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Buying AI and Using It Well Are Two Different Things

Adoption headlines suggest a technology sweeping through the economy. The harder question is whether companies are building anything new with it, because that is what actually shows up in growth. Here is a number you have probably seen some version of: roughly one in five firms and businesses are now adopting AI, according to Census data . It sounds like a technology spreading fast. And in a sense, it is. But adoption figures answer the easy question, the one about whether companies have brought the tool in the door. They say nothing about the harder and more important question, which is what those companies are actually doing with it once it arrives. That second question is the one I care about, because it is the one that decides whether all this activity adds up to a stronger economy. A tale of two adopters Imagine two companies that both report adopting AI. They look identical in the statistics. The first uses AI to trim expenses. It automates a few routine tasks, speeds up some pap...
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Why Cheaper AI Could Mean More of It, Not Less

Making a powerful technology cheaper does not always shrink demand for it. Often it does the opposite, and that pattern is worth keeping in mind as the cost of running AI falls. Most coverage of artificial intelligence focuses on what the technology can do. The figure I keep coming back to is a quieter one: what it costs to run. That number, more than any single capability, will shape how far AI spreads and how much it ultimately changes the economy. The number behind the question There are estimates suggesting that the cost of processing for a model with one trillion parameters could fall by roughly 90 percent by 2030. That is not a modest discount. It is the price of a powerful capability dropping to a tenth of what it is today. The instinct, when a price falls like that, is to assume spending on it falls too. Cheaper AI, lower AI bills, end of story. But that instinct is usually wrong, and the reason has a name. Efficiency does not lead to thrift It is called the Jevons paradox: im...
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A Supply Shock Has Two Acts. We Keep Watching Only the First One

Higher prices are the headline. The slow erosion of demand that follows is the part that actually decides how rough the landing gets. Picture a negative supply shock the way most coverage frames it. Costs jump, growth gets pinched, and the economy ends up in that uncomfortable spot where prices climb while activity drags. That framing is not wrong. It is just incomplete, and the missing half happens to be the half that matters more for where growth goes next. Having spent years studying economies at very different stages of development and having sat on the Federal Open Market Committee as these questions played out in real time, the pattern I keep coming back to is this: A supply shock is not one shock. It is a first shock that can summon a second one. The initial blow lands on supply and shows up as inflation. Then, with a lag, it can reappear on the other side of the economy as a negative demand shock. And that delayed second act is usually where a real slowdown takes root. The ear...
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The Grocery Receipt Tells a Different Story Than the Inflation Report

Prices are cooling in the data, and the public is more worried than ever. The contradiction dissolves the moment you stop treating inflation as one thing. Right now, in 2025 and into 2026, the price pressure people feel most is back where the whole episode started: food and energy, with goods alongside. The cause this time is geopolitical rather than pandemic logistics . Tariffs have added up to 0.7 percentage points to goods prices over the past year and a half. The war involving Iran has pushed energy costs up, since roughly 20 percent of the world's oil moves through the Strait of Hormuz, which has been under blockade for several months. And because somewhere between a quarter and a third of globally traded fertilizer passes through that same strait, food prices have climbed too. These are the prices households meet weekly and sometimes daily, at the pump and the checkout, which is why this latest pressure lands so hard on the public mood. And that brings up a puzzle worth sitti...
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