We Need An Intelligent Democracy

“We can easily forgive a child who is afraid of the dark; the real tragedy of life is when men are afraid of the light.”― Plato

This week in the Business Brief

In light of this week's election results, here are some important thoughts to consider; they are certainly weighing on many of us.

The Markets: A wild week post-election.

Personal Log: Caught between Rock and a Tariff...what it will mean to retailing

Politics: It was all about the Economy

Artificial Intelligence:

- A new Intelligent Democracy

- Identifying AI text it's not flawless

At the end of the day: Democracy's Evolutionary Phase

The Markets

Private prison stocks rose by about 40%; no explanation is needed. Overall, the DJIA jumped +1,946, S&P500 +267, and NASDAQ +1,587. In Canada, the TSX increased by +504.

What is the expectation of all this run-up? Lower inflation, less regulation, lower dependence on imports, and more people working by deporting illegal immigrants. In addition to a mandate to Make America First in AI. In July of this year, that statement was in a Washington Post Article, and a few days ago, Inc.com had this article on what a second Trump Presidency could do with AI. This includes advanced AI capabilities for the military.

By the way, if you're Canadian and expect the same kind of run-up in the market if we have an election. Don't bet on it. And the following articles will explain why.

Personal Log: Caught Between A Rock and a Tariff

The world is now bracing for the US to implement 10-20% tariffs; interestingly, economists believe that they will increase prices in the US, quite the reverse of what voters might expect. Economists predict this could increase US prices by 5.1%. Of course, the logic is to bring manufacturing and jobs back, but this isn't a quick fix and could send many companies into turmoil.

Decoupling from globalization is a novel idea but not one without pain, and essentially tariffs will bring many Western economies their to their knees. There is no logic to it. Peace exists because we have a geopolitical-economic balance. It is not perfect, but it keeps the global economies moving.

Tariffs will hurt GDP in Canada, as they will in the UK and the EU. Sending the world into economic turmoil makes no sense because it will weaken global democracy, play into authoritarian regimes' hands, and create instability.

However, the Trump administration will also be after China with 40-60% tariffs. China isn't the problem. It's Western consumers. We like cheap stuff, or shall I say affordability! This will cause prices for basic goods like clothing and appliances to rise. The impact on retailers will be detrimental. An already slower economy could see the purging of weaker players, and stronger ones focus on greater productivity to remain competitive.

The outcome is that Canada, the UK, and the EU create different alliances and become isolationists. Tariffs on Canada will raise prices and lower the Canadian dollar and GDP. The Bank of Canada will have to introduce a stimulus, lowering interest rates to keep the economy from declining. This isn't a recipe for economic growth or growth of housing or jobs. We should be concerned, and for whatever reason, as I wrote this, I had an image of a box of "Lucky Charms" cereal pop into my thoughts because we may need it, or worse, that's all we could afford to eat.

Politics: It was all about the economy.

I have often mentioned in this newsletter that sixty percent of the population lives paycheck to paycheck. Elections are the only opportunity they have to be heard about their struggle. I don't believe that social issues are not important to them. But when you struggle to pay bills, fill the fridge, and keep a roof over your head, unable to buy the things you want to give your kids, your priorities are elsewhere.

I will not debate the virtues of one candidate or party versus another. The outcome of the US election, which, like many of you, I stayed up to watch, was no surprise for me despite all the polls. It was and has been about the economy. It was a referendum on inflation. The stock market has been soaring with growth, but not for this sixty percent of the population. Profits were all based on inflation, which has weakened the hearts of many Western economies. Wars have added another burden. That discussion is for another day.

Unfortunately, the real issues will likely continue to be ignored. Primarily, the impact of globalization and technology, for the last three decades, they have both eroded opportunities. Technology has made Industries more productive, and globalization has seen manufacturing move overseas. Natural resources are shifting towards more sustainable ones; mining and oil demand will be different in twenty years. Everyone expects prices to return to 2019 levels and the industries with their associated good-paying jobs to return. Regrettably, that is not about to happen.

Workers in the West are right to be concerned about their futures from the US and Canada to Europe. The average income of someone living in Shanghai or Beijing in 2023 was about $24,500 USD. That income offers a very comfortable and affordable lifestyle. For anyone to have the same affordability and comfort in the West, the average income would have to range between $85 to $100K in USD and even higher in major city centers.

In third-world or authoritarian nations, the sixty or eighty percent struggling population will never be heard nor their issues addressed. The election results in the US were only a surprise if you're not listening to 6 out of 10 of your neighbor's voices; that's how Democracies work.

Artificial Intelligence - A New Intelligent Democracy

For the last two years, I have advocated that Canada must lead in AI. It must become our new economic resource, and we must do everything to develop and retain it. We cannot allow the 'Brain Drain"  of Canadian talent or the likes of dismantling the AVRO Arrow  67 years ago, forever putting Canada behind its NATO commitments. Canada must lead, and the federal and provincial governments must appoint MPs and MPPs who will be specifically responsible for developing AI technology firms in Canada. If the world were to be protectionist, we should also do everything to protect and scrutinize any investment interests of external parties on our AI capabilities and advances.

We must make AI our new economic agenda, meaning we will have to direct and invest in developing the most trained and capable society in the development and uses of this technology. Oil has but another fifteen to twenty years before we have moved to other energy sources; trying to save this industry from a shifting world makes no sense. And we would be selfish not to address the environmental risks associated with this.

Canada needs to become the poster child of Intelligent Democracy, not one of division and unrealistic idealism tied to an era of the Second World War. But the time to act is now, which means changing our bureaucratic systems' agenda. If we do not change our vision, we risk becoming a nation subjugated by an old guard of wealthy oligarchs and oligopolies who only want to protect their industries.

To be very transparent, this is a brief outline of a Chapter, "Intelligent Democracy," in my new book, "Predictive Leadership - How Humans and AI Will Transform Organizations, Innovation, and Competition."

Identifying AI Text It's Not Flawless

Within the next five years, humans will be writing like AI, or will AI be writing like humans? Newspapers and writers are already using AI applications. I use Grammarly, but beyond that, while I can afford it, I can't be bothered to pay for a lot of other services. I use Grammarly here on LinkedIn because it saves me time for corrections. Even then, it is not perfect. And when I am in a hurry, I post it like it is with errors!

Recently, a 13-year-old student was accused of writing a 308-word essay using AI. The school caught her, or so they think. Here's the dilemma: Most applications that catch AI text are flawed. After a quick search and reading their disclaimers, many of these sites point out that they are not 100% accurate. As you read the article from The Toronto Star, even AI academics point out these detectors are flawed.

And it gets a little more terse that people are losing their jobs for using AI. This article from Gizmodo is startling in how people lose credibility and jobs to a flawed system. This practice of firing people will end shortly as more companies deploy AI capabilities, and we ask humans to work with the technology. As we read the content being sent to us by machines, our use of English and the style of writing will also change, as will the machines. What is currently happening is like a witch hunt, and teachers, some afraid of being replaced, could be pushing this too far. However, to be fair, they have a right to point out that students are taking shortcuts and not learning. No teacher or education system should have the right to publicly humiliate or destroy the development and confidence of a child.

At the end of the day - Democracy's Evolutionary Phase

The US election results have spooked and surprised many. But not me. I expected the situation to play out as it did. Much to the frustration of my friends and family, I did not buy into the polls. I believed they were missing on the misery of society, and while all the social issues matter, I believed whoever they believed would offer economic security would win.

But I do argue that democracy is in a very important evolutionary phase. It seems like a cycle of the past is repeating itself. In the late 1890s and early 1900s, we saw similar shifts as we moved from agriculture being a major employer to introducing mechanization. Globalization went too far; It did not make everyone wealthy. Today, it is automation and AI.

Democracy's Revolutionary Phase will need to be more intelligent, focusing on ensuring that no one is left behind. It was thought that democracy should only be left to those who were educated and successful. That was the worst social mistake made. A lack of university education doesn't mean a society is less intelligent or aware. The educated, super-rich, and wealthy companies had better pay attention. Rome fell because it wasn't paying attention.

Thank you for reading this week's issue of The Business Brief.

For more information about the book, this newsletter, and speaking engagements click on the image or send me an email: minakakisg@inceptionretailgroup.com