewrite the history of the last 50 years. Standard economics holds that the divergence between Productivity and Wages that began in 1973 was a policy failure or the result of corporate greed, the loss of unions, etc.

Institutions and policy certainly shaped how this divergence manifested, but it became unavoidable once throughput migrated from human bodies to owned infrastructure.

Some economists argue that this divergence is a statistical illusion—that if you adjust for inflation correctly (using output prices instead of consumer prices) and include non-wage benefits, pay actually kept up with productivity.

They are missing the point (unsurprisingly). The divergence isn’t a measurement error; it is a Topology Shift.

As the chart above illustrates, Labor and Productivity marched in lockstep for the first half of the 20th century. Why? Because the economy ran on Liquid Fuels and Human Labor. To burn more oil, you needed more men to drive the trucks, man the rigs, and work the assembly lines. Labor controlled the throughput and hence negotiated its proportionate share. In the areas of the economy where this remained true, as the linked paper demonstrates, wages largely tracked productivity:

 

In 1973, we hit the Thermodynamic Wall. We couldn’t just add more men to burn more oil. We switched to the “Cheat Code” (Offshoring) and began the slow transition to the “Electro-Capital” grid....

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