From NPR, The government shutdown is now the longest in U.S. history. AI ,’big tech’, the US economy (in terms of GDP), and the stock market are booming during what is the longest government shutdown ever. Google stock keeps making new highs. Open AI valued at $1 trillion is a given; the question is when. Yes, in b4 ‘the stock market is not the economy,’ as people like to say as if it’s some clever retort, but it’s generally a leading indicator, and appears unfazed.
First, this vindicates the libertarian argument that the government is bloated, given the minimum disruption to people’s lives and the overall economy despite such a long shutdown.
Second, predictions of bubbles are useless and of no actionable value. Warnings of an ‘AI bubble’ keep falling on deaf ears. From hussmanfunds, “The S&P 500 stands at the most extreme level of valuations in history.” People said this 2-10 years ago. It’s such a useless metric. Overvalued markets can become even more overvalued. At some point, you may never get a chance to buy if you sit it out. Pundits said NVDA was overvalued when it was ‘only’ worth $1 trillion, compared to $5 trillion last week.
Third, this agrees with my prescient Jan 2022 post “From Big Government to Big Tech” and November 2023 “Big Tech and the future: A mini-manifesto“, which predicted the boom of ‘big tech’ being concurrent with the decline of the power of the federal government, but also how the government is increasingly deferential to tech companies.
As I wrote last week, Trump rolled out the red carpet vip treatment to many of the same tech companies that opposed Trump during his first term and censored his supporters on social media, or donated nothing. All of this was so predictable, as I said in 2024, writing:
‘Big tech’ companies will also thrive. Tax cuts, stimulus, and deregulation are a bigger tailwind than the headwind of tariffs. Trump knows that Silicon Valley is a major source of money and influence and is the future economically (not those coal towns or factory jobs politicians love to romanticize about), so pleasing tech people is very important even if there is ideological friction. Tech companies are bigger contributor to the stock market, too, compared to a decade ago. Nvidia is something like 7% of the S&P 500 now, which is a record for any individual stocks, surpassing even Apple.
NVDA stock is an even larger share of the S&P 500, and is up 30% since Trump was re-elected.
In 2022, when wokeness began to fall and Biden’s approval ratings nosedived, the leading tech companies started to come to the realization that they were betting on the losing horse and began to pivot. Trump avoided federal prison, effectively securing the 2024 GOP nomination. Yet again, I correctly predicted Trump would avoid jail time and would not be precluded from running.
Right now, we’re seeing leadership effectively being outsourced to AI and tech companies, which are more efficient. Billions of dollars has been pledged to AI and other initiatives despite the shutdown, in order to boost American competitiveness against China’s AI efforts, and with a great sense of urgency. By comparison, the debate over the legality of Trump’s tariffs has been a fraught matter, now being dragged through the Supreme Court, which thanks to the shutdown and a backlog, will also be a drawn-out process.
Pretty much everything is shutting down or slowing down in government as AI and big tech companies operate at breakneck-speed. This trend began during Covid, which saw the boom in work-from-home, cloud productivity software, and delivery apps, which defecto acted as infrastructure when everything else was shut down. Covid stimulus money also poured into tech, such as Netflix, Amazon, Shopify, and of course, Door Dash and Uber Eats.
These companies also proved much more efficient as well compared to government. The government knows this. Why wouldn’t the government avail itself of this opportunity to save costs by outsourcing to tech companies, which is what we’re seeing now. Maybe at some point all government will be shutdown and replaced by AI. Unless there is some crisis or or something that urgently needs to be put to a vote, why not let AI run it. Or just wind it down, save for the bare essentials? The success of the shutdown shows smaller government is truly possible.