Doomberg - Chips, China & Power Plays: The Big Bets on a Multipolar World

and those margins are a giant prize for other people to go and, and chip away at. And especially when you mix in geopolitical risks, like the Chinese intent on putting everybody out of business because they will. And so we shall see, maybe this time is different.

The geopolitical tensions, how that all winds into the demand for energy, the demand for energy across the different dynamics of both AI as well as, you know, the geopolitical theaters that are ongoing, Russia, Ukraine, China, Taiwan, the Middle East and Israel. So where are you seeing the most critical pressure points right now? And, and how do you think they're going to influence?

the global power structures, both from a political sense, from a technological sense, and an energy sense as we go through the next decade. How are you looping this together?

And leaders of the sort of old western unipolar order, not quite coming to grips with what's going on and responding in ways that, in our view, appear to be accelerating the transition away from the old, what they would call rules based international order. And into what Xi Jinping and Vladimir Putin would call sort of a multipolar world of nations, you know, collaborating and interacting in their own best interests.

And that's the sort of big mega trend and then what you see all around the world. are little flare ups, proxy wars, indirect confrontations, direct confrontations, but they all sort of lead back to this fundamental axiomatic shift that we're seeing in the world. And I think 50 years from now when historians pen what has transpired, in this sort of post COVID era, I think the decline of US omnipresence and dominance is probably going to be the lead headline.

Ah Gold scares me how much it's going up in a straight vertical line at the moment. The weekly chart of gold is just parabolic, at this point. And there's moves afoot that can at least explain that.

So, for example, this week in a vastly under reported story, at least in the Western media, the many of the leaders of the BRICS countries are gathering, in Kazan for a meeting hosted by Putin to, what many believe, roll out an alternative, means by which imbalances in international trade will be settled going forward and, and part of the hype, the hope amongst gold bugs, the belief amongst sort of those skeptical of the U. S. and the old system, is that gold will play a major role as a neutral

reserve asset once again in the settlement of imbalances in international trade. And if that were to happen, the theory And recent price action in the metal might seem to be supportive of this theory. The theory is that the price of gold as measured in US dollars needs to go much higher, in order for it to effectively serve that role. And in so doing it would replace US treasuries and some European debt as sort of the existing neutral reserve asset.

And the argument goes that the moment the West, froze, sanctioned, and, and is talking about seizing Russian reserves, the neutrality of those.

Assets went out the window and anybody who has ever been the subject of criticism by the US or the Western powers or fears they might one day be has to take a hard look at where they're putting their excess foreign reserves and Is a U. S. Treasury bond or bill truly neutral, in a world where the U. S. is sanctioning everybody, and weaponizing its privileged position as the holder of the U. S., of the global reserve currency?

And so, if gold is going to be at the heart of some new system, and it remains to be seen, I will be watching, With bated breath, what happens at Kazan like everybody else. And I should say, as an owner of an uncomfortably large amount of gold, I'm pondering, whether I need to be hedging or at least putting in some, some rolling stops because things don't go up forever. We're all, we've all been in the business long enough to know what happens in the aftermath of such Icarus prints.

and, and might Kazan be a sell the news event? who knows, but that that's high on the board. And so once you sort of have that, that grand theory of what's going on in the world. Certain events become a little easier to understand. It's a good working model for interpreting the news. and we shall see. I, I think it's very clear that we have a bad event in Kazan, and then in a bit more of a slow motion catastrophe, we have NATO on the cusp of losing a war against Russia.

And let's not kid ourselves. I mean, this is a war between NATO and Russia. And Russia is winning. And how NATO responds to losing that war is one of the great risks on the board going forward. And so, lots of different ways we could take this. We've written about it from a variety of different angles. We have an alternative view on the Middle East that we wrote but didn't publish. I'm happy to go over that.

and of course, the confrontation with China, which involves intellectual property, semiconductors, AI, energy. It's all intertwined and so we could pull on the string any way you guys want to go.

Do you have any Any further insight into what the proposed reserve basket might look like for this new, I guess monetary collaboration among those who are becoming more fearful of US, monetary dominance, I guess, or, you know, using, using monetary policy. Yeah, weaponization. Yeah.

and the fact that very few people read anything other than what, you know, they can find in the Western media is kind of a scary development. You can go and read Chinese readouts from meetings with U. S. government officials and see what the Chinese are telling to themselves and it's scary sometimes actually like and so if you do that, you can see that in their domestic audiences, they are already in World War III. And that would surprise some people in the West, but back to the meeting.

From what we could gather again. Just open source and you know Investigations, there's going to be something which is going to be called the unit which is an odd choice of names, but nonetheless it is apparently going to be a basket of currencies of BRICS countries and 40 percent backed by gold And this will all be settled on some form of a blockchain, a central bank digital currency created for and used by central banks.

and this will be used exclusively to transact in and amongst the BRICS countries and to settle, imbalances, in those trades as they arise. And so if Saudi Arabia is selling oil to China and Saudi Arabia is buying a bunch of Chinese goods with the proceeds from those sales, they have to net out at some imbalance. It's pretty rare that you'd land on the number and presumably this new mechanism, which is not a US dollar, it's not a currency. I think this is a source of a lot of confusion.

the mechanism for settling such trade imbalances could in theory involve gold as at least a partial neutral reserve asset in such a construct. Now, this is well beyond our expertise. It seems a complicated system. reports that these countries have been working on developing such a technology and such an implementation have been out there for years. and I think that the, the Ukraine war, has just accelerated those efforts and we may see some kind of a culmination of that.

Now we wrote up a long shot piece where we made a prediction that maybe Lula in Brazil might derail the whole thing and we were, keenly interested yesterday when news broke that he has decided he's not going to be attending the meeting in person. and when we wrote that piece called, Neighborhood Watch, we caught a lot of flack for it actually because it was pretty speculative.

but we like to speculate once in a while, and if this one turns out to be true, it could be one of our better calls of the year. But we shall see. there was a lot of similar hype going into the last such meeting in South Africa, you may recall, and the meeting disappointed, at least from the perspective of, of the gold bugs.

And one of our views, and the reason why we wrote Neighborhood Watch, is it's not like the British and the Americans and their allies haven't been down this road before and are completely out of, tools and weapons they can deploy to scuttle the whole thing. I wouldn't count them out. the trend may be going in one direction, but that doesn't mean it's, permanently in that direction.

And so this is why when I wake up and every day gold is up 30 an ounce, it makes, makes me a bit anxious, to be honest with you.

To make it into the mainstream media. I know Mohamed El Erian, was out in a piece either this morning or over the weekend about gold and what this might have to say about geopolitics and the monetary system, the banking system, et cetera. But it's just remarkable how little coverage this has gotten and energy, despite this unbelievable move higher.

I'll always have a large position on because I don't actually view Gold as a, as a speculation medium. It's more of a savings medium. And that's why when your savings vehicles double in value, you have to ponder what it actually means for the U S dollar. and that's really my concern because most of my net worth is tied up in U S dollar denominated assets.

And so I don't want to wake up tomorrow and see gold at 6, 500 because yes, my heads will have paid off, but on balance, my portfolio will presumably be. Much worse off. I'll probably be doing better than my neighbors because as you said almost nobody owns gold But it's still a tricky situation. So I'm fortunate in the sense that I didn't miss the run up But when when a position grows like this on you, you do have to ponder risk management at some point

And that's why it's a really fascinating time to watch the news and in our case to be privileged enough to be able to write about it for an audience. Um, so there's no shortage of things for us to write about. That's for sure. but beyond the BRICS countries, the gold is being accumulated by people in India, by people in China, like citizens. and, and if you're in Argentina, for example, I mean, what are you trusting? Are you trusting the peso? Are you trusting gold or, or Bitcoin?

And frankly, I mean, Bitcoin is, is to some people that the sort of modern digital version of Bitcoin. At least holding some attributes comparable to gold. not, not for us, but I understand why. Intellectually, I understand why some people feel that way. and so, but again, like when you just see Here's what this reminds me of.

when we first started writing about uranium and nuclear in a big way, uranium was 30 a pound and, we were, you know, motivated to do that because our friend, Cuppy had a piece on it and the physical uranium thrust was coming, you know, just getting on the scene and uranium kind of went straight up for a long time. Right. And then it hit like 107 to 110. I forget where it exactly popped out. And I didn't have any uranium at that point. Cause I generally don't like to own things.

And nobody on the Doober team likes to own things that we write about. The one exception being gold because we're not affecting the price of gold. and uranium sort of topped out and it felt a bit like an interest print and we, we cautioned on a few podcasts appearances that maybe if you've enjoyed this run from 30 to 107. maybe you might want to manage your portfolio a little bit and take a bit of risk off. And it did have what I would consider a healthy consolidation.

And I'm not calling that that's what's going to happen in gold, but it has a very similar feel. You know, the FinTwit crowd is very excited. This is it. This is the big one. I'm seeing all kinds of cup and handle charts on silver in particular right now.

but, there's a lot of, well, compared to the crickets and the empty cemetery that gold and gold bugs have been experiencing for a decade, it's natural to look at even the small amount of coverage it's getting now with great caution, because we're just not used to it. As you say,

we have a pretty important election in the U S here in the next two weeks. Um, I watched with interest the results from Moldova overnight, which I'm sure you guys were paying very close attention to, but, it was a fascinating Set of results and accusations and so on. And so it feels like the time is now if not now when but but again We shall see we are sort of informed speculators sitting on the outside of this trying to make sense of what's going on

Putin dumped all of his treasuries in the aftermath of the Crimea invasion and and the scuffle in Georgia. dumped all his treasuries, and he just assumed that, you know, Europe would never, anything to his mostly Euro denominated reserves because they required, Russia for their energy needs. In fact, the entire German industrial national business model is predicated on access to cheap, reliable natural gas and oil and products from Russia.

So he, in his wildest dreams, never imagined, that, His Euro reserves would be sanctioned by the Europeans over the Donbass. And I think the reaction to what he calls the special military operation and what we in the West have been calling the war in Ukraine, I think surprised him. and probably surprised the Chinese and probably surprised Modi and the Indians. And so I think that the sanctioning of those reserves, which shocked everybody, frankly shocked us.

I mean, we wrote a piece, I believe it was called on the cusp of an economic singularity in the weeks afterwards. And then we've been saying that the sanctions, won't work and are designed to backfire from the very beginning.

but Putin saw what Europe has done and everyone else saw what Europe is doing and how the war was being spun over here versus the way it was being spun in their own countries and everybody reads history through their own lens of propaganda, and I think this has been the catalyst, the catalyst, so that the war in Ukraine, again, which the Russians call Special Military Operation, the SMO, if you will, that's going to be the seminal event that if, you know, there is a shift.

In the U. S. financial system's role in global trade, it will have been both the incursion into Ukraine and the West's reaction to it that will be seen as the pivotal moment. And this meeting will, if it does produce what we're speculating it might, will be viewed as a natural culmination of a decade plus worth of work and history that has evolved in the aftermath of the global financial crisis.

it has largely done the bidding of the US and paid all the price for it, while the US has basically benefited economically by supplying the continent with relatively expensive energy, and, and that has been exchanged for the cheap energy that Europe had built its entire business model on, Germany in particular. And so, if you just look at Germany, I mean, they, they they've been severed from energy, their industry is uncompetitive, and even the auto sector is moving to China, right?

And so if the molecules get rerouted to China too, which is why I mentioned the power of Siberia too earlier, because that takes molecules that had been going and were intended to keep going to Europe and reroutes them permanently to China, then they've lost their molecules and they've lost their industry. Both of which have gone to China. and the only truly sort of economic beneficiary of all this is, is the US, but Great Britain and Europe are energy vassals now.

And we suspect that the European union is probably not going to survive in its current state. this is a rather unnatural state for Europe. Europe is a collection of nations that normally don't get along with each other all that well, which is why there's been so many wars on that continent over the years. And to assume that you can just impose this sort of super bureaucracy out of Brussels. on all of these nations with centuries of history and culture was always a challenge.

And now Europe seems to be breaking apart at the seams. We're seeing country after country, what the traditional media are calling, you know, far right parties gaining a plurality of the vote, but being denied any parliamentary, benefits that would normally come with being the leading party. Party to receive the votes.

They're pro in the in the name of saving democracy We see an awful lot of undemocratic things being done to parties that are popular and look Populism in its name is a reaction to unpopular policies And if you don't want the rise of quote unquote far right parties, then maybe you should govern better.

I think it is perfectly normal That populations who suffer the consequences, because it is the average person that suffers consequences of bad geopolitical and economic decisions, not the elite, it is perfectly predictable, that they would revolt. And I think Brexit, the first election of Donald Trump, these are all consequences of what we would call a crisis of confidence among Western leaders.

How would you view, or how do you think that Europe would view a Trump presidency versus a Harris presidency given, I think, Trump's pretty clear message that he wants to take a less outwardly collaborative, perspective with both, you know, less friendly and historically more friendly trade blocks.

And I think the reality of governing is always more challenging than the ease with which you can critique the existing leadership. which is why we'd like to say, you know, be careful to not be the dog that catches the car. So what are you going to do after that?

Like, I think the fatal mistake that was made by Biden and, Van der Leyen and Boris Johnson and Justin Trudeau and the whole batch of Western leaders was, once again, as It seems like we are intent on proving to ourselves every 50 years or so, although it's been a little longer this time. the Russian society, its military industrial complex, its technical prowess, and its unity were radically underestimated by the West. They thought this would be quick, that there would be a regime change.

I remember listening with some horror as analysts that people respect and are widely listened to were proclaiming that Russia was a technological paper tiger and that the pullout of Western energy service providers would lead to a collapse in their production of energy and so on and so on. This was all nonsense.

Anybody who has competed with Russians, worked with Russians, hired Russians understands that whatever you think of Putin, the country of Russia itself has enormous resources, has enormous industrial potential, and has a history of being invaded. And so one thing the Russians have figured out how to do is to march from east to west and carpet bomb towns and villages along the way. I think we should have learned this lesson by now, right? And we're seeing it happen in Ukraine.

By the way, very serious war crimes, I believe, being, we believe, being committed in the process, like the The specific targeting of the Ukrainian electricity grid, in our view, is a war crime. And, they've knocked out some two thirds of that grid and stand ready to knock out the rest of it just as winter unfolds. The only logical reason that one would do that is to create a migration crisis to make the country unlivable.

and that's likely going to succeed and, and it's dastardly and all of those things, but it's the reality. One of the reasons you don't get into wars is you might lose them.

isn't one way to undermine that power dynamic that exists sort of in that Russia Iran multi polarity production partnership with the, you know, sort of the China India side of it.

A Harris win means more EPA, which in a way, the U. S. regulatory regime acts as a police and a disciplinarian to the energy sector in ways it never seems able to do on its own. So a Harris win is bearish for supply, which is bullish for price and bullish for equities.

And so you have this perverse situation where I'm, I'm sure just based on all of my contacts, 95 to a hundred percent of industry executives in the energy sector are going to be voting for Trump and they're not voting their pocketbooks because Trump is going to be very bad for their their stock prices. Now, you've hit on the exact point. drill baby drill is and has always been the only effective way to starve Putin's war machine of the funds needed to win.

And all of the sanctions have done nothing but increase the friction costs associated with Trump. And that means he gets to transact at a higher price than he otherwise would. The sanctions were designed to backfire. We wrote about this two years ago, two and a half years ago now, in a piece called Crazy Pills. Where we're like, we were screaming from the roof that this is going to fail and it has failed. That Brent is still at 75 dollars a barrel right now, is criminal.

if the US and European leaders had any sense, Of how commodity markets actually worked We would have done what James Baker did ahead of the Gulf War which is you go around the world and back then people still took the US Secretary of State seriously and you lean on all of your allies to produce produce produce produce It doesn't take much in the way of excess supply for prices to crater If we had got prices down to below Putin's break even production costs what do you think would have happened

to their economy

You get oil back to 30 a barrel and we are looking at a very different geopolitical chessboard right now.

And so it's not like Russia and Saudi Arabia that Putin and MBS are natural bedfellows. Like this is not a natural relationship. It is a sort of once the U. S. sanctioned those reserves, I think that kind of spooked the Saudis and drove them closer to the BRICS position. And they've applied now. to join the BRICS. So have we lost Saudi Arabia? Who knows?

God knows the domestic political situation in Saudi Arabia is beyond our zone of expertise and what's going on in the back channels between, you know, the US and Saudi Arabia again, who knows? History will tell us what was really going on 15 years from now when we're allowed to read it. But, but yeah, like we're not doing it.

Like again, the fact that Brent is at 75 is a condemnation of the sanctions regime and one of the things we haven't talked about, I mentioned earlier, it calls into question the broad competence of those that are currently leading the Western world. They didn't get it right on energy. They didn't get it right on Putin's political stability on the domestic front.

They certainly catastrophically got it wrong on Russia's ability to, keep its commodities flowing, to increase its war machine, to build weapons at a rate that is lapping all of NATO. Like how much really important stuff do you need to get wrong before you ponder the accountability question

I suspect you've given it some thought, but I don't necessarily expect you to have all the answers, but what is it about the frameworks that the current breed of Western leaders who are, as you described, sort of clinging to power and have been in power largely over the last kind of, call it 30 to 40 years, what What is it about the frameworks they're using that has led them to make so many what seem obvious errors, and maybe they're more obvious errors a little bit in retrospect, but then there

doesn't seem to be the kind of recalibration that you'd expect once observing a series of errors either. What is it about their frame of reference that makes it very difficult for them to adapt and learn from these mistakes?

And I think what's going on is the current set of leaders have failed to internalize the consequences of the shale revolution. We no longer need to worry about going around the world to secure access to oil. to oil and commodities and other products. We're the world's global energy giga power, and we're not acting like it. the Middle East actually doesn't matter to us anymore in the way that it did when we were deeply short oil and gas.

I think the shale breakthrough and the meaning of it has not been fully internalized by the current leaders. And they have not changed their worldview to accommodate a fundamental change in assumption that the technical revolution that is shale has brought. Now, concurrent with that, there's an entire complex that has grown wealthy on foreign adventures. people call it the military industrial complex. We spend 900 billion a year in the U S alone and where it all goes is a great mystery.

find me the last major conflict. Okay. Where things ended well, as a consequence of those adventures, Afghanistan, Iraq, Libya, Ukraine. Now, you forget about Libya, but you know, a lot of, wreckage left in the wake of these adventures. And we like to say, and have written under our masthead that when you're in the bomb making business, this is a working capital problem. And so you have these trends. It was this. Need to secure energy supplies. Like there's some great books to describe all this.

One of them is called The Pipeline Wars. It's a fascinating book. We quoted it in one of our earlier pieces. That's changed. Like we're swimming in hydrocarbons now. I'm old enough to remember when Freeport LNG was going to be an import terminal as late as 2014, I believe.

The fact that we are drowning in cheap hydrocarbons has not, you know, percolated up to the highs of senior decision making in Washington, D. C. or, or in Europe, and Europe's not drowning in hydrocarbons, so why would they have that view? But the U. S. certainly is, and we need to worry less. In fact, we've advocated. If we just go back to the Monroe Doctrine, planning in the western hemisphere to keep us busy for a very long time.

Venezuela is sitting on the largest hydrocarbon deposits in the world, and it's a, it's a broken country. Argentina, the, the, Yaca Verta, I've got, I've reversed names, but the, the large shale deposit in Argentina, Yaca Verta, is capable of producing an enormous amount of oil. We, we, we read one expert analysis that if all of the infrastructure was there, that field could handle five to six million barrels a day of production. It won't get there, but it could. It's huge.

It's on par with the Permian. plenty of oil. Look at British Columbia, Alberta. I mean, we're drowning in natural gas on the British Columbia side of that formation. So, the, the, one of the most fundamental pieces on the board has changed, but our geopolitical worldview really hasn't.

sort of like we have in the West with, with Europe being a user and, and, America and American allies being producers. Can we maybe switch to how that's trickling down in other areas, maybe heading to the world of technology, chips, AI, or is there anything else, Adam, you want to cover on this particular, vein of conversation?

But as we have been chronicling, China is very, very good when it puts its entire national interest to work at stealing, bribing, blackmailing their way to whatever technologies the CCP declares are in the country's strategic interest. And there is no technology more in the strategic interest of China today than Then semiconductor technology, even more so than energy because they've largely worked that out.

You know, they have access to reasonable supplies from a basket of suppliers across the entire array of primary energy sources. But just by an enormous inventory of coal and the ability to bring more coal power online, they're doing an all the above energy strategy, which is the right thing to do when you're fundamentally short one of them. In this case, they're short oil, solving those problems.

And so now they're turning their attention to semiconductors and we're seeing a truly incredible arms race, in that sector. It's long been our view that the Chinese are going to win. we've seen this movie before and directly experienced it in multiple industries. one of the great examples of this is, how the Chinese are just gonna take over the global auto industry. BYD in particular is just an amazing company. amazing in a sort of agnostic sense.

Not in a praising sense, but I'm, I remember seeing what we would call the, the Frankenstein mobile at an auto show in China, which was, BYD's complete and total knockoff of the Toyota Corolla. It was literally a, a total rip off with different parts on their hood, ripped off from other, manufacturers. But, and this made it very easy for people to not take BYD seriously, right?

But one of the things we've written about is when you're allowed to take and cherry pick the very best technology developed by your competitors over the decades. And skip the time and resources needed to develop such a suite of technologies on your own. You have a huge advantage. And today BYD produces a car that is a plug in hybrid electric.

And if you start with a full tank of gasoline and a fully charged battery, you can go 2000 kilometers before you have to charge up either of them for 14, 000. GM and Ford and Volkswagen are cooked. Like these companies are capitalized to compete globally. And the Global South, the BRICS countries, are going to happily buy this car from BYD. and they're going to win and the Chinese stole that from under, you know, well in plain sight, they stole it.

They forced all of the major OEMs to create joint ventures and then, you know, called all the technologies from those JVs and suddenly a wholly owned, national champion comes out of nowhere and dominates the market. And we're going to see the same thing in, in semiconductors. We watch with great interest. the recent, inadvertent early release of earnings from ASML. because this, this was a, we had written about this company about 10 days prior to that.

And so whenever something we've written about hits the news, it's always a high pucker factor moment for us. Cause like, did we get it right? Or did we get it wrong? Right? in this case, I think we largely got it right. One of the interpretations, again, we like to challenge narratives and think outside of the proverbial box, so to speak, is that China stopped ordering from ASML because they figured out how to steal the technology and they don't need them anymore.

And if that's the case, there's an awful lot of companies with very rich valuations that are about to fall off a cliff.

The U. S. has been trying to inhibit China's ability to get the best machines that ASML has to offer, and as part of that sanctions policy, which again reminds us of the futile efforts that we saw in the Russia energy situation, China reacted to those sanctions in two ways. One, they bought as much from ASML as ASML would sell them.

Basically, anything that wasn't specifically on the sanctions list was pre ordered, which is why ASML's shares have skyrocketed, and separately, they embarked on a massive national campaign to make ASML redundant to them. ASML enjoyed huge growth in sales. In fact, in the second quarter of this year, China was 49 percent of their revenue. Up from 10 to 20%, just a couple of years before. that's dangerous, right? That's a concentration of risk.

And then suddenly in this, recent accidental release of their Q3 numbers, we learn that their order book, which was expected to come in at between 5. 5 and 6 billion, was closer to 2 billion and change. Well, if that order book is half China, what does that tell you? Tells you the Chinese are not really ordering anymore. And if the Chinese aren't ordering anymore, what does that tell you?

and it should be noted that, as we quoted in our piece, I believe the piece, the title of the piece where we wrote about this was called Going Dutch, because ASML is a Dutch company. I think the social preview for that piece was in the chip war between the US and China. The Netherlands struggles to split the bill. and so, we, we pointed out that I believe it wasn't 2023.

It was revealed that a senior technical employee walked out of ASML, presumably with a thumb drive full of their secrets and escaped into China. We've seen this before. This is what the Chinese do, right? So if they're in possession of all the machines they need, and then some to keep things going now, And plenty of spare machines for them to do a complete and total breakdown on. Then it's only a matter of time before they get around the problem. The Chinese have a history of doing this.

and next thing you know, we're going to wake up to a headline where the Chinese no longer need, you know, the Taiwanese or the Dutch or the American designs or the chips that come from the combination of those three things, because they're going to have done it on their own. And, ASML was happy to take that revenue. Stock was skyrocketing. And, and now we see what happens.

Now, if this does happen, as you say, there's trillions in market cap predicated on the current market darlings, not only having a moat, but keeping it for a very long time. And to the extent that that assumption isn't true, it doesn't mean those stocks are going to go down now. It doesn't mean they're not going to keep going up for a while. But the long term situation, the equilibrium state is pretty clear.

and those margins are a giant prize for other people to go and, and chip away at. And especially when you mix in geopolitical risks, like the Chinese intent on putting everybody out of business because they will. and so we shall see, maybe this time is different. but then you mix on top of that, the piece we released over the weekend about Taiwan's energy situation and things

Maritime exercises to simulate a blockade. Why would they be doing that? Certainly not if they needed the chips.

You see this massive pre buying from an ASML by the Chinese. You see telephones being produced that are shocking people in the West because of their sophistication. And then we see a sudden drop in orders, presumably from China, in ASML's future books. What do you see? I mean, I, I see, I see a pattern.

You know, like, I don't think anybody is saying that China can effortlessly invade Taiwan, without consequences, but it's, it's not clear to us that those plants would survive. And most importantly, the sort of hidden magic, which we know from our time in industry and having supplied this sector, the real magic is in the technologists and the technicians. It's not actually in.

It's the people that are doing the work, which is why it's been so hard, for example, to get these facilities up and running outside of Taiwan, because they have a nationwide dedicated strategy to grow and develop brilliant technicians dedicated to this space who do the actual work. Much of it is indistinguishable from magic, trade secrets, fine tuning, like these are highly sensitive machines.

And it's the technologists and the technicians and whether they would be motivated to work or still be alive, right? I mean in the case of a total war that could cause significant problems. So I don't think the Chinese are necessarily interested in grabbing the foundries. But they certainly would be limited in what they could do until they have become self sufficient in that, at a minimum, but we shall see. but this is how we view it, right?

When, when we see those combination of things, it, it sort of triggers our Spidey sense, so to speak, as, as to a movie we've seen play out in, admittedly far less important industries than this one. But the, the, the tools and the tactics are very similar.

So, so what are you seeing in the open source space and what should make people concerned about that?

And We have a friend who works in the space, and we've been dabbling with the technology, mostly because we're in, we have a media business now, and, this person is capable of leveraging nothing but off the shelf, open source technologies of creating you, Adam, your voice, your likeness. And speaking with almost perfect, you know, your mannerisms to, to, to like fool people that it's actually you, that exists now.

And, and we're seeing all kinds of fraud, like, people calling children of people calling their parents, but it's actually AI. And they're getting like money sent to the wrong bank. You know, there's all manner of dastardly things that could be done. it campaigns. When you watch a video on Twitter, now you have to be. wary of no matter how real it looks, is it truly real? Like how, what is the test?

as we're blurring the definition between human and machine, is there a test for authenticity?, I would argue we're, the window on that is closing. And so like any technology, nuclear power for example, in the wrong hands, it can be used for terrible things. And in well controlled hands, it could be a source of limitless clean energy for decades.

And there is legitimate, real risk to our current way of life that is happening online in the dark corners of the web that would freak people out if they saw it. Cause from what I've seen, it's freaked me out and I don't go looking for the worst of it, I can assure you.

Indistinguishable from reality today. A bad actor looking to destroy Mike's reputation has a lot more tools at their disposal than they did a year ago.

You know, I read an interesting article, I think it was in the Financial Times, about how teachers are struggling to catch students because the AI detection algorithms often get things wrong, and people are falsely accused, and how do you handle that? And it's, it's really gonna mess things up in a big way. But the part that's freaky is there's just no stopping it. Like, there is no guardrails. It's out there. You can build these things at no cost, in record time, and people are building them.

Like,

When it was just text and you know now we've gone from text to speech to AV We're in three dimensions now four arguably in time and You know, we're we're just getting further and further behind. I agree It's almost certain we won't be able to regulate or manage it How do you envision the next three to five years playing out from a political? and social perspective

I mean, it's cliche to say it now, but I, I, I didn't grow up with an iPhone. I didn't grow up with a universal information machine in my pocket, effortlessly telling me everything I need to know. Now equipped with, you know, AI powered search apps that with amazing precision and almost no hallucination tell me everything I need to know in seconds. that this is, this is staggering.

one way to model the world, which we have written about, is to assume that society will do whatever it takes to organize itself in a way which ensures that it stays on this exponentially growing Kurzweilian curve of supercomputing power growth. And that model has worked very well. Betting against it has been a fool's trade. And if you do that and we circle it all the way back to energy, you get back to, how AI might predictably impact energy, assuming everything else remains reasonably solid.

and by the way, I should note as we're talking, gold just dropped 20 bucks an ounce. who knows on what headline, but man, I hate being right. Anyway, I don't want

your standard of living is defined by how much energy you get to harvest and all humans everywhere want a higher standard of living and AI for all of its threats and flaws and the fears we may have surrounding those threats and flaws is a smashingly impactful, powerful tool for progress towards the human endeavor. And, we are going to extract the energy needed to keep us on that Kerswellian curve.

and the two biggest winners from the trade are nuclear in the long term and natural gas in the medium term, and we could talk about why and the timing of those two, why we hold those views. And the biggest loser is, is the climate change hysteria, because, big tech isn't going to care. and, and we predicted that COP 28 was peak ESG.

And I think the lack of turnout headed towards COP 29, ostensibly under the reason that it's difficult to get there, is further proof of that, but the biggest winners will be nuclear and natural gas, and the biggest losers will be the carbon counters. Sharon

One of the, one of the challenges that we are facing at the moment to perhaps the greatest extent in, in a century is consensus building and, you know, global cooperative gameplay, how, and one of the symptoms of that is a loss of faith in the institutions of decision making.

maybe talk a little bit about some of the things you've written on that theme, what you're, what you're maybe currently writing about that theme and what the impact of this inability to build consensus and build global cooperative frameworks might be on our ability to solve these big challenges. So,

This is why, by the way, when we write pieces like Scientists Say, we bemoan the knee jerk response of Hurricane Helene is proof of climate change, because that just drives that half of the country to not believe anything the media says about science. As it pertains to the particularities of AI, though, we do see one major difference. The technology companies control social media, and therefore have enormous power to shape beliefs. And conservatives are generally pro energy development.

So that one will be an easier sort of piece to move on the board, to normalize the use of natural gas. To power data centers in the Permian, for example, or we see Microsoft reopening Three Mile Island, shocking the sort of old school Malthusians who thought they had won the war on nuclear power.

So I do think that the move to use abundant U. S. energy to power data centers to keep the U. S. on the cutting edge of technological development in a quote unquote war with China will be widely well received and that'll be an easier thing for the technology companies to sell and they will pay off all the environmental groups they need to in order to get them to quiet down about clean burning natural gas and carbon free nuclear, but your broader question about the breakdown in trust between

roughly half the population and The government media medical sort of nexus is real. It's important. It's what we're going to write about whatever side of that debate you find yourself on, its existence is undeniable, and the impact of its existence is also profound, and so we need to recognize that. And I think ivermectin is an incredible story, now that time has passed and you could do a sober assessment of what actually went down. It's a truly incredible story to view that lens through.

We'll see. Generally when you publish on red button issues like this, you tend to trigger people no matter how carefully you write your piece or how balanced you try to be in your prose. One of the things we like to say here is that we're more than happy to defend what we wrote, but not what you think you read. People project all manner of meaning onto words that were clearly not there and certainly not intended to be there. And this is one of those topics where we do have to tread carefully.

people are very emotional about such topics, and when we write about something that people are emotional about. we, we do have to tread carefully. it's just one of those constraints of the business, right?

at the edges of the network, which prior to social media were never really given voice. In fact, you might argue that the algorithms that drive social media engagement serve to amplify the edges to orders of magnitude greater degree than might be warranted by Merits of the ideas that that come from the edges relative to the center of the cannon in those domains, right?

So how are lay people, you know, which are most people in general, but also even experts who are, who are trying to make decisions on topics outside of their field of expertise supposed to, Make decisions or, or gain an understanding of the world, given the, the vast number of messages that are now being propagated from the edge of the network. Like a really near term example is I saw yesterday a tweet from someone that had gotten well over 2 million views.

Making the case that mammograms cause breast cancer and advocating for women to stop getting mammograms, right? This is like one of the most, went absolutely everywhere. I mean, this is a clearly extremely harmful message to propagate that's getting an enormous amount of attention. Just one narrow example of a broader general category. How do we navigate an information environment like this? Where people are, we have informed citizens who are able to check government, check institutions.

And that's why sometimes we write things that annoy our subscriber base because they're living in a different ecosystem. And we have a different view of things after having explored it thoroughly. There are certain tactics that you can use as you consume information. One is to wildly broaden information you're willing to consume. We read English language news and opinion pieces from Iran, from China, from Russia, from Ukraine, from Britain, from Brazil, from Argentina.

The world is a vastly different and more complex place. than the grossly simplified version of it that most people are fed by western media. Second is you have to identify trusted sources. So there are certain accounts on Twitter, and we still use Twitter as a read only social media tool. It's a wonderful and a terrible tool at the same time, and you just like any other tool, you have to know to not put your finger in front of the drill, right?

I mean you, so there are certain accounts, That engage in the harvesting of impressions and engagements for monetary value. And they are more than happy to spread trusted sources and identify sources that you shouldn't trust. And if you do those two things, widen the aperture on what you're willing to consume.

and always be partitioning things you consume into trusted or not trusted categories, you stand a far better chance of getting closer to objective reality slash truth than perusing the headlines of any particular western based newspaper. And because much of the U. S. in particular has lost trust in the traditional media, this is the inefficiency in the market that we and many others are exploiting.

So, our greatest brand ambition and our most sacred brand tactics is we must 100 percent believe everything we write the moment we press send. What happens after that? We'd like to be right, but we have to be willing to change our views when new data comes in. Sometimes we get things wrong, which is why we occasionally write a piece where we grade our previous work and we try to mix things that we got right with things that we got wrong.

And then we have a rule, which is mistakes should be rare, admitted to, corrected and learned from. It's a very simple rule. our audience believes that, we hope. we've built a brand around that ambition and people know that if they get a piece from Doomberg about ivermectin, which will probably publish this week, it is our honest best take on the subject.

it might be wrong, you might hate it, you might disagree with it, but hopefully only a small number of people will question our motive for having written it. and that's rare in the media world today, but can be found. And, and you have to find those Transcribed But always be evaluating them. You know, I'm old enough to remember when the judge board was right leaning. Somebody bought it, and it went under a substantial shift.

You know, when I read stuff on Zero Hedge, you have to question some of it, but some of it's interesting. It can get you ahead. But it's fine. You've got to categorize the information source for its veracity. based on experience. And then you always have to make sure that you don't get trapped in an echo chamber. So we had a very tough decision to make when we went behind the paywall because we graduated from a blog to a business. And that's a whole different endeavor, right?

And we decided to close the comments to paying subscribers only And our view was if you want to troll us, you at least have to pay us. And if you pay us, you can troll us all you want. But also, we sort of police that comment section. It's not a free speech zone. Literally, people are paying to be there. And we have to protect all of the people who are paying to be there from the occasional out of bounds comment. We have a pretty wide berth.

I think we may have deleted a grand total of five comments out of the three. The 250 pieces we've written since going behind the paywall, a pretty good record.

That we enforce is you have to be polite, and we think that that's missing from modern discourse, the team sports aspect of politics, right? so climate change, and by the way, the, this is becoming more normal to wonder whether some of the more extreme and unscientific claims shouldn't really be taken with such, you know, such literal interpretations of what's being said.

And this is, you know, Again, an example of people, in this piece we wrote about the hurricanes, like we had no hurricane season, and then we had two hurricanes, and suddenly climate change was back, right? That's not science. I mean, call it whatever you want, that's not science. and so, that's becoming more acceptable, especially if you do it in a polite way, backed by data. And look, one of the things we do is we show our homework.

Like, here is the basis of our opinions, here's the hyperlinks. You can go and investigate this yourself. You can think we're full of it because of A, B, and C. We're happy to receive polite, politely written, rebuttals to our pieces. Cause that's how we learn, you know, for example, we've got something fundamentally wrong about the natural gas market interference. And then we corrected it and basically set the record straight. We don't like to do that.

Like typos and, and facts, factual errors are our nightmare. every time we publish a piece, the first 30 minutes is a very stressful time because if you do have a typo. Or, or a factual error in your piece, it will be discovered and you will get waves of emails from people, especially if it's above the cut to paid in our entire free list, see it. the only benefit of that is it teaches the spam algorithms that maybe we're not spam because people normally don't reply to spam.

and so we generate a lot of email response when we have a typo. We even pondered the strategic typo

Like I read what the CBC is telling Canadians about Trudeau, for example, even though I happen to have a, probably a wildly different view of the man than many of the people who work there do. you have to see what people are telling themselves to get a holistic view of how and why people are behaving. and the, the comfort of confirmation bias is a trap.

I look forward to the next one because we never really seem to be able to cover everything we want to talk about in, in what is still a relatively long period of time, and that just means that the conversations must be interesting.