Arin Dube

In forecasting the future of AI, it's easy to miss the main point.

Whether AI largely substitutes or complements human capabilities isn't merely a technological matter.

It's a societal choice.

Bad day for bubbles

Twitter/X is not real life, apparently.

It's a statement about relative price changes.

Restaurant meal prices have risen more than prices of food at home - so restaurant meals have become relatively more expensive.

It's a statement about relative price changes

Restaurant meal prices have risen more than prices of food at home - so restaurant meals have become relatively more expensive.

The DoorDash discourse is missing the bigger picture: restaurant meals have become more expensive than preparing food at home, and guess what? People are are eating less restaurant meals (whether takeout or going out) and preparing more food at home.

Especially poorer and younger folk.

We can learn a lot from Moltbook - by reading how people react to a simulacrum

37 year old ICU nurse shot to death in a brazen act of state terror.

We will remember Alex Pretti.

This

💯 accurate description.

Breaking: Econometrica is now accepting "Framework of a paper" submissions

The Lucas Cri-taco?

Yes!

Fundamentally, the problem is TACO undermines itself over time.

How markets factor in Trump came up in the Fed firing oral argument today at SCOTUS. SG pointed to lack of market reaction to Cook's firing as a reason why the impact is not so bad, but no discussion of whether market assumed courts would intervene, and so on.

Here’s the really bad part: over time, this dynamic breeds bigger and bigger crises.

Markets keep updating their beliefs about TACO, so it takes ever more extreme actions to convince them he might not TACO.

Buckle up.

The single best theory of the last few months

The TACO cycle:

Markets want to price in TACO. But TACO only works if Trump sees stocks tank.

So we get a loop: Trump does things → nothing happens (markets already priced in TACO) → that emboldens him to do more → until markets start to think he might not TACO → stocks fall → TACO is restored.

I really don't know what you mean, perhaps in no small part because I have never known any policy agenda to feel ever-present in any moment...

That would (at least in the short term) lead to a worsening of the downturn.

Of course, none of this may happen. (I hope it doesn't!) But I see these as very plausible scenarios.

The add-on risk is macro-economic. Given the importance of AI cap-ex in holding up spending, a sharp reduction in AI asset prices will likely cause a major reduction in spending.

Our current political economy is probably tilted against providing necessary fiscal stimulus.

Think 30%+ in the S&P 500 ... sometime in 2026.

I'm not in the business of forecasting asset prices (no one really is, if they're honest). But these risks feel very real.

Right now, the most likely source of that kind of shock (and not unrelated to tech valuation) is political economy: Trump's trade and military choices.

Layer that on top of possibly finding weaker-than-expected AI earnings, and you can get to a major drawdown.

Don't get me wrong: AI will still be valuable after such a crash, but asset prices will very likely adjust downwards.

The question is how it happens. Most often bubbles unwind after a shock ... something that jolts sentiment and forces deleveraging/margin calls.

My 2026 market outlook: a tech bubble meets political shocks—Trump's trade and military choices—potentially triggering a 30%+ S&P drawdown.

AI will remain valuable, but current asset prices can't be reconciled with plausible earnings. Here's how I see it playing out:

🧵

I was confirming that coding based on my prompts was able to replicate correct outcomes - in both languages. Julia, which I've am not familiar with, and Python, which I am.

I know what's "correct" because I have the ground truth sample to check against.

As @eschatonblog.com used to say, another wild day at the dog track. Amazing what threatening military and economic conflict with your major trading partners and allies can do!

I do not like how close POTUS is getting to declaring war against Minnesotans & ordering the U.S. Army to coerce us.

We are standing up peacefully.

The only way I see this walk down is enough GOP members of Congress coalesce with Ds to reign him in on this.

What can u do to advance that?

I think Matt gave example of how in his work it can help the ability to reason and make informed arguments. I think the big question is under what circumstances does AI complement versus purely substitute human expertise ...