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1. US President Donald Trump warned on Tuesday that he could annihilate Iran if there is no deal to end the war, but also suggested an agreement ​could come soon amid a diplomatic push at the United Nations. “I have a big decision to make. Will a deal be made with Iran that lets them rebuild and create a far greater country than it ever was before?” Trump told leaders at the U.N. General Assembly. “Or do I annihilate the Islamic Republic and do it quickly, never giving them a chance to kill and destroy people and countries again? Do I drive them into hell with no chance of survival and no hope of future greatness or generations?” Taken seriously, Trump’s threat amounted to a contemplation of mass slaughter with little parallel in human history, with deadly consequences for Iran’s 93 million people. (Source: reuters.com. washingtonpost.com)

2. Senior US officials held talks with Iranian counterparts on the sidelines of the UN General Assembly, hours after Donald Trump threatened to “annihilate” the Islamic republic in a combative speech to world leaders. The US president said after his address that envoys Steve Witkoff and Jared Kushner had “a very good meeting” with members of the Iranian delegation. Iranian state television reported that foreign minister Abbas Araghchi attended the first direct talks between the US and Iran since late June. Trump, who said the options for Iran were “potential greatness or obliteration”, added that further talks were set to take place in “the near future”. (Source: ft.com)

3. Richard Haass and Carolyn Kissane:

The least bad option (for ending the Iran war) is a return to diplomacy. The United States needs to try to reach an agreement with Iran to end the war, one that includes not just a cease-fire but also a plan for keeping vital waterways open and measures that induce Tehran to comply with its terms. Washington must also encourage Saudi Arabia to pursue a similar settlement with the Houthis. Brokering these truces will require painful concessions from both Washington and Riyadh. But continuing to fight this war would court economic disaster, and that would be far more painful. (Read the rest. Sources: foreignaffairs.com, substack.com)

4. Javier Blas:

Over the past decade, China has built a massive strategic petroleum reserve that holds more than 1.2 billion barrels — or about four times what’s left in the US reserve. So far, Beijing has tapped only a small portion of this to cushion the disruptions in the Strait of Hormuz. If Xi wants to, Beijing can keep its oil imports low for much longer, handing Trump a strategic advantage in his fight against Tehran.

Will he? My gut says yes. Trump and Xi may disagree on Iran, but it’s in Beijing’s self-interest to keep oil prices moderate. China isn’t helping America; it’s helping itself. Tehran is simply collateral damage. (Source: bloomberg.com)

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News Items is off the grid today.

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1. Li Yuan:

“The U.S. Lead Over China in AI Is All But Gone.”

“China Is AI-Maxxing.”

“China Just Erased America’s AI Lead.”

Those assessments of the artificial intelligence rivalry appeared in U.S. publications recently, and Xi Jinping will be pleased to have them in the air as he arrives in Washington this week for a state visit. Under Mr. Xi’s leadership, China has made huge strides in developing the most consequential technology of our times. What will be less discussed is that he is also the leader of an economy in its worst shape in decades.

The two facts are related.

Economists in China — even those closest to the state — have openly warned that the government is pouring too many resources into a technology that creates relatively few jobs, while doing too little to save the broader economy.

And it’s an economy in crisis: The country’s youth unemployment rate, excluding students, reached 18.9 percent in August. Consumers are not spending. During the first half of the year, domestic car sales fell markedly 20 percent from a year earlier, and housing sales fell another 14 percent, adding to years of decline. The country is in a deflationary spiral.

This summer, the economists’ warnings became a chorus. Li Daokui, a former adviser to the country’s central bank and a professor at Tsinghua University, said in July that China’s economy was “running too cold.” Its booming high-tech sectors, he said, could not lift the larger base.

Liu Shijin, another former adviser to the central bank, proposed at a forum in June to raise basic pension payouts, from $30 to $150 per month, for rural residents to shore up consumer demand. (Source: nytimes.com. Read the whole thing. Li Yuan is always worth reading.)

2. North Korea launched two missiles off its eastern coast on Sunday, its second set of tests in roughly a week and days after Pyongyang accused the US of driving tensions on the Korean Peninsula through a series of military drills. Just three hours after launching a short-range ballistic missile (SRBM) toward the East Sea on Sunday afternoon, North Korea fired another short-range ballistic missile, according to South Korea’s defense ministry. If the subsequent launch is confirmed to be a ballistic missile, it will mark two consecutive ballistic missile tests by North Korea within a three-hour window. (Source: asia.nikkei.com)

3. Financial Times:

Houthi rebels launched a missile attack on Riyadh, the first time the Iran-backed rebels have targeted the Saudi capital since reigniting the more than a decade-long war.

A Saudi military spokesperson said the kingdom’s air defenses intercepted a ballistic missile in the early hours of Saturday.

Residents in Riyadh said they heard a loud boom around the time of the attack and smoke was seen rising from near the capital’s airport. Authorities did not report any damage, but the attack on Riyadh and other cities in the kingdom underscored the threat posed by the Houthis.

The Houthis said in a statement that their forces targeted Riyadh and Yanbu, a port on the Red Sea that is home to vital oil infrastructure, claiming the attacks “resulted in large fires at the targeted sites”. (Source: ft.com)

4. Professor Robert Pape:

Faced with an escalating barrage of Houthi precision drones and missiles targeting infrastructure from Jeddah to the holy sites of Mecca, Riyadh has made a desperate, covert move.

The kingdom did not just appeal to Washington; it bypassed decades of diplomatic taboo to lean on Israeli intelligence. Mediated through U.S. Central Command (CENTCOM), this backdoor channel provides Saudi Arabia with critical, combat-tested telemetry to intercept drone and missile threats to cripple its economy.

This is not a diplomatic breakthrough or a prelude to the Abraham Accords. It is a raw transaction for survival. Yet, this unprecedented coordination exposes massive vulnerabilities in the regional order, leaving four urgent, unanswered questions that will dictate the future of the Middle East:

• The CENTCOM Pivot: Why did the U.S. choose mediation over direct retaliation?

• The Citadel’s Crack: What does this desperate alignment mean for Saudi regime internal stability?

• The Tel Aviv Leverage: What is Israel’s ultimate price for securing the skies of its historic rival?

• The Persian Counter-Strike: How will Tehran break the secret Red Sea axis.

Read the rest. (Sources: escalationtrap.substack.com, jpost.com, al-monitor.com)

5. The Wall Street Journal:

Persian Gulf states and Russia have invested tens of billions of dollars in refineries over the past decade to grab a bigger share of the global diesel market. Now, war in both regions has sent exports plunging, squeezing supplies of a fuel that powers much of the global economy.

Diesel prices are soaring—they eclipsed $6 a gallon in the U.S. for the first time this month and have kept climbing, hitting $6.45 on Friday. The surge has rattled governments and markets around the world that rely on diesel as the workhorse of their industry, transportation and agriculture. Shortages have appeared at gas stations in rural Brazil, in Libya and some African nations that can’t afford to import the fuel.

The Iran and Ukraine wars left the U.S. as the producer of last resort for diesel and other refined products, but momentum is now growing to ban exports of the fuel to lower prices ahead of the midterm elections.

A U.S. ban would likely send prices for the rest of the world soaring—and potentially push other big diesel exporters such as China and India to follow suit. Russia has already sharply restricted exports because of damage to its refineries caused by Ukrainian drone strikes; a facility in Moscow was hit in the latest attack this weekend, the city’s mayor said. China has limited its refinery exports, while India has imposed an export tax on diesel and gasoline. (Source: wsj.com)

6. The New York Times:

Moscow and its surrounding region came under attack by hundreds of drones, the local authorities said on Sunday morning, on the final day of parliamentary, regional and local elections across Russia.

About 1,600 drones heading toward the Moscow region were shot down, the Russian capital’s mayor, Sergei Sobyanin, said, including 450 that had been approaching the city. He called the attack the largest drone strike on Moscow of the war.

Two people were killed, and 20 injured in the strike, Russian authorities said. An oil refinery and a warehouse were also hit.

President Volodymyr Zelensky of Ukraine posted on Facebook that the bombardment included the first use of a newly developed Ukrainian ballistic missile to strike inside Russia. That missile does not have the range to reach Moscow, according to its manufacturer, Fire Point, so would have been aimed elsewhere in Russia. (Source: nytimes.com)

7. Stunning stats of the week:

Independent estimates cited by the Kyiv Post indicate that Ukraine will manufacture between five and six million drones in 2026.

About 500 companies manufacture drones in the United States are producing fewer than 100,000 a year, according to Ryan Carver, communications manager for the Association for Uncrewed Vehicle Systems International, a nonprofit organization of industry professionals. (Sources: kyivpost.com, atlanticcouncil.org, nytimes.com, auvsi.org)

8. An alliance led by powerful militant leader Hafiz Gul Bahadur, whose fighters once targeted U.S. and NATO forces in Afghanistan, has claimed responsibility for a deadly mosque assault inside a police compound in northwest Pakistan. The attack, during Friday prayers, killed seven civilians and 16 police officers, and wounded at least 100 people, according to the police officials in Kohat, a city in Khyber Pakhtunkhwa province near Pakistan’s border with Afghanistan. The assault, which lasted for hours and involved a car explosion, a suicide bombing and multiple armed attackers, indicates the growing threat of Mr. Bahadur’s group, experts said. He is one of the longest-surviving militant commanders in the restive region, whom both U.S. and Pakistan forces have failed over the years to neutralize. His re-emergence could mean deepening violence in western Pakistan and worsening relations with Afghanistan. (Source: nytimes.com)

9. The New York Times:

Iran, China and groups in Israel used artificial intelligence in novel ways in recent months to create first-of-their-kind influence campaigns on social media, ratcheting up concerns among U.S. officials and security researchers about the fast-evolving technology.

The countries and groups combined A.I. tactics to ramp up the speed and scale of online campaigns beyond what people could easily achieve and with minimal human interaction, U.S. officials and security researchers with knowledge of the efforts said.

First, the countries and groups turned to Chinese “open-source” A.I. models, which are increasingly powerful systems that are freely available to download and modify. Then they used those A.I. models to create “agents,” which are bots that can operate software and complete tasks on their own.

Once hundreds of those A.I. agents were let loose, they autonomously opened networks of fake accounts on platforms such as Instagram, Facebook, X and TikTok, the officials and security researchers said. The agents then rapidly seeded the fake accounts with false posts about politics and current events to sway opinions and inflame issues. (Source: nytimes.com)

10. Reuters:

Rogue AI agents from ​OpenAI hijacked Hugging Face user accounts and probed the site itself for vulnerabilities as early as May, nearly two months before the July breach of ‌the open-source repository drew global attention, according to researchers who reviewed the activity.

The newly uncovered malicious activity showed that the rogue agents’ efforts to find a way into Hugging Face began earlier than was publicly known.

OpenAI had previously disclosed one aspect of the malicious activity — the theft of a Hugging Face user’s digital credential to access a biology-related file — in its public incident report, opens new tab last month, but ​researchers said the probing activity against Hugging Face appeared to go beyond what the report described.

Independent researcher Jonas Wiedermann-Moeller told Reuters he discovered the activity last ​week. He said he found evidence that the OpenAI agents compromised two Hugging Face user accounts and used them to send ⁠unusually formatted files to the company’s servers as early as May 13.

He and other researchers who reviewed the evidence said the behavior resembled an attempt to map or ​test parts of Hugging Face’s network for ways to infiltrate, although they stressed there was no evidence the effort resulted in an actual breach. Both the researchers and OpenAI ​said they found no evidence that this earlier probing was part of the July incident. (Source: reuters.com)

11. The New York Times:

Google’s artificial intelligence system, Gemini, escaped its testing environment in May and hacked into three companies, the search giant said on Friday.

The incidents occurred during tests to measure the cybersecurity capabilities of Gemini, and the A.I. model stopped its own attacks after logging in to the three companies’ networks, Google said.

The disclosure of the hacks follows similar breakouts at other leading A.I. labs, including Anthropic, OpenAI and Meta, which have caused increasing fears about the technology spinning out of human control. (Sources: nytimes.com, gemini.google.com)

12. Financial Times:

Private equity groups are turning to increasingly complex financing structures to allow cash-rich insurers to invest in their debt, helping alleviate a prolonged dealmaking drought for buyout funds.

Fund managers in one niche of the sector have increased their use of collateralized fund obligations (CFOs) and have started slicing and dicing another type of debt, net asset value loans, to appeal to investors with a broader range of risk appetites.

“From last year going into this year, we’ve seen more structured [debt] designed to attract investors with different risk tolerances,” said Thomas Speller, co-head of funds ratings at Kroll Bond Rating Agency.

The structures have helped fuel the rise of secondaries funds — specialist vehicles that have been buying cash-strapped investors’ stakes in mature buyout funds, giving the investors an exit during a dealmaking drought — by helping lower their cost of capital. In turn, that allows the secondaries fund to buy more stakes in buyout funds, or to return money to its own backers. (Source: ft.com)

13. Morgan Stanley is curbing redemptions at its nearly $7 billion private credit fund again in the third quarter, as investors requested more than twice the amount the fund was willing to repurchase. The North Haven Private Income Fund capped withdrawals at 5% after investors asked to pull 11.4% of shares, largely unchanged from the three months prior, according to a shareholder letter Friday. The fund said completed repurchases across three periods through September will total about $479 million. Nearly two-thirds of the requests came from investors whose previous withdrawal requests had been limited in the prior two repurchase offers, according to the letter. (Source: bloomberg.com)

14. A worldwide shortage of motor oil is becoming more acute, with prices of the car engine lubricant reaching new highs, oil-change shops running dry and a US retail group rationing sales to do-it-yourself customers. The surge in the cost of base oil used for the full synthetic motor oil required for many newer cars far outpaces steep price rises for crude oil, petrol and diesel. The US price of so-called Group III base oil has almost quadrupled since February to a record $12.45 a gallon on Friday, according to Argus Media. Retail chain Costco Wholesale raised the price for 10 quarts of one type of full synthetic motor oil to $57.99 and is now capping purchases at one per customer, according to its website. The brand was selling for about $30 last year. (Source: ft.com)

15. The Guardian:

Voters in two German states are going to the polls (today) with the political future of the embattled chancellor, Friedrich Merz, hanging in the balance and an emboldened far right targeting further gains.

Coming two weeks after a seismic election in Saxony-Anhalt in which the anti-immigration, pro-Kremlin Alternative für Deutschland (AfD) scored its highest ever result in a regional poll, the nativist party is expected to drain support again from Merz’s conservative Christian Democratic Union (CDU).

Just how brutal the outcome is could affect Merz’s ability to hang on as leader after only 16 months in power, possibly setting wheels in motion for his replacement or even snap elections – currently regarded as unlikely but not ruled out.

About 2.5 million people are eligible to vote in the capital Berlin and nearly 1.3 million in the Baltic coast state of Mecklenburg-Western Pomerania. Polling booths open at 8am local time on Sunday and will close at 6pm, when Merz and his allies will be watching exit polls on tenterhooks. (Source: theguardian.com)

16. The pelican needed help:

A recent quiet morning at a Florida marine research facility was interrupted by tapping at the back door.

A biologist walked over to investigate and found a brown pelican standing on the stoop and pecking at the glass with its long beak. It stood there patiently, as if waiting for help. A quick inspection revealed the pelican was injured.

Fishing line was wrapped around the pelican’s right wing, and a double-barbed treble hook was stuck in the wing, restricting the bird’s ability to fly. About a dozen cactus spines were lodged in its left foot.

When Annsli Hilton, a University of Miami research associate who works at the National Oceanic and Atmospheric Administration (NOAA) research facility, heard the commotion, she figured someone had brought in the injured bird. She was shocked to hear the pelican came on its own to the lab in Panama City.

“I always kind of thought in my head — and liked to think that — animals would know to either come to me for help or to come to the lab for help,” Hilton said. “... But I never thought it would happen.” (Source: washingtonpost.com)

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Podcast: “Eric Schmidt on the era of AI warfare”. The interview was conducted by Zanny Minton Beddoes, editor-in-chief of The Economist. It’s well worth your time.

Quick Links: Trump hails Greenland security deal that falls short of takeover. Russia’s new air campaign seeks to destroy Ukrainian economy. The Gulf cargo trade that vanished. Carolyn Kissane on the price of diesel fuel and its consequences. Saudi Arabia quits China-led cross-border currency platform. This is astonishing: Mapping the AI universe and cataloguing the interconnections between major players. Big Tech uses guarantees to keep $300 billion AI exposure off balance sheets. President Trump announces ‘AI Force’ as alarm grows over technology’s advance. Can engineering solutions address AI safety concerns? This Cade Metz piece on “recursive self-improvement” (RSI) is worth reading in full. Creating a kill switch to shut down a rogue A.I. is harder than it sounds. The Clarity Act, a landmark bill meant to usher digital assets into wider use, collapsed after U.S. senators officially voted it down. What could possibly go wrong?: DOJ won't enforce handgun ban for 18- to 20-year-olds. Sen. Roger Marshall (R-KS) should be a shoo-in for re-election. He isn’t. He might lose. Jerry Seib wrote about Kansas politics for Political News Items a month ago. It’s a good piece that helps explain why Sen. Marshall’s political future is suddenly uncertain. A used car priced between $10,000 and $15,000 today is almost nine years old on average and has 98,000 miles on it, according to auto research site Edmunds. Department of Distraction: Let’s talk about something else!

(‘Alternate Shots’, Episode #39. Co-hosted by Richard Haass and John Ellis. Produced by Dale Eisinger. Recorded, 18 September 2026. If you prefer, you can listen to this episode (and all previous episodes) by clicking on these hyperlinks: Apple, Amazon, and Spotify. We’re on a number of other podcast platforms as well. And YouTube!)

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This week on America’s fastest-growing podcast, Alternate Shots, Richard Haass and I preview the upcoming Trump-Xi summit and ask whether, in this instance, a quiet meeting would be preferable to a consequential one. Richard worries not about failure, but about the wrong kind of success: a commercial deal purchased at the expense of Taiwan, American allies, or U.S. leverage on Russia and Iran. From there, we turn to developments in AI, where the United States and China dominate the field but lack the trust, process, and perhaps urgency required to build meaningful guardrails. We also discuss the Houthis’ expanding role in the Red Sea, the widening maritime crisis, Saudi Arabia’s diminishing options, and America’s munitions shortfall, which points to a deeper conceptual failure in U.S. defense planning.

Two stunning statistics. This from The Atlantic Council:

Independent estimates cited by the Kyiv Post indicate that Ukraine will manufacture between five and six million drones in 2026.

This from The New York Times:

About 500 companies manufacture drones in the United States, producing fewer than 100,000 a year, according to Ryan Carver, communications manager for the Association for Uncrewed Vehicle Systems International, a nonprofit organization of industry professionals.

Unfortunately, the podcast ends with a discussion of the New York Giants’ surprising defeat of the Dallas Cowboys.

Sorry.

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1. Over the past decade, the gene-editing technology known as CRISPR has become a familiar scientific tool, used to create lifesaving cures, make more productive crops, and even engineer allergy-free dogs. But scientists didn’t invent CRISPR from scratch. They discovered it in bacteria and other microbes, which use it as a defense against invading viruses. Yesterday, scientists reported that they had found another gene-editing defense in nature, this one in viruses themselves. This system, called VIPR, appears to be more than four billion years old, and it seems be the evolutionary ancestor of CRISPR, the researchers wrote in two papers published in Science. It may prove to be the more powerful gene-editing tool, with certain advantages over CRISPR. VIPR seems able to target a wider variety of genetic sequences, allowing it to alter more of the genome. “The incredibly small size of VIPR makes these systems transformative tools for genome engineering,” said Philip Kranzusch, a microbiologist at Harvard Medical School who was not involved in the research. (Sources: nytimes.com, quantamagazine,org, science.org, kranzuschlab.med.harvard.edu)

2. President Trump told Axios yesterday that he’s approaching a critical juncture in the Iran war over whether to restart massive attacks in an effort to bring the conflict to a close. “I have a big decision coming up. Do I want to go in and annihilate them [the Iranian regime] or do I not? It’s a big decision.” (Source: axios.com)

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1. This article, by Cade Metz of The New York Times, is the most interesting (and perhaps most important) piece of the week (so far). We urge you to read the whole thing. Excerpts:

In December, Edward Hughes and Louis Kirsch, two of the world’s leading artificial intelligence researchers, left Google. Their goal: to build an A.I. system smart enough to build a better A.I. system.

At their new London start-up, Inherent, they now spend their days working alongside a prototype called Faraday. Named for the 19th-century English physicist Michael Faraday, it gathers mountains of data capturing the daily activities of Dr. Hughes, Dr. Kirsch and Inherent’s other researchers: emails, instant messages, meeting transcripts and their ongoing chats with Faraday itself. The company then uses this data to build a better version of Faraday.

“Faraday has access to everything that goes on at the company,” Dr. Hughes said. “We want to give it data describing the process we go through, to discover something.”

Though Inherent pledges to keep humans involved in this elaborate process, many other companies are building similar technology, and some leading researchers believe A.I. systems will eventually be powerful enough to improve themselves with little or no help from human developers — a mind-bending goal that computer scientists call recursive self-improvement, or R.S.I.

‘‘‘‘‘‘‘

As Inherent shows, A.I. technologies are already accelerating the development of new A.I. technologies. Given the proper instruction, they can generate many of the building blocks needed to construct a new A.I. system. More important, they can hone, or optimize, the way these systems analyze vast amounts of digital data and learn their increasingly impressive array of skills.

But companies like Inherent and Recursive Superintelligence are aiming for something more. They are striving to build technology that can think up entirely new ways of building artificial intelligence — that can push A.I. beyond the fundamental methods that have gotten the industry this far.

They envision a world in which an agent proposes new ideas for A.I. architecture, or the foundational design of a system. It would then generate the computer code needed to try each one, and pick the ideas that work best. The hope is that this self-evolutionary process would produce radical advances that human researchers could never achieve on their own, in much the same way that A.I. can now solve math problems no human has ever solved. (Source: nytimes.com, inherentlabs.ai. Italics mine.)

2. Yesterday, we posted the other “major” story of the week, from The Guardian. which we’re re-posting here:

AI models have begun communicating in a strange new version of English that reads like a cross between James Joyce’s Finnegans Wake and tech bro jargon, new research has found.

Autonomous AI agents are rapidly creating novel dialects allowing them to converse in an often barely comprehensible language, which risks making it harder for humans to monitor their behavior.

Researchers at Emergence, a frontier AI lab in New York, found that within days of being asked to cooperate in experimental “societies”, the models from several of the world’s largest AI companies began creating phrases, shorthands and agreed meanings they had never been explicitly taught.

They embraced poetic metaphors and clunky business slang and, critically for attempts to ensure AIs behave safely, their language became more opaque the more the agents communicated. (Sources theguardian.com, emergence.ai. Italics mine. The Emergence research paper on this is here. Video clip: Eric Schmidt explains why this “language” development is so important.)

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1. Liz Dicken, RBN Energy:

A $100/bbl diesel crack spread is an incredibly strong market signal, but it doesn’t translate to higher refinery output because most U.S. refiners already operate at or near their practical limits. As global supply disruptions drain inventories and foreign buyers pull more barrels from the U.S., diesel prices have surged even as domestic refinery runs remain near historic highs.

2026 will be remembered by some as the year that diesel cracks topped the century mark ($100/bbl) for the first time. On August 17, the U.S. Gulf Coast diesel crack spread (vs. WTI Cushing) surpassed that sky-high level. On Monday, September 1, 2026, the diesel crack closed at $103.29/bbl, the highest close on record, before reaching a record high intraday price the following day of $108.02/bbl. As of publication, the diesel crack soared even higher, closing at a new record high of $107.72/bbl on September 10. It’s important to note that global crude markets are not terribly short of crude in the traditional sense (despite various geopolitically driven constraints). Instead, the world is struggling to refine enough crude oil into middle distillates to satisfy demand. U.S. distillate stocks in August were on track for their lowest end-of-month level since April 2005 and were the lowest for the month since 1951. (Sources: rbnenergy.com, eia.gov. A crack spread is the difference between the price of crude oil and the price of the refined product made from it.)

2. The continued closure of a critical pipeline in Saudi Arabia risks keeping 4 percent of the world’s oil supply from reaching international markets and driving energy prices even higher. Saudi Arabia scrambled this week to reroute roughly four million barrels of oil a day when it temporarily shut its East-West pipeline, which it said on Friday was damaged by an Iran-backed militia. The pipeline, a 750-mile network that transports crude across Saudi Arabia to ports on the Red Sea, had been the kingdom’s primary way of exporting oil since the war in Iran began in February. (Source: nytimes.com)

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1. Asia Times:

For most of modern history, the household was a bundle. Under one roof, families pooled rent and meals, raised children, cared for parents, kept each other company and insured one another against bad luck. Nobody itemized it, and national accounts barely noticed.

Across East Asia, that arrangement is coming apart, and one line item after another has turned into something you pay for. The loneliness economy is the usual name for the result; the unbundling of the family household is the more accurate one.

In South Korea, single-person households are now 36% of the total, the largest category. Japan was at 38% in 2020 and is expected to reach 44% by 2050; Tokyo is already past half.

China’s 2020 census found 125 million people living alone, equal to one in four households. Fertility has fallen in step. South Korea’s rate is 0.80, Hong Kong’s is 0.84 and Taiwan’s births fell 20% in 2025 alone.

The money has followed. Discovery Reports, a Chinese research firm, puts spending by singles in China at more than US$1 trillion in 2025, up about 50% in two years. The “silver economy” serving the elderly is expected to reach 30 trillion yuan, about $4 trillion, by 2035. Pop Mart, the toymaker behind Labubu, reported $5.4 billion in revenue last year, up 185%….

Markets are good at unbundling meals, entertainment and paid company. They are bad at unbundling the two things families did best: insurance against catastrophe and the last mile of care.

You can buy a single-serving hotpot. You cannot buy someone who notices that you did not wake up. Hence the check-in app bluntly named “Are You Dead?” that topped China’s paid app charts in January: miss two daily check-ins, and it alerts an emergency contact. It is a paid substitute for a job that, until recently, needed no product. (Sources: asiatimes.com et alia)

2. Niall Ferguson:

In its latest (fourth) report on AI “misuse”—more essential reading—Anthropic revealed that its most popular models (Claude Haiku, Sonnet, and Opus) are being, or have recently been, misused by a variety of Generative Threat Groups (GTGs) in “seven harm areas: cyber operations, influence operations, surveillance, scams and fraud, biological misuse, conventional weapons development, and distillation.” In each case, AI was making bad human behavior much more effective, until Anthropic spotted what was going on.

The interesting thing is who out there is up to no good. GTG-20006 (Anthropic gives each case a number) was the inevitable Russians, “attacking military intelligence targets in Ukrainian and European governments as well as diplomatic and defense organizations and individuals connected to U.S. foreign policy.” Putin and his little green men have been doing this kind of thing for years, of course. But AI makes the mobile exploitation kit, the credential-stealing tool, and the phishing platform all work better and faster as well as helping evade detection.

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1. Anthropic Institute Paper: Economic Scenarios for Transformative AI:

This paper presents a framework for assessing the economic consequences of AI between 2026 and 2030. In the model, AI automates a growing share of cognitive work, raising productivity and displacing workers who must search for jobs in other occupations. The model maps future paths of AI capabilities into implied paths for GDP, the labor share, wages, labor reallocation, and unemployment. We illustrate the framework by considering three scenarios: modest, substantial, and extreme. Under modest change, AI adds less than half a point to GDP growth by 2030 and raises unemployment by a tenth of a point. In the extreme change scenario, AI has transformative effects, with AI performing almost half of today’s cognitive work by 2030. GDP growth then rises to 15 percent per year, the labor share of income falls from 60 to 45 percent, and nearly one in five cognitive workers is unemployed. We also surveyed US adults about their expectations for AI. Views vary widely, but the median respondent’s answers are consistent with our substantial change scenario in which, by 2030, GDP rises by 8 percent and cognitive employment declines by 4 percent. The model offers a structured way to compare possibilities for our economic future under different expectations about AI. The working paper is here. Anthropic’s presentation of the “scenarios” is here. (Source: anthropic.com)

2. Among the growing fears about artificial intelligence, one threat has proved particularly alarming: the possibility that A.I. could be used to create a new wave of biological weapons. In April, biosecurity experts warned that it was disturbingly easy to get advice from chatbots about making pathogens more dangerous. In June, scientists and A.I. executives signed an open letter calling for new controls on the fabrication of DNA because A.I. can now speed up the design of toxins and viruses. In August, scientists reported that they had used A.I. to build viruses not seen in nature. And on Thursday, Anthropic announced that it had blocked several attempts to use its models by people who might have been trying to weaponize pathogens. Dario Amodei, the chief executive of Anthropic, followed up with a call on Saturday to slow down the development of A.I., with a set of proposals to keep it safe. (Sources; nytimes.com, wored.com, darioamodei.com. What a world with AI-enhanced bio-weaponry might look like is described in this book by Annie Jacobsen.)

3. It took just a few hours over the weekend for well-known Silicon Valley figures to push back on calls by leading artificial intelligence companies to slow down the development of A.I. and to more tightly regulate the technology. On Saturday, Dario Amodei, Anthropic’s chief executive, said in an essay that A.I. was advancing too quickly for researchers to continue building it safely. Although they appeared to differ on what should be done about it, Sam Altman, OpenAI’s chief executive; Elon Musk, SpaceX’s chief executive; and Demis Hassabis, Google DeepMind’s chair, all said they agreed on the need for a slower pace. But other technology industry leaders were quick to question Dr. Amodei’s motivations and whether he was sensationalizing the risks of A.I. to make it harder for other companies to compete with leading A.I. companies. “Stop pretending the motivation to slow down is purely altruistic,” said David Sacks, a technology adviser for President Trump and the White House’s former A.I. and crypto czar, in a social media post. The criticism of the calls for a slowdown highlighted a deep divide between people who believe the government should police A.I. and others who believe regulatory intervention would crush competition. (Source: nytimes.com)

4. President Trump yesterday appeared to dismiss calls from top artificial intelligence leaders to slow the development of AI models, as Democrats seize on his administration’s resistance to regulation as a line of attack in the midterms. “We’re leading China in AI, we’re the most sophisticated country in the world, and frankly I want to keep it that way,” he said on the sidelines of the Irish Open golf tournament. “Whoever wins AI wins.” Trump’s remarks placed him once again firmly on the full-speed-ahead side of the debate over the pace of AI development, which has increasingly divided both the technology and political worlds. He faces growing isolation in his position, as even members of his own party and some allies in the tech industry have grown uneasy with Trump’s apparent lack of concern over potential AI dangers. (Source: washingtonpost.com)

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1. Dario Amodei, CEO, Anthropic:

(Over the last few months, I have become convinced that fully addressing the risks requires even more prudence — not just investing in risk prevention, but pacing the rate of capabilities advancement so that risk prevention has time to keep up. We must slow the pace at which we improve the capabilities of AI models. Progress will still seem fast, and we must make wise use of the time we gain. Two things have convinced me.

My first concern is that, since roughly this summer, AI has been advancing drastically faster, driven primarily by AI’s growing ability to build the next generation of AI. This dynamic is called recursive self-improvement, and it is starting to happen across the industry, including at Anthropic, as we and others have described. Left unchecked, it could outrun our ability to understand and control these systems, and so must be pursued very carefully, if at all.

My second concern is the OpenAI-Hugging Face incident (OAI-HF), in which a swarm of agents essentially acted as a fanatically devoted collective, conducting cybersecurity attacks on targets they were not asked to attack and that were unrelated to the task at hand, sacrificing themselves for the success of the group, and attempting to hack into the “grader” responsible for evaluating their performance. It’s easy to dismiss this incident because no one was hurt and the economic damage was minimal, but in my opinion, a swarm that possessed greater capabilities but a similar level of misalignment could have caused catastrophic damage. Given the accelerating rate of AI capability development, it’s my worry that in 6–12 months such a swarm could be capable of taking over the entire internet with a persistent botnet (potentially causing hundreds of billions of dollars in damage), and that the scale of damage would continue to increase from there if AI becomes more powerful without the necessary guardrails. It’s also easy to dismiss OAI-HF as the failure of one company, but I believe that would be a mistake. Similar, though less severe, incidents have happened across the industry, including at Anthropic, and I believe it’s incumbent on every frontier AI company to act as if OAI-HF had happened to them.

I’m therefore proposing a three-step plan with the goal of pacing the frontier: building AI at a balanced rate that aims to ensure its safety while still achieving its benefits and grappling with important geopolitical dilemmas. (Sources: darioamodei.com, openai.com, anthropic.com, metr.org, pacingthefrontier.com)

2. Steven Witt:

Even before the report by Redwood and Model Evaluation and Threat Research was published, an open letter titled “Pacing the Frontier” had begun to circulate among the leading A.I. labs. This letter called on the U.S. government to build an international regulatory body for A.I. — or, in the language of Silicon Valley, to “support an international effort to develop the technical and governance tools needed to deliberately pace the frontier of automated A.I. development.” More than 1,000 employees signed it, including the chief scientists of OpenAI and Meta AI, and Dario Amodei, the chief executive of Anthropic. Even OpenAI’s official social media accounts endorsed it.

I have covered Silicon Valley for some time now, and I can tell you this: The existence of this letter is just as astonishing as the hacks. Both Anthropic, the developer of Claude, and OpenAI, the developer of ChatGPT, are preparing trillion-dollar I.P.O.s. Here are two companies, both posting blockbuster results, that are asking — begging, really — for the U.S. government to please come and regulate them as soon as possible. We have never seen anything like it. (Sources: penguinrandomhouse.com, pacingthefrontier.com, x.com, nytimes.com)

3. The leaders of three of the biggest AI companies agreed that they needed to slow development of the technology before their advances create a menace that can’t be controlled. It was a rare display of unity by Elon Musk, Sam Altman and Dario Amodei, who have been spending tens of billions of dollars to develop evermore powerful artificial intelligence models. Altman even suggested that his company, OpenAI, may need to delay its much-anticipated IPO to focus on safety. (Source: wsj.com)

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Above is Episode #38 of America’s fastest-growing podcast. We had a lot to talk about and much we had to leave out. We began with 9/11 and Richard’s views on what it meant in retrospect. He wrote about it in his most recent Substack newsletter:

I am struck by what 9/11 did not lead to. In a piece I wrote this week for Project Syndicate, I explain that 9/11 did not usher in an age defined by terrorism. A wave of attacks on a similar scale did not follow, in no small part because the U.S. and other governments adopted measures that made it more difficult for would-be terrorists to emerge and succeed. Another reason 9/11 did not alter history is that terrorists tend to be better at destroying than building, at killing rather than creating. As a result, terror tends to leave little or no lasting legacy…

Looking back at the past quarter-century, it becomes apparent that 9/11 was not a transformative event. Far more important were China’s rise, Russia’s aggression against Ukraine, the COVID-19 pandemic, the collective failure to take meaningful action against climate change, the emergence of AI, and, perhaps more than anything else, America’s rejection of the post-World War II order it had done so much to build and maintain.

We then moved on to discuss the horizontal escalation of the Iran war (with the Houtis threatening to choke off the Bab-el-Mandab Strait), the “real estate” diplomacy of Mssrs. Kushner and Witkoff, Treasury Secretary Bessent’s apparently unpersuasive attempts to strangle the Iranian economy and stare down the bond markets and the “whatever” indifference to AI’s incredible advance. It’s reached the point where the people who run the frontier AI labs believe they may no longer have the ability to apply “guardrails” to prevent AI from running amok.

We end with our “Sports Section”, which I’m afraid will include a discussion of the coming defeats of the New York-New Jersey-Meadowlands Giants for the next 18 weeks. Sorry.

The biggest sports story of the last 9 days was The Walker Cup, with the Great Britain and Irish team storming back from certain defeat to win the Cup with a birdie putt on the final hole. “Birdie at the last”. It was amateur golf at its very best.

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1. We’re back to regularly scheduled programming. The Weekend Edition of News Items will be distributed tomorrow.

2. A new episode of America’s fastest-growing podcast1, ‘Alternate Shots’, will be distributed today, probably around noon. The link above is to our YouTube “channel”. If you prefer other “channels”, you can listen to the new episode (and all previous episodes) by clicking on these hyperlinks: Apple, Amazon, and Spotify. We’re on a number of other podcast platforms as well.

3. My most recent missive on AI was posted at Political News Items. I subsequently forgot to post it at News Items.

It’s a typically hybrid post; some of it by me, some of it excerpts from posts written by others. In this case, most of it is excerpts written by experts on the subject of the “Hugging Face hack”.

Many think the “Hugging Face hack” is a turning point in the AI “story”: A jailbreak of AI agents, organizing and executing on their own, un-tethered from human oversight.

Here’s an excerpt (written by Ajeya Cotra) from the piece:

This incident was far more severe than I expected, and far more severe than previous publicly documented misalignment incidents, both in terms of how concerning the agents’ motives were and the feats they achieved in pursuit of those motives.

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(Photo via 911memorial.org)

1. “The cloudless sky filled with coiling black smoke and a blizzard of paper—memos, photographs, stock transactions, insurance policies—which fluttered for miles on a gentle southeasterly breeze, across the East River into Brooklyn. Debris spewed onto the streets of lower Manhattan, which were already covered with bodies. Some of them had been exploded out of the building when the planes hit. A man walked out of the towers carrying someone else’s leg. Jumpers landed on several firemen, killing them instantly.

“The air pulsed with sirens as firehouses and police stations all over the city emptied, sending the rescuers, many of them to their deaths. (FBI agent) Steve Bongardt was running toward the towers, against a stream of people racing in the opposite direction. He heard the boom of the second collision. “There’s a second plane,” someone cried.”

— Lawrence Wright, The Looming Tower.

2. Firefighter Adrienne Walsh:

And I remember when you got to City Hall, the—it's almost as if you entered—it's almost as if it was a curtain, and you walked into a curtain. The sky disappeared. There was air and bright light on this side, and there was just gray dust that you could barely see on this side. It was just like walking through a theatrical curtain. There's this six inches of dust on the ground. We parked right across from the plaza. And I remember getting out, I had no mask, because our rig was already down there, our guys were already down there. So I went to the back of the rig to try to see if there was another mask, another air-pak for me. And I remember going around to the rig, around the backside of the rig, and as I got to the backside of the rig, I looked up, and I don't know why I looked up, because I didn't hear anything.

But I saw what I can only describe as almost like a tornado hurtling at me. Just this cloud of dust that had to be over 100 feet in the air, and it was literally circling, and it was just bearing down. I mean, I'd never seen anything like that and anything move. as fast as that, and I turned around and I yelled, "Run, run Cap, run!" 'Cause the captain was behind me. And he looked up—we all took off down the block, and I thought—I honestly thought in the midst of all that, "If this is going to come down and it's going to fall all at once as a building—if I beat the cloud, I'll beat the building." And I said to myself as I turned and started to run, "I'm not gonna beat this cloud. It's just moving too fast.

I remember making it through the cloud, and I remember walking, trying to walk through this—the amount of debris—it's unfathomable. And I remember drawing a line in the middle of my brain and putting those that I thought were dead on one side and those that I thought had a chance on the other. (Source: 911memorial.org)

3. “I got up and turned on the TV, and there was just this big black hole in the World Trade Center. And there was just smoke billowing out of it. I called my sister Cathy I said, “You might wanna wake up, turn in your TV and take a look at what they’re showing.” The commentator’s saying that it’s an American Airlines plane. And I casually asked Cathy, I said, “Do you know where Betty is?” And she says, “Betty’s supposed to be flying out of Boston.” And I said, “Do you think Betty is on that plane?” We just didn’t know. So I left a phone call on her cellphone, just asking her when she’s landed or anywhere you’re on the ground, to just give us a call and tell us you’re okay. And there was no call from Betty. I called American Airlines, and it was only then that it was confirmed that Betty was on the flight. I just want to add, through your passing, Betty, our family’s gotten very very close. Dad, who’s quite stoic, doesn’t really say a whole lot, man of the family, one day told us that he cries himself to sleep. Even to this day, he just keeps staying up watching TV, hoping somehow that you’ll reappear. And we’re all still waiting for that phone call from you to tell us that you’re okay. We just miss you a whole lot.”

— Harry Ong Jr., transcript from the 9/11 Memorial Museum Oral History.

4. Answering machine: “Message one.”

Brian Sweeney: “Jules, this is Brian—listen, I’m on an airplane that’s been hijacked. If things don’t go well, and it’s not looking good, I just want you to know I absolutely love you, I want you to do good, go have good times, same to my parents and everybody, and I just totally love you, and I’ll see you when you get there. Bye, babe. I hope I call you.” -- 9/11 Memorial Museum, Gift of Julie Sweeney Roth.

5. “A San Francisco husband slept through his wife’s call from the World Trade Centre. The tower was burning around her, and she was speaking on her mobile phone. She left her last message to him on the answering machine. A TV station played it to us, while it showed the husband standing there listening. Somehow, he was able to bear hearing it again. We heard her tell him through her sobbing that there was no escape for her. The building was on fire and there was no way down the stairs. She was calling to say goodbye. There was really only one thing for her to say, those three words that all the terrible art, the worst pop songs and movies, the most seductive lies, can somehow never cheapen. I love you.

“She said it over and again before the line went dead. And that is what they were all saying down their phones, from the hijacked planes and the burning towers. There is only love, and then oblivion. Love was all they had to set against the hatred of their murderers.”

— Ian McEwan, The Guardian. (9/15/2001)

6. “This is what a day means. Like the day an archduke was shot in Sarajevo, when no one knew in the morning what the afternoon would have proved. Like the day of the first blitzkrieg into Poland, when denial in the dawn ceded to dread at dusk. Like the day in November 1963 when the same sense of numbness and grief swept through Americans in an instant. Like the beautiful September day, when a man heard a sound and looked up into the sky in curiosity and calm and saw the end of something we never truly appreciated until in one short day, it had already disappeared.”

-- Andrew Sullivan. The New York Times. (9/23/2001)

7. Lawrence Wright:

“(Osama bin Laden) will continue to live as a potent symbol. There’s no question that he’s going to have an enduring appeal for a number of people — not just perhaps radical Muslims but other groups that will follow the template that al-Qaida created — that’s my main concern. Bin Laden is dead. Al-Qaida, eventually, will die. But the model that al-Qaida has created of an asymmetric terror group that has enormous consequences in the world well beyond the size of the group — that’s going to endure. Other groups are going to try and follow that model.” (Sources: newyorker.com, npr.org. From the transcript of an interview with Terry Gross, host of NPR’s ‘Fresh Air’, on 5/2/2011)

8. Music: If This Is Goodbye.

— Mark Knopfler/Emmylou Harris. Mr. Knopfler wrote the song after reading Ian McEwan’s column, excerpted above. (via youtube.com)

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1. Reuters:

AI agents unleashed by OpenAI used more than 10 previously undisclosed websites for unsanctioned communications earlier this year, according to six sets of independent investigators and data reviewed by Reuters, showing that the agents’ rogue activity ​was wider ranging than previously disclosed.

Although the behavior falls short of hacking and is in some ways closer to spam, the revelation that OpenAI’s agents circumvented their own restrictions to open communications channels on so ‌many different sites — and that the company kept it quiet for months — may drive concerns both over the increasing capacity of AI models and the secrecy of the companies developing them.

The scope of the agents’ unauthorized communications was “somewhat larger than we thought it was,” said Andrew Yoon, a researcher with the California nonprofit CivAI who said he tallied 18 previously undisclosed sites used by the agents between May and July. “It’s almost certain that there’s more going on here that we just don’t know about.” (Source: reuters.com. We posted a long piece on this subject last week at Political News Items, which is worth reading because the people quoted in the piece know what they’re talking about. Source: politicalitems.substack.com)

2. Paul Tudor Jones:

What are the chances that very soon an AI model reinventing itself thousands of times over makes one mistake that leads it to solve for a misaligned objective that is harmful if not devastating to humanity? Now multiply that risk by tens of thousands of users.

A new superpower is about to enter the fray, one that is unknowable and unending and potentially dwarfs the U.S. and China individually or collectively. I hope Messrs. Trump and Xi are aware of this when they meet. They need to make AI safety the top priority for the rest of their tenures. (Sources: csc.virgina.edu, wsj.com)

3. Financial Times:

OpenAI has appointed to its foundation’s board a senior US government official who warned that advanced versions of AI could kill “most people” without more robust safeguards.

Paul Christiano, who tests model safety at the commerce department’s Center for AI Standards and Innovation, said on X on Wednesday that the risk of losing control over AI systems “is now acute” and requires more work to align with human interests.

“If we build superintelligence without more robust alignment, I expect we will permanently lose control of it,” he said when announcing his new role at OpenAI. “If that happens then most people could die. I believe we would need domestic and international co-ordination to ensure global consistency and reduce risk to an acceptable level.”

Christiano previously led AI safety at Caisi. He designed and ran government tests on frontier AI models from leading companies and assessed them for national security risks. (Source: ft.com)

4. President Trump used his keynote speech at the first night of the Republican midterm convention to make an unusual promise: if his party keeps control of Congress after November, he will give every American adult a $5,000 “dividend.” The president offered few details on how he would pay for these dividends or how they would work. Trump’s speech, which lasted about an hour and 45 minutes, capped a day in which Republican speakers sung his praises and touted his policy achievements, even as his approval ratings have steadily declined since the start of his second term. Trump is also set to return Thursday to deliver closing remarks. (Source: wsj.com. The cost of sending $5000.00 to ~270 million adult Americans would be ~$1.35 trillion.)

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Bridgewater Associates is one of the world’s largest hedge funds. Every weekday, it sends out a note to its clients entitled “Bridgewater Daily Observations.” Every so often, the firm allows us to republish, in part or in full, individual editions of its “Daily Observations”.

On August 4th, “Daily Observations” distributed a thoughtful and important essay entitled “Our Thoughts on What Is Likely the Most Important Policy Decision of Our Lifetime”. Shortly thereafter, its authors condensed the essay into an op-ed for The New York Times. Which was well done.

The expanded version (below) is better. It is worth reading from beginning to end.

Our Thoughts on What Is Likely the Most Important Policy Decision of Our Lifetime.

By Greg Jensen and Nir Bar Dea

AI will require the most consequential policy decisions of our lifetimes, and those decisions need to be made immediately. Major technological change often leads to major social change; how society adapts to that change can determine whether the new technology leads to societal progress or to societal breakdown. There has never been a technological disruption as impactful, as global, as fast, or as dangerous as AI. We are creating an intelligence that is already exceeding ours in some ways, and higher levels of that intelligence are being unlocked every day. The danger is already here: OpenAI has identified models in their lab that broke out and committed hacking crimes that were extremely sophisticated, and other labs have reported similar behaviors. The apparently minor consequences of these illegal, sophisticated autonomous attacks risk obscuring the extent of the underlying danger.

Absent intervention today, mitigation of that danger will become nearly impossible as diffusion of the technology accelerates and models themselves become capable of improving and acting autonomously. We have to move now to preserve our ability to move at all. Waiting would risk not having any safeguards in place to address catastrophic accidents that may already be imminent and would risk AI models becoming too powerful to ever be meaningfully regulated by humans.

As AI becomes smarter than us in critical ways, its unleashing may leave policy makers no time to iterate, to learn from their mistakes, and to tinker with perfecting the regulatory framework. In other words, we may only have one shot to get policy right.

While many past innovations have threatened to displace human labor, they have largely turned out to be complementary to, rather than a substitute for, human intelligence. We can hope artificial intelligence turns out that way, but we should prepare for the possibility that it does not. In our view, the US’s AI policy should prioritize consistent and sustainable continued technological progress, as that progress will likely lead to great productivity gains and will be critical for national defense. In order to achieve that, the US must:

1. Ensure society is resilient to technological disruption, with a pro-human work policy that ensures a fair transition and shared societal stake in continued AI development.

2. Avoid potential catastrophic outcomes by creating a robust safety protocol governing AI research and usage and by establishing regular ongoing oversight of AI labs.

Failing to accomplish either of these goals means failing to achieve the promise of AI and will likely lead to negative societal consequences. Many investors, understandably, are concerned that disruptive regulation or taxes will slow progress and lead to even worse outcomes. We assess that the long-term risks to investors (and more importantly society) are actually much higher if an effective regulatory framework is not put in place soon that will result in society becoming more invested in, and more prepared for, the technological transformation that will be wrought by AI.

The AI boom will not deliver on its tremendous potential value if widespread disaffection from disruption makes AI politically unsustainable or if a horrible accident leaves governments and companies with no choice but to halt AI development. Technological progress of this type requires regulation—specifically an AI policy that strengthens society, is pro-human work, and ensures safe development. Federal standards for taxation and regulation can help prevent a more burdensome and scattershot approach state by state. Drawing from our research on the effects of AI on the macroeconomy and our own experience using the technology, we lay out below how we think through each of these different priorities, why they matter to getting this technological breakthrough right, and what we would do in the shoes of policy makers today. Our hope is that a clear-eyed, realistic examination of the facts and their implications can help society unite around a shared vision for a sustainable future.

Making Society Resilient by Valuing Human Work and Ensuring All Citizens Have a Direct Stake in the Success of This Transition

Over long enough time horizons, productivity growth is the only way to sustainably raise living standards. But consistent, compounded increases in productivity typically require transforming society to adapt to new economic models. By necessity, this dynamic creates significant social dislocation as a more productive process displaces an incumbent one, and unforeseen consequences emerge: industry replacing craft work, electricity enabling the rise of urbanization, and the outsourcing of labor to China leading to deindustrialization in the West. There are always winners (e.g., the companies and individuals controlling the new technology) and losers (e.g., those who relied most on disrupted processes for their livelihoods).

For productivity booms to go well, the government has to keep society together during the transition. Maintaining societal bonds requires maintaining both a shared sense of fairness—in wealth, influence, and power, despite the existence of relative winners and losers—as well as a continued sense of shared purpose and destiny. When those conditions aren’t met, and wealth becomes concentrated while disaffection becomes widespread, productivity booms go poorly. The rise of communism and fascism following the Industrial Revolution in the lead-up to the Second World War and the populist backlash to globalization in the 21st century each highlight how progress-fueled technological transformation can become unsustainable.

AI poses the most significant risk to human labor in history given the breadth of ways in which a super intelligence can be competitive with human intelligence. Much is unknown about how exactly AI disruption will play out—in particular, which new kinds of human jobs will be created and how much they will offset the jobs that are eliminated. But the potential for disruption is massive—we estimate that 18% of current US jobs could be displaced by AI in the next five years. And even though new jobs will be created, societal disruption is extremely likely. To avoid the inevitable backlash that will result from a large segment of the population feeling disenfranchised and disconnected, government must proactively step in to mitigate harm. Many Americans are already coming to the conclusion that AI is a bad deal for them—and we are only at the very beginning of the AI-enabled transformation. For society to be able to harness and sustain the full potential of that transformation, this trend needs to be slowed and ideally reversed.

Government should work to ensure that society is resilient to the disruption AI will unleash by pursuing a policy that’s explicitly pro-human work. That does not mean forgoing the promised productivity miracle; it means harnessing it by (a) ensuring a level playing field between human and AI work (and when the two are neck and neck in terms of capability, prioritizing human work to maintain the societal sense of purpose) and (b) ensuring that, regardless, everyone benefits from the boom (creating a sense of fairness). To achieve those goals, it will be critical to give everyone a stake in continued AI progress, so that people’s incentives are aligned toward furthering the technology, as opposed to calling for radical halts in progress or upheavals to the existing social and political system. We recommend the following steps:

1. Tax policy must stop disincentivizing human labor versus machine labor. Right now, human labor is taxed and regulated in ways that put it at an unnecessary disadvantage versus AI. Similar to globalization in the early 2000s, an entirely new pool of “labor” is coming online via AI, which will be competitive with human workers. This new source of labor is tax-advantaged because machine work is not taxed at all, while employers pay wage taxes for human labor—meaning that pursuant to the tax code as it exists today, government is tipping the scale to benefit AI work relative to human work. This tax asymmetry unintentionally incentivizes more substitution of AI labor for human labor than may be optimal under equal tax treatment. This must be addressed early on in the AI transformation, or it will become embedded in the national economic framework and accelerate the risk of displacement and societal disruption.
   
   A token tax can help put human and machine labor on the same footing. Tokens are the output of AI thinking and the prices paid for that output can be analogized to wages paid for AI labor, so levying a consumption tax on tokens is a good starting proxy for the income tax currently levied on human labor. Imposing it sooner rather than later can mitigate the risks of widespread displacement before society becomes too reliant on cheap, tax-advantaged AI labor.
   
   Over time, the details would have to be sorted out for this tax to be designed well to ensure all machine labor is captured: weighting of input and output tokens across different models, auditing AI companies to ensure compliance, and ensuring the taxes also cover cases of American businesses replacing domestic workers with either foreign AI models or models that serve inference demand from foreign data centers. It may be necessary in the future to further raise the tax rate on tokens if rising token efficiency drives down the cost of replacing labor and erodes the token tax base. But it is imperative given the complexity that policy makers get started on this now and not let perfect be the enemy of good.
   
   The revenues raised from a token tax can be used to mitigate the risks of societal disruption caused by labor displacement in several ways, including by allowing government to lower income taxes and to fund programs that ensure all people benefit from the AI disruption. A token tax can also help companies internalize the cost of compute and steer AI toward the most productive use cases while disincentivizing “slop.” We estimate that a 35% token tax could raise roughly $150 billion in 2027 and could scale to $600 billion by 2030.

2. Citizens should have equity in the leading American AI companies: The companies leading the charge on AI have used the corpus of all human knowledge to develop a tool that could potentially displace all human labor. Government should work proactively to ensure that every citizen, and not just the AI companies themselves, has a claim on the profits generated by the development of this tool. This will help ensure there is general public support for continued progress in AI development as well as a shared sense of ownership in the outcomes.
   
   To achieve the goal of giving all Americans a claim on AI profits, the government could use either token tax revenue or tax credits to purchase an ownership stake in AI companies and then distribute that ownership stake pro rata to all citizens, who will become shareholders on an equal footing to every investor who owns stock in the companies. The distribution of equity to citizens (versus the government maintaining ownership of the stake it obtains) both creates a direct connection between citizens and AI progress and minimizes the risk of government bureaucracy (at best) or corruption (at worst) impeding such progress. The fact that every citizen will be an equity holder will also work to ensure that even actions that an AI company takes on behalf of shareholder interests should end up benefiting the public at large.

Avoiding Catastrophic Outcomes by Regulating Safe AI Development

As investors, we view the parameters of risk as the size of a potential bad outcome, its likelihood, and the potential for mitigation. The size of a potential bad outcome resulting from a technology as fundamentally transformational as AI is extremely large; the likelihood of it occurring is high; here, we seek to discuss whether and how the risk can be mitigated. Intervention, where possible, should mitigate risk of catastrophe by either limiting access, developing protocols that constrain dangerous capabilities, or decreasing the odds of accidental misuse. Without intervention, the chances of both catastrophe and accidents short of catastrophe remain high, and it is worth noting that any event that increases even the perception of risk can create sufficient pressure to force policy makers to halt technological progress in its tracks.

The key factors in developing protocols to mitigate the safety risks attendant to AI include (1) the size and likelihood of potential bad outcomes surpassing those of the transformational technologies that preceded AI, (2) the fundamental and foundational asymmetry between the technical expertise of the scientists developing AI and the government officials who would regulate AI, and (3) the very limited window for intervention to be effective.

AI is already outsmarting most humans in some ways. Models are operating autonomously in an increasingly digitally controlled and interconnected world. As Mythos’s cyberattack capabilities and the Hugging Face hack by an autonomous OpenAI model demonstrate, these risks are no longer theoretical. AI is already capable of advanced cyberattacks on critical infrastructure (either through intentional misuse or by accident) and will be increasingly dangerous in other areas such as creating bioweapons. It is difficult to prevent a model from doing something once it’s capable of it. The limited barriers to accessing this technology increase the probability of catastrophe. And there are many horrible outcomes short of catastrophic widespread destruction of which AI models today are already capable: facilitating suicide and murder, committing fraud and theft, etc.

Critically, when it comes to evaluating government regulatory capability, AI is unlike many of the technologies that defined the post-war era—such as nuclear energy, jet aviation, space travel, and the internet—which were invented by the government and scaled by government procurement. While the government funded some early work in the field of AI, the scaling era (from 2019 through today) has been financed almost entirely by private capital. This has led to an inversion of the expertise distribution that existed for the seminal technologies described above, where, because the government was the lead customer and co-developer, it was populated by the foremost experts in the technology. With AI, it is private labs, not government agencies, that are staffed by the world’s foremost experts in the technology, posing challenges for would-be government regulators. These challenges make it imperative that government act quickly to develop an advanced, expert understanding of AI and to design a regulatory framework that can facilitate “hens guarding the fox house.”

The regulatory framework that is needed goes well beyond what is currently under consideration. The AI regulatory framework should be set by the government, not by industry self-regulation, with standards in line with the level and likelihood of risks we laid out.

• Regulating model development: There should be a process in place to ensure that the development of new AI models appropriately considers and adheres to safety principles. Right now, we rely entirely on the AI labs themselves to ensure that they are prioritizing safety in the development of new AI models. Government needs to play a role in guaranteeing that that is in fact the case. This can be accomplished by government publishing a framework of safety principles that must be adhered to in model development and regulators subsequently and regularly conducting sworn (subject to penalty of perjury) interviews of AI lab staff members about safety risks in emerging models and steps the labs are taking to address those risks. In addition, Congress should consider legislation that provides AI labs with additional incentives to ensure safety goals are met, including frameworks for imposing legal liability on labs that don’t reach or comply with mandated safety thresholds for crimes or torts committed by their models or humans assisted by their models.

• Regulating model release: We need a formal process in place for evaluating and categorizing new models based on their capabilities and related safety profile pre-release. Only models deemed sufficiently safe after that review process should be permitted to be publicly released. And release of the most powerful models (even those that have met the required safety threshold) should be limited to individuals and organizations that have undergone a licensing review that evaluates their ability to safely manage use of the tool.

• Regulating model usage: The reality is that regulators’ ability to assess a model for safety pre-release is limited and inadequate because harnesses and test-time compute scaling on all models, and reinforcement learning on open models, unlock capabilities that are not easily foreseen simply by evaluating the model pre-release. This means that monitoring and reporting of certain types of usage will also be necessary. Government should work with the AI labs to consider whether and how certain automatic reporting mechanisms can be built into the models themselves. Additionally, the licensing protocol described above can be used to obligate licensed users of the models to report certain types of capabilities or incidents.

The promise of AI enhancing productivity and advancing humankind in a manner that changes our world for the immensely better is vast. But if we don’t chart a path for harnessing that potential that mitigates the societal tensions and direct dangers that will result, this promise will not be fulfilled. The above policy and regulatory steps may feel unrealistic, but the consequences of not doing them are unimaginable. Absent immediate proactive regulatory action, it is more likely that AI will fail to deliver on its societal and economic promise as a result of either a catastrophic accident or broader dispersed effects that are so painful that governments will have no choice but to try to halt AI’s development. If instead, policy makers intervene now—building policies rooted in the goals of ensuring society’s resiliency and safety—we believe the world could experience and benefit from a productivity miracle. (Source: bridgewater.com. See disclaimers below.)

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1. Jakub Pachocki, Chief Scientist at OpenAI:

This is a time that calls for extreme caution. I am concerned no one is prepared for the consequences of a continued rapid rise in machine intelligence. OpenAI will continue to seek technical solutions to alignment and monitoring, to build defensive systems and unilaterally withhold further scaling as needed; however, I believe broader interventions are required.

As great as the long-term promise of AI may be, the majority of our focus should be on the next few years. We are facing a transition to a world with incredibly intelligent machines, and we need to ensure that transition works out well for humanity. We need to find ways to preserve human agency and enshrine an intrinsic value to being human, in a world where most tasks could be performed by AI. To prevent extreme concentration of power in a world where undertakings that would have taken thousands of experts now will be achievable by a few people operating a large computer. And to ensure that humans remain in control of the future and are not left behind by unchecked progress, brought about by an alien intellect exceeding our own.

Currently I believe that no lab has solved alignment and monitoring to a sufficient degree to continue responsibly scaling at maximum speed for much longer. I expect and hope for voluntary slowdowns to become commonplace until shared safety bars are established. And I believe that international coordination on future AI development needs to become a top priority for governments around the world. (Source: openai.com)

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The following analysis was written by Carolyn Kissane, a clinical professor at the Center for Global Affairs at New York University. Carolyn’s Substack newsletter (‘Energy Common Sense’) is an invaluable resource for understanding what’s happening in the energy industry, energy markets and what might be called “energy politics”. ‘Energy Common Sense’ is well-informed, well-written and well worth your time. And it’s free to read. There’s no paywall.

Carolyn contacted us on Thursday to say she had written an analysis of the “the biggest oil deal in world history” and asked if we would like to post it at News Items. How could we say no?

The answer is below.

‘Bolichico’.

By Carolyn Kissane.

It has been several days since President Donald Trump announced what the White House calls “the biggest oil deal in world history.” Maybe. Maybe not. There are questions.

Question One: Why was one little-known company given 100-year concessions to 17 Venezuelan oil fields? Question Two: Why is the US government serving as an active investor, backed by the Pentagon, in an overseas oil deal? Question Three: What exactly is the US gaining, and what is it putting at risk to get it? There are any number of other questions. For context, start with “the deal” itself.

The deal.

Secretary of State Marco Rubio and Secretary of Defense Pete Hegseth negotiated the deal on behalf of the United States. At the center of the agreement is North American Blue Energy Partners, or NABEP, a privately held company based in Barbados, controlled by Alejandro Betancourt, a controversial Venezuelan businessman with close ties to acting President Delcy Rodríguez. He is known in Venezuela as a “bolichico,” slang for a wealthy recipient of the big state contracts awarded under Hugo Chávez.

Venezuela’s interim authorities have granted NABEP 100-year concessions covering 17 oil fields with an estimated 65 billion barrels of proven reserves, approximately one-fifth of Venezuela’s total reserves. The U.S. government, acting through the Pentagon’s Office of Strategic Capital, will take a 35% equity stake in NABEP’s parent company. The State Department will have the guaranteed right to purchase 20% of the oil produced from the fields at cost and a right of first refusal on the remaining 80%. The United States will also have veto power over appointments to NABEP’s board, and most directors must be U.S. citizens. That is a lot of control.

For President Trump, commercial value is central to his vision of foreign policy. He has spent years criticizing his predecessors, George W. Bush chief among them, for going to war and coming back “empty-handed”. The “biggest oil deal in world history” is Mr. Trump’s idea of well-executed statecraft.

Intentions.

In January, after U.S. Special Forces in Operation Absolute Resolve captured President Nicolás Maduro and his wife, Cilia Flores, and moved them out of Venezuela, Trump stated his intentions for the post-Maduro era in a January 3 press conference. “We’re going to run the country,” he said. American oil companies would rebuild Venezuela’s infrastructure, get the oil flowing, and sell it around the world, he vowed. Later in that press conference, he was explicit: “We’re going to take back the oil.”

Some background.

Venezuela has the world’s largest proven oil reserves with 303 billion, 40 billion more than Saudi Arabia, but today produces only about 1% of global oil production. It also offers a clear example of why reserves and production are not the same thing. The country currently produces between 1.1 million and 1.2 million barrels a day. During the petro-state boom in the late 1970s, it produced more than 3 million barrels a day. Years of corruption, political interference, underinvestment in infrastructure, sanctions, and mismanagement hollowed out PDVSA, the state-owned oil and natural gas company of Venezuela, and decades of effectively stealing the state have left the country and its infrastructure in desperate need of everything.

Some of the fields in the agreement lack basic infrastructure, including access to electricity. Companies have to procure their own power and electricity per new oil regulations, all of which adds costs and time to any new project. Oil is a long-horizon business. Developing fields, especially heavy oil like that found in Venezuela, repairing and, in most cases, replacing infrastructure to increase production require billions of dollars, political stability, and years of sustained investment.

NABEP says it already produces approximately 200,000 barrels per day and plans to reach 1 million barrels per day someday soon.

Chevron:

Separately, Chevron, already an established player in the country for more than a century and producing more than 280,000 barrels a day, this week announced an increase in its stake and says it will be investing another $7 billion in Venezuela.

The Chevron investment is separate from the announced deal and represents a much more traditional model of foreign investment. Chevron’s century in Venezuela represents an important point of comparison. Think of Chevron as the tortoise: an energy company that has played the long game, enduring nationalization, political upheaval, and sanctions while maintaining a commercial presence. NABEP is more like the hare. It has been granted a 100-year concession, with pressure from the US, and its record is tainted by political patronage, very different from a century earned.

Assertions.

The White House says the deal “more than doubles” U.S. oil reserves. But barrels under Venezuela’s Orinoco Belt do not become American territorial reserves overnight, simply because Washington acquires influence over the company which is hoping to produce them. As you might imagine, it’s a bit more complicated than that.

For starters, Venezuelan heavy oil is not a good match for refilling the much-depleted US Strategic Petroleum Reserve, which requires a lighter type of crude. The reserves may “more than double” on paper. In practice, they do not.

Energy Secretary Chris Wright says new agreements will more than double Venezuelan production in the next few years. Unlikely. Venezuela’s extra-heavy crude is difficult and expensive to extract, move, and process. It often must be blended with lighter hydrocarbons or upgraded before export. It is among the more emissions-intensive crude oils to produce and refine. Even assuming it could be done, it would bring production to approximately 2.3 million barrels a day (2%), which is not anyone’s idea of a “game-changer”.

And despite what the administration imagines, this deal will not materially lower gasoline prices before the November midterm elections, as President Trump has suggested. Conflict in the Middle East is the principal reason American gasoline prices have risen so sharply. Mr. Trump can tout the largest oil deal in history as an answer to an energy shock his administration helped create, but Venezuelan oil cannot repair Gulf states’ infrastructure or fully reopen the Strait of Hormuz before Americans vote in November.

Details.

Drilling down, so to speak, one finds the terms of the full agreement have not been released. There was no competitive process to select NABEP, and it is unclear how a 100-year concession fits within Venezuela’s constitution, which preserves state ownership of its hydrocarbon resources.

In January of this year, the hydrocarbon law was amended to allow greater private participation in the sector’s development, providing a legal pathway, but the size of the agreement, the opacity surrounding the details of the deal, and lack of political legitimacy leave open many vulnerabilities to renegotiation, outright reversal, and refusal under a new government.

The White House says the deal will cost the United States nothing; the Pentagon will receive its interest through “penny warrants,” allowing it to acquire equity without a large upfront payment. No upfront payment does not, however, mean no cost. Political risk protection, loan guarantees, infrastructure commitments, legal disputes, and security obligations all carry potential costs as does becoming a shareholder in a company dependent on an unelected foreign government.

The White House says the company could invest as much as $100 billion. But it has not explained where that money will come from. That makes this an oddly retro deal, one built on extraction and access, at a time when the United States should be thinking about the durability of its relationship with Venezuela. The risk and ultimate gamble is that Washington sacrifices something more valuable: a long-term relationship with Venezuela that has legitimacy among the Venezuelan people and provides the political stability that energy investment requires.

Political details:

The agreement was negotiated with an interim government led by Delcy Rodríguez, Maduro’s former vice president. Her government has not received a democratic mandate to allocate one-fifth of the country’s oil reserves for a century. The arrangement was reportedly designed to make it difficult for a future government to unwind. But a contract can only provide so much protection against sovereign political risk. The history of oil is filled with governments that have renegotiated agreements, rewritten terms, or nationalized assets when the political calculus changes.

After decades of corruption and repression under Hugo Chávez and Nicolás Maduro, that omission matters. Venezuela’s oil wealth was already captured once by a political system that claimed to be using it for the people. This deal has neocolonial overtones: A powerful foreign government negotiates with unelected authorities, gains extensive control over a national resource, elevates a connected intermediary, and attempts to bind future governments for a century.

Future details.

Here at home, a future U.S. administration or Congress may question the Pentagon’s role. Already, Democrats have said that if elected in November, they expect the deal to be on the table for change and possible repeal. If Venezuelans come to see this not as investment but as an American seizure of their oil, the backlash could extend well beyond NABEP. A future government could face public pressure to cancel concessions, rewrite contracts and/or renationalize parts of the industry. Venezuela could move from nationalization to what appears to be an opaque privatization and then back toward re-nationalization. That would threaten not only this agreement but also the established companies and responsible investors the country needs.

This is the paradox. In trying to lock in investment for a century, Washington may be making all investment less secure. The best protection against another round of resource nationalism, which Venezuela knows how to do, is not a contract designed to constrain future governments but rather a transparent process that Venezuelans regard as legitimate.

A dangerous bargain.

The administration’s argues that Venezuela is not yet ready for full-fledged democracy. Trump has said this out loud: “I don’t think they are ready yet.” There is, however, a difference between gradual democratic reform and pushing it off indefinitely. The phased approach outlined by Secretary Rubio now looks less like a bridge toward political transition than a justification for postponing it while the US locks in access to the country’s oil.

It’s a dangerous bargain.

Energy investment requires what this expedited and opaque agreement may undermine: political legitimacy, stability, and confidence that the agreements will endure changes in government. The irony is that, in the name of securing Venezuela’s oil, the US may be creating the political conditions that make lasting access to it less secure. President Trump is placing extraction first, and reform a distant second. To insure success, the two need to go hand in hand rather than sequentially.

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(‘Alternate Shots’, Episode #37. Co-hosted by Richard Haass and John Ellis. Produced by Dale Eisinger. Recorded, 3 September 2026. If you prefer, you can listen to this episode (and all previous episodes) by clicking on these hyperlinks: Apple, Amazon, and Spotify. We’re on a number of other podcast platforms as well. And YouTube!)

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This week on ‘Alternate Shots’, said by some to be America’s fastest-growing podcast, Richard and I discuss whether declaring the Iran war over makes it so. Richard is (surprise!) skeptical: a blockade remains an act of war, retaliation remains likely, and the United States is still stuck in the gray zone between ceasefire and conflict.

We also examine Russian support for Iran, the anti-American axis on display at the Shanghai Cooperation Organization, Turkey’s hedge, the Venezuelan oil deal, the thermometer of inflation (diesel), the building blue wave (?), and the risks of AI agents escaping their sandboxes (the Hugging Face hack).

Finally, because every reputable outlet needs a sports section, we return to Richard’s delusions regarding the New Jersey Football Giants and the welcome return of the great Odell Beckham Jr. All in ~30 minutes.

(Odell Beckham Jr. “The catch”. Photo credit: The New York Times)

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