Philosophers amongst you will be familiar with the work of Rene Descartes – a mathematician, epistemologist, and rationalist – much of his work laid the ground for modern philosophy and in particular the strand that has grown out of Hobbes and Locke that informs a lot of the 17^th century and the formation of states and societies thereafter.

There is one eerie and unsettling aspect of his life that is gaining greater attention. Descartes had a relationship with a servant (Helen van der Strom), and their relationship produced a young daughter Francine, to whom Descartes was very attached. Tragically, Francine died of scarlet fever, aged five, and so distraught was Descartes that he had a robot or automata (clockwork, lifelike doll) built in her likeness.

He transported this ‘doll’ with him whenever he travelled (in a casket), and on a trip to visit Queen Christina of Sweden, the crew of the ship on which he was travelling became so alarmed (it was a stormy night) by the robot and Descartes murmurings with it, that they invaded his quarters, seized and broke the ‘doll’ and threw it overboard. Descartes was further traumatized, and whilst it is not clear the incident immediately impacted his health, he died soon after.

Descartes ‘doll’ is enjoying renewed attention for what it suggests about the relations between humans and machines, how robots can potentially replace and even supplant humans in different ways and for the manner in which this can cause consternation.

The relationship between human and machine is a theme that will cut through the advance (or decline) of the world, and we have written about it frequently (i.e. ‘Talos’). As my limited vision can perceive,  will attempt a classification that says there are at least two aspects of this megatrend – the risks that machines take over our (human) world (AI), and the risks that machine led worlds start to exist outside the human one (Defi, Web3/metaverse).

The bad news is that in the case of the former, there is an unknown risk that machines could injure the human race (weaponized AI, the use of AI by ‘bad’ humans and the use of robots in war not to mention the creation of chemical and biological weapons by AI that I referred to in ‘The Final Problem’).

The good news is that ethereal new worlds – Web3 and Defi (decentralized finance), whose architects had boldly proclaimed were independent of the ‘old’ system, now look like they will be adjuncts to it.

While much of the early hype around Web3/metaverse suggested it was a place that humans could stay in for considerable amounts of time, it now looks like a country they can visit or ‘pop in to’. This much was made clear to me as I attended the Validify digital retail conference in Hertfordshire last week, where the consensus view is that Web3 can help consumers (try clothes or mock up house decors) but will not necessarily become a domain that rivals ‘our world’.

Much the same is true of decentralized finance, which has so far failed to rival in the incumbent financial system, but where its most useful elements such as digital asset infrastructure, are being adopted by incumbent financial system players.

In both cases the growing modesty of new ‘inventions’ is correlated with rising interest rates (and falling market liquidity), highlighting that (as with Descartes time in the Dutch Republic in the 1630’s and 1640’s when the Tulip Bubble took place) many triumphs of innovation are to a large extent cheap money in the drag of new technologies.   

In some cases, cheap money and – good design/branding – allows new technology led companies to grab market share, to build new supply chains and to generally make consumer life easier (a small number of fintech and consumer platforms do this). What cheap money also does is allow investors and the wider commercial marketplace to believe that ‘new commercial worlds’ (like the Metaverse) can be created and will have corresponding commercial potential as the human world. The tide is going out on this idea.

To some extent, as expectations of the potential of the metaverse and decentralized finance are deflated, investors and analysts should become more circumspect about AI. AI, the metaverse and defi are very different things – though all driven by the same capital markets, venture capitalists and evangelists.

To my own experience, AI is rooted in data regression analysis – which makes me cynical about it given the time I have spent on econometrics. I do think it is different to Web3/metaverse and defi in that AI can potentially operate in and build out both of these ‘worlds’, as well as ours. AI driven computer programing is an example of such a productivity enhancing application.

What potentially makes it interesting and deadly, to my earlier point, is that it can evolve and enhance the way it has been structured by programmers, to the extent that, to quote Descartes ‘it thinks, therefore it is’. That’s something to worry about.

Have a great week ahead,

Mike

Brexit might be over, at least in the sense that the ‘Windsor’ framework brings much of the legal and political wrangling to an end and opens up the vista of better relations between the UK and the EU. Economically and strategically though, Brexit lives on.

One of the accomplishments of Brexit has been to set very low standards in political behaviour and a very high benchmark for the absurd, so it was no surprise to hear Rishi Sunak praise Northern Ireland’s newfound status in that it enjoys open trade with both Great Britain and the EU, though I did blink once or twice. The risk for Sunak is that Scotland and Wales might want the same, not to mention England.

The Windsor framework was also a coming out of sorts for Sunak as an independent political creature, one that is analytical (the first prime minister to have an MBA) and unusual, in that he does not have the same amount of political baggage as other Tories. In that context he is less attached to the unionist point of view and slightly more rational than some of his predecessors.

Politically, the Windsor deal means several things.

First, the bad blood between London and Brussels is likely over and there will be a more pragmatic, productive approach to working together on defence/Ukraine, innovation and border policing. The EU will now have more political time to spend on ‘strategic autonomy’ and the reordering of its defence and foreign policy, while Sunak will have more time to spend tending to the British economy. Despite ‘Windsor’, Britain still owns Brexit and its economy will still be handicapped by it and still suffers poor productivity, a weakening housing market and anemic investment.

Second, speculation about the breakup of the Union – the reunification of Ireland and Scottish independence, will be tempered for the moment. As soon as Brexit happened my first thought was that it would catalyse dramatic, and hopefully constructive political change in Ireland and Scotland. As we noted last week, Nicola Sturgeon’s departure from Scottish politics plus the

recent ruling from the Supreme Court limiting a Scottish referendum have sapped the moment of the independence movement.

In Ireland, there is also the realization that the case for unification needs a stronger and arguably different basis in the sense of their being more cross border tourism, investment, commerce (this is picking up) and shared public goods (similar health systems for instance).

A lot of imagination needs to go into conceiving what a united Ireland might look like (Brendan O’Leary’s recent book on this is good), ultimately the structure of a united Ireland could well look like a Swiss style federation (see ‘Ireland and the Global Question’ (2006)!). What is also interesting is the role of demographics in changing Scotland and Ireland. This is noticeable in the sense of younger populations that are less rooted in traditional politics, as witnessed by the successes of the Alliance Party in Northern Ireland, and to a large extent the SNP in Scotland.

A third reason to be cheerful is for Northern Ireland itself. More than many other regions in Europe it has suffered the backwardness and intransigence of its own politicians, and the careless neglect of many in London. Whilst politicians in the Major and Blair eras had a sense of the complexity of the North, and in general were careful with this, a string of recent secretaries for state and prominent Brexiteers have displayed a shameless ignorance of Northern Irish politics and society, whilst at the same time treating it as a political pawn. That still seems to be the attitude of Boris Johnson.

My sense is that the vast majority of people across Northern Ireland desire a return to normalcy and I hope that the Stormont’ assembly now sits and the North enjoys a period of uneventful calm, and enjoys the benefits of close ties to the EU. The assembly members may have come comfort in the existence of the ‘Windsor’ brake, but some trepidation that it was designed by the same people who crafted the ‘backstop’.

In that respect, that Rishi Sunak referred to Northern Ireland as the ‘most exciting economic zone in the world’, which is probably an exaggeration that stems from his days as a hedge fund salesman. However, a friend of mine is leading a social impact real estate project to revitalize the centre of Belfast, and as I help along, I can see the potential there is for the city to grow (especially compared to other UK cities).

As a final word, Brexit cannot end until the villain at its centre stage is slain. Sunak now needs to take on Boris Johnson and the ever-delusional Liz Truss – by for example canceling the resignation honours lists of both former prime ministers, by cooperating with civil servants who are investigating multiple breaches of ethics and security by Johnson, suspending Johnson’s part membership and potentially by steering the Tory party away for awarding Johnson a safe seat at the next election. Labour will probably win that, and they could then remake British politics by changing the electoral system (introducing proportional representation for instance). Such a move might well shatter the Tories and produce a new party of the centre and a (far) right one.

If that happened, Brexit might well and truly be over. Though we might also miss it.