Roundup #86: Unintended consequences

Noah Smith · Noahpinion · August 12, 2026 at 08:27 · ⏱ 25 min read  | Read on Substack ↗
Summary
The article argues that many current economic and political trends are driven by unintended consequences and statistical illusions, such as the falling labor share being partly a tax reporting artifact and AI complementing rather than replacing Indian outsourcers. It contends that while AI is driving macro-productivity through capital intensity, its direct impact on worker output remains bottlenecked, and warns that reliance on single resources (like Botswana's diamonds) or permissive urban drug policies ultimately degrade economic and social wealth.
  • •Right-wing influencer viewership is dropping significantly, with figures like Nick Fuentes and Benny Johnson seeing massive declines from their 2024/2025 peaks.
  • •The decline in the U.S. labor share is partially a statistical illusion; reclassifying S-corp profits back to wages adds 0.9 percentage points to the 2017 labor share.
  • •Uncounted stock-based compensation accounts for approximately $200 billion in 'missing' labor income, explaining about a third of the labor share's fall since the late 1970s.
  • •The 2016 extension of the OPT program for international STEM graduates increased local firm creation by 1% and boosted native high-skilled employment by 0.5%.
  • •Indian service exports are booming despite AI fears, suggesting AI is currently acting as a complement to human labor rather than a substitute.
  • •Permissive 'harm reduction' drug policies in cities like Seattle, which saw 7,089 overdose deaths from 2016 to 2025, have led to severe urban disorder and are now being scaled back.
  • •Recent U.S. productivity growth correlates poorly with AI adoption when adjusting for pre-2019 trends; gains are instead driven by increased capital intensity and utilization.
  • •Botswana's diamond production has fallen by more than 50% since 2022 due to the rapid price decline and rising market share of lab-grown diamonds.
  • •AI now generates 41% of long-form LinkedIn posts and 13% of Reddit content, but AI-generated posts on LinkedIn receive 45% less engagement than human-written ones.
Read time 25 min
Length 25,862 chars
Category macro
Ideas
Noah Smith Economist; ex-columnist, Bloomberg Opinion
The author notes that 'Indian exports, which are heavily weighted towards those service industries that everyone said were going to be crushed by AI, are booming,' suggesting AI is a complement to hum
The author notes that 'Indian exports, which are heavily weighted towards those service industries that everyone said were going to be crushed by AI, are booming,' suggesting AI is a complement to human labor. Infosys and other Indian IT outsourcers are direct beneficiaries of this trend. Risk: The dynamic could flip if AI reaches a tipping point where it becomes a true substitute for back-office human labor.
INFY
Noah Smith Economist; ex-columnist, Bloomberg Opinion
The article highlights platform degradation on LinkedIn (owned by Microsoft), noting that 'AI now writes something like 41% of long-form LinkedIn posts' but these posts 'get 45% less engagement than h
The article highlights platform degradation on LinkedIn (owned by Microsoft), noting that 'AI now writes something like 41% of long-form LinkedIn posts' but these posts 'get 45% less engagement than human-written ones.' Risk: LinkedIn may successfully implement algorithmic filters to downrank AI slop, preserving platform engagement.
MSFT
Noah Smith Economist; ex-columnist, Bloomberg Opinion
The article explicitly names Reddit as a platform being flooded with low-value AI content, stating that AI now writes '13% of Reddit.'
The article explicitly names Reddit as a platform being flooded with low-value AI content, stating that AI now writes '13% of Reddit.' Risk: Reddit's upvote/downvote system may naturally filter out AI slop better than traditional feed-based social networks.
RDDT
Noah Smith Economist; ex-columnist, Bloomberg Opinion
The author highlights that 'Botswana’s diamond production has fallen by more than half since 2022' due to the rise of lab-grown diamonds. Anglo American (NGLOY) owns De Beers, which is the primary ope
The author highlights that 'Botswana’s diamond production has fallen by more than half since 2022' due to the rise of lab-grown diamonds. Anglo American (NGLOY) owns De Beers, which is the primary operator of Botswana's diamond mines. Risk: Natural diamonds could see a resurgence in luxury branding if consumers begin to reject lab-grown diamonds as cheap or synthetic.
NGLOY
Noah Smith Economist; ex-columnist, Bloomberg Opinion
The article cites research showing that 'even though Google’s AlphaFold AI has made it a lot easier to predict protein structures, this hasn’t yet led to accelerated drug discovery,' illustrating bott
The article cites research showing that 'even though Google’s AlphaFold AI has made it a lot easier to predict protein structures, this hasn’t yet led to accelerated drug discovery,' illustrating bottlenecks in AI productivity gains. Risk: Downstream integration of AlphaFold into pharmaceutical pipelines may just be lagging and could still yield massive long-term monetization.
GOOGL
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This newsletter, published August 12, 2026, features Noah Smith discussing INFY, MSFT, RDDT, NGLOY, GOOGL. 5 trade ideas extracted by AI with direction and confidence scoring.

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