Donald Trump and the Common Knowledge Game

I think Kamala Harris is going to win the election this November.

I think this for the same reason that I thought Trump would win in 2016: modern Presidential elections are turn-out elections ... they're not about 'winning over' undecided voters but about turning out a supermajority of your core voters in your core districts ... and I think Harris is beating Trump pretty handily in this regard, almost as badly as Trump was trouncing Biden a few months ago. There is authentic voter enthusiasm out there for Harris in Team Blue, a relief rally from Biden's 'retirement' that has somehow been transformed into a vibrant campaign. This enthusiasm for Harris is as incomprehensible to me personally as the remaining enthusiasm for Trump in Team Red, but so what? It's there, it's growing, and I think it's enough to get Harris to 270 electoral college votes.

I also think there's nothing either candidate can do to change the common knowledge structures - what everyone knows that everyone knows - to alter voter turn-out at this point. For example, if Donald Trump were caught on a hot mic using the n-word, would that change anything? Ehh. I doubt it. If Kamala Harris were caught on a hot mic ... oh, haha! that would require allowing her to be near a mic and speaking human words. Please.

I think both candidates understand the importance of the crowd watching the crowd, meaning that both candidates are focused on audience size and audience energy at their live speeches, and then doing everything possible to broadcast video of those rallies into swing state TV media. Here, though, Harris has a decided advantage over Trump in earned media (free media exposure by news networks) with most of the national media in the bag for her, so I think time works for Harris and against Trump. If the election were held tomorrow I think it's a toss-up. With the election 40 days away ... I think it's a reasonably close (but maybe not that close) election that Harris wins.

Where the common knowledge game rears its ugly head is the day after the election: Wednesday, November 6th. That's the day where, if I'm right, Kamala Harris has claimed victory in the early AM hours and where some hours later Donald Trump has ... umm ... also claimed to be the winner. Or at least has stated publicly that he is not the loser, that there is 'evidence' of a terrible fraud perpetrated against him, that the election has been stolen. Again.

Win or lose - and I think it's lose - that's what he's going to say. That he's the winner. You know it and I know it. We all know it. No one in a position of media prominence for Team Red or Team Blue - what we'd call a missionary in common knowledge terms - is talking about it, because it's totally counterproductive for either side to talk about it before it happens, but we all know that it's going to happen. If he wins, he wins. If he loses ... well, he didn't lose. Donald Trump is not going to concede this election, and he's going to call for 'patriotic Americans' to 'stand up' and 'get to the bottom' of it.

THIS is our common knowledge about Donald Trump: we all know that we all know that he will not accept the election result if he loses.

On Wednesday morning, the crowd - us - will look around at the crowd, wondering what happens next. Some of us will believe that Trump is right, that the election was 'stolen'. More of us will believe that Trump is wrong. None of this matters. None of our personal beliefs, individually or in the aggregate, about the validity of the November elections matter. What matters is what a critical mass of Americans believe that a critical mass of Americans believe, and that common knowledge will be determined by the missionaries who step up to tell us how to think about the November elections.

The question is not whether Trump will accept the election result if he loses. He won't.

The question is whether a missionary with actual power will join him.

What does 'actual power' mean? It means executive power over political outcomes, like the governor of a state or the CEO of a large media corporation. In most countries I would include the general of some branch of the military in this list, but it's the great strength of the United States (probably its greatest strength), that I don't.

It does not mean legislators. Josh Hawley and Ted Cruz and Mike Johnson can tweet and stamp their feet at pressers all they like ... they have no skin in the game here, meaning that there are no adverse consequences for them to join with Trump in questioning the election results. It's cheap talk, and we all know that it's cheap talk, because there's nothing they can DO other than talk.

But for a governor or mediaco CEO to join with Trump in publicly questioning/denying the election results on the Day After, that's not cheap talk at all. An executive can DO things beyond talking about it, which makes their words as a missionary much more powerful in the common knowledge game. Why? Because if someone who can do something to delay/question/reverse the election result says that we ought to do something to delay/question/reverse the election result, the crowd they are speaking to feels those words of ought far more keenly. The ability to DO something about it converts the ought into a categorical imperative, converts the "just asking questions" into a call to action that we humans are hardwired to respond to, especially in the context of a crowd. Immanuel Kant figured this out about 250 years ago, and it's weird to me that we treat his writing as philosophically ethereal and non-practical, when in truth it's as real-life and practical as it gets.

It's also not cheap talk for a governor or mediaco CEO to join Trump in seeking to delay/question/reverse the election result because there is enormous personal and political risk in taking this step. If you publicly support Trump's claims of election fraud from a position of actual executive power, then you are declaring your executive power to be outside of the political system that conferred that power. You are declaring yourself as an enemy of 'the system', and that path means walking through a door that locks shut behind you. You can never reconcile with the system after taking this step. If Trump 'wins' in this extra-judicial struggle, whatever that might mean, then great ... you're the kingmaker or the Hand of the King or whatever fantasy title you want to give yourself. But if Trump loses this post-election fight ... man, you are toast. I mean, just having a post-election conversation with Trump on this topic ... you know that the FBI is recording the call, you know that Trump is recording the call (and would sell you out in a heartbeat), and obviously you are recording the call, too. This must be a coordinated action, planned across multiple influential missionaries to have any chance of success, and there's a legal term for all that: conspiracy.

I honestly can't think of a governor who would take this risk. We know for sure that Brian Kemp won't. We know for sure that Ron DeSantis won't. Would Greg Abbott do it? I dunno ... I just don't see the play here for Abbott. What's in it for him that he doesn't already have? Mike DeWine? Kay Ivey? No way, too old, too status quo. I guess there's Sarah Huckabee Sanders, but as Trumpy as she is, there's so much to lose here for what seems to me like so little to gain.

Ditto for mediaco CEOs. You think Rupert and Lachlan are going to risk it all for Donald? LOL. The Succession finale plot was wonderful, but no way it plays out that way. Honestly, I think it's more likely that the Murdochs go 100% the other direction, that we get a splashy editorial in the Wall Street Journal essentially saying "GTFO, you loser", and if that has legs (and I think it does) then that narrative migrates over to Fox News and into the mainstream.

The only missionary with actual power who I think believes a Trump loss is - maybe - existentially bad for him, and would consider - maybe - risking it all for the guy is ... Elon Musk.

To be clear, I'm not sure that Elon is wrong here! Would a Harris administration move to shut down Twitter and arrest Elon? Probably not. Emphasis on the probably. But it's not out of the question. And I think it's a lead pipe cinch that a Harris administration will do everything humanly possible to make life difficult for Elon personally and his companies professionally, including new 'misinformation' guardrails for Twitter and new 'national security' controls over SpaceX and Starlink. The fact is that Elon Musk has actual power in a political sense, and he's been very direct about using that power in a very partisan way. When push comes to shove I think the risk of going all-in for Trump will be too great and he'll back down, just like he backed down from his recent Twitter 'joke' about no one trying to assassinate Harris or Biden. But he is already pretty far out there, and other than Trump himself I am hard pressed to identify a person of real, actual power who has more to lose from a Trump loss this November than Elon Musk.

At the end of the day, I think the answer to my question ... will a missionary of actual, executive power join Donald Trump in actively seeking to delay/question/reverse the November election? ... is no, I don't think anyone will. I think you'll get lots of missionaries without actual, executive power frothing at the mouth, and I think Elon Musk will flirt with going all-in, but I don't think you'll get a governor who will say that he or she doesn't recognize the legitimacy of the election and gets their state legislature to withhold their Electoral College slate pending an 'independent investigation'. If you do, though, all hell breaks loose, because other governors will follow and that's when Elon and his Silicon Valley fellow travelers pile in. That's how we fall into the Great Ravine quickly and all at once. Not my base case, and in fact I think it's a low probability event. But not an impossible event, and it's going to feel very squirrelly with the usual suspects talking a big game and Elon flirting with it and everyone waiting to see if a governor who matters takes the leap. Forewarned is forearmed.

PS - All of this works the other way around, too. If Trump wins by a hair (which is the only way I see it happening for him), then I think there's a decent chance that Harris will refuse to concede until there's an 'independent investigation' into 'voter suppression' in Georgia or North Carolina or Pennsylvania or whatever the hinge state was. It's not a 100% chance that Harris will do this like there is with Trump, but there's a decent chance, say 1 in 3? And then we play the same game with Team Blue governors and mediaco CEOs.

PPS - And yes, it's not only national media that's in the bag for Harris, but also the Fed. Here's what I wrote to Epsilon Theory Professional subscribers on April 9:

I think everyone in Washington and on Wall Street is in the bag for nominal growth (ie, number-go-up) by any means necessary through November.

Washington is in the bag because their world ends if they don’t win in November. Wall Street is in the bag because it’s their last chance for a big score before a stagflationary vol event of enormous proportion hits the economy regardless of who wins in November.

Rate cuts? Sure. 100% baked in IMO. At some point we will get a cooler-than-expected inflation report or jobs report. Just by variance we’ll get this. And at that point the cuts will be unstoppable. It doesn’t matter if commodities continue to rock and inflation gets more and more embedded, as we’ll just come up with some new narrative explanation to tell you that inflation is fine, some new version of “hey, you should really be paying attention to 3 month annualized trimmed median core CPI”.

And when the rate cuts happen, stocks are going to rock (rates, too, especially on the short end) because we have full narrative acceptance today of higher for longer. Whatever market adjustment needed to take place to move from 6+ rate cuts in 2024 to 2- rate cuts has already happened (and as I wrote about here, actual professional investors/traders never believed the 6+ story anyway), so as we move back to 3+ cuts all of the usual suspects are going to work great. This concludes Round Two of the unmoored rates trade.

Basically, I think our world is going to be flooded with liquidity for the next six months.

Nominal growth is all that matters. What cannot happen is an economic slowdown and job losses. What cannot happen is number go down. So that will not happen, no matter what that does to inflation and Fed credibility and all that.

After that, we will all have to pay the piper.

Wheeeee!

The Last Hurrah

Yes, I wrote that in early April.