Climateer Investing

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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Audit Professionals In Love: "Forget Flowers, KPMG Wants You to Give Your Spouse the Gift of Compliance on Valentine’s Day"

With St. Valentine fading really fast in the rear-view, from Going Concern:

A tipster has provided us with what passes for Valentine’s Day cards at KPMG: notices that their spouses will be receiving postcards reminding them that independence matters to them, too....

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Also at Going Concern:

KPMG Brings AI Talking Points to a Fee Negotiation, Inadvertently Opens a Pandora’s Box Filled With Stingy Clients
According to KPMG, ‘A Majority’ of People Would Take a Pay Cut If It Meant Working With Friends
Friday Footnotes: Italian Tax Cops Go Sniffing Around KPMG’s Office; Depreciation Is AI’s Latest Victim

Probably not related:
Valentine's Day and Economists

This tale is said to be told by John Kenneth Galbraith on himself. As a boy he lived on a farm in Canada. On the adjoining farm, lived a girl he was fond of. One day as they sat together on the top rail of the cattle pen they watched a bull servicing a cow. Galbraith turned to the girl, with what he hoped was a suggestive look, saying, "That looks like it would be fun." She replied, "Well.... She’s your cow."

"Think your breakup was bad? Check out the Museum of Broken Relationships"

With St. Valentine fading in the rear view mirror, we are left with the detritus of love gone bad.

From exp magazine, February 8, 2023:

A toy bunny. A ‘stupid frisbee.’ A ‘toaster of vindication.’ If it reminds you of your ex, the curators will take it.

Over 19 years, the Museum of Broken Relationships in Zagreb, Croatia, has amassed more than 4,000 items: watches, stiletto shoes, espresso machines, self-empowering books, wedding gowns, angry dolls, axes, and breast implants. They’re all items that left a severe mark on the hearts of the people who donated them. Now, they’re displayed for all to see in a 10,000-square-foot baroque palace in Zagreb’s Gornji Grad, or Upper Town — a historic hilltop neighborhood of charming little cobblestone streets.

The collection began in 2004, when Dražen Grubišić, a prolific visual artist, and Olinka Vištica, an arts producer, broke up. Afterward, Grubišić found himself trapped by an object that still held emotional value: a toy bunny that he and Vištica had each left with the other while traveling abroad. How would they deal with the bunny post-breakup?

“I have always found burning and destroying objects barbaric,” Grubišić says. Apparently, so had Vištica. The former lovers talked about creating a place where items like their bunny could rest in peace — and where these cast-off artifacts would be treated like found art. In 2006, they put up an exhibition in a shipping container in the garden of a Zagreb art museum, containing items donated by residents of the Croatian capital. The exhibition made quite an impression. Soon, boxes filled with objects and stories started coming their way, often from beyond Zagreb. Popularity planted the idea in their minds of creating a permanent museum. In 2010, the Museum of Broken Relationships opened its doors.

Visitors wind through seven rooms, each with a poetic title, such as “Body of evidence,” “Archaeology of the heart,” and “The doors we dare not open.” Smaller museum items are displayed in cases along the walls; others are placed atop boxes.

Now, broken-hearted lovers can ship their romantic memento and its accompanying story directly to Zagreb. So can anyone with a token of a lost platonic relationship. The donations are typically anonymous. “People have donated items related to war, family, breakup with religion, or breakup with profession,” Grubišić tells me over coffee in the cozy cafe inside the museum....

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"China’s future growth rate could drop to 2.5% without market reforms: economist"

That would be bad for China and probably for the whole world.

From the South China Morning Post, February 8:

China will struggle to keep growth above 4 per cent unless there is a ‘strong turnaround’ in productivity and consumer spending, economist warns

China’s long-term growth trajectory will depend on the introduction of market reforms, and the country’s potential growth rate could fall to about 2.5 per cent in the coming years unless action is taken, a prominent Chinese economist has warned.
“Without a strong turnaround in total factor productivity and a meaningful expansion in household consumption, it will be difficult for China’s economic growth to reach 4 per cent or higher,” said Zhou Tianyong, former deputy head of the Central Party School’s Institute of International Strategic Studies in Beijing.
The warning came as Beijing prepares to unveil its next five-year plan and economic policy priorities for 2026, with policymakers striving to address a series of challenges at home and abroad and boost China’s long-term development by accelerating innovation and raising domestic consumption.
“Our estimates for the 15th five-year plan period [from 2026 to 2030] and the decade beyond put potential growth at around 2.5 per cent,” said Zhou, who is now head of the National Economic Engineering Laboratory at Dongbei University of Finance and Economics, in an article posted on February 1 on the social media platform WeChat.
“Potential growth” is an academic term that measures a country’s long-term and sustainable productivity by calculating the inputs of labour, capital, innovation, entrepreneurs and other production factors.
Zhou pointed to mounting supply-side pressures, as well as significant uncertainty on the demand side, including over fixed-asset investment, household spending and goods exports.
The estimate is far lower than the 5 per cent growth in gross domestic product that China reported last year. It is also below the 4.17 per cent average annual growth rate Beijing has calculated it must hit to double per capita GDP from 2020 levels by 2035.
China’s quarterly GDP growth slowed to a three-year low of 4.5 per cent in the final three months of last year, weighed down by domestic headwinds including weak demand and a prolonged property downturn....

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Be My Macabre Valentine

A couple posts from the covid time:

Be My Macabre Valentine: "How much chocolate would you have to eat for it to kill you?"

From Popular Science:

Death by chocolate is only 7,084 Hershey kisses away.

If you were a kid in the ’90s, or had a kid in the ’90s, you probably remember the Matilda scene—the scene—where the loathsome Miss Trunchbull made Bruce Bogtrotter eat an 18-inch chocolate cake in one sitting, in front of his classmates.
The punishment is torturous to watch, and the act is probably illegal. But if this were real life, would Bruce have died? No, he would not have suffered any sort of chocolate toxicity from it. A conservative estimate would have him eating probably only about a pound of pure chocolate. That's not enough to kill somebody.
In the fact that it is almost impossible for the average human to die from eating too much chocolate....

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Well there you go.

Be My Macabre Valentine, II

From Vintage Everyday:

This Ad to Spend Your Valentine’s Day Planning Your Funeral

“Give her the perfect gift, make pre-arrangements as a couple with the affordable funeral home.”

Because this Valentine’s Day, there’s nothing more romantic than letting her know that you’re more than prepared for her to die.

....MORE

Who's up for a goth Valentine's Day!?

Vintage Everyday home

"The Stock Market Has No Idea What’s Coming: Investors are simultaneously terrified that AI works and that it doesn’t"

Professor Schrödinger, please call your office.

From the Algorithmic Bridge, February 6 i.e. before the Nasdaq notched its fifth weekly decline on February 13.

Hey there, I’m Alberto! Each week, I publish long-form AI analysis covering culture, philosophy, and business for The Algorithmic Bridge. Free essays weekly. Paid subscribers get Monday news commentary and Friday how-to guides. You can support my work by sharing and subscribing.
Today I’m delaying the Friday guide because the AI selloff this week is too interesting to let sit until Monday. The guide will go out very soon. Here’s my take on what’s actually happening and why everyone’s analysis is missing the point.

Pictured: the stock market when investors think about AI’s implications for too long. It doesn’t matter when you’re reading this. Source: Brew Markets

I. THE SAASPOCALYPSE
Jefferies has a name for what’s happening to software stocks: the SaaSpocalypse. Since January 28, the S&P 500 software and services index has shed roughly $830 billion in market value. The word on every trading desk, according to Jefferies’ own equity desk, is “get me out.”
The proximate trigger was Anthropic. They released new legal, finance, and marketing capabilities for its Claude Cowork productivity tool—they call Cowork “Claude Code for the rest of your work,” although Claude Code was already for non-coders as well—and open-sourced the plugins.
So AI is finally eating software. LLMs are pushing into the “application layer,” the lucrative enterprise territory where SaaS companies have built their businesses for two decades. It’s not looking good.
Nvidia CEO Jensen Huang called the selloff “the most illogical thing in the world,” because it makes no sense to think that AI agents will invent new software tools when they can use existing ones. But as Keynes said (and has been repeated this week a lot): “Markets can remain irrational longer than you can remain solvent.” Despite the apparent irrationality, the story kind of makes sense: part of SaaS revenues will be redirected to the pockets of AI companies.
But that’s only half the selloff picture. While SaaS stocks collapsed on fears that AI works too well, infrastructure stocks were also collapsing on fears that AI doesn’t work well enough.
Alphabet reported earnings—first ever $400 billion year—and projected $185 billion in AI capital expenditure. The stock fell because the market—we can only speculate here—assumes that’s more than AI will require (especially if the datacenters are financed on debt). Your typical bubble concerns and such. Deutsche Bank said the number “stunned the world.” And indeed, the world was stunned: Microsoft had already dropped about 10% after disappointing cloud services growth. AMD plunged 17%. Nvidia extended its losses for the year. Amazon’s stock tanked (they project $200 billion of AI spending for 2026). Meta projects up to $135 billion. And so on, totaling $650 billion across Big Tech, most of it dedicated to AI infrastructure.
What do all these companies have in common? They either make chips or build datacenters: they’re the backbone of the AI industry. The market’s verdict on AI infrastructure spending is quite clear: Unclear return on excessive investment.
If you now take both pieces of the story and put them together, you realize what’s going on: The market is running two conflicting trades simultaneously. Trade one: AI will destroy software companies, so sell them. Trade two: AI companies are spending too much building AI, so sell them....

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Technology's Long Shadow: How Areas In Germany That Early-Adopted The Steam Engine Are Outperforming Today

As always, being aware that the arrow of causality could go either directions.

Or neither.

I'm thinking average intelligence of the native workforce as a proxy for inventiveness and adaptability.

From Berlin's Rockwool Foundation, January 2026:

From Steam Power to Artificial Intelligence: What the Past Can Teach Us About the Future of Work

Short summary

Regional inequalities remain a central issue in public and policy debates. In Germany, average full-time wages in the richest 10% of counties are more than 40% higher than those in the poorest 10%. This raises core questions: Where do such disparities originate? How persistent are they? And what policies can reduce them?
A new study traces these inequalities back to the introduction of a transformative technology: the steam engine. Much like AI today, the steam engine was among the most disruptive technologies in the 19^th century. While the long-term effects of AI remain uncertain, history provides guidance: German regions that had more steam engines per worker in 1875 have higher wages, a more skilled labor force, and greater firm productivity today. They also show greater occupational diversity and sustained innovation over time.
These findings are consistent with theories of technology–skill complementarity (where new technologies raise the demand for skills) and directed technical change (where firms orient innovation toward exploiting those higher skills), pointing to a persistent, self-reinforcing dynamic between technological progress and human-capital development.

Key Findings

Higher long-run wages in regions with higher steam engine density: Compared to regions with an average adoption rate of 6.64 steam engines per 1,000 workers in 1875, regions that were in the top 10% steam engine intensity (13.13 steam engines per 1,000 workers) have 4.59% higher average wages in modern day Germany (1975-2019). This wage premium holds after accounting for worker demographics, historical industry mix, and geography.
Greater educational attainment and higher firm productivity: These regions have also a larger share of tertiary-educated and technically skilled workers 150 years later, as well as more productive firms. The study finds that nearly 50% of the steam engine-related wage premium is explained by having more productive firms in these regions.
Innovation and technological diversity: Regions with more steam engines per worker in 1875 registered significantly more patents, historically (1877-1918) and in recent decades (1980–2014), and show greater technological diversity in their innovations.
Occupational diversity: Regions with more steam engines per worker in 1875 exhibit greater occupational diversity today, both in overall economy and within the manufacturing sector

“Steam power didn’t just fuel factories, it reshaped the technology and skill development of entire regions for generations. The lesson for today is clear: early adoption of transformative technologies like AI can have long-lasting consequences.”
— Christian Dustmann
Based on RFBerlin Discussion Paper 13/26: Becker, Dustmann & Ku (2025) “The Virtuous Cycle Between Skills and Technology”

Research summary

A central question in economics is how new technologies shape labor markets and, in turn, how these changes influence innovation and long-run growth (Autor et al., 2003; Katz & Margo, 2014). With today’s rapid advances in automation, digitalization, and artificial intelligence, this issue has gained renewed urgency (Brynjolfsson & McAfee, 2014; Autor, 2015; Acemoglu & Restrepo, 2018).
Our study (Becker, Dustmann & Ku, 2025) takes a historical perspective. We examine one of the most transformative technologies of the past: the steam engine. Unlike water or wind power, steam provided a reliable, scalable, and geographically flexible source of energy that reshaped industrial production across 19th-century Germany (Crafts, 2004). By linking digitized census records of steam adoption in 1875 to German social security data (1975–2019), firm productivity measures, and historical as well as modern patent data, we investigate how steam engine adoption influenced regional outcomes over more than a century. Figure 1 shows the number of steam engines per 1,000 workers in 1875 across Prussia.

Notes: This figure shows the spatial distribution of steam engines per 1000 workers in 1875.

Data on steam engines are available at the level of year 1871 Prussian counties. The figure

also shows the boundary of modern Germany 2019.

The results are striking. Regions with higher steam engine density in 1875 have persistently higher wages today: a one standard deviation (4.6 steam engines per 1,000 workers) increase in steam adoption is associated with 2.3–3.7% higher wages today. This relationship can also be seen in Figure 2 which shows the number of steam engines per 1,000 workers on the X-axis and mean wages in 2015 on the y-axis....

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Sadness In Seattle: "Amazon Joins Microsoft in Bear Market. Why Mag 7 Stocks Are Struggling" (AMZN; MSFT)

Using the "down 20%" convention.

From Barron's, Friday morning, February 13:

The Magnificent Seven are all being moved by artificial intelligence again. Except, this time, they’re sinking on fears about AI rather than rising on hopes about the new technology.

The Roundhill Magnificent Seven exchange-traded fund, which provides equal-weight exposure to the so-called Mag 7 large technology companies, closed in correction territory on Thursday, down nearly 11% from its high in late October. The ETF was falling 0.6% in morning trading Friday.
Investors are worried about the returns on AI spending for large U.S. technology companies. Collective capital expenditure this year from Amazon.com, Microsoft, Google-parent Alphabet and social-media company Meta Platforms is set to come in at roughly $650 billion. Concerns about how that is set to impact the companies’ balance sheets and cash flows are leading to rotation into different sectors and overseas markets.
“Focusing solely on the US information technology sector is unlikely to fully capture the direct beneficiaries of AI. With meaningful value creation also occurring elsewhere, we recommend diversification across sectors and geographies,” wrote Mark Haefele, chief investment officer for global wealth management at UBS, in a research note on Friday.
Amazon and Microsoft have led the declines, with both now entering bear market territory, meaning they are down more than 20% or more from their recent highs. Both have been penalized for heavy spending on AI investment without enough cloud-computing growth to satisfy investors that it is money well spent.
Amazon’s stock closed at $199.60 on Thursday, 21% below its recent high. Shares were down 0.6% in morning trading Friday.
Amazon was sliding even before its earnings earlier this month, when it missed quarterly earnings estimates and forecast $200 billion in capital spending in 2026, amid concerns about the company’s cloud growth compared with peers.
However, now some of the Mag 7 stocks that had previously defied the downturn are also suffering. Alphabet, which has been lauded for its Gemini AI and growth in its cloud unit, is now down nearly 7% over the past month. Meta has given up all the gains it recorded after its recent earnings, which highlighted AI-driven growth....

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Friday, February 13, 2026

Meanwhile, in Japan: "Fukushima's radioactive hybrid terror pig boom was driven by amorous mothers"

From The Register, February 11:

Genetic study finds domestic pigs' year-round breeding sped gene flow into wild boar

Back in 2021, in the thick of pandemic mania, The Register gleefully reported that "radioactive hybrid terror pigs" were thriving in Japan's Fukushima exclusion zone.

The image of feral swine exposed to 300 times the safe human dose of cesium-137 after the 2011 nuclear meltdown, interbreeding with wild boar and roaming a post-apocalyptic hellscape, proved unusually popular with readers. It even spawned fan art. I suppose we were all extremely bored.

As the old saying goes, never let the truth get in the way of a good headline. However, new research into the Fukushima fiefdom suggests the reality is less mutant horror hog and more brisk genetics.

A team analyzing DNA from pigs and boar inside and around the evacuation zone has found that, while domestic pig genes initially mixed freely with wild boar, they're now being steadily diluted as the hybrids backcross with the local population. In other words, the "hybrid" bit is fading.
What hasn't faded is Mom's influence.

The study, led by Professor Shingo Kaneko of Fukushima University along with co-author Donovan Anderson from Hirosaki University and published in the Journal of Forest Research, reports that mitochondrial DNA – inherited down the maternal line – shows domestic sows played a key role in the early hybridization.

More intriguingly, the researchers say the rapid, year-round reproductive pattern typical of domestic pigs in the care of humans appears to have accelerated generational turnover in the population. In contrast, wild boar naturally breed only once per year....

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And speaking of terror pig swamp sows, have you seen the invitees to the Munich Security Conference?

"Gary Marcus calls out viral AI essay as alarmist 'hype'"

And within the last hour we posted that Spotify had validated in real life exactly what the essay said: "Spotify says its best developers haven’t written a line of code since December, thanks to AI"

From Business Insider February 13:

Gary Marcus said Matt Shumer's viral essay about the future of AI missed the mark.
The AI researcher said Shumer didn't grapple with the current limitations of AI models.
"I think that one should work from the facts rather than just trying to cause an alarm," Marcus told Business Insider.
If that viral essay about AI had been printed on paper, there's a good chance AI researcher Gary Marcus would've ripped it up in disgust.
Marcus acknowledges something is happening in AI — just nowhere near the scale described in the recently viral essay, which predicted a looming disruption "worse than COVID."
Marcus, who on X criticized the essay written by entrepreneur and investor Matt Shumer as having "not a shred of actual data," dismissed its contents as alarmist in an interview with Business Insider.
"Hyped-up views have gotten us into a bad place, possibly one that's going to lead to a serious economic recession or something like that," Marcus told Business Insider. "And I guess I think that one should work from the facts rather than just trying to cause an alarm."
In his essay titled "Something Big is Happening," Shumer, whose past startup sells a subscription-based AI-assisted writing tool, warned that AI would upend not just software engineering, but most jobs done "on a screen." Shumer also has a small VC fund.
Marcus said that while AI will replace some labor and affect jobs, the process will be much slower than what Schumer and others are describing.
AI can do some things well and help speed up work, but it's just not near the point of replacing humans, Marcus said.
"AI can do a small subset of the tasks, and that sometimes speeds up human beings and things like that, but it rarely does all of what a human being can do in any particular domain," he told Business Insider. "This will change over time, just to be clear. It is likely that AI will replace most human labor over the next century, but it's not likely that it will over the next year or two."
Companies that move too quickly to replace jobs with AI are likely to find themselves in a similar position as Klarna, Marcus said. In 2024, Klarna touted an AI assistant that could do the equivalent work of 700 people. By May 2025, CEO Sebastian Siemiatkowski, long a proponent of AI, said the Swedish fintech was leaning back into recruiting actual people.
"Six months or a year later, they come back with their tails between their legs because it turns out that the AI systems don't do things as well as the human," Marcus said. "So, I'm not saying that there's nothing going on. I'm not saying that there's no value in these AI systems, but they're premature."
Marcus said that the more likely outcome in the short-term is not that AI will replace junior employees but rather that executives think it's capable of doing so — and make what could ultimately prove to be a costly gamble.
"The biggest thing I think junior people have to worry about right now is a misapprehension by the C-suite that these techniques work better than they actually do," Marcus said.
As of Friday morning, Shumer's post has been viewed more than 80 million times on X alone. In a Substack post expanding on his criticisms, Marcus called Schumer's post "weaponized hype."....

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"China showcases new Moon ship and reusable rocket in one extraordinary test"

From Ars Technica, February 11:

The test marks a significant step in China’s push to land humans on the Moon by 2030.

China’s space program, striving to land astronauts on the Moon by 2030, carried out a test flight of a new reusable booster and crew capsule late Tuesday (US time), and the results were spectacular.
The demonstration “marks a significant breakthrough in the development of [China’s] manned lunar exploration program,” the China Manned Space Agency (CMSA) said in a statement. China and the United States are racing to accomplish the next human landing on the Moon in a competition for national prestige and lunar resources. The Long March 10 rocket and Mengzhou spacecraft, both tested Tuesday, are core elements of China’s lunar architecture....

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"Spotify says its best developers haven’t written a line of code since December, thanks to AI"

As Mr. Schumer said in his essay: AI: "Something Big Is Happening".

From TechCrunch, February 12:

Has AI coding reached a tipping point? That seems to be the case for Spotify at least, which shared this week during its fourth-quarter earnings call that the best developers at the company “have not written a single line of code since December.” That statement, from Spotify co-CEO Gustav Söderström, came alongside other comments about how the company is using AI to accelerate development.

Of note, Spotify pointed out it shipped more than 50 new features and changes to its streaming app throughout 2025. And, most recently, it has rolled out more features, like AI-powered Prompted Playlists, Page Match for audiobooks, and About This Song, which all launched within the past few weeks.

At Spotify, engineers are using an internal system called “Honk” to speed up coding and product velocity, the company told analysts on the call. This system allows for things like remote, real-time code deployment using generative AI, and specifically Claude Code.

“As a concrete example, an engineer at Spotify on their morning commute from Slack on their cell phone can tell Claude to fix a bug or add a new feature to the iOS app,” Söderström said. “And once Claude finishes that work, the engineer then gets a new version of the app, pushed to them on Slack on their phone, so that he can then merge it to production, all before they even arrive at the office.”

Spotify credited the system in helping to speed up coding and deployment “tremendously.”

“We foresee this not being the end of the line in terms of AI development, just the beginning,” Söderström said.

The exec also touted Spotify’s ability to build a unique dataset that other LLMs could not commoditize, the way they could other online resources, like Wikipedia. That’s because there’s not always a factual answer for music-related questions, he said....

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And back to Matt Schumer:

....The AI labs made a deliberate choice. They focused on making AI great at writing code first... because building AI requires a lot of code. If AI can write that code, it can help build the next version of itself. A smarter version, which writes better code, which builds an even smarter version. Making AI great at coding was the strategy that unlocks everything else. That's why they did it first. My job started changing before yours not because they were targeting software engineers... it was just a side effect of where they chose to aim first.

They've now done it. And they're moving on to everything else....

"Nvidia Shares Go Cold Even as Big Tech Spending on AI Balloons" (NVDA)

This is true.

It is also true that come October - November, after the boys of summer have gone, Nvidia will still be with us. It is sometimes difficult to comprehend just how truly awesome the company is, technologically or financially or just about any dimension you care to examine.

As just one example, after a decade of watching Google and their Tensor Processing Unit slowly catch up to, and then surpass, Nvidia's GPU's on the inference side of things, Nvidia did a $20 billion acquihire of Groq's wunderkinder CEO and licensed their inference technology.

For most any other company on earth that would be a tectonic move. For Nvidia it was just another step on the journey. And truth be told, Groq's CEO isn't really a kid any more. While he was at Google he invented the TPU.

From Bloomberg via Advisor Perspectives, February 13:

Big Tech keeps raising its spending plans for artificial intelligence infrastructure, yet shares of Nvidia Corp., one of the biggest beneficiaries of that flood of cash, have been largely stagnant for months.

The stock is up less than 1% since the beginning of the fourth quarter and has been largely range bound despite hitting a record high in late October. It’s also barely beating the S&P 500 Index to start 2026, a slowdown from Nvidia’s nearly 40% leap in 2025 following two consecutive years of triple-digit percentage gains.

Even ballooning capital spending from Meta Platforms Inc., Alphabet Inc., Microsoft Corp. and Amazon.com Inc. — estimated to exceed $600 billion in 2026 — hasn’t been enough to meaningfully boost the stock amid increasing anxieties about returns on those investments.

“There is perhaps growing concern that the ultimate revenue from AI will simply not keep up with the capex spend that’s been announced,” said JoAnne Feeney at Advisors Capital Management, adding that more spending now raises the probability that the market will reach satiation faster. It’s “going to move up the date at which they pause and let the new compute be digested.”

The cyclical nature of the chip industry is baked into Nvidia’s valuation, which has compressed as revenue growth is expected to slow in the coming years. Sales are projected to expand 58% in the current calendar year and 28% in 2027, according to data compiled by Bloomberg.

Nvidia shares trade around 24 times profit estimates, roughly in-line with the Nasdaq 100 index and a slight premium to the S&P 500. Even though this price-to-earnings ratio is far below the five-year average for the stock at 38 times, investors aren’t counting it as a discount....

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$183.03 down $3.91 (-2.09) last.

Our judgement: If you want to own the future, own this company. That is not a new opinion.

Autonomous Vehicles: "Is China Cooking Waymo?"

From ChinaTalk, February 11:

China's AV companies are expanding globally and pushing to control the supply chain

In terms of international expansion, Chinese firms are way ahead of the American competition. Chinese companies have worked out Autonomous Vehicle (AV) deployment deals with more than thirteen countries. The US: two. Chinese companies are also exporting something closer to a full autonomy stack — vehicles bundled with cloud services, AI traffic management systems, and road sensors.
There’s also the supply chain. Unlike frontier AI models, where US export controls on Hopper and Blackwell GPUs have genuinely constrained China’s progress, AVs operate in a different hardware regime. Here, the leverage between the US and China is more evenly matched, and in some cases, inverted.
Today’s Content:
AVs in the US and China
The International AV market
Who has leverage in the AV supply chain
At times, this piece reads like a typical “US vs China” article, but in fact we’re seeing more of a “co-opetition” dynamic Kevin Xu highlighted in the AI industry. In fact, the perhaps more interesting aspect is how the line between “Chinese AV company” and “US AV company” blurs in practice. Chinese AVs use NVIDIA chips, Waymo uses Chinese-made Zeekr vehicles, and Uber and Lyft partner with Chinese AV firms internationally, not to mention critical minerals. The industries are too tangled for neat distinctions… but let’s try to untangle them anyway.

1. AVs in the US and China
The US has Waymo. China has its “big three”: Baidu’s Apollo Go, WeRide, and Pony.ai (whose founders ChinaTalk interviewed last year).
There are other potential players in the US, like Amazon’s Zoox and Tesla (RIP GM’s Cruise). But right now, Waymo is the only American company operating a scaled, paid Level-4 robotaxi service, which enables vehicles to handle all driving tasks within specific operating zones. China also has BYD and Xiaomi with L2 driving features (who could transition to L4 soon), and many more robovan, robus, robodelivery, and robotruck companies on track for L4 deployment.
In aggregate terms, China appears to have the edge in overall deployment. An analysis by SCSP suggests Chinese autonomous-vehicle operators have collectively logged roughly 149 million autonomous miles, compared to around 106 million miles for US firms — a roughly 1.4 to 1 advantage.1
But mileage comparisons are limited. Companies report different levels of autonomy, mix supervised and driverless miles, and disclose data unevenly across jurisdictions. Ridership is a different way to look at it, where China has completed ~30 million rides, versus ~20 million for the US (Breakdown in Appendix 1).
Different Services
Ridership itself misses a big part of the story, because China’s AV industry extends beyond passenger ride-hailing. By the end of 2024, more than 6,000 driverless delivery vehicles were reportedly operating across 100+ city zones. Companies such as Neolix, Zelos, Meituan, JD Logistics, and Alibaba’s Cainiao are actively piloting or scaling operations for shipping, food delivery, and street-cleaning vehicles....

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Graphics - some quite interesting - omitted.

"Florida enters worst drought in 25 years as extreme conditions expand"

It's always something. Somewhere.

From The Watchers, February 13:

Florida has entered its worst drought in 25 years, with 100.00% of the state classified in drought categories D0–D4, according to the U.S. Drought Monitor. Severe to extreme drought now covers 85.46% of the state, marking the most extensive spatial coverage since the 2000–2001 drought event.
The February 10, U.S. Drought Monitor shows 98.77% of Florida in Moderate Drought (D1) or worse and 85.46% in Severe Drought (D2) or worse. Extreme Drought (D3) now covers 43.40% of the state, a sharp increase from 12.54% recorded on November 11, 2025. No areas are currently classified in Exceptional Drought (D4).

Extreme drought expanded across portions of northern Florida and re-intensified in south Florida, including areas surrounding Lake Okeechobee and sections of the Everglades. Severe drought conditions extend across most of the peninsula and into the central Panhandle.
A Drought Information Statement issued February 12, by the National Weather Service (NWS) Miami–South Florida reports that Severe Drought has returned to portions of South Florida following continued below-average rainfall through early to mid-February. Most of South Florida remains in Severe Drought (D2), with Extreme Drought (D3) present over portions of the Everglades and near Lake Okeechobee....

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Here's the national map:

Earnings: Uranium Miner (+nuke plant maker) Cameco Reports, Beats, Stock Jumps, Stock Fades (CCJ)

This is one of the class acts of the energy business, meaning you can take comfort from the fact that whatever the stock does, the company is going about its business.

By-the-bye, despite today's pre-market action the common equity is up 136% over the last twelve months:

TradingView

And from Investing.com via Yahoo Finance, February 13:

Cameco stock rises after beating Q4 forecasts

Cameco Corp. shares jumped about 4% in premarket trading after the uranium producer reported fourth-quarter results that topped expectations.

The company posted Q4 earnings per share of Cdn$0.50, beating the analyst consensus of Cdn$0.32. Revenue came in at Cdn$1.2 billion, well above the consensus estimate of Cdn$764.84 million....

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In very late pre-market trade the stock is down $2.95 (-2.53%) at $113.47.

Here's the press release from the company.

BLS: CONSUMER PRICE INDEX - JANUARY 2026 UP 0.2%; UP 2.4% Year-over-Year

Electricity prices were up 6.3% and natural gas was up 9.8% YoY.

From the Bureau of Labor Statistics, February 13:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis in January, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.4 percent before seasonal adjustment.

The index for shelter rose 0.2 percent in January and was the largest factor in the all items monthly increase. The food index increased 0.2 percent over the month as did the food at home index, while the food away from home index rose 0.1 percent. These increases were partially offset by the index for energy, which fell 1.5 percent in January.

The index for all items less food and energy rose 0.3 percent in January. Indexes that increased over the month include airline fares, personal care, recreation, medical care, and communication. The indexes for used cars and trucks, household furnishings and operations, and motor vehicle insurance were among the major indexes that decreased in January.

The all items index rose 2.4 percent for the 12 months ending January, after rising 2.7 percent for the 12 months ending December. The all items less food and energy index rose 2.5 percent over the last 12 months. The energy index decreased 0.1 percent for the 12 months ending January. The food index increased 2.9 percent over the last year.

Food

The index for food rose 0.2 percent in January as did the index for food at home. Five of the six major grocery store food group indexes increased in January. The index for cereals and bakery products rose 1.2 percent over the month. The meats, poultry, fish, and eggs index increased 0.2 percent in January. The index for nonalcoholic beverages and the index for fruits and vegetables both increased 0.1 percent over the month. The dairy and related products index rose 0.8 percent in January. In contrast, the index for other food at home decreased 0.3 percent in January.

The food away from home index rose 0.1 percent in January. The index for limited service meals increased 0.3 percent, while the index for full service meals was unchanged over the month.

The food at home index rose 2.1 percent over the 12 months ending in January. The index for other food at home rose 2.1 percent over the last 12 months. The nonalcoholic beverages index increased 4.5 percent over the same period and the meats, poultry, fish, and eggs index rose 2.2 percent. The index for cereals and bakery products increased 3.1 percent over the 12 months ending in January. The fruits and vegetables index rose 0.8 percent over the year. In contrast, the index for dairy and related products decreased 0.3 percent over the same period.

The food away from home index rose 4.0 percent over the last year. The index for full service meals rose 4.7 percent and the index for limited service meals rose 3.2 percent over the same period.

Energy

The index for energy decreased 1.5 percent in January. The gasoline index decreased 3.2 percent over the month. (Before seasonal adjustment, gasoline prices decreased 2.5 percent in January.) The index for electricity declined 0.1 percent in January. In contrast, the natural gas index increased 1.0 percent over the same period.

The index for energy decreased 0.1 percent over the past 12 months. The gasoline index fell 7.5 percent over this 12-month span. In contrast, the index for electricity increased 6.3 percent over the last 12 months and the index for natural gas rose 9.8 percent....

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Capital Markets: "The Dollar is Firm Ahead of January CPI"

From Marc Chandler at Bannockburn Global Forex:

The US dollar is firm against the G10 currencies ahead of the US January CPI. The week began with news that Chinese officials were encouraging de-risking from US Treasuries. Helped by stronger than expected January employment data, the greenback pared its losses. Separately, and counter-intuitively, the Japanese yen and Japanese bonds have rallied in the aftermath of the LDP’s dramatic victory. Despite the heavier tone for the yen today, it is the strongest of the G10 currencies this week, rising almost 2.5% against the dollar ahead of today’s North American session.

The Fed funds futures have pushed the next Fed rate cut into July from June. The June meeting is the first Warsh will chair if the confirmation hearings proceed normally, which is not a sure thing given the objections to the investigation into the Federal Reserve for cost overruns in its renovations. Still, there is about a 75% chance of a cut still discounted for June. Meanwhile, reports indicate that the Trump administration is considering narrowing the scope for import duties on some metal products. Several industrial metal prices softened in response. The Supreme Court has a decision day next Friday and a ruling on the president's tariff power is possible. Lastly, with the US markets closed on Monday, liquidity may dry up earlier than usual today. Note that Chinese markets are closed now until February 24 for the New Year celebration....

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AI: "Something Big Is Happening"

From Matt Schumer whose Xitter bio reads:

CEO

@HyperWriteAI, @OthersideAI, investing via Shumer Capital in @GroqInc @Etched @Rork_App @DaytonaIO @OpenRouterAI + more

shumer.dev/about

February 10, 2026:

Think back to February 2020.
If you were paying close attention, you might have noticed a few people talking about a virus spreading overseas. But most of us weren't paying close attention. The stock market was doing great, your kids were in school, you were going to restaurants and shaking hands and planning trips. If someone told you they were stockpiling toilet paper you would have thought they'd been spending too much time on a weird corner of the internet. Then, over the course of about three weeks, the entire world changed. Your office closed, your kids came home, and life rearranged itself into something you wouldn't have believed if you'd described it to yourself a month earlier.
I think we're in the "this seems overblown" phase of something much, much bigger than Covid.
I've spent six years building an AI startup and investing in the space. I live in this world. And I'm writing this for the people in my life who don't... my family, my friends, the people I care about who keep asking me "so what's the deal with AI?" and getting an answer that doesn't do justice to what's actually happening. I keep giving them the polite version. The cocktail-party version. Because the honest version sounds like I've lost my mind. And for a while, I told myself that was a good enough reason to keep what's truly happening to myself. But the gap between what I've been saying and what is actually happening has gotten far too big. The people I care about deserve to hear what is coming, even if it sounds crazy.
I should be clear about something up front: even though I work in AI, I have almost no influence over what's about to happen, and neither does the vast majority of the industry. The future is being shaped by a remarkably small number of people: a few hundred researchers at a handful of companies... OpenAI, Anthropic, Google DeepMind, and a few others. A single training run, managed by a small team over a few months, can produce an AI system that shifts the entire trajectory of the technology. Most of us who work in AI are building on top of foundations we didn't lay. We're watching this unfold the same as you... we just happen to be close enough to feel the ground shake first.
But it's time now. Not in an "eventually we should talk about this" way. In a "this is happening right now and I need you to understand it" way.
I know this is real because it happened to me first
Here's the thing nobody outside of tech quite understands yet: the reason so many people in the industry are sounding the alarm right now is because this already happened to us. We're not making predictions. We're telling you what already occurred in our own jobs, and warning you that you're next.
For years, AI had been improving steadily. Big jumps here and there, but each big jump was spaced out enough that you could absorb them as they came. Then in 2025, new techniques for building these models unlocked a much faster pace of progress. And then it got even faster. And then faster again. Each new model wasn't just better than the last... it was better by a wider margin, and the time between new model releases was shorter. I was using AI more and more, going back and forth with it less and less, watching it handle things I used to think required my expertise.
Then, on February 5th, two major AI labs released new models on the same day: GPT-5.3 Codex from OpenAI, and Opus 4.6 from Anthropic (the makers of Claude, one of the main competitors to ChatGPT). And something clicked. Not like a light switch... more like the moment you realize the water has been rising around you and is now at your chest.
I am no longer needed for the actual technical work of my job. I describe what I want built, in plain English, and it just... appears. Not a rough draft I need to fix. The finished thing. I tell the AI what I want, walk away from my computer for four hours, and come back to find the work done. Done well, done better than I would have done it myself, with no corrections needed. A couple of months ago, I was going back and forth with the AI, guiding it, making edits. Now I just describe the outcome and leave.
Let me give you an example so you can understand what this actually looks like in practice. I'll tell the AI: "I want to build this app. Here's what it should do, here's roughly what it should look like. Figure out the user flow, the design, all of it." And it does. It writes tens of thousands of lines of code. Then, and this is the part that would have been unthinkable a year ago, it opens the app itself. It clicks through the buttons. It tests the features. It uses the app the way a person would. If it doesn't like how something looks or feels, it goes back and changes it, on its own. It iterates, like a developer would, fixing and refining until it's satisfied. Only once it has decided the app meets its own standards does it come back to me and say: "It's ready for you to test." And when I test it, it's usually perfect.
I'm not exaggerating. That is what my Monday looked like this week.
But it was the model that was released last week (GPT-5.3 Codex) that shook me the most. It wasn't just executing my instructions. It was making intelligent decisions. It had something that felt, for the first time, like judgment. Like taste. The inexplicable sense of knowing what the right call is that people always said AI would never have. This model has it, or something close enough that the distinction is starting not to matter.
I've always been early to adopt AI tools. But the last few months have shocked me. These new AI models aren't incremental improvements. This is a different thing entirely.
And here's why this matters to you, even if you don't work in tech.
The AI labs made a deliberate choice. They focused on making AI great at writing code first... because building AI requires a lot of code. If AI can write that code, it can help build the next version of itself. A smarter version, which writes better code, which builds an even smarter version. Making AI great at coding was the strategy that unlocks everything else. That's why they did it first. My job started changing before yours not because they were targeting software engineers... it was just a side effect of where they chose to aim first.

They've now done it. And they're moving on to everything else....

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Thursday, February 12, 2026

"“We Screwed Up”: How Warren Buffett And Charlie Munger Regretted Not Investing In Google" (GOOG; BRK)

From Office Chai, January 4:

Even some of the world’s best investors can get pretty down when they realize they missed an investment opportunity that had been staring them in the face.

At a Berkshire Hathaway annual meeting several years ago, Warren Buffett and his longtime business partner Charlie Munger did something rare for investors of their stature: they publicly admitted to a major investment mistake. In a candid exchange, the two legendary investors discussed their failure to invest in Google despite having direct evidence of the company’s extraordinary business model through their own insurance subsidiary, GEICO. Their admission offers a striking window into how even the most sophisticated investors can overlook opportunities hiding in plain sight.
Munger opened the discussion by drawing a distinction between the tech giants they’d missed. “I don’t mind not having caught Amazon early,” he said. “The guy is kind of a miracle worker. It’s very peculiar. I give myself a pass on that, but I feel like a horse’s ass for not identifying Google better. I think Warren feels the same way.”
Buffett confirmed with a simple “Yeah,” before Munger delivered the blunt assessment: “We screwed up.”
“He’s saying we blew it,” Buffett acknowledged. “And we did have some insights into that because we were using them at GEICO and we were seeing the results produced, and we saw that we were paying $10 a click or whatever it might have been for something that at a marginal cost to them was exactly zero. And we saw it was working for us.”
Munger reinforced the point about their access to firsthand data: “So you could see in our own operations how well that Google advertising was working. And we just sat there sucking our thumbs. So we’re ashamed. We atone. We’re trying to atone. Maybe Apple was atonement.”....

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Office Chai front page

"Hong Kong, Singapore to be biggest winners as global capital flows shift to Asia: DBS CEO"

From the South China Morning Post, February 9:

The two financial hubs are best choices for global investors seeking to diversify their portfolios amid geopolitical risks, Tan Su Shan says

Hong Kong and Singapore are set to be the biggest winners in attracting new capital inflows as global investors diversify their asset allocations amid geopolitical risks and trade tensions, according to the top executive at DBS Group.
The two Asian financial centres would be the best choice for international investors who previously held overweight positions in US markets but now sought to diversify their portfolios, Tan Su Shan, CEO of the largest lender in Southeast Asia, said in an interview last week.
US interest rate cuts and ongoing geopolitical tensions have prompted international investors to eye faster-growing Asian markets. “Global capital flows are changing, and that is going to become increasingly important to Asia,” she said. “Singapore and Hong Kong, as financial hubs, will both be winners in capturing the capital flows.”
Tan said Hong Kong’s initial public offering (IPO) market remains buoyant, supported by multiple connect schemes with mainland China that enable cross-border trading in stocks, bonds, exchange-traded funds and other assets. “Singapore will also benefit because its regulators have done a lot of work to revitalise its stock market,” she said.
She said she expected international investors to deploy capital across IPOs, private assets, precious metals and digital assets, with DBS – which uses Singapore and Hong Kong as its twin hubs – positioned to benefit....

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Her company has some tchotchkes on the bookshelf:

DBS named Global Bank of the Year 2025 by The Banker