Reality Check

Copyright 2025 Kurt Cagle / The Cagle Report

What are we seeing here? Let me see if I can break it down:

?? Cloud automation (more than GenAI, yet), is finally having the effect of reducing most business cost centres - it can take 4-6 years for a given technology to become pervasive, and the big cloud consolidation occurred in the late 2010s then was accelerated by the pandemic. Once the need for work from home collapsed after the pandemic receded, so too did massive cloud buildup.

??GenAI has only had a fairly minor effect on companies in terms of adoption, but as profits began dropping in most sectors because it was harder and harder to justify price gouging, companies began to look for other ways to keep their investors happy, so they did two things: they began firing people in job lots, and they began reducing the quality of their goods and services dramatically. In the tech sector, AI became the go-to excuse for firing people, even though AI had barely entered most companies' technical planning.

??As quality dropped and prices rose, people stopped using those products and services. As more people were fired, fewer passionate customers (any company's employees make up the most passionate and knowledgeable customers and champions). Still, ex-employees also tend to drag other customers away. People began looking for alternatives that didn't involve these companies.

??Today tech hiring is at levels comparable to the lowest point in the pandemic and well below the long-term trendlines before the pandemic. However, other sectors, especially health care and government hiring, had remained strong, and inflation dropped below 3%.

??With the new administration, however, both sectors are now under pressure. Tech has collapsed, and agriculture is collapsing due to tariffs and draconian immigration measures. Unemployment is rising again, and will likely continue to do so for some time, inflation has risen (especially as avian flu is now exploding causing the price of eggs and chicken to rise dramatically and everything based on that, from breads and cereals to most Asian foods, to also go up in price). Smallpox and measles, once nearly eradicated, have gained a foothold in Texas and the South and are overwhelming hospitals, and Ebola has now emerged in New York City.

??Tariffs are similarly already causing the rise of most goods (primarily on the futures markets, the full effect will be seen by April as these make their way to consumer prices), and in general, all that tariffs are doing is driving global customers from the US to China.

??The stock market has started dropping regularly now. Note that there are provisions in place to keep the market from falling too dramatically in any given day, but this means that rather than a few dramatic crashes, the markets are going to lose air as people pull money out of the markets to remain as liquid as possible. I am not vested in the market and have no real stake in it. I'm just commenting on it from the perspective of an observer of trends.

??Musk isn't going to find his trillions in wasted inefficiency, not that I think he's even remotely looking. He will likely see a few billion here and there, primarily with military projects, but this is a small rounding error in the face of a $7 trillion budget. It won't pay for a significant tax cut for billionaires, except maybe his own. The reality is that after nearly forty years of austerity spending, the government is already very lean and efficient compared to most businesses.

??AGI is not going to return hundreds of billions of dollars in investment any time soon. Like so much else, LLMs lie. They hallucinate. They make things up. This is great if you want to make bad porn movies and fairly indifferent music, at best, a wash when working with code and not a rational solution when dealing with any kind of large-scale agentic system running mission-critical corporate systems. That's not going to change. We need to accept LLMs for what they do well, not use them for what they do poorly, and move on to alternatives that might have a chance of working.

??Quantum Computing is not going to save the markets. Quantum computing is essentially high-grade magic, is barely understood (though it is admittedly fascinating) by even seasoned programmers, and is struggling to get outside of the 8-10 qubit limit that it's been stalled at for some time (quantum computing has been around since the early 1980s, which means they are a forty-five-year-old technology - think about that). It would be a decent replacement for LLMs if they didn't require a refrigerator truck to keep coherent. By all means, invest in quantum computing, and be aware that you won't see returns until 2040, no matter how confident people in the industry are.

?? Let's talk about Bitcoin and other forms of eCoin. Trump's in the White House, and he's caught BTC religion, can talk Ethereum with the best of them, and no doubt is rolling out all those NTFs for every nickel and dime he can manage to wrest from his followers. Here's the problem with Bitcoin - many very big banks looked at ICOs more than a decade ago and came to a very reasonable conclusion: they wouldn't make enough money from them to justify the volatility and control by consolidated networks that they didn't control personally. They didn't like the performance and didn't like the fact that self-sovereign basically meant that there was no one to sue when things went wrong. Nothing has changed in the last decade other than to hammer this reality even further home.

The reason that the Bitcoin mafia supported Trump was not because they were passionate about the technology. Instead, it was the fact that they were holding hundreds of billions of dollars worth of electronic coinage that would never find near enough buyers even remotely to realize their investments. On the other hand, IF they can convince Uncle Sam to buy the majority of their shares at artificially inflated market values, they would be able to go off and buy up their own countries, while you and I, as taxpayers, would each our own hoard of electronic coins worth tiny fractions of a penny. Now, I'm not against electronic coinage, but frankly, it is something that should be issued by the government, under government control, and tied very much to the US Dollar, or better yet, to a basketful of currencies.

??We have bought the concept that government is evil and incompetent from the corporate-owned media for so long that, contrary to all evidence, bureaucrats are corrupt and stupid. No, they're not. Many have been in business and seen both the good and the bad there; most have advanced degrees and years of experience both in the "real" (i.e., corporate business world) and in academia, and many have taken pay cuts working for the government because they felt they would make a difference, not just make a billionaire wealthier. I've worked for both as a consultant, and I had far more respect for my civil service coworkers than I did for the corporate managers looking to maximize every seat's profit potential, whether meaningful work was done or not.

No doubt there will be many out there, including regular readers of my posts, who will shake their heads and say that I just don't understand modern enterprise. I do, actually. I've worked with Fortune 50 companies and for many different agencies over the years. Government is a machine, a tool, a force multiplier. In the hands of good stewards, it can change the lives of hundreds of millions of people for the better. In the hands of bad stewards - the inept, the corrupt, the venal - it is capable of mass harm. Indeed, I think that in some respects, the Libertarians are correct in that the US Federal Government, in particular, has too much power, but that's more because, in any complex system, you have to balance out power sufficiently to ensure that no one branch or one party can fully take over while at the same time balancing that with the fact that when power is too diffuse, it becomes ineffective.

??Finally, a few thoughts about the Chinese. In 1973, Mao Tse Tung, the Chairman of the People's Republic of China, died of old age. At this point, millions of people had been killed in the attempt to purge dissenters, some directly and many more from starvation and disease. The Gang of Four, who were part of the inner circle of the Maoist wing of the party, were captured and sentenced to death, though in all cases, their sentences were commuted to life in prison. This was not a failure of Communism but a failure to keep power from becoming too concentrated in the hands of only a few. Communism is a secular religion, so is Capitalism, and it is time that we need to acknowledge that most political creeds are crutches for the intellectually lazy.

The reformist wing of the Chinese Communist Power, Deng Xiou Peng, took over, and a policy was established that no head of the CCP could be in the office of Chairman or other senior leadership position for more than ten years. China has 1.3 billion people, four times as large as the United States. It was also, for the most part, part of a political structure that goes back nearly 3200 years, making it one of the oldest continuous bureaucracies on the planet. This helps to understand the country. It is not democratic at the highest echelons of power, but most regional and mid-level positions are democratically elected.

China, at its core, is a surveillance state. So is the United States. China used to send its most promising students to the United States to study, most of whom came back to China at some point and established institutions of learning that rival or surpass those of the United States. China has been building chip fabrication plants and is likely close to, if not surpassing, chip production capabilities in the United States. Chinese scientists produced many algorithms and techniques used for neural network-based technologies, and have improved many more. They are supplying this technology to much of the rest of the world, while the US has looked to build highly centralized, concentrated AI in the hands of a small number of ridiculously over-financed companies. Not surprisingly, much of the rest of the world is far more interested in the Chinese products than in the American ones, and even here in the US, the tide is shifting away from the "Magnificant Seven" (I think it no accident that Microsoft has been distancing itself from this position - Satya Nadella is no dummy).

China's "hands" are not free from corruption or repression, but I think it is past time for Americans to acknowledge that the US isn't any cleaner. Nor am I saying that China doesn't have an ulterior strategy with their AI - they want to control it, want China to be the primary providers of the hardware and software, and they want to be able to control other countries so that they are more receptive to Chinese interests. Replace China with the United States in that last sentence, and it is just as true. China wants to retake Taiwan. Russia wants the Ukraine and the Baltic Countries. The US wants to take Greenland and Canada (though the Canadians have suggested that we should consider their offer for the US to become the 11th province). The US has made much of China's piracy and theft of intellectual property (rightly), but IP in the US all too often has been settled not by who the creator was, but by who could afford the most high-powered lawyers.

We're increasingly looking through cracked and distorted mirrors. We are in the realm of RealPolitik, and we need to acknowledge that exceptionalism, jingoism, and national arrogance become increasingly hollow when there is less and less to be proud of. Maybe it's time for all of us, liberal and conservative, Democratic and Republican, to get up off our butts and away from our magic screens and start trying to make a real difference, to try to solve the real problems besetting us right now - failing infrastructure, increasingly devastating vulnerability to climate change, the resurgence of disease, income inequality, an increasingly polluted information space, and many, many other problems.

When reality bites, it bites hard.

In media res,

Kurt Cagle

Editor, The Cagle Report

If you want to shoot the breeze or have a cup of virtual coffee, I have a Calendly account at https://calendly.com/theCagleReport. I am available for consulting and full-time work as an ontologist, AI/Knowledge Graph guru, and coffee maker.

I've created a?Ko-fi account?for voluntary contributions, either one-time or ongoing. If you find value in my articles, technical pieces, or general thoughts about work in the 21st century, please contribute something to keep me afloat so I can continue writing.

Recent Articles