Vol. I, No. 12
Covering 22 May - 4 June 2023
Monday, June 5, 2023
Late edition · A Relentless publication
The Relentless Dispatch
All the fortnight that mattered, in technology and in the world, read next to what we were building at the time.
WASHINGTON

The debt-ceiling deal passes with days to spare, and the world exhales at a crisis that never had to happen

A manufactured emergency, resolved at the manufactured deadline, on terms close to where it began. The cost was the anxiety, and the precedent.

President Biden signed a bill on June 3 suspending the federal debt ceiling until January 2025, two days before the Treasury said the government would have run out of cash to pay its bills. The deal, negotiated between the president and Speaker Kevin McCarthy, caps some domestic spending, claws back unspent pandemic money, adds work requirements to some benefit programmes, and, above all, takes the threat of a first-ever US default off the table until after the next election. The House passed it comfortably on May 31 with more Democratic votes than Republican; the Senate followed on June 1.

The terms are close to what a normal budget negotiation would have produced without anyone threatening to detonate the world's financial system. That is the maddening shape of the whole episode. The United States borrows to pay for spending Congress has already approved; the debt ceiling is a separate, redundant vote on whether to honour those bills, and for months one party used the threat of saying no, of a default that would have raised borrowing costs for every government and household on Earth, as leverage. The threat worked, in the sense that it extracted concessions, which guarantees it will be used again. Ratings agencies noted the brinkmanship even as the deal passed. The market's relief was real and narrow: the bullet was dodged, the gun remains loaded and on the table.

TECHNOLOGY

Nvidia touches a trillion dollars, and the AI boom acquires a balance sheet

A chipmaker most people had never heard of two years ago is now worth as much as the largest banks, because it sells the one thing every AI company cannot do without.

Nvidia briefly became the first semiconductor company worth a trillion dollars on May 30, days after it told investors that demand for its data-centre chips was so far beyond expectations that it was raising its revenue forecast by more than fifty percent in a single quarter. The stock had already doubled this year; the guidance sent it up another quarter in a day. The company designs the graphics processors that train and run nearly every large AI model in existence, and for the moment it has no real competition, which means that whatever happens in the war between OpenAI and Google and the rest, Nvidia sells the shovels to all of them.

This is the fortnight the AI boom stopped being a story about chatbots and became a story about capital and physics. A trillion-dollar valuation is the market saying it believes the build-out is real and enormous: that the world is about to construct data centres full of these chips at a scale it has not attempted before. Which raises the question this paper has been noting in the margins for months and now moves to the front page: those data centres run on electricity, vast and growing amounts of it, drawn from grids that were not built for them. The chip is the glamorous constraint. The wire, the substation, the power plant and the cooling water are the real ones, and almost nobody is talking about them yet.

Alongside the money came a warning. A one-sentence statement released on May 30 and signed by many of the field's leading figures, including the heads of OpenAI and Google DeepMind, declared that "mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war." The same people building the data centres signed the note about the danger. The market read the guidance and ignored the note.

INDIA

A signal failure, three trains, and nearly 300 dead in Odisha

One of the worst railway disasters in India's history killed about 290 people and injured more than 1,000 near Balasore, in Odisha, on the evening of June 2, when a packed passenger express was diverted by a signalling fault onto a loop line where a freight train stood, derailed, and was then struck by a second passenger train on the adjacent track. Rescuers worked through the night and the monsoon heat pulling survivors and bodies from the tangled coaches. The railways minister pointed to a fault in the electronic interlocking system that governs which train goes where; an inquiry and a criminal investigation were opened. India runs one of the largest rail networks on Earth, carrying millions every day, and has poured money into fast new trains; the disaster was a brutal reminder that the money must also go into the unglamorous safety systems underneath, the interlockings and the collision-avoidance technology that had been announced with fanfare and installed on only a fraction of the network.

TURKEY

Erdogan wins, and rules for a third decade

Recep Tayyip Erdogan won Turkey's presidential runoff on May 28 with about 52 percent of the vote, extending his rule into a third decade despite an economy wrecked by inflation he caused and a February earthquake his government was slow to answer. He held his coalition of religious conservatives and nationalists, out-organised a fractured opposition, and dominated a media landscape he has spent twenty years bending. The result disappointed Western capitals that had hoped for a reset and cheered no one who worries about the drift of a NATO member toward one-man rule.

IN BRIEF

DeSantis glitches into the race; Meta fined; Uganda; Ukraine brings the war home

Ron DeSantis launched his presidential campaign on May 24 in a live audio event on Twitter with Elon Musk that crashed repeatedly under the load, an embarrassment for a candidate selling competence. The European Union fined Meta a record 1.2 billion euros on May 22 for transferring Europeans' data to the United States in violation of privacy law. Uganda's president signed one of the world's harshest anti-homosexuality laws on May 29, drawing sanctions threats from Western governments. And the war came to Moscow: drones struck the Russian capital's wealthy suburbs on May 30, the first such strike of the war, as cross-border raids and sabotage multiplied ahead of Ukraine's expected offensive.

The Column

The crisis we scheduled

The debt-ceiling standoff was resolved at the manufactured deadline on terms close to where it began. The only real product of the whole exercise was fear, and the discovery that fear works.

By Rebecca Cho

The United States spent months this year threatening to detonate its own financial system, and then, two days before the deadline, chose not to, on terms a normal budget negotiation would have produced without anyone threatening anything. That is the shape of the debt-ceiling crisis that closed this fortnight, and it is worth understanding as a specific kind of failure, the self-inflicted kind, because a country that builds a doomsday button into its own government and then dares itself not to press it has done something genuinely strange, and the strangeness has consequences that outlast the relief.

Start with the mechanism, because the mechanism is the absurdity. The United States borrows to pay for spending that Congress has already, separately, approved. The debt ceiling is a second, redundant vote on whether to actually pay those bills, and refusing it does not cancel the spending; it simply defaults on debts already incurred, which would raise borrowing costs for every government and household on Earth and shake the one asset the whole global financial system treats as risk-free. It is, in effect, a button that blows up the world's reserve currency, wired into the ordinary machinery of government, that either party can threaten to press. There is no good reason for it to exist. It exists, and once it exists, the threat to press it becomes leverage, and leverage that works gets used again.

And that is the real product of the exercise, the thing that will outlast this fortnight's relief: the confirmation that the threat works. Concessions were extracted, a crisis was manufactured and resolved, and everyone learned that manufacturing the crisis is an effective tactic, which guarantees the next one. This is how a system teaches itself to be fragile: not through a single catastrophic choice but through the discovery that brinkmanship pays, made a little more certain each time the bullet is dodged. The markets exhaled this fortnight because the bullet was dodged again. But the gun is still loaded, still on the table, and the lesson of the fortnight is that pointing it works. A country that has built a self-destruct button and proven that threatening to use it is politically profitable has not resolved a crisis. It has scheduled the next one, and every one after that.

Field Notes
A Relentless build, told plainly

Moving a marketing operation off one platform and onto another, without losing the customers in between

The front page is about a trillion-dollar chipmaker. This is a smaller kind of engineering: taking a company's entire relationship with its customers and rebuilding it on new rails while the relationship keeps running. No client is named.

By Alosh Paul

Some of the most delicate work I have done had nothing to do with a flashy product. It was migration: taking a company's marketing operation off one platform, a well-known inbound-marketing tool, and rebuilding it on Salesforce Marketing Cloud, without dropping a single customer through the gap. That sounds like plumbing, and it is, but it is plumbing with people's inboxes on the other end, and the failure modes are not abstract. Migrate badly and you email the wrong person the wrong thing, or you email the right person the same thing five times, or you go silent on someone in the middle of the sequence that was about to turn them into a paying customer. Trust, once you have broken it in someone's inbox, does not come back with an apology.

The work has two halves, and people always underestimate the second one. The first half is the assets: the templates, the data, the subscriber lists, the segments, moved and rebuilt and checked. Laborious, but knowable. The second half is the journeys, and the journeys are where the real operation lives. A welcome sequence for a new subscriber. A win-back sequence for someone who has gone quiet. An unsubscribe flow that has to work perfectly and instantly, because the one email you must never get wrong is the one to the person who asked you to stop. Promotional sends timed to the customer's own time zone. Each of these is a small piece of software that runs automatically, forever, on real people, and each one existed on the old platform in a form that could not simply be copied across. It had to be understood, then rebuilt, then tested against live behaviour before it was trusted.

Here is the lesson I carried out of that work, and it is the same lesson as the railway disaster on this fortnight's front page, which is a strange thing to write and I mean it precisely. The visible part of the system, the fast new train, the shiny campaign, gets the attention and the budget. The invisible part, the interlocking that decides which train goes where, the unsubscribe flow that decides who gets silenced, is what actually keeps the thing from hurting people. You migrate the campaigns and everyone claps. You migrate the unsubscribe logic correctly and nobody ever knows, which is exactly the measure of having done it right. I built the boring half as carefully as the visible half, tested the journeys against real sends before cutting over, and set up a way to keep the new platform and the customer records in sync so the two never disagreed about who had asked for what. The migration went quietly. Quiet was the whole achievement.

The Ledger
AI
Nvidia's guidance makes the build-out real in dollars; a one-line extinction-risk statement makes the anxiety official; the market bought the first and shrugged at the second. The money and the warning now come from the same signatures.
Data centers & power
This is the fortnight the subject earns the front page. A trillion-dollar chipmaker implies a data-centre construction wave, and data centres draw enormous, growing power from grids not built for them. The wire is the real constraint. Remember this line.
Rates
Debt-ceiling deal signed; default averted until 2025. The Fed meets mid-June and is expected to pause after ten straight rises, then watch. The Treasury will now flood the market with bonds to rebuild its cash, draining liquidity.
Real estate
Regional-bank panic quieted, commercial-office distress not. US 30-year mortgage 6.79 percent (June 1), climbing again as the pause looks shorter than hoped.
India tech
The Odisha crash is a safety-systems story with a technology-policy core: the collision-avoidance system existed, was announced, and had been installed on a fraction of the network. The gap between the announcement and the coverage is the whole tragedy.
What we called wrong
For months this Ledger kept "Data centers & power" as a quiet line saying "nobody is pricing the electricity yet." That was the right call and we buried it too low. As of this issue it is a front-page subject, and we should have promoted it a month ago when Nvidia first flagged accelerating demand.
The Back Page

Simply the best

Tina Turner died on May 24, at her home near Zurich, at 83. The story is told so often it has worn smooth: the girl from Nutbush, Tennessee, the years of abuse from Ike, the night in 1976 she walked out of a Dallas hotel with thirty-six cents and a gas-station credit card and nothing else, and then the second act that dwarfed the first, a solo career begun in her forties that made her, for a while, the biggest rock star on the planet. What the smooth version leaves out is how hard the second act was to start, how long she played small rooms and took the television spots that more precious artists refused, how completely she rebuilt a life and a voice that a man had spent sixteen years trying to break. She sang about that without self-pity and danced like the floor owed her money. She became a Swiss citizen, took up Buddhism, and by the end seemed, genuinely, to have found the thing the songs kept reaching for. She was, the phrase is unavoidable and for once exactly right, simply the best.