wknd notes: Thought Experiments

Left the parking garage and engaged Autopilot. Tesla’s AI knows my habits, optimized the route home. It’s been four years since I first let it take control. Initially, it was unnerving, adolescent, like being driven by an indecisive16-year-old. With each software update Autopilot matures, in quiet communication with the cloud. It’s not perfect, but that day is approaching fast. It was Friday, I’d spent my day reading, walking, trying to drown out today’s incessant noise with some quiet, searching for something new to write about. The latest humanoid robot videos had blown my mind. And Autopilot pulled confidently into my driveway.

Overall: “There were two conceits our leadership class had when it came to globalization,” said JD Vance at the American Dynamism Summit [transcript here]. “The first is assuming that we can separate the making of things from the design of things. The idea of globalization was that rich countries would move further up the value chain, while the poor countries made the simpler things,” continued the Vice President. “But we got it wrong. It turns out the geographies that manufacture get awfully good at the designing. There are network effects. The firms that design products work with firms that manufacture. They share intellectual property, best practices, and even sometimes share critical employees,” he said, America’s great business builders in attendance. “We assumed other nations would always trail us in the value chain, but it turns out that as they got better at the low end, they also started catching up on the higher end. We were squeezed from both ends.” US economic ideology is undergoing a profound shift, and hardening, it’s a vast experiment of enormous consequence. “The second conceit is that cheap labor is fundamentally a crutch, and it’s a crutch that inhibits innovation. If you can make a product more cheaply, it’s far too easy to do that rather than to innovate,” he said. “Whether we were offshoring factories to cheap labor economies or importing cheap labor through our immigration system, cheap labor became the drug of Western economies,” he said. “And if you look in nearly every country, from Canada to the UK, that imported large amounts of cheap labor, you’ve seen productivity stagnate. The connection is very direct,” said Vance. “The fundamental goal of President Trump’s economic policy is to undo 40 years of failed economic policy in this country. For far too long, we got addicted to cheap labor and we got lazy. We overregulated our industries instead of supporting them. We overtaxed innovators, instead of making easier for them to build great companies, and we made it way too hard to build things and invest in things in the USA.”

Week-in-Review: Mon: China unveils plan to ‘vigorously boost’ consumption. American maritime regulator calls for levy on Chinese ships at ports. Trump threatens Iran with ‘dire’ consequences for Houthi attacks. US air force strikes Houthis in Yemen. OECD warns Trump’s trade war will damage global growth. UK expects more than 30 countries to join Ukrainian ceasefire coalition. US Empire mfg -20.0 (-1.9e), S&P +0.6%. Tue: Germany’s parliament approves Merz’s €1tn spending plan. Putin agrees 30-day halt to strikes on Ukrainian energy infrastructure in Trump call. Trump says China’s Xi to visit US in ‘not too distant future’. Baltic states and Poland propose exit from anti-landmine agreement to defend ‘vulnerable eastern flank’ with Russia and Belarus. Netanyahu says Israel has resumed ‘fighting with force’ against Hamas. US chief justice rebukes Trump after president’s threat to impeach judges. Erdo?an’s main rival risks ban from Turkish vote after degree annulled. BYD unveils 5-minute EV charging batteries. BofA survey shows investors slash US equity holdings by most ever. US Housing starts 1501k (1385k e) / building permits 1456k (1453k e), Canada CPI 2.6% (2.2%e), S&P -1.1%. Wed: Fed holds rates, expects 2 cuts this year and shifts forecasts towards stagflation. Trump says US could take over Ukrainian nuclear power plants. China raises state funding for strategic minerals amid US trade war. Italy’s Meloni warns EU against ‘vicious circle’ of tariff war with Trump. BoJ holds rates and cites uncertainties around tariffs. Turkish police detain Erdo?an’s main political rival. Israel renews ground operation in Gaza. UMich survey shows inflation outlook at its highest since the early 1990s. Fed keep rates unchanged at 4.25%-4.5%. Eurozone CPI 2.3% (2.4%e) / core 2.6% as exp, Argentina GDP 2.1% (1.7%e), S&P +1.1%. Thur: UK’s Starmer shifts from boots on the ground in Ukraine to air and sea defense. European military powers work on 5–10-year plan to replace US in Nato. Turkey detains 37 in escalating crackdown on opposition to Erdo?an. Bank of England holds rates at 4.5%, maintains a ‘gradual and careful’ approach to easing, and suggests a cut in May is likely. Switzerland Policy rate 0.25% as exp, Sweden Policy rate 2.25% as exp, South Africa Interest rate 7.5% as exp. UK Unemp rate 4.4% as exp, US Jobless claims 223k (224k e) / cont claims 1892k (1887k e), S&P -0.2%. Fri: US to probe Chinese telecom groups it suspects of posing security risk. Trump says he would be happy for US to become ‘associate’ Commonwealth member. Merz’s €1tn spending plan and constitutional reform wins final approval. Trump imposes sanctions on Chinese companies over Iranian oil shipments. UK government borrowing overshoots expectations. Israel’s defense minister threatens to annex territory in Gaza. Tens of thousands protest in Turkey against arrest of Erdo?an rival and central bank spends record $12bn defending lira. UK cons. conf. idx -19 (-21e), euro zone cons. conf. idx. -14.5 (-13e), Canada retail sales -0.6% (-0.4% e), S&P +0.1%.

Weekly Close: S&P 500 +0.5% and VIX -2.49 at +19.28. Nikkei +1.7%, Shanghai -1.6%, Euro Stoxx +0.6%, Bovespa +2.6%, MSCI World +0.7%, and MSCI Emerging +1.1%. USD rose +3.2% vs Turkey, +1.5% vs Mexico, +1.1% vs Bitcoin, +0.9% vs Indonesia, +0.8% vs Australia, +0.6% vs Euro, +0.5% vs Yen, +0.2% vs China, +0.2% vs South Africa, +0.1% vs Sterling, and flat vs Sweden. USD fell -1.2% vs India, -1.2% vs Russia, -1.0% vs Ethereum, -0.8% vs Chile, -0.2% vs Brazil, and -0.1% vs Canada. Gold +0.7%, Silver -2.8%, Oil +2.0%, Copper +4.4%, Iron Ore -4.3%, Corn +1.3%. 10yr Inflation Breakevens (EU -1bp at 1.95%, US +2bps at 2.33%, JP -5bps at 1.59%, and UK flat at 3.37%). 2yr Notes -7bps at 3.95% and 10yr Notes -7bps at 4.25%.

2025 Year-to-Date Equity Index Returns: Poland +29.3%priced in US dollars (+21.8% priced in zloty), Colombia +24% priced in US dollars (+16.6% priced in pesos), Czech Republic +23.9% in dollars (+18.1% in koruna), Hungary +22.2% in dollars (+13.4% in forint), Austria +21.1% (+16.3%), Chile +20.8% (+13.1%), Greece +20.8% (+15.5%), Spain +20.4% (+15.1%), Germany +19.7% (+15%), Brazil +19% (+10%), Italy +18.9% (+14.2%), Norway +18.6% (+9.7%), HK +18% (+18.1%), Ireland +16.4% (+11.3%), Euro Stoxx 50 +15.9% (+10.8%), Switzerland +15.5% (+12.7%), Sweden +15.4% (+5.9%), Finland +14.6% (+10.1%), France +14% (+9%), South Africa +13.4% (+8.9%), Korea +10.8% (+10.2%), Belgium +9.9% (+5%), Mexico +9.8% (+6.4%), UK +9.2% (+5.8%), Netherlands +8.9% (+4.1%), Portugal +6.5% (+1.9%), Singapore +6.1% (+3.7%), Vietnam +3.9% (+4.3%), Israel +3.1% (+4.3%), Canada +1.3% (+1%), China +1.1% (+0.4%), MSCI World -0.5% in US dollars, UAE -0.5% (-0.5%), Japan -0.5% (-5.6%), Australia -1.4% (-2.8%), India -1.7% (-1.2%), Saudi Arabia -2.1% (-2.3%), Philippines -3.1% (-4%), S&P 500 -3.6%, Taiwan -4.2% (-3.6%), Denmark -5.1% (-8.8%), New Zealand -5.2% (-7.6%), Malaysia -7.3% (-8.3%), Argentina -7.3% (-4%), Russell -7.8%, NASDAQ -7.9%, Indonesia -13.4% (-11.6%), Turkey -13.8% (-8%), and Thailand -14.5% (-15.3%).

Humanoids: “There’s an iPhone moment happening with humanoids,” said Brett Adcock, founder of Figure, a humanoid robotics company in California. “It’s going to happen right now,” added the serial entrepreneur, his robots already working on the production line in BMW’s Spartanburg factory. Another major corporate customer is trialing his robots for warehouse work. “To succeed at this, you have to do three things that have never been done before. And you have to get all three of them right within the next 5yrs or you’re going to fail for sure.”

Humanoids II: “The first thing is you have to build hardware for humanoids that’s incredibly complex and can never fail, and it’s got to work at human speeds with human range of motion,” explained Adcock. “The second thing is a neural net problem, not a control systems problem. You can’t code your way out of this problem. You need to have a robot that can ingest human-like data through a neural net and it has to be able to imitate what humans do. Humanoid robots are not like arms bolted to a factory table. None of those robots have AI.”

Humanoids III: “The third problem is that you then have to generalize. This is the holy grail of robotics,” explained Adcock. “To have a robot look at something it’s never seen before, or heard through speech, and to be able to tell a robot how to do it, and then have it be able to complete that task end to end with one neural net,” he said. “If you can solve those three things, then you’re in the right decade and you’re at the iPhone moment,” he said. “And we can confidently say we have solved or are making major progress on all three problems.”

Humanoids IV: “If we had 100,000 robots today that all worked, our two commercial customers would take them all,” said Adcock, not able to leverage scaled up supply chains because they do not yet exist, it’s still early. Which nation wins remains up for grabs. “And we could sign on fifty Fortune 100 companies by the weekend. We are bombarded by demand. The supply of humans is going down.” The working age population is in steep decline across the developed world. “There is unbounded demand. We could ship 1-million robots this month if they were all ready to go.”

Humanoids V: I asked Perplexity to tell me about the leading companies that are producing humanoid robots. Perplexity is an AI that excels in searching the web for the most up-to-date information. I now use different robots depending on the type of task. I’d guess that someday soon we’ll all have multiple robots. Anyhow, Perplexity gave me the top ten companies. Brett Adcock’s Figure, Boston Dynamics, many others I’d never heard of. Tesla made the list of course, its Optimus humanoid robot, run on a proprietary AI, getting smarter every day I drive.?

Anecdote: We were discussing thought experiments. Charlie, my youngest. He’s studying Hobbes and Locke, English political philosophers. Hobbes saw humans as selfish, brutish, competitive, driven by fear, desire. Locke was more optimistic. Hard to know who is right, but running thought experiments helps. I like to explore such things in the extreme, searching for vivid contrast. Like many of our discussions, we wandered. What will humans become in a world where low-cost super-intelligent humanoid robots are ubiquitous? It won’t be long; a decade, two, certainly inside three. After Aristotle fled Athens, Philip II of Macedon employed him as a tutor for his son, who became Alexander the Great. What will we become when every young, curious mind explores our world with the greatest tutor in all human history? Once robots can make more robots, and produce our food, mine metals, build infrastructure, houses, manufacture goods, provide every service imaginable, police streets, fight wars, what will we be left to do? Every luddite has feared revolutionary technologies, only to discover that unimagined jobs appear from the ether. But in a future where our robots are faster, stronger, more agile, and more intelligent than us, will that pattern repeat? The cost of nearly everything will collapse, and so perhaps humans will manufacture more of the things that robots cannot, children. Many of them. They may become our finest luxury, our greatest source of pleasure, meaning. And in that world of material abundance, what will money even mean? Most of us will have very little use of it, other than to acquire things robots cannot make more of, which includes meaningful experiences with other humans, and real estate in the most beautiful places on earth. Which will become priceless, that process may have already begun. And in that world of plenty, denied the ancient excuse that we compete for survival due to scarcity, we may finally answer the question that consumed both Hobbes and Locke.

Good luck out there, ?

Eric Peters

Chief Investment Officer

One River Asset Management

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Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, converse with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.

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