When does the AI bubble burst - and what then?

That AI is currently inflating a mighty economic bubble is a commonplace observation.  A vast proportion of US economic growth (as conventionally measured) and stock market value is related to AI.  Every damned company on the planet is trying to portray itself as somehow AI-contributing or AI-powered - and they are frequently getting a gratifying share-price kicker from it[1].  Presumably, the pension industry is pretty addicted by now.

In the real world, the vast and (we are told) exponentially-growing demand for electricity - 100% secure baseload electricity to boot - made by data centres is seriously distorting electric power-system planning for many a nation.  Coming atop the average grid's already torturing itself - and its hapless bill-payers - to accommodate the diametrically opposed demands of a decentralised renewables-based future, this is a serious spanner in the works.  And of course governments everywhere are anxious to play host to new data centres, Starmer's as much as any; and are making this a policy priority.   But the (would-be) data centre builders have twigged that these contortions on the part of conventional grid operators may very probably not prove successful - and thus are talking about joint ventures with nuclear generators and ... sponsoring nuclear fusion development! [2]  Yup, it's a completely irrational bubble.     

But what does that tell us about AI itself?   Not much, beyond the obvious fact that it has gripped the universal imagination to the extent that dollar signs rotate in every businessman's eyeballs.  

Well.  Railways had a mania, and many a railway company went bust.  The technology and much of the infrastructure they built is still evolving and very much in use.  We had a dotcom bubble.  It burst, alright, but it didn't mean the internet was a phantasm.  Enron was a bubble: but it didn't mean the Enron vision for how energy markets should be configured was wrong.  (Even China is trying to figure out how to bring that revolution into its own constipated energy sector.)  Etc etc - these techie-based phenomena are not like Dutch tulip mania: nobody needs tulips, but everyone needs railways / electricity / the www / .... and, probably, we'll continue to want and need the advances that are made under the banner of 'AI'.

So: if history is any guide, it'll be a painful financial collapse; a reshuffle of the runners and riders in the "AI industry" (for those who don't break a leg & are not shot by the vet); and the underlying new tech rumbles on to find a more stable way to become a permanent fixture in all our economies and our ways of life. 

Views?  Predictions?  Timing ..?

ND

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[1]  Even Drax, FFS - a floundering, downsizing biomass-burning power company.  

[2]  On the eve of the 2007-09 financial crisis, a high-end energy-specialist VC firm of my acquaintance was looking for opportunities to invest in unsubsidised nuclear powerplant development.  When money is aimlessly sloshing about on that scale, that's when you really know a financial crash is coming soon.

Mandelson, document-release ... and Polly Toynbee

So what to make of the latest state of play over Mandy?

I'd say it's really clear: Team Starmer is utterly determined to tough this out, and they reckon they can do it: their man is no conscience-stricken wimp, likely to flake on them one fine morning.   Grim determination is no guarantee of success, of course: but (a) it is at least a necessary condition of success; and (b) these are scheming, desperate people with a lot of levers available to them.

> the way things developed in Parliament on Wednesday shows that Team S's going-in point was to resist document disclosure, period.  They were thwarted procedurally by the unholy alliance of Badenoch + Rayner, but we know what is plainly their aim: not to release docs. 

> they are 'framing' like crazy to the media, and it still largely gets swallowed whole.  As well as "It's all about Mandelson's lies - to my staff (not me, of course)" and "I wanted to release the docs yesterday" (see previous post), we read: 

• "There will be no leadership challenge, because ... [Rayner = tax dodger, still under investigation // Burnham = disqualified // Streeting = Mandelson-best-buddy // etc]." 

• "PC Plod has a serious point about not prejudicing their investigation / potential charges being brought."   

• "So-oo many docs - this is going to take months and months."   

Etc etc.  Yup, they are going for that oldest, most intellectually dismal, most sordidly shameless  tactic of all: playing for time - and it's often successful.  Let me give you a recent parallel: a case I have been reading up lately from my own patch (energy).  A big corporate - Drax plc - had a run-in with an employee-whistleblower whom Drax fired, and who brought an employment case, early in March last year.  Halfway through the unusually lengthy Employment Tribunal, they settled: by all accounts it amounted to a capitulation by Drax.  Meejah organisations sought release of the court documents - which, had the case continued, they'd have had access to, it was a public hearing.  Drax has stonewalled for nearly eleven months, only finally releasing the docs under a court order at the end of Jan.  And even now, the docs are (a) not the complete set, and (b) in some cases, heavily redacted (on the usual grounds: "commercial sensitivity / privacy / yadder yadder").  In which time Drax has managed to secure 4 more years of juicy new subsidy, and a 40% increase in its share price, from which many execs will benefit materially, in cash.

If a corporation can behave like that, how much more easily can HMG, with all the resources of the State and the added killer pretext of "national security" (see below)?  My prediction: we ain't gonna get anything much before those May elections - and we'll never get anything they truly don't want us to see.  

Which brings us to La Toynbee, whose general run of risible Guardian offerings is occasionally but reliably punctuated with something half-worthwhile.  Here's her latest.  You need to look past the usual fatuous fawning - the idea that Starmer is "a decent PM" (she once idolised Gordon Brown, too - and Tony Blair before him) to get to the blunt & forthright expression of utter disgust at the "send-him-to-the-Tower treachery and treason".  And here's a little nugget (my emphasis): 

... he gave a wretched display of it in the Commons with a fatal attempt to hold back some vital documents on Mandelson’s vetting and appointment. Never mind that it was for sincere security reasons – mainly fear of what abuse of the US president the papers might contain – Starmer failed to measure the ferocity of the storm on his own benches

That Trump angle  -  another subtle bit of Team Starmer framing?  Well, maybe: but it's a neat idea I hadn't seen aired elsewhere.

My prediction stands: many months of Strategic Starmer Stonewalling to come.  Don't change your New Year predictions for 'name of PM on 24.12.2026' just yet awhile.  Meantime - more popcorn!

ND

UPDATE: her Gruaniad colleague Aditya Chakrabortty slaps down La Toynbee's characterisation of Starmer as a 'decent PM'. 

The refrain that Starmer is a “decent” man does not fit his record of deceiving his way to the top of the Labour party, sitting on his hands during the massacre in Gaza or clamping down on protest against it.  

Oh, those feuding Graun writers !

We know the Mandelson "vetting" was a stitch-up

As ever, Starmer had a carefully crafted speech for deployment on Thursday.  He vehemently - very vehemently - wants us to believe that whatever Parliament thought it had secured the day before, it's really all about a catalogue of "Mandelson's lies" which Starmer "had wanted to hand over yesterday" (if PC Plod hadn't told him not to hand them over; yeah, right).  Nice try, Kier; but what your MPs actually want - and won't easily be deflected from - is what McSweeney's role in all this was, blow by, errr, blow.

And what McSweeney was up to is clear enough - orchestrating a sham of a vetting process.  How do I know this?  Because on top of outright secret sources (and who knows what they knew?), within the security services is an OSINT desk - open-source intelligence gathering.  People whose job is to trawl everything available from open sources.  And in this day and age of Bellingcat and the extraordinary online resources they've tapped into and made public, and when you have the resources of HMG, GCHQ etc at your disposal, OS is one helluva resource, properly marshalled.  Be it immediately added that imposing QA on what is found online etc is a very significant analytic task, when all the OS stuff is assembled, tinfoil-hat dross / disinformation / Маскировка and all.  But that's not the point in this case.  What can be said for certain is that whatever was available in OS, worldwide, on Mandelson - and everybody knows that includes, e.g., the Deripaska affair - it was ready to hand within Whitehall.  And cumulatively, it was all anybody needed to know to conclude he was a non-starter for Ambassador by any rational criteria.

Ready to hand - but seemingly not deployed.  In other words - and let's charitably dump this all on the convenient fall-guy - McS ran a sham exercise in which Mandelson was invited to tell whatever lies he liked; and he was then taken at his word, without the security services being tasked to give it the old red-ink marginal annotation routine.  Because if Mandelson had simply given them a big assemblage of lies, they could have demolished it, line by line. 

The alternative explanations - that all his lies were indeed fisked, or even that he simply didn't lie at all - and still Starmer made the appointment, well, that would be even worse for Starmer.  But since PC Plod is conveniently withholding the list of lies, we can only speculate...

ND

Mandelson: endless, shameless optimism of self-promotion

A few months ago we had cause to consider Mandy and his little ways.  "Always plotting, always thinking creatively, always strategising" - even, or perhaps especially, when his back is against the wall [are we allowed to say that?].  Since then, he's been defenestrated from the Washington embassy and caught pissing up George Osborne's side street.  But - the usual modus operandi - he waited for just a short time before he was back on manoeuvres.  As Guido has documented, before the lame attempt to offer Trump-whispering advice in the Speccie, Mandy had been hawking himself around the meejah, and for some reason Laura Kuenssberg and her people decided to gratify him with a big set-piece Sunday interview.  (Why??)  Another carefully-crafted foray; and when he decided his week's work around SW1 hadn't quite had the desired effect, why then it was followed by another crafty tweaking of his tortuous, oblique "apology".  And, as Private Eye noted, for the Mandy of 1998 it was Don't you dare say I'm a gay man!  Now, it's Don't forget to say I'm a gay man!   

Now here's the thing.  These two big self-PR drives, separated by several months, have one significant factor in common (over and above his unvarying MO and the eternal willingness of the meejah to rise to his bait): on both occasions we may be sure he knew full well there was a barrow-load of shit coming his way.  In such circumstances, maybe keep your head down? [are we allowed to say that?]  No, not Mandy: all the instincts are still to get on the front foot and try to shape the agenda. 

And what a barrow of ordure this one turns out to be!  Has there been a bigger scandal since Profumo?  As the hacks trawl the 3,000,000 new docs, more outrageous stuff turns up by the hour - and how much more might there yet be?  

But, you know what?  He'll stay down [are we ..?] for a bit: but somehow there will be a dream of redemption and another foray into the Westminster limelight.  Maybe just a bit longer interval this time, though ...

ND

James Allcock RIP, rogue [2]

Continued from last week

So what disturbed Allcock's stately scam ship as it sailed serenely through the market?  The first issue arose in the mid '80s when the laws of supply / demand / price caught up with him, as they always do eventually.  You can suspend the laws of nature, but only for as long as you are willing to throw money at it.  

What happened was this.  He'd secured vast quantities of gas at ultra low prices (the units don't matter, but it was single-digit pence per therm) in the late '60s and early '70s - see part 1.  This was amply sufficient, right through the 70's.  But by the '80s there had been two oil crises, 1973 and 1979; and the price of oil had risen tenfold (sic).  The prices BG was paying for its gas had jogged upwards a bit with inflation and other adjustments, but nothing on that scale.  So the big producers, who were always oil companies au fond,[1] stopped drilling for gas, concentrating on the still bounteous North Sea oil reserves.  There were whole years in the '80s where not a single gas well was drilled - not for exploration, nor even for extending already-producing gas fields.  A complete gas-investment strike by the producers.  BG did the sums, and correctly assessed they'd be facing a supply crisis in due course.  And new gasfields took an absolute minimum of 2 years to bring onstream[2], often much longer if outright new exploration was to be involved.

Still, BG had a monopoly to go with its monopsony, and they knew who was going to pay for the business of digging them out of that hole - its captive customers!  So Allcock did the rounds of the big producers, intimating that BG was now willing to pay prices above 20 p/th - a huge increase - for any new gas fields they could bring to the table in the next few years.  This, of course, set off a new round of stately and highly enjoyable negotiations I described last time, as the producers dug down into the archives for overlooked gas discoveries, and indeed started drilling again for new resources.  It worked: high prices have that effect.  (I've written before about another, hilarious aspect of this episode as the crazy, artificial boom-and-bust cycle ran its inevitable course.)  Thus did Allcock and his monopoly powers - a dismally blunt instrument indeed - avert the first storm that broke over his head.

The second, however, was to be terminal, albeit a protracted affair.  On purely ideological grounds, Nigel Lawson persuaded Thatcher to privatise BG, a task given to Peter Walker.  To make a long story short, in 1986 he succeeded in getting the public to buy the shares ("Tell Sid", for those with 40-year memories), and the legislation ended BG's de jure monopoly / monopsony.  But it did nothing to eliminate or even, in the short- to medium-term undermine, its de facto stranglehold, not least because in the initial legislation, no regulator was appointed!  

And it was Allcock who commanded BG's first and highly effective line of defence: making sure no other bugger could obtain gas with which to go into competition with the monopoly.  In the next part we'll tell the story of his long, ruthless but ultimately unsuccessful rearguard action.  And, no, I haven't forgotten the promised account of the colourful abuses of its monopoly that BG perpetrated over the years - some of which will feature in part 3 and others in a later episode.

ND

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[1] Gas was always seen as a more-or-less unwanted by-product - something that came up from most oil-wells anyway, or something you discovered, disappointingly, when you'd really been looking for oil.  In some places around the world, by-product gas was simply flared

[2] A lead time as short as 2 years would be for a geologically simple gas field in shallow waters, close to existing infrastructure, that had already been discovered but never developed because the price BG had been willing to pay was just too low - the producer had better uses for its development budget

Starmer's China Triumph: errr ... visa-free travel!

The scene: a small, bare office on an industrial estate near Beijing Capital International airport.  Sitting nervously on a metal chair, nursing a plastic beaker of water and facing a plain table adorned with two small pennants, one a Union Jack and the other the Chinese flag, is The Most Important Man In Government Jonathan Powell, legendary Xi-whisperer (self-styled) and Starmer's right-hand man on all foreign matters. 

A loud voice off, shouting into room:   You bow low!

Powell leaps to his feet, turns to face the figure walking in through the door and doubles over at the waist with as much gravitas as he can muster.

Enter Yu Bau-Lo, 3rd Deputy Under Secretary at the Chinese Ministry of Protocol.  

Yu:  Mr Powell, get up.  Very busy.  Have many executions of Ming gang to supervise.  What you want?

Powell:   Err, Mr Yu, greetings ... I, err, we, err, came good with the approval for your new London embassy, just like we discussed.

Yu:  Yes.  So what?

Powell:   Err,  we were, err, hoping there might be something in return?  Something big, that Sir Kier could announce?  

Yu:  He could say "I got to meet President Xi.  In person.  Camera present, photo taken."  This is great honour.  Everyone in world deeply impressed.

Powell:  Err, we were hoping for something, like, err, tangible? 

Yu:  We will send copy of photograph meeting with President Xi.  Can have framed.

Powell:   But, but ... we need a deal - everyone needs a deal these days!

Yu:  OK, (looks through notebook entitled "Sops") - we give you visa-free travel!  Big concession - only Vietnam, Thailand, Indonesia, EU, Canada, Turkey etc etc etc get visa-free travel.  North Korea desperate for visa-free travel!

Powell, crestfallen:   Surely there must be something more than that?  The embassy ...

Yu:  Don' push luck Mr Powell.  OK, final word: half-rate tariff on Scotch whisky.  

Powell, utterly crushed:  Thanks ... we're very grateful.

Yu, turning to leave as shots ring out offstage:  OK.  You go now.  (With back turned)  Anyhow, Chinese people don' drink Scotch any more - Indian whisky really good these days**.

As overheard by ND

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** It's true!