Hey Reader,

It's hard to see past the chaos in the White House, but I want to share something with you that I told my team a few months ago:

When history tells the story of the 2020s, AI will be the main character, and Donald Trump will be a footnote.

This week it seems likely that Trump will send his country and several others into a recession. But despite his temporary power and his fame/infamy, he's a small man in a big decade. Our grandkids will be reading history books like this:

To understand why Trump, Biden, Musk, Zuckerberg and all today's famous players will be forgotten in 50 years, just look at this week's tariff debacle.

Trump really dislikes international commerce. This is a pretty extreme, idiosyncratic and unpopular view, but it matters because the president basically has unilateral power to decide on tariffs, which are taxes on things that cross the border.

To get a sense of Trump's thoughts on this topic, here is an excerpt from a book by renowned journalist Bob Woodward, showing a note Trump wrote by hand on a draft speech: "Trade is bad."

Basically he has an extremely shallow and innumerate view on international trade – he believes that if we buy more from a country than we sell to a country, the other country is cheating us.

This led him to put huge tariffs (taxes / duties / levies) on any physical object that crosses the border, from toys to car parts to bananas. (Not just products made in China, but everywhere.) This crashed the stock market because most companies don't have the profit margins to cover these new costs – for example, iPhones would be 30% more expensive and small businesses will effectively be bankrupted by sudden bills when their made-in-China products arrive at American ports. Example: This small American business that makes products for special-needs children will owe an extra $79k in new tariffs.

Also, Trump put some tariffs on uninhabited islands, which is just funny and probably does deserve a spot in the history books.

This is a big deal and probably will be a huge setback for the American economy over the next year.

But let's think through it – in the age of AI, what will happen when you kill international trade?

Trump's stated goal is to "re-shore" manufacturing jobs, though it's unclear which ones he wants to bring back. (Making Nikes?)

In practice, if the new tariffs remain in place, we'll likely see this sequence of events:

1. The prices of all imported products (toys, fruit, lumber, electronics, car parts, etc.) will go up. This will also affect made-in-America products that use imported packaging or components.
2. Since incomes are not going up at the same pace, people will have to make hard choices and buy less stuff. (Notice that this is inflation.)
3. The companies that make products with imported components will earn much less profit.
4. These companies will have to lay off workers, since payroll is in their control but tariff costs are not.
5. Since it is unclear how long the tariffs will last (3 weeks? 3 years?) and very likely they will go away under the next president, the companies will not invest in new factories in the U.S., since you need 10+ years of certainty to make a big investment like that.
6. The cycle repeats as layoffs further reduce consumer spending.
7. Companies need to figure out how to survive with higher costs of goods and fewer employees.

And that, of course, is where AI enters the scene.

We've been talking about this for two years now, but I'll reiterate the most important trend of the century – everything that humans do is getting better, faster and cheaper as a result of AI.

So if you run a company whose import costs just went way up, which seems like a safer path?

Door 1: Invest millions in a new factory in the U.S. to avoid tariffs that will probably be moot long before the facility opens.

Door 2: Automate your business operations and dramatically reduce payroll to offset the new taxes on every physical object that crosses the border.

(Note: There's also a lot of stuff, like bananas and coffee, that can't be made in the U.S. at any price, so automation is the only cost-control option for those companies.)

Now, you can see why Trump has so little control over the future.

Anything he tries to do to strangle trade (or otherwise mess with the economy) will just accelerate the inevitable shift to more and more human "knowledge work" being sped up by AI.

In short, no matter how loud anybody yells about trade deficits, high tariffs will have the opposite of the intended effect. Rather than "bringing factories back" to America, tariffs are simply a blunt and self-destructive way to accelerate the adoption of AI in the office and robotics on the assembly lines.

The problem: "slower" AI adoption is a lot better for society

We're all here because we're early AI adopters, and to some degree we stand to benefit from AI moving faster. But in my mind, moving too fast toward AI replacing a large amount of human knowledge work is a bad idea.

Right now there is a (healthy) barrier to greater AI displacement because it is really bad for a company's reputation to fire workers en masse.

But if the tariffs force those firings, then you basically get the worst of all worlds. Companies adopt AI in a way that rapidly displaces humans, the average family has less money, and the whole system gets rapidly distorted in a way that hurts everyone.

The better version would be that as older employees age out of the workforce, companies either don't replace them, or they replace them with younger AI-savvy employees who are many times more efficient thanks to their "partnership" with AI. Most existing jobs are retained while new job creation adapts to AI.

That's why a 10- or 20-year AI transition to is so much better for society than a 1- or 2-year blitz.

As you may have noticed, 95% of companies have barely scratched the surface of what is possible with AI as it stands today. (This is why the newly minted AI consultants in our programs are scoring so many projects right now.)

And even in a recession, the major tech companies will be pouring billions of dollars into making AI better, faster and cheaper, over and over again.

To put it another way, our destination is clear – and to the extent our leaders can make a difference, it's by guiding the economy to an AI-powered future the hard way (massive, unnecessary, self-inflicted disruption) or the easy way (gradual, steady change).

To a better future,

– Rob