American Consequences - June 2019

Is AI Coming to Get You?

The Upside of Dystopia

How to Survive the Bear Market

Jumping on Opportunities Despite (or Because of!) Down Markets

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CONTENTS Second Anniversary Issue

JUNE 2019 : ISSUE 25

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4 Inside This Issue

46 Toledo, Ohio:

AMERICAN CONSEQUENCES

BY STEVEN LONGENECKER

A Lesson in Successful Failure BY P.J. O'ROURKE

6 Letter From the Editor BY P.J. O'ROURKE

54 Predicting the Next Stock Market "Flash Crash"

Editor in Chief: P.J. O’Rourke Editorial Director: Carli Flippen Publisher: Steven Longenecker Assistant Managing Editors: Chris Gaarde, Laura Greaver Creative Director: Erica Wood Contributing Editors:

BY ROMESH SAIGAL AND ABDULLAH ALSHELAHI

10 What Could Possibly Go Right?

12 From Our Inbox

58 The U.S. Economy's Dirty Secret BY TODD G. BUCHHOLZ

16 Is AI Coming to Get You? BY JOHN TIERNEY

62 How Inflation Could Return BY MOHAMED A. EL-ERIAN

22 More Than a Home BY DR. DAVID EIFRIG

Abdullah AlShelahi, Todd G. Buchholz, Dr. David Eifrig, Mohamed A. El-Erian, Andrew Ferguson, John Phillips III, Austin Root, Romesh Saigal, Buck Sexton, John Tierney NewsWire Editors: C. Scott Garliss, John Gillin, Greg Diamond Cartoon Director: Frank Stansberry General Manager: Jamison Miller Advertising: Ricky D'Andrea, Jill Peterson Editorial feedback: feedback@ americanconsequences.com

66 Paperback Pollyana

26 Small Fortune With Collectible Cars BY JOHN PHILLIPS III

68 Read This

COMPILED BY P.J. O’ROURKE AND LAURA GREAVER

32 The Bright Side of Bad Situations BY CHRIS GAARDE

70 The Final Word

BY BUCK SEXTON

36 The Upside of Dystopia BY ANDREW FERGUSON

86 Featured Contributors

40 The Bear Market Survival Guide BY AUSTIN ROOT

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INSIDE THIS ISSUE

T his month, our magazine turns two years old... Bringing you news that few others in the tired old know-it-all media would publish... American Consequences is meant to be unlike anything else you might read – an unfiltered collection of ideas that matter... Each month, we’ve tackled a big issue that affects your money (and typically, one that common wisdom was wrong about). We hope we’ve helped you go “against the grain” of most American financial pundits. After all, that’s where the money is usually made. And we want to say thank you to the nearly colleague who might be interested in joining us, please forward them this issue. They can sign up to read for free by clicking right here. And this month, following last month’s “Up in Flames” issue on a potential market crash (not bad timing considering May was the worst month for the market so far this year), we’re pleased to bring you some good news – about the “silver lining” of disasters... Editor in Chief P.J. O’Rourke starts us off with a look at why creative destruction is one of the most powerful forces in capitalism. And P.J. has also penned an incredible article on Toledo, Ohio – tracing the history and future of a city that is a lesson in “successful failure” and the grit that makes America great. Seasoned portfolio manager Austin Root shows three dead-simple ways that can help 300,000 of you who read our words. If you have a friend, family member, or

you survive the coming bear market. Auto writer John Phillips shows the upside, downside, and hype of investing in classic collectible cars. And Dr. David Eifrig shows how your home can be more than simply a place to live... it can be one of the biggest no- brainer investments ever. Contrarian journalist and author John Tierney asks who of us is afraid of artificial intelligence... and has a solution for when AI goes bad. Meanwhile, former White House speechwriter Andrew Ferguson details the •  American Consequences editor Chris Gaarde shows us the bright side of three potential “bust” scenarios that could start soon. • Top economic adviser Mohamed A. El- Erian shows how inflation could return. • Two Michigan engineers think they’ve figured out how to predict the next flash crash. • And former White House director of economic policy Todd G. Buchholz shares the dirty secret of the U.S. economy. And our resident anonymous Book Grump turns his frown upside down for a very limited time in this issue... while former CIA analyst Buck Sexton finishes out our issue with a look at the current border crisis. Tell us what you think of our magazine at feedback@americanconsequences.com. Regards, Steven Longenecker Publisher, American Consequences upside in dystopia. Plus, don’t miss...

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From Editor in Chief P.J. O’Rourke

SCHUMPETER’S CREATIVE DESTRUCTION

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LETTER FROM THE EDITOR

The amazing thing about free-market capitalism is that it gets rid of stuff that doesn’t work. You say, “Amazing? When stuff doesn’t work, of course you get rid of it!”

If you’ve got a washing machine and – no matter how many times the supposedly lonely Maytag Man has been to your house – it just can’t be fixed... do you keep piling dirty clothes into it? You’ll run out of things to wear. No, you haul the old appliance to the dump and acquire a new one. This is what free- market capitalism does with businesses. When a business is no longer profitable, investors dispose of it and put their investment capital into another business that does (or will, investors hope) make a profit. (Which is pretty much what happened to Maytag – the brand name bought by Whirlpool and practically everybody at the Maytag company fired.) This is – sorry, Maytag employees – common sense. And common sense is really all there is to the free-market capitalist system. But there are other systems... systems that don’t involve common sense in the use of capital, systems that spend money in strange and silly ways.

Of these systems, the biggest is big government, with its ethos of “If it works, tax it... If it doesn’t work, subsidize it.” When the government has a broken washing machine, it breaks the dryer to ensure job security for the Maytag Man, then funds a grant program for free clean t-shirts. Or, to take an actual example, there’s the War on Poverty. The federal government has spent hundreds of billions of dollars on poverty programs. (It’s currently spending more than $668 billion a year, according to the Cato Institute.)

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When the government has a broken washing machine, it breaks the dryer to ensure job security for the Maytag Man, then funds a grant program for free clean t-shirts. “

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LETTER FROM THE EDITOR

Capitalism... is by nature a form or method of economic change and not only never is but never can be stationary... The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets... The process of industrial mutation that incessantly revolutionizes the economic structure from within , incessantly destroying the old one, incessantly creating a new one. Schumpeter thought that creative destruction was so creatively destructive that it would, in the end, create the destruction of capitalism itself by undermining capitalism’s institutional framework, that framework being common sense. If we allow common sense to be undermined – and big government is down in that mine working hard with picks and shovels – Schumpeter’s point will have been proven. But the real lesson of Schumpeter is that uncommonly brilliant economists are not uncommonly sensible. They are odd men who can see the inside intricacies of an economy but take more than 175 years to look that economy in the face – watchmakers who understand every spring and gear of clockwork but who can’t tell time. And Schumpeter himself was an odd man. In his diary, he set himself three goals – to be the greatest economist in the world, the greatest horseman in Austria, and the greatest lover in Vienna. He claimed to have achieved two out of three goals but didn’t say which two...

The War on Poverty began with LBJ’s Great Society initiative in 1964. For a while it worked. The U.S. poverty rate was 19% in 1964. By 1974, it was 11.2%. But over the next 45 years, the poverty rate had... a poor run. In the midst of the present economic boom, in 2017 (the latest figures available), the U.S. poverty rate was 12.3%. If poverty were a business, we’d all be broke. This common sense of the free-market capitalist system is obvious. So, obviously, it was the first thing economic theorists noticed about free markets when they began studying capitalism in the late 18th century. Not. It wasn’t until the brilliant Austrian economist Joseph Schumpeter (1883-1950) published his book Capitalism, Socialism and Democracy in 1942 that economists’ attention was drawn to the common-sense fact that abandoning what doesn’t work is what makes what works work . Schumpeter called this process “creative destruction.” It’s been a catch phrase to describe business cycles ever since. He made it sound more complicated than it is: If poverty were a business, we’d all be broke. “

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June 2019

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WHAT COULD POSSIBLY GO WRONG?

Financial hopes and dreams in the making

Mexico is a leading exporter of oil to the U.S. while also being a leading importer of U.S. gasoline. If U.S. gas exports decrease due to a trade war, that excess supply could drive gas prices down even more.

It’s all downhill from here...

According to travel group AAA, we’ve probably already seen the highest gas prices of the year. In a June 5 report, AAA said that the recent declines in oil prices would mean $0.10 less per gallon on average, versus last year. At the time of the report, the national average for regular unleaded gasoline was $2.79 a gallon... That’s down from $2.89 in May, and $2.94 a year ago. That’s because crude oil prices are roughly $13-$20 cheaper than last summer... Futures prices for West Texas Intermediate crude (WTI) – the U.S. benchmark – were $51.68 a barrel. That’s the lowest price since January, according to Dow Jones Market Data. With prices down 22% from their most recent high in April, the dip marked WTI’s fall into a bear market. AAA also warned that trade tensions with Mexico could have an impact... but in a good way.

Mortgages hit a 2-year low...

This month, the average interest rate for 30- year fixed-rate mortgages fell to 4.23% from 4.33%, the lowest level since January 2018. In response, many homeowners are rushing to refinance their mortgages, but the low borrowing costs aren’t exciting new and first- time buyers. Despite mortgage refinance activity increasing from 39% to 42% of total applications, new home mortgage applications fell about 2%... only 0.5% higher than a year ago. The Mortgage Bankers Association (MBA) attributes this disparity to higher home prices and a shortage of entry-level homes. For many buyers, the housing prices aren’t worth the lower mortgage rates...

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“Likely impacted by the financial market volatility caused by the trade tensions, purchase application volume declined for the week,” said MBA senior vice president Mike Fratantoni. “Potential homebuyers may be more cautious given the heightened economic uncertainty.” The U.S. Federal Communications Commission (FCC) is looking to make it easier to protect yourself from robocalls... The plan, passed in early June, authorizes carriers to automatically identify and block unwanted robocalls. Rather than just blocking a phone number, carriers could use analytics and data to pinpoint things like a sudden burst of calls from a single source. Ultimately, the goal is to slow the tsunami of robocalls to home and mobile phones in recent years. This May alone, there were 4.7 billion robocalls, and that’s out of nearly 25 billion in the U.S. so far this year, according to YouMail, a call-blocking company. By YouMail’s numbers, there were 48 billion robocalls in 2018, up from 31 billion the year before. The FCC’s plan would allow phone companies to block calls without gaining permission from subscribers. (It does not require companies to inform customers either.) Companies may be required to provide enough information for customers to decide whether to stay in or opt out, but it’s too soon to know what that would look like. The end of robocalls?

Some experts warn that nuisance and illegal callers may still find a way to get through, which the FCC acknowledges. Phone companies overseas won’t be required to take advantage of the FCC’s call-blocking systems and consumers could face fees for using them. Calls originating from overseas could present a technical challenge. So far, carriers are on board but cautious. A spokesman for telecom giant Verizon said the company was “encouraged” by the plan. The company says it intends to use its new authority “to more effectively protect our customers from robocalls.” AT&T sounded less convinced... Although the carrier says it’s determined to “offer our customers best-in-class tools to combat unlawful robocalls,” there are concerns... One sticking point is the need for protection against being punished for blocking calls that don’t deserve to be intercepted... and that the call blocking may not distinguish illegal telemarketing and scams from calls the subscriber wants, like from their pharmacy or bank. As YouMail CEO Alex Quilici said in a recent interview, “Grandma doesn’t get her prescription and something bad happens to her? That’s catastrophic.” In the end, fewer robocalls are a good thing. And the FCC’s efforts to address nuisance calls may ultimately lead to a service where grandma can still get her medicine without also being scammed for her savings.

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FROM OUR INBOX

I would like to see term limits for all elected or appointed government employees, including Supreme Court judges... I think we should stop treating these people as royalty. We fought a war to get away from a monarchy. – William M. P.J. O’Rourke comment: William, I used to disagree with you about term limits. I figured we’d just end up trading old experienced fools for fools that were young and naïve. My attitude was: “Do you want a dog who knows where the bones are buried? Or do you want a dog who’ll dig up the whole yard?” Ed Crane, president emeritus of the Cato Institute, and I argued about this for more than 20 years – he being pro-term limits and me con. Then one day Ed told me, “P.J., there’s just one more thing I’ll say about term limits – everybody in Washington is against them.” And I said, “Ed, you’ve just won the argument.” (P.S., William – though my royalty checks will hate to hear me say this – I think you can get my books, used, pretty darn cheap on Amazon.) Re: Goodbye to Classical Liberalism... P.J. you wrote an excellent article and should be highly commended for it. However, the end of Classical Liberalism began sometime after the end of the 19th century in the USA and virtually ceased after WWII, because America and Americans were no longer pacifists. Separated by two oceans from most of the rest of the world,

Re: Our Newest Readers Weigh In

Keep up the good work and the hard fight for individual freedoms. The evil of “war for profit” and profiting from prisons should end. – H.T. P.J. O’Rourke comment: Thank you, H.T. But as to your comment about the evil of profiting from warfare and incarceration... It’s not that I disagree, exactly. However, I would ask you to think about the word “profit.” Making money is one form of profit, but there are other forms as well – such as making people obey you. I worry less about those who are out to get money than I do about those who are out to get domination over others. I wish politicians were just greedy instead of being greedy for power. One may have qualms about corporate weapon-making or private penal institutions, but, in the end, it is the power-mad, not the money-mad, who start unnecessary wars and write laws that jail too many people. The articles are insightful, thorough, and interesting! Please keep them coming! – Cliff F. P.J. O’Rourke comment: And you, Cliff, are insightful, thorough, and interesting for reading them! Re: Our ‘Up In Flames’ Issue Thank you for all the good information, and I especially like P.J. O’Rourke. I own many of his books. I wish I could afford to own more.

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20 years as a foreign correspondent, I don’t think of it that way. I see America as “World Ghostbuster.” There was a T-shirt that U.S. troops were wearing during the Gulf War. It was a picture of a crossed-out Saddam Husein with the slogan “Who Ya Gonna Call?” What would a return to “classical liberalism” consist of? Howwould it work in light of world changes? [The article] seems like rabble rousing to no end. -Jon G. P.J. O’Rourke comment: Touché, Jon. And “rabble rousing to no end” is a pretty good description of journalism in general. I’ve always said that one thing I love about being a reporter is... “My job’s just to turn on the kitchen light and watch the cockroaches scurry. It’s somebody else’s job to step on them.” But if, for a moment, I take off my reporter’s fedora with press pass tucked in the hatband and think like a normal person, I still don’t have a very good answer to your question. The best I can do is wish for a democratic government devoted to – and an electorate that demands – adherence to basic liberal principles: individual liberty, individual dignity, and individual responsibility. A slightly different view of history: There is no such animal as “Classical Liberalism.” There is only liberalism. Some political parties adhere to some core values and principles of liberalism. Those that use the term “Classical Liberalism” borrow from liberal philosophy and call it their own. Or, those liberals that try to separate from the Republican/ New York Times version of liberalism. – August L.

someone or some group (the elites) decided that it was time for the USA to become world policeman. [It was] the dumbest, most- sorrowful decision ever made on behalf of all Americans and the rest of the world. The result is well-known. Since that time there has been virtually no time that U.S. forces were not fighting a conflict, war or terrorism somewhere in the world. Who was the biggest winner during this period? [It was] the military industrial complex and the cronies (wealthy families and corporations) behind them, even though Eisenhower warned all of us when he stepped down as president... It is no wonder that there is blowback, but as far as I am concerned [it’s] not enough. President Trump and the so-called “populists” are hopefully just the start... The dictatorship of the EU may be ending and all I can say is good riddance. – William C. P.J. O’Rourke comment: William C., I take your point... up until Pearl Harbor. As the commander of that attack, Admiral Yamamoto, made clear modern technology prevents any country from being isolationist, let alone pacifist, no matter how many oceans separate it from the rest of the world. Yamamoto, by the way, tried to dissuade the Japanese government from attacking the U.S. But they wouldn’t listen. Did Osama bin Laden listen? Will Putin? Will Xi Jinping? Better, in my opinion, to have an America that’s “Sometimes Wrong but Always Strong.” I can also understand your dismay at America being “World Policeman.” But, having spent

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FROM OUR INBOX

war loses it. Look what happened to Japan in the 1980s. They kept giving us radios, TVs, stereos, and cars and we kept giving them little green pieces of paper. The Japanese couldn’t figure out what to do with the little green pieces of paper except give them back to us in return for assets with inflated prices. By the 1990s we had all the radios, TVs, stereos, and cars and all the little green pieces of paper and the Japanese had stuck their economy where the sun never rises.

P.J. O’Rourke comment: August, I confess to not quite understanding your last sentence. But anyway, I use the term “Classical Liberal” because, in contemporary American parlance, “Liberal” has become simply a synonym for “favoring larger government programs” – whether those programs are, classically speaking, “liberal” or not. (This isn’t the case elsewhere. The conservative political party in Australia is the Liberal Party.) What I mean by “liberal” is what I described to Jon, above – a political philosophy in which government both restrains itself from interfering in individual liberty, dignity, and responsibility and endeavors to defend and expand individual liberty, dignity, and responsibility. Re: ‘China Strikes Back... ‘ The Trade war is necessary. China has been infiltrating into our country and our culture, and the past has come to haunt us. The previous administrations were selling our country one piece at a time thinking we wouldn’t notice... And we wondered why everything was so affordable. These people had no right to sell what doesn’t belong to them... We can never back down from fighting the good fight. – Laura S. P.J. O’Rourke comment: I beg to differ, Laura. “Trade War” is worse than an oxymoron, it’s two words that don’t go together at all, like “Love Punch.” Trade is definitionally mutually beneficial. War is definitionally not. Also, anyone who sets out to “win” a trade

Trade war? What trade war? – Richard Z.

P.J. O’Rourke comment: Richard, please have a talk with Laura S.

Trade war? Yes, I’m for it. – Cynthia E.

P.J. O’Rourke comment: Cynthia, please have a talk with Richard Z. Re: ‘Overheating About Global Warming’ So, the truth that real scientists have been telling us for half a century now is somehow “fear mongering.” NOPE. Our grandchildren and generations after them will properly rage against our stupidity. – Phil S. P.J. O’Rourke comment: I don’t have to wait for grandchildren, Phil. My own kids are already doing a fine job of raging against my stupidity. (Though that has more to do with my not knowing who Lil Nas X is than climate change.) American Consequences isn’t some web canyon dug on the Internet so that right-thinking people can hear their right thoughts echoed. We run articles because we

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“Practical. Insightful. Helpful. Educational. Can’t ask for much more.” HHHHH –GAMECOCKS44

think they’re interesting. And Bjorn Lomborg makes an interesting point that overheated emotions do little to stem global warming. It cannot be denied. [Climate change] is occurring but everyone skirts the real issue here: Global overpopulation. – Greg A. P.J. O’Rourke comment: Greg, “overpopulation” is always a tricky argument to make. What if all those people who populate the globe decide that you are the one who is one too many? The answer is not to oppose people but to oppose the institutions that oppress those people and keep them from being freer, more prosperous, and better educated. An interesting side-effect of relieving oppression – experienced by every country in the world that’s become freer, more prosperous, and better educated – is a lower birth rate. I remember telling friends about overpopulation in the early ‘70s. I chose not to have children, planted trees, went solar, recycled as much as I could... Drought was [a factor] of the Syrian crisis. Now the same problem is happening in Central America. Coffee growers produce one-tenth of the crop versus the past 10 years. Fires are displacing hundreds of people, and now flooding is destroying the center of our country. Things are only going to get worse. – Rochelle C. P.J. O’Rourke comment: Whenever I’m feeling down, I just give Rochelle C. a call!

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June 2019

By John Tierney

Who’s afraid of AI? Too many of us. Particularly since Boeing’s computerized pilot started flying airliners into the ground. But our fears have less to do with the dangers of artificial intelligence than with the limitations of natural intelligence – the circuits in our brain that keep us worried about imaginary threats. It’s not that the AI doomsayers are stupid. Some of them are quite smart. Elon Musk, who called AI “far more dangerous than nukes,” knows enough rocket science to send a SpaceX payload into orbit. The late Stephen

Hawking, who warned that AI “could spell the end of the human race,” knew his cosmology. But they aren’t in the business of building AI. The people who do that have a hard time imagining a robot capable of controlling one screaming toddler, much less taking over the world. Yes, robots will keep getting smarter, but even superintelligent machines won’t fulfill the fearmongers’ nightmares. Let’s consider the supposed array of threats from AI:

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AI will CAUSE MASS UNEMPLOYMENT.

– but then, it never occurred to the Luddites that there would ever be a job for someone calling himself a “life coach.” AI will FAIL CATASTROPHICALLY. Recently, when the Ethiopian and Indonesian Boeing 737 MAX airliners crashed within five months of each other, the plane’s automated anti-stall system became the poster villain for AI. But one reason the accidents attracted so much attention is that flying has become so safe. Airliner crashes used to be in the news routinely, but the annual number of fatal accidents has plummeted in recent decades. More people than ever are flying, and there hasn’t been a fatal crash by a U.S. airline since 2009. Why are there fewer crashes? In no small part, it’s because they’re on autopilot so much more of the time. Even when you take the recent Boeing crashes into account, the cockpit computers have a far better safety record than human pilots do. (And the recent crashes may be due less to bad software than to human failures, like skimping on the amount of training that pilots received on the new system.) There’s no reason to expect the cockpit computers will stop improving, because aviation engineers will learn and adapt from these mistakes. That’s how technology advances. When Detroit produced deathtraps like the Chevrolet Corvair and the Ford Pinto, they weren’t harbingers of doom on the highway. They were lessons that led to much safer cars.

It’s true that robots are replacing workers in factories and other industries. A $100,000 machine named Flippy went to work grilling burgers at a fast-food chain in California last year. Robots are roaming the aisles of Walmart tracking what’s on the shelves, and may soon replace delivery drivers. New technology has been displacing workers for centuries, and yet we somehow keep finding new work to do. Nearly everyone used to be a farmer, and now nearly everyone has a different job. As machines relieve us of drudgery and satisfy our basic needs, we constantly discover new needs that machines can’t meet. We don’t have to grow our own food anymore, so we pay people to import it from around the world and cook it for us. And no matter how adept Flippy becomes, we’ll always appreciate a chef who can add a personal touch to the meal. Machines can supply us with all kinds of cheap clothes, just as the Luddites feared when they smashed textile machinery in the 18th century, but people are still willing to machines, the more we value things that are made by hand. The more that machines do for us, the more time and money we devote to the services they don’t: therapists, artists, yoga instructors, tour guides, auto detailers, lawyers, concierges, baristas, publicists, and consultants of every stripe. We don’t know today what new jobs will exist in the future pay high prices for designer labels. The more products that are made by

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AI will CONQUER HUMANITY AND RULE THE EARTH. Will computers ever become as intelligent as humans? “Yes, but only briefly,” said Vernor Vinge, the science-fiction writer and computer scientist who in 1993 described that scenario as the “technological singularity” – the moment when all the old rules would no longer apply. (He borrowed the term from astrophysicists, who call the edge of a black hole a singularity because the normal laws of physics no longer apply beyond that point.) Once computers became as smart as us, Vinge reasoned, those computers would build smarter computers, which would build even smarter computers, and before long there’d be AI with so much brainpower that we’d be dimwits by comparison. They’d regard us the way we regard goldfish. Vinge predicted that this singularity would occur by 2030. With all due respect to Amazon’s Alexa, today that possibility doesn’t look much more likely than it did in 1993, and many cognitive and AI scientists doubt that it will ever occur. While computers will do more and more tasks better than humans, whether they’ll ever become truly intelligent – and achieve consciousness – is still very much in doubt. But let’s assume that it happens someday. Let’s assume, for the sake of argument, that they became so smart and powerful that they could conquer us... Why would they want to? From Arthur C. Clarke’s 2001: A Space

Odyssey , to HBO’s Westworld , science-fiction writers have envisioned AI determined to wreak havoc on their creators. It’s a useful literary device, and an evil omnipotent computer makes a convenient villain. (A docile electronic servant with limited powers wouldn’t do – Alexa is not thriller material.) The prospect of an AI lusting for world domination seems plausible to audiences because we imagine that any intelligent creature would share humanity’s aggressive tendencies. But computers don’t have testosterone running through their circuitry.

While computers will do more and more tasks better than humans, whether they’ll ever become truly intelligent is still very much in doubt.

Human males evolved with the hormonally driven urge for dominance because it helped them reproduce their genes. Conquerors like Attila the Hun fathered more children and were able to provide them with more resources to survive. But computers aren’t looking to enlarge their harems. They’re not trying to win the favor of female computers, and they’re not going to gain anything by

AI IS ITCOMINGTOGETYOU?

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from wolves who thrived by playing nice with humans. The wolves that practiced the Attila the Hun strategy, attacking humans and their livestock, have dwindled in numbers, but ones that evolved to be less aggressive are flourishing. Dogs don’t need to prey on sheep because they’ll get a meal from the shepherd as long as they follow his orders. They don’t bite the hand that feeds them – and that’s the obvious strategy for an AI to follow, too. IBM’s Watson may be smarter than us at chess and Jeopardy , but it depends on us for its very existence. It’s made up of silicon and other components that are mined, fabricated, shipped, and assembled by people all over the world. Even if future AI could somehow do all these tasks by themselves, why would they want to bite all the hands that are already feeding them – and will heal them if there’s a massive power failure or some other catastrophe that wipes out their circuits? If nothing else, we’re a backup repair service. AI will MAKE US HELPLESS AND TERMINALLY INCOMPETENT. Even if superintelligent computers aren’t malevolent conquerors, the argument goes, we’ll eventually cede so much control to them that we won’t be able to survive without them – and we won’t know how to fix them if something goes wrong. So like the Boeing pilots in Indonesia and Ethiopia, we’ll perish if the systems go haywire. It’s true that we’ll lose some of our old skills as

burning down a village and carrying off the women. As the cognitive psychologist Steven Pinker has noted, the “Robopocalypse” scenario is based on a fundamental fallacy about the nature of intelligence. “Intelligence is the ability to deploy novel means to attain a goal,” he writes in Enlightenment Now. “But the goals are extraneous to the intelligence: being smart is not the same as wanting something.” So fretting that superintelligent computers will yearn to conquer us, in Pinker’s words, “makes about as much sense as the worry that since jet planes have surpassed the flying ability of eagles, someday they will swoop out of the sky and seize our cattle.”

We love to imagine what could go wrong and then spend too much time and money averting it.

If computers ever become smart enough to start plotting their own survival strategies, they don’t need to emulate Attila the Hun. A better role model would be the title character of Tom Edison’s Shaggy Dog , Kurt Vonnegut’s clever short story based on the premise that dogs are actually superintelligent creatures (it was Edison’s dog who actually invented the light bulb) but are all pretending to be dumb so that they can laze around and let humans do the work of feeding and sheltering them. There’s a kernel of evolutionary truth in Vonnegut’s story: Today’s dogs are descended

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computers do our work for us. If self-driving cars become common, a lot of people will prefer to rely on computer chauffeurs and not bother to learn how to drive themselves. The computers’ safety record will be so much better than humans’ that there’ll probably be bureaucrats and activists campaigning to outlaw human drivers. But there will also be people reluctant to cede all control to a computer, as well as traditionalists who still prefer driving themselves. Just as there are people who still like to bake their own bread and create their own pottery even though machines can do the job more efficiently. The ability to drive a car will not be lost forever. But what if some virus suddenly strikes all the world’s cars, causing them to careen off the road or crash into each other while their humans sit there helplessly? Or what if a computer running the world’s power grid crashes, or if some glitch sends armies of drones to bomb cities while human commanders sit there powerless to stop them? Those are the kind of nightmare scenarios that AI-phobes like to imagine, to which the best answer is: Really? We’re supposed to believe that humans are smart enough to build advanced computers but too dumb to design any safeguards or notice any vulnerabilities until it’s too late to save ourselves. In reality, we’re prone to err in the other direction — to fear new technologies so much that we cling to the old ones for too long or take unnecessary precautions. Railroads kept using brakemen and flagmen long after their functions had been automated. Some buildings still have

John Tierney is a contributing editor at City Journal and a contributing science columnist at the NewYork Times . He is the co-author, with Roy Baumeister, of Willpower: Rediscovering the Greatest Human Strength . Of course, there will always be AI glitches that we don’t anticipate, but we can always respond the way we did to the problems in the Boeing 737 MAX’s computer. It took just two crashes for humans to ground the whole fleet of planes. When AI goes bad, there’s one simple and immediate solution: Pull the plug. elevator operators. The risk of an airline being hijacked in the post-9/11 era is minuscule now that cockpit doors are locked, but federal air marshals are still riding planes. We love to imagine what could go wrong and then spend too much time and money averting it. In the late 1990s, the world’s computer networks were supposedly going to be incapacitated when the Millennium Bug flummoxed operating systems unprepared for a year ending in 00... But January 1, 2000 passed with few problems, even in the countries that spent little money preparing for it.

AI IS ITCOMINGTOGETYOU?

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ORE THA THE MORTGAGE CRASH GAVE US THIS

In 2018, the housing market

was booming. Prices for existing homes were on the rise. Sales were brisk. And builders kept planning more construction through the end of the year. Then came news that existing-home sales fell 5% this March and continued falling in April. But the problem isn’t that people don’t want to buy houses... It’s that there aren’t enough houses to buy. Simply put, the demand is there, but the supply is not. And that’s going to lead to rising prices. To understand this, let’s have a quick and easy Economics 101 lesson...

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June 2019

A HOME BIG OPPORTUNITY IN HOUSING TODAY

By Dr. David Eifrig

PLAYING CATCH-UP When demand exceeds supply,

prices rise to bring the relationship back into equilibrium. There are very few times when you see an imbalance in a supply and demand relationship. Since we have a free market in the U.S., supply should typically always meet demand. After all, if there’s demand that’s not being met, some entrepreneur will find a way to satisfy it. But we’re not seeing that today in one industry. For years the economics in this sector have been off, and that has created a buying opportunity today...

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There was a homebuilding boom in 2000- 2005 because demand for homes was through the roof. Everyone needed to have that new five-bedroom house, so housing starts – an indicator that reflects how many new homes are being built – skyrocketed. Then the housing market collapsed. And we saw new home construction crash during the recession. But the economy slowly began to recover after 2010. Unemployment started falling. Wages slowly started to increase. Consumers gained confidence and were spending again, and they were ready to buy new homes... The only problem is that homebuilders didn’t keep up with demand. Even though housing starts gradually increased, demand still far exceeds supply. The problem isn’t that there aren’t enough people selling homes to match the number of buyers... It’s for lack of inventory.

OUTWITH THE OLD... The chart to the right shows the ratio of houses for sale versus houses sold. When the ratio is low, it tells us that buyers have few homes to choose from. The homes that are on the market are extremely old, too. According to the National Association of Home Builders, the median age of owner-occupied homes in the U.S. is more than 35 years. More than half of all homes were built before 1980 and 38% were built before 1970. When potential home buyers – consumers who have benefitted from a growing economy and a raging bull market – are looking for new homes, a 30- or 40-year-old house isn’t first on their list. They want something new... a house that doesn’t need constant maintenance and repairs. The point is that there are too few homes buyers want on the market today. More homes need to be built... Period.

NEWHOUSING STARTS

New homes surge then collapse...

2,100 1,900 1,700 1,500 1,300 1,100

Homebuilders try to catch up

900 700 500

1986

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2016

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June 2019

MONTHLY SUPPLY OF HOUSES IN THE U.S.

MORE BANG FOR YOUR BUCK Another positive for the housing market is mortgage rates. Mortgage rates have dropped in recent months, which makes homes more affordable to buy. Just a few months ago, rates were close to 5%. While a 1% difference may not seem like much, it can add more than $100 to a standard monthly loan payment (assuming a 20% down payment on a $300,000 home). Over the course of 30 years, that’s tens of thousands of dollars. Today, the setup for homebuilders is just too good to pass up. And stocks that are involved in home improvement will benefit as well. The houses on the market right now are just too old. If you have some extra cash floating around and want to put it to use, I think a play on housing is a smart move.

12 11 10

9 8 7 6 5 4

There are few homes on the market today

2007

2009

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2019

2017

AVERAGE 30-YEAR FIXED RATE MORTGAGE

5.0%

4.5%

4.0%

3.5%

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2016

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2019

Subscribers to Dr. David Eifrig's Retirement Millionaire service are up nearly 45% on a housing-related stock

he recommended in April 2018... one of over 20 open and “winning” positions up as much as 76% on average.

To learn more about how you can try Retirement Millionaire risk-free for 30 days, click here.

American Consequences

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June 2019

HOWTO MAKE A SMALL FORTUNEWITH COLLECTIBLE CARS AS THE SAYING GOES, STARTWITH A LARGE ONE

(another $9,800), licensing and registration (at only $100 per year, that’s $4,900). Then, of course, cars fall apart even when they’re not driven. Rubber rots — tires, hoses, wipers, belts. Fluids turn to syrup, bearings seize, and gaskets degrade into confetti. Your collectible car has to be started at intervals and, oops, now it needs a fourth battery, and why aren’t the turn signals working? So, let’s add maintenance at, say, $500 per year, a fair estimate. At which point, to get that 1970 Boss 302 to a 2019 auction, an owner could easily have stuffed $84,770 into a car worth $68,000.

Investing in cars is like Russian roulette but with more to lose. The man who bought a $5,200 Ford Mustang Boss 302 in 1970 now sees the same car selling for $68,000 and regrets selling prematurely. Missed an opportunity for big bucks? Not really. For starters, $5,200 in today’s money is $34,249, but let’s not even factor that into the equation. Let’s instead consider the 49 years he had to pay for garaging the car ($2 per day equals $35,770), insuring it ($200 per year equals $9,800), insuring the premises

By John Phillips III

CLICK HERE TO READ THEWEB VERSION

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Talk about fun. And that doesn’t include transportation to the auction and the steep auction fees. How would I know all this? I’m the guy who bought that 1970 Mustang. Still, it’s theoretically possible to make money on rare and old cars, but I’ve never done it. Please note that the dollar figures below are true sums paid at recent sales. And keep in mind what the winsome philosopher Mike Tyson once said, “Everyone has a plan until they get punched in the mouth.” Among American muscle cars, the big money for years was in Chrysler Hemi-powered machines from the late ’60s and early ’70s. They’ve since peaked, but Baby Boomers aren’t done with this niche. Good examples can be had for $250,000-$350,000. Buy now. The current gold standard in muscle cars is the 1969/70 Mustang Boss 429 ($350,000 and up) and the rare 1969 Camaro COPO 427 ($250,000 and up). And, of course, there’s an always-strong market in late ’60s Shelby Mustangs (a ’68 sold at $168,500, but it’s still possible to find examples around $100,000). I know a Boss 429 owner who paid $11,000 last year for two period-correct Goodyear Polyglas GT tires. See what I’m saying? The muscle cars likely to show a profit in five to 10 years are late ’60s/early ’70s Pontiac GTOs, Buick GS 400s, and Oldsmobile 442s, with handsome examples fetching $65,000 or so. Meanwhile, collectors have lost their minds Hemi Challengers, ’Cudas, and Road Runners were fetching $1 million.

1970 FORD MUSTANG BOSS 302

By Sicnag

2007 PORSCHE CARRERA GT

By Brian Snelson from Hockley, Essex, England

1969 VWMICROBUS

By Andrew Bone fromWeymouth, England

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June 2019

Still, it’s theoretically possible to make money on rare and old cars, but I’ve never done it. And keep in mind what the winsome philosopher Mike Tyson once said, “Everyone has a plan until they get punched in the mouth.” over Ford’s two runs of two-seater GTs (a 2006 version for $384,900 and a 2017 version belonging to professional wrestler/ rapper/actor John Cena that went for $1,540,000). Speaking of names, unless yours is Edsel, there’s virtually no way to get on Ford’s list of preferred buyers anyway. Corvettes, you ask? Chevrolet has always built too many to make them wildly valuable, but if you’re going to invest, concentrate on the second-gen cars, such as a 1966 427 convertible ($150,000), and look for “Bloomington Gold” status, which assures the car has been inspected by persons whose Vette fixations suggest a medical emergency. And, uh, you know all about “matching numbers,” right? Among muscle cars, there exists one outlier that is guaranteed to rise in value: the 2015 Camaro Z-28 ($40,000 to $50,000). It’s a racecar that you can drive on the street — as in no radio and no AC. Find one and salt it away. If you’re drawn to Mercedes-Benz products, recent offerings are usually land mines. Mercedes is currently cursed by perceived over- the-top repair costs, such that resale values have

tanked. A luxo-cruiser 2010 S550 sedan, for example, recently sold for $19,000. There is money to be made, however, with 1963-1971 SLs with the thin-line “Pagoda” roof ($102,000 to $187,000). Buy now – they’re still plentiful. Unlike Mercedes-Benz, the Porsches earning big profits right now are fresh meat: 911 GT2s, 911 GT3s, and 911 GT3 RSs. Want proof? An owner who paid $293,200 for a 2018 GT2RS flipped it — not in a ditch — for $428,600. Another likely appreciator is Porsche’s 2004-07 Carrera GT supercar ($650,000 to $775,000), which should be a million-dollar objet d’art in five years. With Porsches, mileage is everything. Slink away from anything showing more than 70,000 miles, and, as is true with almost all collectibles, have no congress with cars modified by anyone but the manufacturer. Always wanted a Ferrari? You should know that the ’60s GTOs and GTBs are the most expensive automobiles in the world. A ’62 250 GTO recently sold for $48,405,000. If you’re thinking of a Ferrari as an investment, look at Daytonas, once a million-dollar car, but a 1972 version recently brought only $600,000. Even better — well, easier to service — are the latter-day Testarossas. Flawless TRs are now in the $120,000 range, when they should be twice that. Plus, they cause onlookers to drop their Dove bars. Over at Lamborghini, there’s still mindless action in 1990 LM002s, which look like

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Ralph Steadman caricatures of Italian tanks ($368,500 to $467,000). The one Lambo that’s currently tempting is the 12-cylinder Espada (a 1970 version for $198,600). Espadas should be attracting closer to $300,000. Get one that’s perfect, because servicing Lamborghinis requires two NASA engineers and a Boston neurosurgeon. Which leaves us sifting through the miscellaneous bin. Look hard at no Dodge Vipers except the final 2014-17 model, which is the only half-civilized version that will likely rise in value. Check out the action in 1994 Toyota Supra Twin Turbos (a ’94 for $51,000), as well as that car’s two period nemeses, the Nissan 300ZX Twin Turbo (a 1996 version for $30,000) and a 1993 Mazda RX-7 for like money. All three are hot right now.

1970 DODGE CHALLENGER RT 383

You might also profitably loiter in junkyards to scoop up any drivable ’60s-era VW Microbus or Transporter (a ’63 double-cab Transporter sold for $64,950 and a ’66 21-window Microbus for $110,000). They’re cheap to restore. If you’re disciplined enough to buy a car and park it in Saran Wrap for 10 years, grab a brand-new Acura NSX, any McLaren (a 2012 MP4-12C for $110,000), an Alfa Romeo 4C, or even the original Tesla Roadster ($45,000 to $60,000), which rides on a Lotus platform (Lotus being a marque investors associate with eczema).

Servicing Lamborghinis requires two NASA engineers and a Boston neurosurgeon.

1962 FERRARI 250 GTO

2017 FORD GT

By Patrick Ernzen

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June 2019

1990 LAMBORGHINI LM 002

By Sicnag

By Mr.choppers

and a 2006 Quattroporte for $17,600). Even if their values don’t take off, well, you’ve still got a Maserati in the garage. Buy a couple fire extinguishers. Jerry Seinfeld is a Porschephile who doesn’t even know how many he owns (60 seems to be an oft-quoted number), and he has become one of America’s foremost home-of- Porsche-research-center Weissach experts. Yet he recently sold a sickly green 1958 356A Speedster for $1.54 million, only to have the buyer sue him for offering a car with a phony provenance. Jerry didn’t know. The point being, if you don’t know, hire someone who does. Me, for instance. I really need money after that whole Mustang fiasco.

There are some surprising bargains right now in latter-day Aston Martins: a 2010 Rapide V-12 sedan for $57,200, a 2008 Vantage Volante for $63,800, and a whole slew of handsome little ’94-’99 six-cylinder DB7s going for as little as $37,950. Astons can often be serviced by Jaguar specialists. There’s also potential in Bentley Continental GTCs, with low-mileage 2010 and 2011 examples fetching only $49,000 to $60,000. Look, too, for late-model Maseratis (a low-mileage 2002 Cambio Corsa Spyder for $16,500; a 2012 GranTurismo Sport convertible with 15,000 miles for $52,000;

John Phillips III was the Executive Editor of Car and Driver and has written about cars for magazines as varied as Harper's and Sports Illustrated . He lives with his wife in Montana's Bitterroot Mountains.

By Latvian98

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