A New Age of Opportunity

New Frameworks for a Fractured World as Globalisation, AI and the Fourth Turning Collide. It's time to take The Sniff Test.

The Disruption No One Voted For

People are confused and angry about the sudden interruption to business as usual. This week’s Canadian election swung on the single issue of standing up to Trump. Voters ignored three years of falling living standards, brought about by the same policies that are deployed all over Europe.

Yet chaos brings opportunity. Globalisation took a body blow during Covid and is now being carried out. The countries and companies that adapt fastest will be the winners. The world is undergoing a profound change and we need a need new frameworks to think about it.

In industry, this change means rethinking supply chains. For decades, the sole goal was to make things in the cheapest location. We brushed aside subsistence wages and pollution in favour a flow of cheap goods. Things will be more expensive now.

In finance, investors are rethinking old truths. US Treasuries no longer look to be the surefire safe asset. European investors have pulled $17 billion from US stock market funds in the last two months. Mario Draghi implored them to do this in his EU competitiveness report last September. Trump and Vance got them to do it.

The True Cost of Tech

The US stock market boom was fuelled by the technology sector. Margins for all other companies are unchanged for two decades, as this chart shows.

Shoshana Zuboff calls ours the age of Surveillance Capitalism. Technology transforms personal, private data into a raw material used to predict and manipulate human behaviour for profit. This is done with various levels of consent and little understanding among the general populace of what is happening. It has also wasted some of our finest minds working out how to get us to click more adverts.

The Return of Hard Choices

The prosperity that accompanied globalisation encouraged governments to borrow. The US will soon spend more on interest payments than it does on defence. Historian Niall Ferguson says this signals an empire in decline. Successive administrations have talked about this, but Trump is the first to force Europeans to address their underspending. Europe, as a consequence, has less money for welfare.

The Fourth Turning is a powerful framework for understanding what is happening because it ties together multiple explanations. These include culture wars, a religious revival and wealth inequality. The descriptive breadth of the framework limits its use as a tool for precise predictions. Its opponents are uncomfortable with an implied lack of agency, as humans repeat crises every 80 to 100 years. It is uncanny however, how resonant the theory has been since the Wars of the Roses.

The Fourth Turning tells us that what is happening is not a consequence of Trump. This means we cannot sit him out and expect the old order to be restored after 2028. The energy powering change will not be derailed by setbacks in the 2026 elections, even if Trump’s wings are clipped. Hard choices must be made, especially in Europe, if it is to avoid coming fourth in a three-team league of nuclear superpowers.

The Era of National Capitalism

Humanity can thrive regardless of a geopolitical shift. This requires the continued freedom to speak, criticise and correct errors. Governments can influence change by providing infrastructure in the shape of transport systems, education and free trade zones. China dominates the supply of consumer electronics because 44 years ago it backed a Special Economic Zone in the village of Shenzhen, now home to 18 million people. Europe must disrupt its old industries to rediscover a seat at the top table.

We are shifting from a software-driven world to one where physical assets are more important. The risk is that governments interfere too much, try to pick winners and use spending to promote political ends. The economist and historian Russell Napier describes such an environment as National Capitalism. Enlightened governments accept they cannot control change, while political ones reduce innovation to increase cronyism and capital misallocation.

Any system that restricts innovation condemns society. We have the option of longer lives by treating ageing as a disease. To get there we need cures for cancer, obesity and heart disease. We have the promise of abundant clean energy. This will not be without risks, such as nuclear radiation, but these are much more manageable thanks to technological progress. We also have the tantalising prospect of accelerated knowledge creation thanks to artificial intelligence. This also has risks, of which the biggest one is not understanding what we are creating.

The Race to Understand AI

This week I asked the latest version of ChatGPT when Marks and Spencer became mostly about food sales. Its answer was 2023. I asked for sales in each division over the last 15 years, which showed the answer is 2017. Older versions of the model would have apologised. The latest one argued that it had meant when food sales became the management’s strategic priority. This is too human an excuse for my liking.

I didn’t think much of this until I read an essay on interpretability by the Anthropic CEO, Dario Amodei. His company, creator of the Claude AI models, is making strides in understanding how AI works. Until now it has been a black box. Amodei says we are in a race to understand AI before it starts to think and act for itself.

David Deutsch argues in The Beginning of Infinity that the human brain is a universal computer and, as such, is capable of understanding anything. We are constrained by memory and speed of thought, but AI can provide both for us. The symbiosis enabled by AI and brain interfaces, offers the promise of learning evermore at accelerating speeds.

Any restrictions placed on progress will derail this opportunity. Interpretability is possible because AI is profitable. Regulatory restrictions on what it can do, the energy it can consume, or the work it must focus on, means companies such as Anthropic will be forced to scrap interpretability. If the US and China become embroiled in a winner-takes-all AI arms race, then outcomes may be prioritised at the expense of understanding.

The Paradox of Sustainability

Tariffs are an obvious restriction. While the West limits access to its best technology, China will catch-up because tariff and sanctions regimes are leaky. What’s more, the battleground is shifting from training AI with data to building models that learn for themselves. It is not possible to prevent Chinese engineers developing the knowledge to do this.

Sustainability is another restriction. Sustain means both to provide enough resources and to hold in a steady state. I am disappointed to see sustainability experts I’ve worked with celebrating tariffs, because the economic slowdown they trigger means lower carbon emissions. Deutsch tells us why steady-state systems are unstable.

There is always a risk that humanity will be wiped out by an asteroid or pandemic. Developing the knowledge to offset these risks is an essential point of progress. Curtailing knowledge creation increases the chance that disasters arrive before we are ready. Furthermore, in a static world, technologies such as nuclear weapons become available to more countries, without leading powers developing the means to counteract them. Scarcity is the recipe for war.

Freedom to Understand

Where do frameworks come from? Philosophy uses words as the building blocks for concepts, which in turn combine to create networks of ideas. When developing AI, we have equivalents in what Amodei calls neurons, features and circuits. He gives the example of the feature of Dallas being associated with Texas, which is associated with capitals and Austin. This is how an AI model answers the question “What is the capital of the state containing Dallas?”. As another example, mapping neurons to features and circuits allows us to see how AI composes rhyming couplets.

Amodei argues models contain billions of concepts, jumbled together in what he calls Superposition. This means they are not arranged in ways humans easily understand. There are more concepts than the building blocks of neurons beneath them, which is why superintelligence is possible.

Amodei favours limiting China’s access to the latest technology because he fears its authoritarian regime plays to win at all costs. If the US is forced to match the pace of development, resources will be commandeered to increase deliverables rather than understanding. Contrary to the beliefs of many, AI safety is more likely in the free market than under government control.

Build Fast, Build Now

Globalisation is being replaced by a geopolitical framework pitching the US against China. This requires the US to be nicer to Putin to prise him away from a possible alliance with Xi. The defence of Ukraine becomes less important as a result, as does a military presence in Europe and the Middle East.

As the world divides into two, or maybe three camps, the creation of regional supply chains will make things more expensive. The age of unbridled consumerism may be ending and a new age of building beginning. The challenge is to make this a prosperous system with fewer environmental and social consequences.

The ancient myths told of rebirth from chaos. The end game in the new era is the same as it has always been. Our course has been set since the Enlightenment dawned from the Fourth Turning of the Glorious Revolution. The quest is to understand more, build more, progress more, and we do this by preserving freedoms.