Natural Gas-Fired Memos

A friend of ours recently used Claude, the LLM built by Anthropic PBC, to draft a letter to a public company CEO with suggestions for improving a struggling subsidiary after a disappointing Q4 2025 earnings report. It was not quite an activist letter, more like a thoughtful memo from a concerned shareholder.

When he sent us the draft, we winced a little. It was obviously AI-written. Chatty and breezy. It used the CEO's first name repeatedly in a way that felt like a car salesman working a showroom floor. We assumed that he would let us help edit it before sending. Instead, he fired it off on a Friday afternoon, as-is.

We thought he had blown his credibility by sending it, so we were shocked that the CEO responded to his correspondence the same day. They had a two hour, candid phone call to share ideas the following Monday morning. Six months ago, "AI-written" was unambiguously a pejorative. Apparently that is changing faster than we thought.

As Luddites who don't like change (we own coal royalties!), we have been AI skeptics for most of the past several years. We chuckled at Phil Greenspun's recent post, Why Johnny LLM can’t read web page source code. We read Stephen Wolfram's book a year ago. He was impressed with LLMs but doubted they would make it all the way to artificial general intelligence. These seemed like reasonable positions.

What started to shift our thinking was The Scaling Era, which pointed us to a 2019 essay called The Bitter Lesson by Richard Sutton. His argument was that general methods for artificial intelligence that leverage computation always win when competing with methods that attempt to take advantage of domain-specific human knowledge. Historically, AI researchers have always tried to build knowledge into their systems by encoding rules, designing expert systems, and programming in domain expertise. 

The pattern in the past is that this domain-specific structuring has helped in the very short run but it always plateaus and then is outcompeted by brute force computational methods. In the games of Chess or Go, search and learning are the techniques that have worked, using as much computational power as possible. Sutton says that these are the only two methods that seem to scale to arbitrarily large degrees.

This reminded us of a book by psychologist Paul Meehl (1920-2003), who argued essentially the same thing sixty-five years earlier in a completely different field. His book Clinical vs. Statistical Prediction (published 1954) showed that actuarial rules (statistics applied to data) consistently outperformed clinical judgment by professionals. Whether they were doctors, parole boards, or admissions officers, human experts with years of training were consistently beaten by simple models. (This has been called The Robust Beauty of Improper Linear Models in Decision Making.) 

Meehl and Sutton had the same insight. Systematic data processing beats human intuition, and the gap widens as the amount of data and especially the computation available to mine it grows. LLMs are like Meehl's simple linear models for decisionmaking, except scaled to the size of trillions of tokens now available for training.

The clincher for us was the conclusion of The Scaling Era. The author believes in what we have been calling the Gods of Straight Lines: "the GPUs keep improving, the training runs keep scaling, and on a log-log graph everything is eerily, perfectly linear. Next year is simply this year, plus a known rate of change multiplied by delta-t."

We've learned not to fight straight lines on log charts. We now take it for granted that solar panels and batteries will continue to get cheaper every year. Not only have the learning curves been relentless for decades but they have even gotten steeper. The curves governing LLMs look the same. Whether or not we or the AI researchers fully understand why their models work, the scaling curves don't care about our epistemology.

That, in turn, virtually assures that the Mag 7 companies (Zuck) and the AI "labs" (Elon doesn't like that term) will spend their planned trillions on capital expenditure for GPUs and data scenters. Leopold Aschenbrenner is a former OpenAI researcher who published a widely-read series on AI trajectories last year. He has sketched out scenarios involving trillion-dollar compute clusters drawing 100 gigawatts of power. That number seems outlandish until you look at the capex announcements from the past six months and realize the industry is already on that trajectory.

We have started calling our friend's memos his "natural gas-fired research." (Natural gas is the largest source of electrical generation in the U.S., meaning that is what most likely powers any given GPU writing memos.) Which is why we keep coming back to the natural gas pipelines owned by Kinder Morgan (KMI) and Energy Transfer (ET). There is an important distinction between producing natural gas and transporting it. Producing it is a lousy business, but transporting it via pipeline is something else entirely. The pipes are already in the ground. Permitting and right-of-way acquisition to build new ones is enormously difficult. Customers sign take-or-pay contracts that guarantee payment regardless of whether they actually use the capacity. It is a toll road, not a commodity business.

Kinder Morgan operates about 58,600 miles of natural gas transmission pipeline, more than any other company in the country, moving roughly 40% of U.S. natural gas production. Around 96% of its cash flows are take-or-pay, fee-based, or hedged, making the commodity price of natural gas nearly irrelevant to its earnings. Energy Transfer's latest presentation is explicit about what is driving new growth. Its 2026 capital plan lists "natural gas pipeline projects serving data center facilities" as a priority in both its intrastate and interstate segments. It has a long-term agreement with Oracle to supply roughly 900,000 MMBtu per day to three U.S. data centers, and began flowing gas on its first lateral to a data center campus near Abilene, Texas earlier this year. 

The pipeline companies collect a toll on natural gas movement, and their inherent operating leverage will makes incremental throughput for data centers highly profitable. Beyond data centers, there are coal plant retirements, Sun Belt population growth, and manufacturing reshoring all adding to the natural gas story. Kinder Morgan points out in their investor presentation that U.S. natural gas supply has grown more than 70% since 2010 with prices remaining largely range-bound, suggesting no supply constraint on the horizon.

As AI infrastructure spending scales, the competition for land near power infrastructure will intensify. A wind or solar farm on a large tract with good resource potential can supply a data center directly via long-term power purchase agreement, or feed into a grid that increasingly needs it.

We've also seen some overwrought pessimism surrounding AI-induced disruption. The Citrini piece (The 2028 Global Intelligence Crisis, published February 22nd) triggered a software selloff the following day. We think that was overdone. As Fred Liu pointed out, software companies don't really sell code. They sell convenience, trust, reliability, and institutional knowledge. The devil is always in the details like maintenance, security patches, compliance, and integrations. Most businesses would rather pay someone else to handle all of that than own it themselves. 

Our Docusign subscription just auto-renewed. We're still using Quickbooks and Turbotax. Last week we chose to fade Citrini's pessimism with a basket that included the payment networks (Visa, Mastercard, Amex), the bank core processors (FIS, Fiserv, Jack Henry), Booking Holdings, Intuit, and Schwab.

Visa's experience has been that potential competitors just become customers of their (four-sided!) network, which is the biggest and the best. The bank core processors (i.e. the software back-end of almost all banks) have contracts that define "sticky": five to ten year commitments by the banks, plus existential risk to the bank's business if an attempted switch goes poorly. 

Futurist James Pethokoukis (previously) articulated two possibilities for AI: either it is a powerful general-purpose technology (like the PC or the internet), or it advances all the way to AGI, capable of performing essentially every economically valuable task humans perform.

Vaclav Smil's book Growth points out that exponential growth, natural or anthropogenic, is always only a temporary phenomenon, to be terminated due to a variety of physical, environmental, economic, technical, or social constraints. Eventually every exponential growth curve becomes logistic. 

Whether that happens at "very powerful tool" or at "AGI" is the question. If it's AGI, our stock portfolios will not matter. What will matter is who controls it and what they decide to do with the rest of us.

But if AI lands at "powerful general-purpose technology," and that is the scenario we currently find most likely, then the implications are good. A sustained productivity boost would push the economy onto a higher growth path. That makes the debt and entitlement problems of the developed world more manageable. And to the extent that AI advantages incumbents with established distribution and customer trust, the companies in our basket look like reasonable places to be. 

And pipelines will profitably go "ssssssss" transporting natural gas to power the computation, at least until battery and solar get cheap enough to take over. (But we can own the land where that will happen.)

Our friend got instant followup from the CEO of a billion dollar company because a machine wrote a persuasive memo on a Friday afternoon. That's not AGI, but it might be enough.

Saturday Morning Links

• Imagine that every day you wake up in your left-bank apartment, and the city has meaningfully morphed into some magically strange variant of Paris. On Tuesday, the streets and boulevards no longer meet at their old familiar intersections. On Wednesday, the Louvre moves to another arrondissement. The Arc de Triumphe turns upside-down on Thursday and floats in the sky on Friday. Now we’re talking. Now that is more like parenting. To be a parent is to be a permanent tourist in a constantly evolving foreign city, which also happens to be your home. The baby you bring home from the hospital is not the baby you rock to sleep at two weeks, and the baby at three months is a complete stranger to both. In a phenomenological sense, parenting a newborn is not at all like parenting “a” singular newborn, but rather like parenting hundreds of babies, each one replacing the previous week’s child, yet retaining her basic facial structure. “Parenthood abruptly catapults us into a permanent relationship with a stranger,” Andrew Solomon wrote in Far From the Tree. Almost. Parenthood catapults us into a permanent relationship with strangers, plural to the extreme. When you become a parent, you meet your child. And then you meet your child again. And again, every day after that. You will never stop meeting your child. That is one reason to become a parent: To have a child is to fall in love with a thousand beautiful strangers. [Derek Thompson]
• Douglas maintained that he could assume judicial senior status on the Court and attempted to continue serving in that capacity, according to authors Bob Woodward and Scott Armstrong. He refused to accept his retirement and tried to participate in the Court's cases well into 1976, after John Paul Stevens had taken his former seat. Douglas reacted with outrage when, returning to his old chambers, he discovered that his clerks had been reassigned to Stevens and when he tried to file opinions for cases in which he had heard arguments before his retirement, Chief Justice Warren E. Burger ordered all justices, clerks, and other staff members to refuse help to Douglas in those efforts. When Douglas tried in March 1976 to hear arguments in a capital-punishment case, Gregg v. Georgia, the nine sitting justices signed a formal letter informing him that his retirement had ended his official duties on the Court. It was only then that Douglas withdrew from Supreme Court business. [William O Douglas]
• Esoteric reading, being very difficult, requires one to slow down and spend much more time with a book than one may be used to. One must read it very slowly, and as a whole, and over and over again. It will probably be necessary to adjust downward your whole idea of how many books you can expect to read in your lifetime. [Mr. and Mrs. Psmith’s Bookshelf] 
• The true burden of debt is not the size of our national debt, but the cost of servicing that debt as a percent of our national income. Today that burden is significantly less than it was during the 1980s, mainly because interest rates are far lower than they were back then. If Congress exercises even modest restraint and the Fed doesn't have to raise interest rates (which they won't have to if inflation remains under control), then we can gradually reduce our deficits and the burden of our debt. [Scott Grannis]
• If I insisted upon elbowing my way into the metropole — so that I could pay dearly for the very comforting feeling of being only 30+ subway stops from where the Real Action Happens — I’d be broke, overworked, and essentially unable to write for a living. And so it is that by virtue of my incorrigibly low station in this world, I must confine myself to wherever’s dirt cheap — and that, my friends, is the hinterlands. It comes at a cost, of course. The isolation is extreme; it’s distressing that 100% of my intellectual life has to happen online. The winters are brutal. Pollen season is a nightmare. The summers are sweaty. My neighbors watch me — they’ll never really accept me even though I grew up just two counties away. We are a long way from Santa Barbara here. But what makes Santa Barbara, Santa Barbara? What makes a Manhattan? And why will there never be a hub of elite culture in Guymon, Oklahoma? I suppose I am a bit of a “hard geographical determinist.” It seems to me that, so far as we are speaking broadly and with an eye toward recognizing patterns, there are only a handful of “place genres” out there, and each is generally produced by geography above all. [Hickman's Hinterlands]
• But, beginning in 2000 – and perhaps because of Buffett’s age – Berkshire regrettably abandoned that discipline. It has since invested hundreds of billions of its hard-won cash into many businesses that no one can handicap. Worse, it has repeatedly bought whole businesses with very average economics, even when partial stakes of excellent businesses were readily available on the public markets, perhaps because of a mistaken belief that the resulting tax efficiency would prove more valuable than simply buying the better business. (Analysis to follow.) Berkshire has now become what Buffett mocked for decades: a conglomerate built for the ego of its management team, not for the benefit of its shareholders. [Porter & Co.] 
• South Bow Corp. says it is in the “early stages” of gauging customer interest in capacity on a cross-border pipeline linking Alberta’s Hardisty oil terminal to U.S. oil markets in Oklahoma and along the Gulf Coast — a project it is dubbing the “Prairie Connector.” The company said Friday it has commenced an open season — industry parlance for inviting potential customers to reserve capacity on a proposed project — using existing infrastructure and Canadian federal permits that are believed to have been originally issued for the cancelled Keystone XL project. [Financial Post]

A Reflection on the Berkshire Hathaway Annual Report: The Case for Share Repurchases

Berkshire Hathaway (BRK.A / BRK.B) paid $13.6 billion across three separate transactions to acquire Pilot Travel Centers, a chain of truck stops. It may have seemed like a "cigar butt" bet since we all know that hydrocarbon fuels have much greater longevity than many had assumed. But the results have been painful. Pilot earned nearly $1 billion in pre-tax income in 2023, then $614 million in 2024, and just $190 million last year (2025 annual report): a decline of 69% in a single year. On the cumulative $13.6 billion investment, that's a return of roughly 1.4%.

Berkshire's annual report explains the deterioration: revenues fell $4.7 billion (10%) in 2025, driven by lower wholesale fuel volumes, reduced fuel trading activity, weaker fuel prices, and margin compression across both wholesale and in-store operations. Those declines were compounded by rising employee compensation, insurance, and maintenance costs. In short, nearly everything that could go wrong did.

To put a value on what Berkshire currently holds: Murphy USA (MUSA), a publicly traded gas station chain and a natural comparable to Pilot, trades at roughly 16 times earnings. Applying that multiple to Pilot's $190 million in 2025 earnings implies Pilot may be worth only around $3 billion today: a loss of more than $10 billion from the $13.6 billion Berkshire invested.

Now consider the alternative. Had Berkshire used those same dollars to repurchase its own shares at the time of each transaction, the math is stark. The $2.76 billion first tranche, invested in October 2017, would be worth roughly $7.4 billion today (+167%). The $8.2 billion second tranche, deployed in January 2023, would have grown to approximately $13.3 billion (+62%). The $2.6 billion third tranche, purchased in January 2024, would now be worth approximately $3.6 billion (+40%). 

In total, the $13.6 billion spent on Pilot, if instead used to repurchase Berkshire shares, would be worth roughly $24.3 billion today, compared to an estimated current value of ~$3 billion for the Pilot stake. The estimated opportunity cost exceeds $21 billion.

And the financial cost is only part of the picture. Operating a business like Pilot demands something that doesn't show up on a balance sheet: management attention. Every struggling subsidiary creates meetings, reporting structures, remediation plans, and distraction at the senior-most levels of the organization. Share repurchases, by contrast, require none of that. There is no additional SG&A, no new organizational layer, no operational complexity; just a straightforward allocation of capital into a business management already understands deeply.

New Berkshire CEO Greg Abel addressed the Pilot situation directly in this year's annual report, writing: "We should be #1 and we will not be pleased until that standard is achieved. We first invested in Pilot in 2017; however, our ability to manage it was contractually delayed until 2023. That mistake will not happen again." 

That Abel, who is responsible for overseeing one of the largest and most complex enterprises in the world, is personally focused on fixing the performance of a tiny operating subsidiary speaks to exactly this cost. The opportunity cost of managerial distraction is real, even if it's impossible to quantify precisely.

It goes to show that management teams (even one of the best capital allocators in history!) consistently underestimate the value of repurchasing their own shares. 

Thursday Night Links

• In the fifteenth century, everything changed. The human mind discovered a means of perpetuating itself which was not only more lasting and resistant than architecture but also simpler and easier. Architecture was dethroned. The lead characters of Gutenberg succeeded the stone characters of Orpheus. The book was to kill the building. The invention of the printing-press is the greatest event in history. It was the mother of revolutions. It was the total renewal of man's mode of expression, the human mind sloughing off one form to put on another, a complete and definitive change of skin by that symbolic serpent which, ever since Adam, has represented the intelligence. In its printed form, thought is more imperishable than ever; it is volatile, elusive, indestructible. It mingles with the air. In the days of architecture, thought had turned into a mountain and taken powerful hold of a century and of a place. Now it turned into a flock of birds and was scattered on the four winds occupying every point of air and space simultaneously. [Victor Hugo]
• The mainstreaming of FLNG technology represents a major development in hydrocarbon extraction technology—one that vastly expands resource viability worldwide and even pushes the phony concept of peak cheap oil further into the distant future than it already was, not that it was ever really on the horizon. If one plays forward the pace of development by a decade, the potential for change in global molecular flows is substantial. Let’s indulge in some informed speculation and ponder the consequences before they become common knowledge. [Doomberg]
• Recently, a handful of REITs have sold themselves, with the premiums to their share prices ranging from ~25% to ~40%. Historically, over the long run, you have generally seen premiums of at least 20% to a company’s recently traded share price. As you have seen from our previously published portfolio appraisals, the private market would value our assets at a much higher per share price than we are currently trading. All these factors, absent our value gap being closed by or before we complete our portfolio transformation, lead me to the conclusion that if we can’t get it done, then we need to give you a better choice. So, you have my word, that we will do everything in our power to close this value gap within 24 months or less. If someone comes knocking sooner, and they can rapidly close the value gap (increasing your net worth sooner), then let’s dance. However, for all those shops out there reading this thinking we are distressed or desperate, please don’t waste your time because we won’t waste ours. [Modiv Industrial, Inc.]
• See, one of the benefits of having been in the business for almost a quarter of a century directly, and before that I was an investment banker, and my clients were airlines, so I had more time doing that too, so I’ve had a good look at this industry, and here’s the great thing about it, is that in the long run, travel always grows slightly better than GDP. We’re talking global now. Okay? Now, there’s going to be some volatility. And when you have something like a pandemic, or the great recession of 2008, and 2009, and things there, or even earlier, the dot-com implosion recessions, the early part of this century, you always have these issues of, will it come back? And it always does. And that’s the great thing. So, I know there are going to be some soft times, there are going to be some great times. Like when we came out of the pandemic, there was that revenge travel surge, which is fantastic. But the truth is, I know that that couldn’t possibly last because in the end, we’re going to end up in a long-term run where travel goes slightly better than GDP. [Glenn Fogel]
• Mr. Trump told Mr. Huang that when he spoke with Mr. Xi about the island, China’s leader would breathe heavily, said one of these people who was briefed on the conversation. The president didn’t like it. He urged Mr. Huang to make chips in America. [NY Times]
• The rewrite man is a concession to the simple fact that many very good reporters can’t write; when they try to, the consequences can be disastrous. There’s a certain psychological sense to this. Writing well is basically a solitary, introspective activity; it is often time-consuming, and it usually is built on wide reading, another solitary activity. Reporting is fundamentally social and generally its products demand a quick turnaround. (The contradiction between these two, a brother in the trade once suggested to me, is why journalists run to alcoholism—they tend to be basically antisocial people who spend much of their time talking to people.) [The Lamp]
• Mexico could be at a crossroads, in the similar way, to how the Colombian government killed Pablo Escobar in 1994 and violence started to dramatically decrease from that point onward. And, with the election of Uribe, a forceful anti-narcos president in 2002, that set the stage for the final Colombian military offensives that crushed the remaining organized narco forces. FARC began peace talks with the Colombian government in 2012 and the definitive peace treaty was reached in 2016. Medellin went from the world’s single most dangerous city in 1994 to one of the world’s fastest-growing tourism destinations by the late 2010s. I don’t pretend to have a timeline for when Mexico can deescalate with the cartels in the same way that Peru crushed the Shining Path terrorists or Colombia neutralized the FARC. That said, Sheinbaum is making the right moves, and she has the mandate of the people to keep using overwhelming force rather than standing down or trying to coexist. From a long-term Mexico perspective, you should be more bullish today than you were last week. This has been an impressive show of force and discipline by the Mexican government and military to take down the country’s most wanted man and his immediate replacement in short order at modest cost of life -- and then getting CJNG to stop the retaliation attacks within 48 hours. [Ian Bezek]
• What's important to remember, is that the most resilient technology businesses aren't selling a product. They're selling convenience, trust, reliability, and business process knowledge. Maybe 20% of a software company's value is in the code itself. The other 80% is a customer service business – constant maintenance, security patches, compliance updates, new integrations, new features. Most businesses don't want the responsibility for any of this. They're not buying code. They're buying headache-free, all-in-one solutions to their problems. Software business also have immense “economies of scale”. As they sell more licenses, the incremental cost per license decreases (sometimes to zero). So instead of millions of businesses each vibe-coding the same product independently, isn't it more efficient for a single company to centralize production and maintenance, then sell it to all of them? By aggregating these customers' software budgets, they can also attract the best talent and invest in the best technology – something no individual customer could justify on their own. [Fred Liu]

Kayne Anderson Energy Infrastructure Fund, Inc. (KYN) - 2025 Letter

From the Kayne Anderson Energy Infrastructure Fund, Inc. (KYN) - 2025 Letter:

We have made this point consistently in our stockholder letters, but it bears repeating – energy infrastructure plays an essential role in the global economy. These “must run” assets enable society’s modern way of life. These businesses generate material (and growing) levels of free cash flow and are an attractive way for investors to gain exposure to listed real assets. Further, equity investments in energy infrastructure companies provide holders exposure to some of the most consequential (and durable) trends in the global economy, pay attractive dividends and provide an important hedge against higher-than-expected levels of inflation. Putsimply, the case for owning listed energy infrastructure is robust. One of the most important points we want to convey in this letter: We believe KYN has the potential to generate low-to-mid-teens annual returns over the next five years. Given recent developments in the energy infrastructure sector, our confidence in this scenario has increased over the last year. Our expectations are underpinned by improving demand growth trends, increased project backlogs and growing earnings and free cash flows for the Company’s portfolio investments.

[While subject to numerous assumptions, the primary considerations incorporated into these target returns are estimated dividend yields from portfolio holdings of 4% to 6%, estimated annual growth in dividends and cash flows of 5% to 7%, and estimated annual “excess” free cash flow of 0% to 3% for KYN’s portfolio investments. After incorporating the impacts of fees, expenses and leverage, Kayne Anderson views KYN as having the potential to generate 10% to 15% annual returns on a net basis for investors.]

Monday Morning Links

• What is the use of machines? The world is full of machines: railways, telegraphs, telephones, motors, flying-machines, talking-machines, adding-machines, typewriters — no end to them. Why are they made? To save time, space, trouble, money. They are often a nuisance to everybody around, they spoil one's eyes and ears, offend the senses, make life dangerous; worst of all, the better the machine, the less it uses our intelligence. It is quite possible to argue that they do more harm than good: but suppose they are all good, suppose time, space, money, labour is saved, what then? The question then comes, How am I to use the time, space, money, and labour which has been saved? In making more machines? In sloth, eating, drinking, self-indulgence? In quarrelling with my neighbour, and destroying what I cannot understand? Here is the question which the world has not faced. So much time has been saved, that thousands of people who used to be working all day now have leisure; and they do not know what to do with it. They are often ignorant, violent, intolerant, and they are so many, that the few wiser who ought to guide them are forced to follow. To what end? [W.H.D. Rouse]
• As U.S. oil prices dropped below $60 a barrel in recent months, the industry shed rigs by the dozens and laid off crews that frack wells. Yet, the country’s wells last year gushed a record 13.6 million barrels of crude on average each day—100,000 barrels more than the Energy Information Administration, the federal forecaster, had anticipated before President Trump’s inauguration. The disconnect between slackening activity and the increasing yield has mystified even oil chieftains. “I’ve been wrong,” said Kaes Van’t Hof, chief executive of Permian producer Diamondback Energy. “I thought we’d be down by now.” [WSJ]
• Pardee Resources Company (the "Company") announced today that Greenbrier Minerals ("Greenbrier"), a coal operator on one of the Company's properties located in Logan County, West Virginia, issued a Worker Adjustment Retraining Notification ("WARN") Notice on Friday, February 13, 2026. The WARN Notice indicates that Greenbrier, through various subsidiary companies, intends to idle seven coal mines, including several located on the Company's Logan County property, and begin laying off 530 employees around mid-April. Greenbrier claims the layoffs are due to "the current adverse market conditions". This action is likely to have a material negative impact on the Company's 2026 operating results as these mines were expected to generate between $4-5 million in revenues for the full year. While Pardee intends to work diligently to replace this production on its properties going forward, there can be no guarantee that it will be successful in doing so. [Pardee Resources Company]
• Despite a mixed construction environment, Eagle’s portfolio of businesses continued to perform well during the quarter, generating revenue of $556 million, EPS of $3.22 and gross margins of 28.9%. While the residential construction market was challenged, federal, state, and local spending on public infrastructure projects and private non-residential construction remained elevated, supporting strong demand for our Heavy construction products. Our Cement sales volume was up 9% and our organic Aggregates sales volume increased 34%. [Eagle Materials Inc.]
• It should be remembered we can deport foreigners on a plane faster than they can have kids, and our long-term goal is to salami slice Democrat coalition by starting with Somalians and moving down the tribal list to reverse Hart-Celler Act (1965) with 150 million deportations. We will start by targeting all foreigners on welfare, which is an easy rhetorical argument. It makes zero sense for America to bring in worthless foreign savages who can't speak English, then give them scarce resources of free housing, welfare, food stamps, and medicine. At every stage of the process, our goal is to exhaust Democrats and force Leftists into publicly destroying their own credibility by taking ownership of indefensible positions, such as when Democrats protect Mexican pedophiles and cartel sicarios from deportations. Our goal during this process is to build cohesion among smart young white Christian men, and strengthen our position by deporting 20 million foreigners on welfare. At that point, Democrats will be massively weakened, and our wins will build self-reinforcing momentum. Our priority should always be to fracture Democrat politics by attacking the weakest and most vulnerable group in their coalition, such as transgender mass shooters. It's a win-win: either Democrats abandon their footsoldiers, or Democrats tarnish their national public brand. [Fugitive Caesar]
• Many compare India and China’s energy systems as they stand today. From this perspective, China is ahead in most new energy metrics, from solar capacity to electrification. But the comparison has limits. China is at a later stage of development. China’s GDP in purchasing power terms is over double that of India; its electricity consumption is five times greater; its manufacturing output, in monetary terms, is nearly an order of magnitude larger. It is more reasonable to compare the two countries at equivalent levels of development. When we do so, a different story emerges. India is generating more solar electricity, burning far fewer fossil fuels and electrifying transport faster than China did at an equivalent GDP per capita. [Ember] 
• We show that any cross-national measure of human material wellbeing that is (i)
  basics (not luxuries), (ii) general (uses indicators from multiple domains), and (iii) plausible
  (uses any defensible choices for weights) will have a statistical relationship with country GDP
  per capita with four features. First, the relationship will be strong, with nearly all cross-national
  variation in basics associated with variation in GDPPC. Second, the relationship will be non-
  linear, with a stronger elasticity of basics to at lower than higher levels of GDPPC. Third,
  GDPPC is empirically sufficient: no country has high levels of GDPPC and low levels of basics.
  Fourth, GDPPC is empirically necessary: no country has high levels of the basics at (very) low
  levels of GDPPC. [Lant Pritchett] 
• While Western OEMs have generally moved toward outsourcing, this is not true across the board for Chinese automakers, some of which retain much higher levels of in-house production. BYD and Leapmotor, in particular, have roots in electronics manufacturing and operate with high degrees of vertical integration. Leapmotor reportedly produces 60–70% of its components in-house. Our bill-of-materials analysis indicates that BYD manufactures around 80% of Tier 1 components and roughly 36% of Tier 2 components internally—more than twice Tesla’s in-house share of Tier 1 components (37%). A UBS study similarly estimates that 75% of BYD’s Seal is produced in-house, compared with 46% for Tesla’s Model 3 and 35% for Volkswagen’s ID.3. For BYD, vertical integration is the single most important factor behind the company’s price advantage. [Rhodium Group]

Friday Morning Links

• This paper extends a simple economic model of the regulated firm to include a wider range of both management objectives and of regulatory constraint. The authors find that these generalizations in the assumptions are able to effect profound alterations in the conclusions. For example, if a firm is constrained to a fair return on invested capital, we find that the profit-maximizing firm would have an incentive to overcapitalize (the Averch-Johnson result), while the sales or output maximizing firm would have an incentive to undercapitalize. [John C Malone]
• Below, in bullet point format, is a list of the ticker symbols across the midstream and MLP universe that have disappeared since the August 2014 peak. In total, 73 names have been removed from the universe (or become irrelevant due to size). In addition, a further 9 tickers that were created after the peak are gone too (names like DM, PTXP, RMP). [MLPguy]
• The U.S. produces plenty of gas, but bottlenecks abound, said Kevin Greiner, CEO of Gas South, which supplies natural gas to about 500,000 customers in the eastern U.S., including curtailed manufacturers. “We just don’t have enough pipe capacity to get the gas from where it’s being produced to where it’s needed,” he said. [WSJ] 
• The argument for the paleo V8 runs thusly: In the past two decades, emission and fuel-economy requirements forced pickup manufacturers to downsize engines and increase complexity, using turbocharging, variable cam phasing, direct fuel injection and other means to squeeze more efficient power out of fewer cc’s. But as a generation of buyers can attest, these hard-revving little gassers suffered a host of maintenance, reliability and durability issues. The last decade has been particularly hard on Ford buyers, who have endured a string of recalls affecting the “EcoBoost” 2.0-liter, 2.7-liter and 3.0-liter engines, 10-speed automatic transmissions and other mission-critical components. Let me take a moment here to say, recalls suck. [WSJ]
• Those who have lived in software land don’t realize they’re about to have a hard lesson in hardware. It’s actually very difficult to build power plants. You don’t just need power plants, you need all of the electrical equipment. You need the electrical transformers to run the AI transformers. Now, the utility industry is a very slow industry. They pretty much impedance matchto the government, to the Public Utility Commissions. They impedance match literally and figuratively. They’re very slow, because their past has been very slow. So trying to get them to move fast is... Have you ever tried to do an interconnect agreement with a utility at scale, with a lot of power? [Elon Musk]
• Our aggregates business once again delivered record profitability and meaningful margin expansion, reflecting strong strategic and commercial discipline and a consistent focus on what we can control. Our highly complementary Specialties business also achieved record revenues and gross profit, underscoring its differentiated value and strategic importance within our portfolio. Notably, we delivered these results despite single-family housing and nonresidential square footage starts, the two macro indicators most highly correlated with aggregates demand, remaining approximately 20% below their post-COVID peaks. [Martin Marietta Materials, Inc.] 
• When I can combine two of my passions, cycling and visiting French villages, I’m about as happy as I can be. At some point around 2003 or 2004, on one of my first cycling trips to France, I picked up a big, coffee-table book called Vu du Ciel: Villages – Des Alpes-Maritimes et du Var (you can find it in many bookstores in France and on amazon.fr). It features 73 villages from the Alpes-Maritimes department and 59 from the Var department. There are beautiful aerial photographs of each village along with a short, one paragraph description. Some of these villages I was already quite familiar with (Eze, La Turbie, Peillon, Peille, Gourdon, etc.) but many more were new to me. I made a goal to cycle to each and every one of the 73 villages in the Alpes-Maritimes section. It took me nine years (I was only able to cycle in France about three to five weeks each year), trying to reach as many as I could every summer when I was here, and in 2013 I finished. I can’t begin to tell you the sense of accomplishment and satisfaction when I rolled into that village (Tende). [Steve and Carole in Venice]
• I think if I had to do this all over again, coming out of COVID or I'll say post-COVID, I would not have -- when they went on allocation, I'd have told them to keep their trucks. That's what I'll tell them next time. They keep their trucks and when they jack prices, they can keep their trucks because I can sweat out 2, 3, 4 years, and I think my customer will support me. I think I was over eager to buy trucks because we had such a nice balance in '16. I wanted to get back to that balance quickly. And I didn't stand firm enough when they came through with massive price increases. I just don't know it's unsupportable. Now they had all this talk, and we all saw it and I think everybody is a little guilty of this saying that, as Mary Barra did, she had something, I don't know, after 2037 or something, GM will not make an internal combustion engine. Well, if you're on my end of the deal, that's a frightening thought because the other ones don't run, you see. So you can see how I fell into the trap and think well hell, if she's not going to build any, but then my friends at Ford didn't make quite as broad a statement, but practically speaking, they were running their investment as if they were no longer willing to make it. [U-Haul Holding Company]