2024 Predictions
ft. the Creator Economy, AI Litigation, Culture Wars, and the 2024 Election Winner..
Hola amigos! This week we are going to be doing one of my favorite things which is predicting what is going to happen over the next year. This is fun because it is very Popper-esque, we can make an objective prediction about the future and then measure to see how we did. We aren’t going to be those people who said “oh, yeah I knew that was going to happen” with no historical internet evidence! We are going to put our reputations on the line and see how our forecasting abilities stack up.
Also, I am not sure what 2024 looks like yet for this publication. I have gotten very deep into ∞-x’ing my full stack coding abilities (that’s when start from 0 as x/0=∞) so the ROI on my time is probably better spent building LLM applications. I’ll keep you posted.
2024 Predictions
Manufacturing becomes cool again. If you follow the richest people in the world (Jeff/Elon) and listen to what they say and watch what they do, they will always provide you with alpha. Back in November 2021 they foresaw the top of the market and sold off large chunks of their businesses. In late 2023, with both of them working on hard, physical problems, the common thread they have both harped on is manufacturing. Tesla and SpaceX at their cores are only possible via their manufacturing breakthroughs that allow for cars and rockets to be mass produced at levels of efficiency not previously available. It’s not just a margin unlock to reduce COGS like that, it makes the impossible possible. Elon is quoted as saying “people don’t understand how difficult manufacturing is”. Likewise with Bezos and Blue Origin, the main focus is in the manufacturing. Rockets are expensive, and the space race is about getting the price per tonnage out of earth’s atmosphere as cheap as possible. With two of the deepest pockets working on the hardest problem simultaneously, we will likely see some trickle effect into other companies and industries as new cheat codes are unlocked, just as it happened when the first space race occurred many years ago. This alpha, combined with the residual onshoring effects still lingering from Covid-disrupted supply chains, breakthroughs in BioTech and AI, I think we start to see an emergent trend to build stuff in America again. Now, to be clear, I don’t know if we will start to see the actual improvements in 2024 as the US Manufacturing PMI just marked down its expectations, but I do think that provides more alpha in what will happen, which is future improvements will start to be priced in.
Spread trade to measure this hypothesis: take XLI 0.00%↑ vs SPY 0.00%↑
We huge departure from parity when Covid struck, but I’m betting that gap starts to close again:
Creator Economy Barbells: Everyone has a take on what social media is going to do. This is probably because it is all predicated on trends, what’s cool, what’s not, what are people buying, what are people watching. Everyone exists in their own little algo-chamber of the internet, no matter how many sources of information you get, you can’t get it all (not even you, OpenAI). Everyone is also wont to say things like “brand deals are going away”, or “influencers don’t influence anymore”. OK, cool, maybe in your small slice of American-TikTok, but if you look objectively at what drives sales, it is content and distribution. It doesn’t matter what you are selling, you need some form of both of those things in order to make money. Tesla famously doesn’t “do marketing” but there is plenty of content out there about it. Most companies have to do a shit ton of marketing, so much so that they aren’t even profitable. With the fragmentation of distribution via new social channels and niche-of-a-niche markets, combined with the commoditization of content creation via AI or even just the simple capabilities of a smart phone, there is infinite alpha to be created on the fringes. This would be the creator with “1000 true fans” who charges $100 / mo for some exclusive content and grosses a cool $1M per year. Does that person get a brand deal? No, of course not, because intensity of their signal diminishes drastically after the 1001st follower. Niche artists are beloved within their own community, and can remain in profitably obscurity forever if they please. The need to “strike it big” is gone. They live on the left side of the barbell and value quality of content and quality of distribution.
The right side of the barbell expectedly values quantity of content and quantity of distribution. These are your Kardashians who can beam themselves into billions of eyeballs, but don’t have to operate any deeper than surface level. Are there still going to be brand deals for these people? Of course. If your company lacks distribution, you have to pay to get it. Now, this puts high distribution individuals in a seat of power, as they may (like the Kardashians) decide to just make their own brand, or start their own firm that buys brands. This puts mid-tier brands out of business, as they are both too small to create distribution, and too small to buy it.
So what is the result of this? Tech stocks pump. TikTok shop revenue quadruples in size. More entrants into the market means more money for everyone. All of this leads to No Government Action on TikTok, as much as everyone is calling for it. I can see this being a conservative talking point on the US’s weak position against China, but if roles were reversed they wouldn’t ban it either.
The bet? TikTok IPOs in 2024, and it doesn’t flop.
NYT Wins its Lawsuit Against Open AI: but it doesn’t matter in the grander scheme of things. I wrote about this at length in Infringement Binging. My opinion hasn’t shifted but here’s how I think it will play out. NYT wins the lawsuit, and all Large Language Models are forced to provide attribution or sourcing in some manner, or else not use copyrighted material in its training data. OpenAI of course complies, as MSFT 0.00%↑ share price is at stake. However, the Napster loop re-uploads to the zeitgeist, and Open Source Software AIs to do traditional publishing what Napster did to music.
OpenAI will do all the right things. They will give credit where credit is due in some sort of Cost Per Click or Cost Per Mille deal that benefits both parties. OpenAI continues to build out its impressive dev kits, making it easier and easier to build custom GPTs for fun or for your business. I made this silly vibe checker GPT just for laughs. The GPT Store becomes the Apple App Store, and with it massive value capture for OpenAI. Microsoft is now looking very vertically integrated! They have the most commercially viable (and most advanced) LLM, they have the tailwinds of hype, the colloquialism (people now call AI ChatGPT the way they call Search Google), they have the user-friendly tool kit, and the dev-friendly tool kit, and they have Azure, the cloud computing network to process all these requests, as they collect massive $$$ for all the API tokens for the absolute litany of LLM-apps built upon it.
That’s awesome, that’s great, but I don’t think that matters. It makes people too reliant on OpenAI. We aren’t going to just have one LLM to rule the world. There is a massive tailwind behind OSS LLMs, as well, and they lag only slightly behind GPT4 (and probably always will). So what do you get as a developer building on an OSS LLM? Well, you get freedom of speech, you aren’t limited to any particular guidelines. You don’t have to sit around and wait for OpenAI to jack up the API token price, like some mobile home owner who doesn’t own the land underneath them. And you can use whatever content you want and don’t have to give credit to anyone. Now, will there be litigation against app builders who use OSS LLMs and don’t provide attribution? Yes. But what if the LLM doesn't easily provide attribution and the COGS to build it into your app infrastructure are too high? Well, you probably just ignore the law, and it becomes whack-a-app, trying to shut down every app that doesn’t comply. The problem is that these apps are open source, and you can run them on your personal hard drive. I don’t think that downloading Minstral to your PC will be a felony the way that having a burned Metallica CD was, but we’ll see. The point here is that the content doesn’t matter if you don’t have the distribution along with it. NYT can write a great story, and it’s economic value is due to the user reading it on the NYT site. NYT gets points for having written it, and showing it to the customer, but like music, once its out in the open air, it is part of the collective knowledge of humanity. The estate of Sir Isaac Newton doesn’t get royalties every time we talk about gravity. So if NYT wants to compete with LLMs that are constantly aggregating paywalled information, they are going to have to have news and information so prescient, that we look to them as the first source of information, knowing that LLMs are downstream of that. The problem, not just with NYT, but any news journalist, is that they have gotten too far downstream themselves. Most news breaks on social media, direct from a source, and then reporters “report” on the social media post. But what is the value there if the user can just hear it from the originator’s lips? Consumers don’t want to hear the biased take on a mis-quote, they want the truth. LLMs might mess up the facts, which is a real danger, but news aggregators in general can utilize AI to speed up, or shorten the pipeline of information of source to consumer.
Who wins in this sort of environment? I think it is Tech in general, specifically X and Substack and any other type of text platform that enables audience building and monetization. If you’re a good writer, at some point the distribution and money you will make writing for an institution will be less than what you make on your own. It’s the barbell effect continued, its Tucker Carlson going direct to viewers, its musicians foregoing the traditional record label deal. But in order to reap the benefits, you have to have trust from your audience, which is why you have earned the right to distribute to them. LLMs commodify distribution like a Kardashian, blasting information out the wazoo, taking 100% of the rewards. In less than 10 years we will go through the same thing with video. The GPT4 API can already analyze images, so once the cost of compute comes down in a few years, running a video through an LLM will be no big deal. Just upload the entire LOTR trilogy have it export with Gollum as Kermit the Frog. It’s not going to stop and any litigation will be short lived.
Soon everyone will have an LLM stored locally on their personal device as a standard feature. And like the Android vs iPhone, its going to be a battle over distribution, starting with the hardware. Depending on which LLM gets installed on which device, you could have interesting consumer choice emerge. Apple doesn’t have a viable LLM that we know about, Meta’s are OSS, do they finally build that phone, or do they close up the LLM and lean hard into VR and throw it in the MetaQuest? What does Google’s Bard and Amazon’s Anthropic do? There is such a large variety of ways to capture value, but OSS runs roughshod through all of that. NYT wins the short term lawsuit, but long term I think copywrite laws are largely ineffective against LLMs.
Rates to 3.5 by Election Day. They say the Fed isn’t political but it’s really hard to imagine that being the case. With perhaps the soft landing orchestrated, yet still many people clamoring about the poor economy, the Fed has the ability to shift the vibes whenever they want. The economy is always the #1 issue that voters vote on, and it’s almost too obvious of a call to say that a significant rate decrease right before November would pump the market and juice the incumbent. With the current fracturing of the Left, they are going to need every trick in the bag, so keep your ears open for the money printer. Not too soon, but not too late.
Culture Wars Cont’d: We haven’t really seen much going on yet in terms of the traditional Left vs Right media hysterics leading up to an election year. Partly because media has become decentralized, partly because everyone is burnt out of bad news, and probably mainly because Trump has wisely been keeping his mouth shut. It’s actually kind of hilarious that the best strategy for both Biden and Trump is to say and do literally nothing. Proposed SNL skit: Biden and Trump debate for 4 hours in a “who can stay quiet the longest contest” and its a tie. But there has to be something, right? An increase in gun violence reporting over the summer, immigration crisis at the border, abortion debates, something, anything to do with race? Nope, I think it is all going to be about war. Ukraine and Israel are going to be the hot topics. We don’t stop aiding Ukraine, and we don’t explicitly back Israel. Biden is stuck kowtowing to the military industrial complex on the former, and remaining as ambiguous as possible on the latter. Standing with Israel means you’re an oppressor, and standing against it is political suicide. I think Mainstream Media remains relatively centrist here, in a change of pace. They are experiencing the same level of fragmentation that the major parties are, and can’t realistically go full court press without knowing which way the wind is blowing. CNN can’t be 100% on the pro-Palestine bandwagon (for fear of losing large Jewish donor/voting base), and FOX can’t be 100% anti-war in Ukraine (just in case Nikki Haley wins the nomination). Interesting how each war is fracturing a US political party.
That’s probably why RFK is getting so much support. There is an opening here for independent candidates, but we are probably still years away from seeing that materialize. I do think RFK will get a decent part of the vote, which will hurt Dems more than Reps.
My Presidential Election Prediction: I said at the beginning of 2023 that this was going to be a wild year, but now I am revising that. I don’t think anything is wild anymore. Things just happen and nothing is surprising to anyone. Here is how I think the totally not wild at all year will play out politically:
Biden enters primary season, does not poll well. Trump enters primary season, polls pretty well (despite making no public appearances). Nikki Haley second, DeSantis third. Vivek remains loud but does not concede yet. RFK is incline-bench-pressing 250lbs in jeans on Venice Beach!
Uh oh. It’s not looking good for Dems.
Full court press on Trump’s indictments, more initiatives to take him off ballots in some states. It’s successful! By some act of God (or political swindery), Trump is convicted of something, and somehow (I am not a constitutional attorney) that is enough to get him off the ballot in several important battle ground states.
Trump is no longer viable to the Reps! They must begrudgingly change course. All aboard the DeSantis train! Remember Covid? He stayed open and Florida boomed! What a genius! He’s anti-war (unlike the Washington establishment)! FOX and major Rep donors pump DeSantis stock like crazy, he surges ahead of Nikki Haley in the polls.
But even with all this disruption Biden is not gaining ground. Americans don’t want to be at war in other countries. Americans don’t want to send money to Palestine for a terror organization to allocate the resources to the affected children. American’s don’t want an old man! RFK challenges Biden to an arm-wrestling contest! Biden accepts! “I’ll show that malarkey what American strength looks like” he says, smiling in his aviators.
Then suddenly, in a very hush-hush manner, it is revealed that Biden has some sort of innocuous illness (not dementia!) and has to step out of the election. It’s no longer Biden/Trump! What?! Who has the chops to arm wrestle RFK on prime time TV?!
“I have the chops” Gavin Newsome says, smiling in his aviators. Wait, are those Biden’s aviators? Did Gavin Newsome poison Biden?? “Of course I didn’t poison Biden” Newsome says out loud at a press conference for some reason. “Um, I asked if you wanted to avoid the violence, sir..” says the reporter from Al-Jezeera.
So now we have the race that everyone and nobody wanted: DeSantis vs Newsome. Gov vs Gov. Trad Red vs Trad Blue. But wait.. RFK and Nikki Haley haven’t gone away yet. It’s a four horse race! Unbelievable.
Newsome locks up the nomination early. RFK polling at 20% of the popular vote as an Independent. However, some very late and troubling news emerges about DeSantis! The military industrial complex does not like his anti-war opinions and thinks he is too short for the job! It turns out DeSantis is actually 5’2” and had shin-lengthening surgery! More corruption and debauchery is revealed, and at the last minute, Nikki Haley emerges with the party nom.
Now we have Newsome, RFK, and Haley. RFK gets 11% of the popular vote in the general. Newsome is cruising, looking very presidential, but the Republicans have been waiting for this moment for years! Of course they have tons of dirt on Newsome. It turns out he did poison Biden! (ok not that, but something equally explosive). Do you really think Donald Trump Jr is dating Kimberley Guilfoyle (Newsome’s ex-wife) for some reason other than political gain? A bombshell drops on Halloween. Days before the election, Newsome tries to throw attacks wherever he can, RFK is an anti-vaxxing drug addict, Nikki Haley is a war hawk! To no avail.. the person with the least skeletons in the closet is declared victor. The first female President of the US is elected (which goes curiously un-celebrated), and Nikki Haley is your new commander in chief.
Oh, and the Bitcoin ETFs get approved by the SEC, right around the same time as the halving, and you see $80k BTC before the end of year. Of course it will fall back to $20k in the winter, but that’s a 2025 problem..
The perfect made for Netflix movie ending....
Bold predictions, Brian! With your forecast on manufacturing's resurgence, do you see any specific sectors or technologies leading this shift? 🏭🔍