Thought of the Week:
I’ve been wanting to write for some time about the link between Plato’s Allegory of the Cave and the growing use of artificial intelligence (AI) in business; it just hadn’t completely come together for me until this past week. My wife and I were sitting on the couch, watching the Olympics, and we saw something that shocked us. It wasn’t the pure artistry and athletic ability of Simone Biles and the other members of the gold medal winning U.S. women’s gymnastics team, nor was it the viral video and photograph of Brazilian surfer Gabriel Medina and his board suspended in mid air after catching a near perfect wave in Tahiti. It was a commercial that you may have seen. The ad tells the story of a young girl who is a promising runner, just like her father once was. When the father realizes his daughter idolizes an Olympic hurdler, he encourages her to write her hero using Google’s new AI program. Immediately, my wife and I looked at each other in bewilderment. At the same time, I exclaimed “Why not write her a handwritten note…in cursive,” while my wife said plainly, “The Internet and AI is going to make us all idiots.” There it was, the inspiration I needed to include Plato’s allegory in this week’s thought. As you may remember from The Republic, the Allegory of the Cave is a depiction of how humans perceive reality and whether there is any higher truth to existence. It tells the story of prisoners held in a cave, their only reality being the contrived shadows their captors project on a wall in front of them. One prisoner is released and is able to ascend into the sunlight of true knowledge. However, upon his return, the prisoners who have never left captivity feel threatened by his knowledge to the point of violence. Socrates reasoned that one must be shown the light before one can grasp reality on their own. A contemporary analogy to Plato’s allegory is the notion that by ingesting through our choice of media only what Silicon Valley executives, advertisers, and politicians want us to think, see, and read, most of us are akin to the chained prisoners in the cave watching the shadows cast before them. The entire train of thought reminds me of AI’s expanding presence in business and even our company’s own use of Copilot. Each of us needs to be cognizant of the fact that ChatGPT, Gemini, and other AI programs are only as good as the algorithms their captors place within them. We need to be careful to use AI as a tool to better understand and communicate business reality rather than becoming a modern-day prisoner in AI’s cave. It is not lost on me that 2024 is the 25th anniversary The Matrix, arguably the greatest film adaptation of Plato’s famous allegory (with the possible exception of The Lego Movie). In The Matrix, the protagonist, Neo, was offered the choice between a red pill or a blue pill—reality or simulation. In business we need to make sure that the use of AI provides us with insight into business reality and does not merely offer the replacement of one simulation for another.
Thought Leadership from our Consultants, Think Tanks, and Trade Associations
Capstone Envisions What a Harris Presidency Might Look Like for Energy, Environment, and Trade. The bottom line is that a potential Harris administration would maintain President Biden’s climate momentum by continuing to implement the Inflation Reduction Act (IRA), managing the role of China in U.S. decarbonization efforts, and expanding environmental policies in line with Democratic Party priorities. Vice President Harris would be expected to govern as she campaigns, being less vocal about progressive policy ideals and focusing on building the Biden-Harris record. In terms of energy, VP Harris would continue the Biden administration’s focus on implementing economy-wide energy and climate policy. She would emphasize the benefits of finalizing IRA guidance, and her victory would end talk of its repeal. Despite being a harsh critic of U.S. oil and gas production—one who aimed to ban fracking, vowed to end federal support for the oil and gas industry, called for a halt on new oil leases on federal lands, and pushed for greater regulation of methane emissions—most of her previous stances differ from those she supported as vice president where she took a step back from her anti-oil and gas rhetoric. However, environmental justice would remain a priority in a Harris administration. Concerning PFAS and chemicals policy in general, a Harris administration would continue the Biden White House’s aggressive approach to regulation. On trade, Harris says she is not a protectionist and has emphasized the importance of pursuing trade policies that create export markets for U.S. products rather than pursuing broad-based tariffs that isolate the U.S. economy. According to her public statements, it could be argued that VP Harris and former president Trump have starkly different approaches to trade policy. Harris views tariffs as burdening Americans by raising the cost of living, criticized Trump’s imposition of tariffs on over $300 billion worth of Chinese imports, and decried his proposal to introduce a 10% universal tariff on all imports. At the same time, Harris opposed two major trade deals that Biden supported—the U.S.-Mexico-Canada Agreement (USMCA) and the Trans-Pacific Partnership. Her opposition stemmed largely from concerns that neither sufficiently protected environmental or labor rights, prompting her to be just one of ten senators to vote against the USMCA. If Harris wins, she will likely emphasize environmental issues in the July 2026 review of the USCMA, and passage of any new free trade agreements will remain unlikely. While VP Harris’s environmental policies would mirror much of the Biden administration’s work, she will push for harsher stances on domestic resources, going so far as taking actions to curb the lifeline of fossil fuel production and consumption. Her policies as a candidate in the 2020 primaries and as the attorney general of California also indicate that she would lean more progressive than President Biden in certain areas, notably environmental justice and climate litigation against oil and gas companies.
Eurasia Group Says Harris’ Strong Start Sets Up New Ways to Trade on the Election. A consensus shift by market analysts from believing that former president Trump was on track for a 400 Electoral Vote landslide to a now competitive election against Vice President Harris has opened new possibilities of how to position around the election. Potential unwinding of “Trump trades” could emerge related to previous expectations of higher inflation, a looser regulatory environment for crypto, fears of a trade war with China, potential lower corporate tax rates, financial sector deregulation, and a favorable policy environment for fossil fuels. The competitive race also points to new opportunities from a potential Harris administration, including:
- Renewed focus on green energy and increased opposition to expanded fossil energy production.
- Renewed support for Ukraine and a broader recommitment to NATO that drives defense spending.
- Though dependent on partisan control of Congress, the expiration of some of the Trump corporate tax cuts and taxes on high-income individuals would translate into a tailwind for consumer stocks.
- Strong pro-labor stances and more willingness to upend the legislative filibuster would lead to big policy shifts such as the union-friendly PRO Act should Democrats win the trifecta.
“Inside Baseball”
House Starts Early Summer Recess. The Global Policy Group reported that the House started its summer recess a week earlier than planned after Republican leaders gave up hopes of passing all 12 annual appropriations bills before the end of July. Although Speaker Johnson (R-LA) had wanted to pass the bills quickly, relying on party-line votes, internal GOP disagreements derailed those hopes. In fact, three spending bills had to be pulled from floor consideration just prior to the House leaving for its extended recess. While the House did pass one bill just before members left Washington, it was just the fifth appropriations measure passed by the House this year—five more than the Senate has passed. As a result, when lawmakers return to Washington on September 9, they will need to quickly consider a continuing resolution (CR) to avoid a government shutdown when the new fiscal year starts October 1. Such a CR would likely last into December, or early 2025, when a post-election “lame duck” session of Congress would address the issue. That the House chose to start its summer recess a week early is just the latest sign of how difficult it has been to pass substantive bills in the current Congress.
What Does K Street Think about Taxes and ‘Chevron’? According to Punchbowl News’ latest survey, K Street thinks the corporate tax rate is likely to stay right where it is next year if Congress passes a bill addressing the expiring Trump tax cuts. In a survey of senior K Street leaders (the Washington office participates), 57% said the most likely outcome for the corporate rate in 2025 is that it remains at 21%; 33% believe the most likely outcome is that lawmakers raise the rate; and 10% think Congress will cut the rate. With a giant tax cliff on the horizon, companies have been preparing to play defense, and there’s more concern right now about taxes going up than securing another reduction. The corporate world won a big rate cut with the 2017 GOP tax law, setting the current 21% level. Democrats have been pressing to raise corporate taxes ever since, while former President Trump has said he’d like to slash them further. It should also be noted that K Street is expecting serious fallout from the Supreme Court’s decision on Chevron deference. 63% of downtown leaders said the ruling will have a “large impact” on how Congress writes laws, and 28% responded that they think it’ll have “somewhat of an impact.”
In Other Words
“We never use our tools to support or oppose a political party, a politician or any political outcome… Anything that we do before, during, or after the election will be based on the data, the outlook, and the balance of risks, and not on anything else,” Fed Chair Powell responding to a question as to whether the upcoming presidential election would influence their decisions.
Did You Know
According to the National Association of Manufacturers (NAM), each member of the U.S. women’s gymnastics team in Paris has a set of leotards adorned with more than 47,000 crystals in total. Each gymnast on the team has eight Olympic leotards. The retail price of each leotard is about $3,000, with this year’s designs including nods to the American flag and tributes to Parisian fashion and art.
Graph of the Week
With Vice President Harris rising to become the presumptive Democratic presidential nominee, the American Enterprise Institute (AEI) has identified a significant political divide between men and women. A recent Quinnipiac poll revealed that 58% of male voters have an unfavorable view of Harris, while only 29% have a favorable view. If this trend continues, voting preferences will feature a significant gender gap reminiscent of the 2016 election, when Hillary Clinton secured 54% of female votes but only 41% of male votes. What’s more, as young men continue to move to the right, the growing gender divide suggests that Republicans could win the majority of young men’s votes for the first time in over two decades.
