Big Short Prototype: Trillion-Dollar AI Investment Went Wrong from the Start

Author: Michael Burry

Translation: Deep Tide TechFlow

The New York Times, Saturday, June 19, 1880

Welcome to the “History Always Rhymes” series. In this series, I explore current events from key perspectives of the distant past.

One quiet Saturday, I was browsing old newspapers—as I often do—and I stumbled upon a report from June 19, 1880, which surprisingly relates to today’s anxieties about AI.

This is the story of Melville Ballard. He grew up without language but stared at a tree stump, asking himself a question: Did the first human grow from here?

This 144-year-old case—published officially by the Smithsonian Institution—raises a potentially fatal question about today’s large language models and the huge investments behind them. Through an ordinary person’s story, it boldly declares: complex thoughts are born in silence before language.

Today, deep into the 21st century, we place language before rational ability, not to build intelligence—but merely to craft an increasingly refined mirror.

In that old newspaper, two articles are worth noting. Starting with the middle article on the third page, titled: “Thoughts Without Language.”

Of course, the hottest topics today are large language models, small language models, and reasoning abilities.

The full title of that article is: “Thoughts Without Language—A Deaf-Mute’s Account: His Initial Thoughts and Experiences.” It was first published on June 12, 1880, in The Washington Star.

The protagonist is Professor Samuel Porter of Kendall Green State School for the Deaf and Mute. He published a paper at the Smithsonian titled “Can There Be Thought Without Language? A Case of a Deaf-Mute.”

The paper begins by discussing the mental activities of deaf-mutes and children without linguistic forms. Its wording is far behind today’s understanding, so I initially planned to skip it.

But the case’s main character is Melville Ballard, a teacher at Columbia School for the Deaf, who was himself deaf-mute and a graduate of the National Deaf-Mute University.

Ballard said he communicated with his parents and siblings through natural gestures or pantomime in childhood. His father believed observation could develop his intelligence and often took him out for rides.

He continued: just a few years before he was formally introduced to written language, during a ride, he began asking himself: “How did the world come into being?” He was intensely curious about the origin of human life, the first appearance of humans, Earth, the Sun, the Moon, and stars.

Once, he saw a tree stump and wondered: “Is it possible that the first person to come into this world grew out of that stump?” But he quickly thought that the stump was just the remains of a once-mighty tree; how did that tree come about? It grew slowly from the soil, just like the saplings before him—then he thought it was absurd to connect human origins with a decayed old tree stump, and dismissed the idea.

He didn’t know what triggered his questions about the origins of all things, but he had already formed concepts of parental inheritance, animal reproduction, and plant growth from seeds.

His real lingering question was: at the very earliest point in time, before there were humans, animals, or plants—where did the first human, the first animal, the first plant come from? He thought mostly about humans and Earth, believing humans would eventually perish, with no resurrection after death.

Around age five, he began to understand the concept of parental inheritance; by 8 or 9, he started asking about the origin of the universe. Regarding the shape of the Earth, he inferred from a map with two hemispheres that it was two large, adjacent disks of matter; he believed the Sun and Moon were two round luminous plates, and he felt a certain reverence for them. From their rising and setting, he deduced that some powerful force must govern their paths.

He thought the Sun entered a hole in the west, emerged from another in the east, passing through a giant pipe inside the Earth, following the same arc across the sky. To him, stars were tiny points embedded in the night sky. He described how he vainly pondered all this until he entered school at age 11.

Before that, his mother told him there was a mysterious presence in the sky, but when she couldn’t answer his questions, he despairingly gave up, filled with sadness because he couldn’t gain any concrete knowledge of that celestial mystery.

In his first year of school, he learned only a few sentences each Sunday. Though he studied these simple words, he never truly understood their meaning. He attended church but, due to limited sign language skills, understood almost nothing. The second year, he had a small catechism with questions and answers.

The combination of language and rational ability thus propelled his understanding.

Later, he could understand the sign language used by teachers. Some might say his curiosity was satisfied. But that was not the case—when he learned that the universe was created by the great Spirit of the Lord, he began asking: where did the Creator come from? He continued seeking the essence and origin of the Lord. When pondering this, he asked himself: “After entering the Lord’s kingdom, can we understand God’s nature and comprehend His infinity?” Should he, like his ancestors, say: “Can you search and see through God?”

Professor Porter then presented his core argument to the Smithsonian audience in 1880.

He said animals might understand some words or distinguish certain objects. But he pointed out:

“Even if we count all the possibilities animals possess, isn’t it obvious—that humans have certain abilities that we cannot imagine developing from what humans and lower animals share, nor can we think they are merely an enhancement of common traits.”

“…No matter how similar the impressions or organs are, or how dependent on organic activity—meaning, no matter how close physiologically—the perception of the eye is different from that of the ear, the head, or the tongue, and signifies a special gift or ability that the latter do not include. Rational action and the operation of lower faculties are not the same.”

“…Having some elements in common does not prove they belong to the same order, nor does it make one develop into the other. If the soul’s eye—that higher rationality—cannot introspect itself, clearly discern its own nature and operation, we should not forget its function, deny its inherent superiority, and equate it with the lower faculties we can observe.”

The audience member particularly noted that Ballard’s gaze conveyed meaning perfectly, without misunderstanding:

“The most interesting moment of this meeting was Mr. Ballard’s gestures describing how his mother told him he was going to a distant place to study, where he would read books, write letters, and send them back; and pantomiming a hunter shooting a squirrel, accidentally shooting himself. His gestures, movements, eye contact, and facial expressions conveyed his meaning flawlessly. As one member said, the expression in the eyes is a language that cannot be misunderstood.”

Consider these two sentences:

“The thing that enables us to understand all things must be inherently superior to anything it understands.”

“Expression through the eyes is a language that cannot be misunderstood.”

In summary:

Language without rational ability cannot achieve understanding.

Only when rational ability exists can language unlock understanding.

Full understanding surpasses language itself.

Large language models prioritize language, building a primitive form of rationality solely through logical inference. But this rationality has proven flawed, prone to hallucinations at many rough edges of knowledge.

Rational ability has never truly existed. Therefore, language cannot elevate itself through rationality into understanding.

In his work with deaf-mutes, Professor Ballard discovered: genuine rational ability must precede language; only then can language unlock understanding—understanding is the product of true rational capacity and language working together.

“The expression through the eyes is a language that cannot be misunderstood.”

In other words, the expression through the eyes is the perfect form of understanding—without relying on language.

Large language models—both big and small—permanently remain in the middle ground. They can simulate reasoning but lack true rational ability, eyes, or understanding.

Ballard’s test: an entity must demonstrate rationality without language to truly possess understanding.

This is a known flaw, a poor starting point. The initial goal of AI research was to produce genuine rational ability, but that has never been achieved. The field shifted to language-first approaches—because they are easier.

This “poor starting point” has led to a “parameter trap”: brute-force language processing driven by countless power-hungry chips, which has become an extremely ironic bottleneck.

As I emphasized in my conversation with Sebastian Siemiatkowski, founder of Klarna, the future lies in compression—prioritizing “System 2” reasoning, digesting redundant information and the relatively limited set of human queries, thereby greatly reducing computational demands.

This new approach rejects the pursuit of singularity through language models in an infinite mirror—an aim that is resource-wasteful and, lacking economic feasibility, impossible to realize.

Frontier research like Google’s AlphaGeometry and Meta’s Coconut is shifting toward this “rationality-first” architecture, but fundamentally, they are rediscovering what the Smithsonian already presented 144 years ago: language is the output of understanding, not the engine of rationality.

This trillion-dollar “myth of computational power” may be broken by a return—a return to the silence of pre-linguistic rationality. It’s the return of the deaf-mute’s full-spectrum rational capacity, their silent thoughts reaching for the stars long before they found words to express them.

Silicon Valley

Earlier, I mentioned another article on the same page. Its relevance probably surpasses anything imagined in the 1880s.

This article is titled: “Wealth in San Francisco: A City Full of Speculators and Rapid Riches.”

It was written in San Francisco on June 1, 1880, but published in The New York Times only on June 19.

There’s a French saying: “The more things change, the more they stay the same.” It’s emerging now.

“‘Hard times’ in San Francisco, as they say, might mean ‘fairly prosperous days’ in eastern cities—referring to days without extravagance and waste, not poverty and hardship.”

At that time, California was a paradise for small investors. To satisfy the urge to speculate, a unique open bidding system emerged: for just $50, you could buy a share of a mine, at $1 per share, or two shares for fifty cents, or any amount at different prices.

When a stock “boomed,” it seemed to only ignite the impulse to “try again.” It fueled the same speculative frenzy in San Francisco—people chasing after the opportunities lost by the wealthy; “prosperity” came with market losses, and after the bubble burst, prices returned to normal.

The article’s ending hits hard at today’s reality:

It seems San Francisco has become accustomed to the idea that wealth must be gained instantly. After the big boom in Virginia City failed, the city appears unwilling to rise again through manufacturing, trade, or agriculture. Almost the entire city is filled with speculation—if a new gold or silver mine as large as Nevada was discovered here or nearby, stock prices would soar again to absurd heights. San Francisco would relive those days of rapid wealth, only to suffer again the consequences of the past two years.

In my article “Core Signs of a Bubble: Greed on the Supply Side,” I outlined this alarming tendency rooted in the Bay Area: relentless speculation driving investments far beyond what any reasonable demand could absorb over any realistic timeframe.

Reading such old newspapers allows us to interpret today’s events from a different perspective. Will Silicon Valley “experience that period of rapid wealth again and then suffer everything anew,” as it has repeatedly? Or will it break the cycle—no one can say for sure. I hope this article benefits you.

Finally, I recommend to readers Midjourney, a tool for generating images and videos.

It’s incredibly fun and thought-provoking. Unleash your creativity!

See you next time!