✨ Paul Krugman and Azeem on the world in 2025

I had a great chat today with Paul Krugman to kick off the Substack Market Forecast Summit. This was our first public conversation but not the last. There was a great amount to discuss at the intersection of economics, technology and geopolitics. We framed it under a broad umbrella – the world in 2025.Almost 5000 readers tuned in as we explored what this year would bring – we covered tariffs and trade wars, the new information ecosystem, AI and debt levels. Here are our takeaways.1. The new information ecosystemPaul’s recent transition from the New York Times to Substack reflects a broader shift in how established thinkers engage with audiences. We explored how platforms like Substack are fundamentally reshaping the circulation of ideas — we are able to have deeper and more nuanced discussions without traditional editorial constraints.At the same time, both of us caution that “democratising” is not the same as “egalitarian.” While there are no editors blocking new voices, attention concentrates around a smaller set of popular authors — a power law distribution (or Zipf distribution). So, while many can publish, those who arrive early or have an existing platform, benefit disproportionately from network effects. Platforms like Substack still wrestle with how to discover genuinely new voices who may not enjoy the built-in audience of legacy columnists or big-name media personalities.2. A strong US economy—for nowPaul emphasized that the US economy is entering 2025 in remarkably strong shape. With unemployment at historic lows, inflation moderating to around 2.5%, and sustained economic momentum, the US’ performance stands in stark contrast to other advanced economies. The UK has seen virtually no growth for a decade, while much of Europe struggles with stagnation.However two major threats stand out:* Trade wars: the potential for dramatic tariff increases, such as a proposed 25% levy on Mexican imports, could inject substantial uncertainty into global markets* Tech bubble concerns: tech valuations have reached levels reminiscent of the late 1990s dotcom bubble. While tech giants generate substantial revenue - unlike the speculative companies of the late 90’s - current valuations depend heavily on assumptions about sustained market dominance, something history suggests is difficult to maintain.3. The AI disruptionPaul compared current tech enthusiasm to the late-1990s dot-com bubble, noting parallels in speculative fervor. However, there are differences: tech giants today possess massive real revenue streams, unlike many late-90s startups that promised growth without earnings. Still, today’s valuations rely heavily on the assumption of entrenched “moats” that prevent competitors from quickly entering AI market.I pointed out that rapid adoption of generative AI tools has validated at least part of the hype. While the 1990s saw limited infrastructure and slower adoption curves, modern companies already sit atop robust cloud and digital systems, making AI implementation faster and potentially more lucrative. The AI transformation has unique challenges for labour markets. While historical patterns suggest new jobs always emerge to replace those lost to automation, the current wave targets high-skilled, white-collar work — from law to coding to creative fields. Paul is concerned about how AI might make industries more hierarchical. Top performers can now leverage technology to extend their reach dramatically, concentrating more value in fewer hands. I pointed out that the startup scene is getting excited about the prospect of “single-person unicorns,” companies valued at over a billion dollars run by one person directing armies of AI agents.4. Technology as a substitute for globalisationOne of the most striking observations came towards the end of our discussion: technology is increasingly substituting for globalisation. Whether through AI-driven automation replacing offshore labour, 3D printing enabling localised production, or the falling cost of renewable energy allowing poorer countries to become more energy self-sufficient, global supply chains are undergoing a structural transformation. The geopolitical consequences of this shift remain to be seen.At the same time, economic nationalism is on the rise. From the Biden administration’s industrial policy push to European moves towards protectionism, governments are prioritising domestic resilience over hyper-globalised efficiency. This trend will likely continue in 2025, reshaping trade patterns and investment flows.5. The inequality challengeRising inequality remains an unsolved challenge. Market forces alone won’t correct the extreme concentration of wealth — historically, shifts toward more equitable societies required deliberate government action through stronger unions, progressive taxation, and wage policies. Whether today’s governments have the political will to enact such measures remains an open question, particularly given the potential for AI to further concentrate economic power.6. Looking aheadOverall, we both see the US economy as unusually strong. Inflation, while slightly above the 2% target, is near historical lows and unemployment hovers at levels reminiscent of a “goldilocks” labor market. Political shocks pose the biggest immediate threats. Paul and I might return to this topic in coming months.  This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.exponentialview.co/subscribe