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Chapter 1: What massive demands does AI place on industrial capacity?
So I actually think a big macro story that we've been exploring at Bismarck Analysis and the Bismarck Brief is that the demands of AI are so massive that for the first time in decades, the economies of scale necessary to supply them require industrial revolutions in everything.
So this demand shock, and we could almost call it a demand shock, arriving from the future in AI is going through silicon, but eventually it's going to reach things like mirrors and steel and natural gas. And once you're doing those things, oh buddy, you've reignited the industrial revolution.
Most conversations about AI focus on software. Samuel Bouria thinks the bigger story may be physical. As AI systems become more powerful, the demand for energy, compute, data centers, chips and industrial capacity is growing at an extraordinary pace. That demand could reshape not just the technology sector, but manufacturing, construction, energy production and the broader global economy.
Theo Jaffe speaks with Samo Burya about AI industrial revolutions, demographic decline, state capacity, and the institutions that determine whether societies can successfully adapt to technological change.
We're live with Samo Burya. Welcome back to The Situation Room. Happy to be here. So we just finished our last segment talking with Ray Ma from China Buzz about, was it? I don't want to get that wrong. It was Tech Buzz China. That's what it was.
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Chapter 2: How might AI trigger a new industrial revolution?
And Sophia made the point that the U.S. has these sort of like grand apocalyptic eschatological narratives around AI because we're a Christian society and China doesn't because they're a secular society. Do you have any takes on this? I'm not convinced.
Well, I think that people over-index on long civilizational narratives and under-index on just the concrete material conditions in a country – To give an example, there was the so-called Yellow Turban Rebellion in China in the third century. You could easily make the case that China has eschatological thinking and has end of the world cults, right?
The so-called Yellow Turban Rebellion was basically a Taoist cult. And it was a bunch of brothers that wanted to overthrow an imperial dynasty. They believed the end of the world would come, that, you know, the heavens themselves would change and that there would be a massive transformation into an unprecedented utopia. This was actually believed by many, many people.
And it was a very bloody civil war and likely one that ended up destroying, you know, destroying the Han Dynasty. I think that people want to equate deep religious traditions with basically the beliefs that a society holds, but they underrate how much those religious beliefs change on the century timescale or the millennial timescale.
I mean, certainly the, you know, religious landscape of the U.S. has changed enormously in the last 50 years or so.
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Chapter 3: What role do energy and infrastructure play in AI's impact?
I think that the United States is still innovating in its practical religious sense. You know, you could say that the rise of this kind of non-denominational Christian-derived ethic where basically, you know, just be a hecking good person, whatever that means, right? That vibe, that ethic, right? seems to be the actual religious belief of most people.
And then some sort of vague belief in karma, some sort of vague belief in like an inactive God that doesn't interfere in the world. I think that actually probably describes most people who are nominally Christian in the United States today.
How do you think like the Puritanism of the early U.S. manifests today? You know, Puritanism is Calvinist. They were very sort of against the pleasures of the flesh. They believed in predestination. So you were born predestined to go to either heaven or hell. Right.
Well, there's a straightforward interpretation where, you know, simply because you're doing well, that doesn't mean your salvation is guaranteed. It's not clear that you were one of the elect, but it is a hint.
Chapter 4: How do demographic trends affect economic growth?
It is something of a possibility. So I think the classic arguments about the Protestant work ethic endure. However, I think they endure because there was first a religious belief that, okay, it's important to do your work well. It's vocation from God. If you're doing really well materially while doing the vocation that, you know, God selected for you, that might be a sign that you are elect.
You're very much nervous about whether you are one of the elect. So one of the people that are predestined, you know, to be saved. But then even as society secularized, the material rewards of working very hard started compounding.
So I sort of think that in a way, the fact that, you know, America was started as a more Protestant, almost Calvinist country or a Puritan country to take a slightly different strain. that was reinforced. It was important for the emergence of capitalism. I think capitalism itself prolonged it right and developed it further.
I think today people work hard on the vague assumption that, you know, it's going to work out for you, right? The whole land of opportunity mythos, which was also true for most of the 20th century, arguably still true in the 21st century here in San Francisco. You know, I think that has long ago secularized and it's sustained by, you know, the facts of economic growth.
Chapter 5: What insights does Burja provide on the U.S. and China dynamics?
Well, the conclusion from this that I would draw regarding China is that if you want to think about China today, maybe you should think about 1950s America. For most Chinese people alive today, their life has just gotten a little bit better and they've become a little bit richer every single year for the last 45 years. And many families are now buying their first car.
The living space allotted has increased. I think recently they surpassed some of the lower ranking European countries and, you know, average urban living space, which, again, makes sense, right? We talk about China's ghost cities, but they built a lot of apartments recently.
Meanwhile, if you're, you know, living in Paris, even if you're very rich, your apartment was probably built in the 19th century. Or California, for that matter.
Unfortunately, yeah. Not the 19th century, but like the 1950s. 1950s, yeah. Or if you're in San Francisco, like a lot of the housing stock of San Francisco, you know, all of our historic Victorians were built right after the earthquake in 1906. So rather old housing stock.
One that could be greatly expanded. You know, maybe this is just a long winded, you know, maybe this is just a long play by the automation lobby.
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Chapter 6: How does automation influence welfare systems?
It's not the landlords that are in charge constricting supply. It's the robotics companies, right? Secretly they're in control. I could joke. Because if you make housing very expensive, then you're going to see $50 lattes eventually. I mean, you're already seeing $20 lattes in the city. I think $50 is not far away. So, you know, eventually the robot makes economic sense. I don't know about $20.
I've seen $10. $20 smoothie is at Erebon maybe.
Perhaps, perhaps. I feel like I always mentally count two coffees. I think it's always a good idea to just buy, you know, if you're meeting someone, it's just such a nice gesture to always like buy for the other person. And if they're Eastern European, then they fight you for the privilege and, you know, you relent.
Chapter 7: What are the implications of AI on global supply chains?
Nice. Yeah. So you also tweeted recently, Sam Hammond was talking about nationalizing AI companies is a terrible idea in reference to the proposal floated by Bernie Sanders and Donald Trump and OpenAI.
And then you said printing a trillion dollars and paying it to AI companies in exchange for equity might be the best economic stimulus the US government can carry out and might yet prove a vastly better investment than, say, the infrastructure bill was.
Well, you know, the U.S. government has been printing trillion dollar bills like it's no tomorrow, practically, right? We're not talking just about the infrastructure bill. There has been the COVID stimulus. There have been many, many cases where the U.S.
that, of course, has been spending with a massive deficit, has a massive debt burden, has injected trillions of dollars of cash into the economy, mainly to make sure that the stock market doesn't go down. You know, at this point, I feel Basically, anyone that holds a 401k, anyone that owns stock, you're basically the beneficiary of the high printing system, right?
It's not money that retains its value, it's stocks. And politically, it's far too costly for the sitting president, no matter his party affiliation, to allow the stock market to go down for too long. And, you know, I think this political incentive is massive.
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Chapter 8: How can functional institutions adapt to the challenges of AI?
I don't think it's going away. And I think because of that, we will be printing trillion dollar bills. And then the question is, well, who gets them? And I sort of feel it's actually better the AI companies get them. If I told you that the US government is investing a trillion dollars into data centers, that would seem good industrial policy.
If I tell you it prints a trillion dollars and buys a trillion dollars of stock at like basically the value, the market value of, say, OpenAI or possibly Anthropic, you know, I'm pretty sure they're going to use it for employee compensation and for data centers. So not that bad, actually. So I'm taking a pessimistic view on sort of fiscal sanity of the U.S.
and an optimistic view of the institutional health of the frontier AI labs.
Sure. How do you think this would compare as a stimulus to the average person compared to just directly giving them money, though, or giving them money through the welfare state?
I mean, I think it obviously is going to be much longer term as a positive consequence. You know, the best asset for a welfare state, if you want it to be sustainable, is a booming economy. Countries like Sweden and Denmark used to understand this. This is why they had an export-driven system. That's why Sweden isn't just the land of welfare. It's the land of capitalism, right? This is much...
the country of IKEA as it is the country of, you know, free healthcare. And IKEA is like, you know, globally innovative logistics company. I think that if we want the United States welfare state to continue, I think this would be a better long-term decision.
I don't think politicians are good at making long-term decisions, but maybe something pettier, maybe something like, you know, the emerging bipartisan corruption consensus. will incentivize office holders to give corporate handouts to companies that are likelier to be profitable rather than just give it to the dole.
I don't know. It seems like rather the opposite of the economic incentives that we do for profitability. Like the way we do corporate income taxes is by taxing the profits of companies. I mean, again, why would we reward profitability in the tax system?
I mean, we always do punish profitability, but I do think that investments in infrastructure build out are a positive. So let's just be very frank. The reason I think that perhaps Sam Altman is floating this is that not only does it position his company as the company that's more benevolent to the general public than Anthropic, making an offer Anthropic has not made,
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