History

Somewhat of a random fact: the last time Denmark sold an island to the US was in 1917. That island was Little Saint James, more commonly known today as “Epstein Island.” pic.twitter.com/JFE3bRhmvZ

— Daractenus (@Daractenus) January 19, 2026

 

An Insight

This is why the Left hates to face facts.

Thomas Sowell speaks the absolute truth.pic.twitter.com/GdEraDGoN0

— Thomas Sowell Quotes (@ThomasSowell) January 18, 2026

 

And all established enterprises and institutions struggle with a high rate of change, no matter what the source.

From BRO-BOTS ☙ Thursday, February 12, 2026 ☙ C&C NEWS by Jeff Childers in his substack Covid & Coffee.  

Childers is a practicing attorney and I do not know how he manages to publish a daily news update which connects dots from obscure sources to articulate a plausible interpretation of what is going on.  He is determinedly upbeat but sees warts and all.  And his insights are generally superior to most sources I follow.  

I have been following this story over the past week.  The case study is KPMG, one of the Big Four Accounting firms.  My career was in management consulting, first with Arthur Young in the Big Eight days, then as a partner at merged Ernst & Young, then later with demergered Cap Gemini Ernst & Young. 

I came up as a strategy consultant and then deep into technology once I started managing business units.  I am deeply familiar with the whole issue of billing by the hour.  For easily half my career, we had various strategies to move away from hourly billing.  As Childers points out, hourly billing has a certain resiliency for all sorts of reasons.  Many of which have to do with who pays the risk premium for highly complex, contingent and difficult work.

From today's C&C.

Pay attention! It’s happening. Late last week, the Financial Times quietly reported “KPMG pressed its auditor to pass on AI cost savings.” Is the billable hour on its last legs?

The Financial Times reported that KPMG— one of the world’s Big Four accounting firms— bullied its own auditor into a 14% fee cut. Their argument was elegant in its simplicity: if your AI is doing the work, your people shouldn’t be billing for it. KPMG’s hapless auditor, Grant Thornton, tried to kick but quickly folded like a WalMart lawn chair, dropping its auditing fee from $416,000 to $357,000.

And now every CFO on Earth is reaching for a calculator.

Here’s the dark comedy. Grant Thornton’s UK audit leader bragged in a December blog post that AI was making their work “faster and smarter.” KPMG took note, and immediately asked why it was still paying the slower-and-dumber price. This is why lawyers tell their clients to stop posting on social media. The marketing department just became the billing department’s worst enemy.

As a lawyer who bills by the hour —and I suspect many of you work in professions that do the same— I can assure everyone that this story sent a terrifying chill racing through the spines of every white-collar professional who’s been out there cheerfully babbling about AI adoption at industry conferences.

The billable hour has survived the fax machine, personal computers, email, electronic filing, spreadsheets, and the entire internet. The billable hour has the survival instincts of a post-apocalyptic cockroach and the institutional momentum of a Senate tradition. But AI might finally be the dinosaur killer, and KPMG just showed everyone exactly how the asteroid hits: your client reads your own press release and demands a discount.

[snip]

The billable hour won’t die overnight. But it just got a terminal diagnosis. Every professional services firm that’s spent the last two years bragging about AI efficiency is now staring at the same problem: you can’t brag to your clients you’re faster and also charge them for the same number of hours. As they say at KPMG, it doesn’t add up. Somewhere in a law firm right now, a partner is quietly deleting a LinkedIn post about how AI is “transforming their practice.” Smart move.

The first rule of AI efficiency fight club is: you never talk about AI efficiency.

It reminds me of an incident in my firm in the late 1990s, maybe early 2000s.  I was the Asia Pacific partner for a global account where we were doing work for many subsidiaries all across the world.  I was on a global account call late one night (perhaps the most significant drawback to being based in Australia, you are on the short end of the timezones stick.) 

We had a new global initiative, establishing an Accelerated Development Center in India.  Client teams in the client country would do the needs and specifications development with the client and then the coding would be done in India.  Basically a labor cost arbitrage strategy.

The head of the ADC was on the call to make a pitch for the ADC services to the assembled global account partners.  At some point in her presentation, the ADC leader enthusiastically declared something along the lines of:

ADC Leader:  We have done multiple projects and trials and we have found we can reduce project costs by a third.

 To which our North American account leader responded by asking:

NA Account Leader:  Next week, I am submitting a proposal to the client for a $6 million project.  Does that mean that I can use the ADC and reduce the cost to $4 million?

What a lesson in being careful of what you claim.  The verbal backpedalling was spectacular.  

The ADC was an advance in efficiency.  It had value, most of which we shared with clients.  But never believe your own marketing.  Big complex projects are - big and complex.  Don't use rules of thumb (minimum of one third reduction) unless you are willing to stake your financial health on them.

Will AI create spectacular efficiencies?  I imagine so.  There will be some rough patches.  Systemic problems will be discovered.  Are the big Law and Accounting firms ready?  Probably not.  AI puts a lot of law and accounting within DIY reach for many firms.  And regardless of that, as Childers points out, if AI is providing dramatic improvements in efficiency, the competitive market will mean that most of that benefit will not go to the bottom line of the Accounting firm but to the client.  That's just the way of the market.

Technology isn't really the issue, its the rate of change.  And all established enterprises and institutions struggle with a high rate of change, no matter what the source.

I see wonderful things

Thank goodness they duckedpic.twitter.com/O601xyZ4jZ

— Massimo (@Rainmaker1973) January 20, 2026

 

Offbeat Humor

I think they started with the stones on the bottom layer, then worked their way up. Any other method would be unnecessarily tricky https://t.co/EZisRN3O6f

— Peggy Vimes (@SamuelVimes10) January 18, 2026

 

Data Talks

Grade inflation and university ideological capture means that a bachelor’s degree is no longer an honest signal of competence. In some woke fields, a PhD is an honest signal of incompetence.

Private industry will start relying on domain-specific tests for hiring decisions. Many… https://t.co/0dT3VPcibP

— Colin Wright (@SwipeWright) January 18, 2026

 

Two fundamental and consequential trends moving together without much discussion

Two nuggets of information.  Both from the same side of the political aisle.  I suspect them to be directionally correct though the absolute numbers may have a material margin of error.  

First. 

Turns out, when you deport 500,000 people and 2 million more voluntarily go home, Americans line up for the jobs they were doing—and companies have to pay them more! How Trump repudiated the Democrats' addiction to cheap labor: https://t.co/FL8HJMuhwk pic.twitter.com/0n6Oybswsz

— Batya Ungar-Sargon (@bungarsargon) February 11, 2026

And then

THIS is the real story out of today's jobs report - Trump was handed an economy that was losing private sector jobs and adding gov't payrolls, but he successfully flipped the script, and one year later it's all private sector growth while cutting gov't jobs: pic.twitter.com/R5r5EHgzqk

— E.J. Antoni, Ph.D. (@RealEJAntoni) February 11, 2026

I haven't seen anyone putting these two trend lines together.   There is a lot of noise in the economic system right now with government policy changes, agency changes, changes in regulations, the year long focus on tariffs, the prospects of AI, reshoring of manufacturing, reshoring of investments, etc.

Against the expectations of mainstream establishment economists, the American economy seems to be doing well.  Productivity is up dramatically, capital markets are booming.  Labor force participation rates and unemplyment rates are only stable but that in itself is a bit of an achievement.  

Those two X posts highlight two fairly fundamental trends which are policy driven, are drags on the economy in the short term and are likely spurs to productivity growth in the long term.  

The new administration immediately launched two broad policies, one explicit, the other more obliquely.

The explicit policy was to close the border to illegal immigration.  And what a huge success.  Cheap and less regulated labor that can be badly exploited went to zero in three months to the long term benefit of the bottom quintile of the American labor force, those least skilled.  Reduction in cheap foreign labor supply is disruptive but ultimately increases the demand for American labor and is an incentive to improve the capital investment in labor.  

We are seeing that policy consequence in hourly wages rising.  

The less explicit policy has to do with government headcount.  During the Biden administration, an increasing percentage of the labor force was sourced to government employment.  The Trump administration came in with a bunch of policies which ultimately drive a reallocation of labor away from government to the private sector where productivity is always higher.

Some of those policies were explicit - close the Department of Education and early retirement programs for example.

Some were indirect.  Other policies objectives which indirectly led to reductions in headcount.  The restructuring of the CDC for example or the massive turnover at the Department of Justice as the change from pursuit of DEI and Woke to the pursuit of criminal justice entailed massive resignations.  

Whatever the actual absolute numbers turn out to be, these two tweets are indicative of the consequences of the first year of policies.  Since many of the policies have been challenged with lawfare in court and therefore have been delayed in impact or otherwise have so far only been partially implemented, I suspect that in year two we will see an acceleration.  The administration has usually eventually won its court cases as they work their way up the legal chain.  

So the headlines it seems to me is that we have had at least a 1% reduction in the real (legal and illegal) labor force.  2.5 million deported (self-deported and ICE deported) even when the whole effort was being ramped up and still being challenged in court.  I suspect we will see even larger numbers this year.  Yet further reductions in illegal labor and a consequent boost to demand for labor from the bottom quintile of American workers.  A demand which has all sorts of potential beneficial impacts on a variety of other social welfare measures.

And the second headline is that we are now growing private sector payrolls and reducing government payrolls, switching labor from low productivity employment to high productivity employment.

And these numbers are really mostly a product of only the past six to nine months given the time required to implement them and fight the delaying tactics in courts.  

A material reduction in the illegal labor pool and a material reduction in low productivity employment (government) and increase in higher productivity employment are huge fundamentals individually and especially when they are happening in tandem.

This is all tremendously disruptive for the individuals involved (illegals departing, Americans reentering the labor market, changing jobs, changing careers, etc.) and for businesses employing people.  But those changes are likely to help drive some very material increases in long term productivity with the associated income and wealth accumulation for all Americans.

We are beginning to see the numbers now but I am not seeing much discussion about those two trends in tandem.  That is surprising to me given how consequential they are to the longer term welfare of all Americans. 

Data Talks

🚨💰 MN CHAOS IS NOT ORGANIC: We followed the money, and found that the Anti-ICE groups facilitating violence & chaos in Minnesota have bagged more than $65,728,128 from Dark Money NGO networks (Soros, Tides, Arabella etc.) according to most recently available IRS form 990s. 🧵👇🏻 https://t.co/hSItOL7gcE pic.twitter.com/MbTMn3F1gB

— Seamus Bruner (@seamusbruner) February 12, 2026

 

Polar Night, View of Magdalene Bay, Spitzbergen, 1925 by Georg Macco

Polar Night, View of Magdalene Bay, Spitzbergen, 1925 by Georg Macco (Germany, 1863-1933)

Click to enlarge.

How did the Anglo-Saxons pronounce Latin?

I start reading an Old English poem (The Wanderer) and only a few minutes later I discover that I am deep into a rabbit hole about the pronunciation of Latin by Anglo-Saxons.  

What a wonderful time we live in.

Double click to enlarge.