How Many Licks?

Now we have Trump imposing tariffs that he can supposedly legally impose in the wake of the Supreme Court decision. Gorsuch has always been my favorite justice, and he always will be. There was never a doubt that Trump would not roll over and die on this issue. We’re going to get tariffs, and lots of them, and they’re negative for stocks and negative for the dollar.

What I am really here to talk about is deflation. I was at a conference in Nashville last week, and I was talking to one of the attendees, who told me that he basically has no need for any employees now that he has AI. I was telling him that it would take decades for the effects of AI to be fully felt—he was arguing that it was happening much faster.

Anecdotally, I am hearing that college graduates are having a very difficult time finding jobs, seeing as how most white-collar employment for young people involves things like spreadsheet and document manipulation, things that can easily be outsourced to AI. Also, another one of the attendees (who did have a background in software) showed me an option monitor app that he created using Claude in a couple of hours. I looked at it, and it was as good or better than any app created by any brokerage firm, ever.

I Am Not a Futurist

In fact, I am the opposite of a futurist. I am the caboose. I am the last to discover any new technology. It took me about 10 years to sign up for Amazon Prime. I didn’t get an iPhone until 2012. I didn’t get a cell phone until 2006. I’m not a technophobe—I just don’t care. And I am comfortable saying that AI will never be able to replicate what I do, in trading, writing, or music.

Unlike my students, I actually write things. Substack has been a very successful platform, but the interesting thing about Substack is that there is now a lot of AI slop on there, and I’ve noticed growth slowing rapidly. Maybe 10 years from now, 90% of books will be AI-generated, industrial content. But maybe there will be a market for artisanal, human-written books, and maybe they will cost more. In creative fields, I don’t think AI will have much of an effect.

But as for investment banking analysts? The poor kids that get an email at 11 pm saying “pls fix?” It was hard enough to get a job in banking before; it is going to be even harder now. All that scut labor is going to disappear, and banking will become a relationship business. If computational skills are no longer needed, then “EQ” will become more important. I haven’t written any code since college, and I was never very good at it, but now I am glad I never spent much time on it. A good friend of mine spends his time “vibecoding” and is creating apps left and right. It’s a brave new world out there.

The Deflationary Effects of AI

I think Warsh is probably right about the deflationary effects of AI. In fact, he may be underestimating it. If you haven’t seen a chart of inflation lately—and I mean the real-time, Truflation data—it is something to behold. 

Source: Truflation

Inflation is plummeting, and it is starting to show up in the official statistics as well. The thing is that lowering interest rates isn’t going to bring the jobs back.

Now, I’m not a technology doomer. I don’t think we’ll have a 20% unemployment rate and universal basic income. I think the existence of AI will create new jobs as it destroys old ones, but the transition will be painful. I think lowering rates a lot in response would be an error. Then we will have job losses and inflation. And it may revive the housing market, which will make some people happy (the people who own homes); and others, not so much (the people who don’t).

I’m just guessing at the macro effects of AI. Anyone who says that they know what is going to happen is lying. I can vouch for not writing this newsletter with AI.

Jared Dillian, MFA

P.S. I am having my seventh (!) conference in Nashville on October 15–16. My conferences are known for great speakers, great attendees, and great parties. I have subscribers that have attended every single conference. We outgrew our old location, so we’re doing it at the Virgin Hotel in Nashville. If you really want to come, I have a recommendation: You probably want to subscribe to The Daily Dirtnap first. Daily Dirtnap subscribers have first dibs, and my last conference sold out in 39 seconds. If there are any spots left over, we will offer them up to Jared Dillian Letter readers, but I doubt there will be. Your volleyball!