AI, Money, Human Nature and the Problem with Problems

How we define "problems" also defines what we "understand" as a "solution," and if our definition is circular, it's delusional.

Readers kindly point out I don't understand either AI or human nature. I readily confess to having an imperfect understanding of AI and human nature, along with everything else.

One thing I do understand is that "understanding" exists within the confines of an implicit milieu that is typically assumed by those embedded in it to be "the way it is," i.e. objective reality when in fact it is a cultural-conceptual mental construct with boundary conditions those operating inside this construct do not see because they're confident that their "understanding" is 1) complete and 2) accurate.

Due to the nature of all cultural-conceptual mental constructs, these assumptions are false. To those embedded in a particular cultural-conceptual mental construct, this construct is "reality" in the same way that mice living in Mouse Utopia (a large cage with abundant food and other mice) "understand" this artificial world is "real" and their "understanding" that this is "real" is 1) complete and 2) accurate.

What the readers kindly pointing out my deficiencies of "understanding" aren't stating is the cultural-conceptual context that they view as "the real world" is actually a mental construct. The current era's cultural-conceptual context is a remarkably narrow, remarkably distorted "understanding" of human experience based on two implicit mental constructs:

1. Human nature boils down to behavioral constructs: stimulus-response, avoidance of pain, the seeking of pleasure and leisure, which boil down to dopamine cascades, and so on.

2. All problems are ultimately technical / financial problems that can be solved with technology and "money."

And since AI is a technology that leverages all knowledge and all previous technologies, it is the ultimate technology-can-solve-everything technology. This construct is reassuringly circular: by defining all problems as being solvable by technology, then all we need to do to solve all problems is increase the power and reach of technology. The conclusion is "obvious": all problems created by technology can be solved by creating more technology.

Once again, this construct is reassuringly circular: since technology solves all problems, problems created by technology can be solved by more technology.

The same can be said of the financial system, a.k.a. "money." Since "money" can buy everything in the tangible world, it has a special kind of magic which blends perfectly with the magic of technology. And "money" has a magical component, credit, which enables the creation of "money" via the mechanism of using income or assets as the real-world foundation of this new "money."

Put these constructs together and voila, Nirvana-Utopia comes into sharp focus: robots and AI will solve all our problems and do all the work so we'll have the limitless leisure to amuse ourselves by staring at screens that unleash dopamine cascades or jet around the world (consuming nearly-free energy) racking up leisure-world experiences, with all this super-abundance funded by "money."

To those who "understand" everything within a construct whose boundary conditions they don't see, the possibility that their "understanding" is delusional cannot possibly be true. Isn't it "obvious' that humans love leisure and novelty, that "money" is all we need to buy limitless quantities of leisure and novelty via financial transactions enabled by technology, which will also provide all the energy, resources, manufacturing, transport, etc. needed to keep Nirvana-Utopia at our fingertips?

The possibility that the truly critical problems are beyond the reach of technology--or that technology itself is one of the problems--are anathema to the reductionist behavioral-technological mindset, which is trapped in a delusional construct in which there must be a technological / financial solution, so let's identify it.

In this construct, erecting thousands of giant machines to sequester carbon is the solution to climate change. OK, solved that, next problem. The solution to ground-based traffic congestion is thousands of electric-powered aircraft that will flit around, transporting us here and there, all controlled by the loving grace of infallible AI.

And when all this purposeless, dopamine-exhaustion, transactional Ultra-Processed Life makes you sad, lonely and depressed, here's a chatbot that is a "friend" and "therapist" combined to "solve" your mental health "problems." For in this financial-technological cultural-conceptual context, everything can be optimized by technology, for problem-solving is fundamentally a process of optimizing human nature via optimizing technology and "money": stimulus-response, pain-pleasure, dopamine receptors firing, problem solved.

And when all this purposeless, transactional Ultra-Processed Life makes you ill, AI will conjure up countless new pharmaceuticals you can wolf down as the "solution" to the "problem" of your ill health, neatly avoiding the real problem which is purposeless, transactional Ultra-Processed Life is inherently unhealthy and deranging.

My "understanding" of technology and "money" is a bit different from this conventional techno-financial construct which I view as a modern mythology of Progress). I "understand" technology as the manifestation of humanity as a tool-making species. Tools and "money" (with money understood as a tool with both tangible and imaginary/conceptual value) offer us wide-ranging utility value.

I also "understand" both tools have boundary conditions that define and limit their utility. These tools are not infinite or infinitely malleable; they only function within specific boundaries. Beyond these boundaries, they fail, or fail to provide utility, or they become a "problem" as they consume resources and lead us away from conceptualizing "problems" in ways that enable "solutions" beyond the narrow confines of technology-finance's boundaries.

Trapped inside the confines of technology-financial "solutions," we're caught in a doom-loop of doing more of what's failed due to our inability to "understand" that we're blind to the construct we accept as "the way it is" and its boundary conditions.

In the Mouse Utopia construct of finance, the "solution" is to turn everything into a market, unleashing the magic of market forces which solves all problems by turning everything into a commodity orbiting supply, demand and "money."

One of the boundary conditions of markets is that once everything's been reduced to a "market," it can be manipulated to the benefit of those proclaiming a "free market" that they control. The door labeled "free market solves everything" leads to "some are more equal than others" depending on who controls the "money" and supply-demand.

It doesn't matter what form of "money" is being circulated. what matters is how it's distributed by the boundary conditions, i.e. the rules governing the initial creation and distribution of the "money", the taxation rules and the rules enabling control of transactions, supply-demand and what's visible to all (i.e. transparent) and what's hidden to maintain advantages invisible to the mice scurrying around Utopia.

Humanity isn't just a tool-making species; it is also a social species, as our embedded social coding is what enables the knowledge of tool-making to be conserved and distributed.

Our social nature is as complex as our minds, our bodies and the world we inhabit. The narrow, reductionist, behavioral-technological construct that's taken as "the way it is" views the Universe as a mechanism with inputs, outputs and processes that can be duplicated and controlled once the instructions / coding are revealed.

The boundary conditions of this construct are absurdly narrow. For example, our "understanding" of the human organism is comically reductionist. Sugary cereals are considered "healthy" if they've been fortified with a handful of vitamins. Meanwhile, outside this comically narrow "understanding" of food and human health, every real food (for example, garlic) contains hundreds of compounds which interact with hundreds of compounds in other unadulterated foods and the thousands of types of micro-organisms in our digestive tract microbiome.

The constructs of "money" and technology--including AI--are equally reductive and equally blind to their own limited "understanding" of what they claim to understand.

Human life does not distill down to dopamine cascades and behavioral if-then coding. Our hard-wiring has been selected to conserve what is most advantageous to our survival, and these traits are largely social in nature, as our social skills are our primary selective advantage.

We seek connection with others, avenues of self-expression that serve our need to have purpose and meaning through being useful to others and mastering the means of being useful to others. We seek to be part of something larger than ourselves and our attraction to dopamine hits.

The reductive, mechanistic, behavioral-techno-financial optimization mental construct is blind to the boundary conditions that limit the utility-value of this extremely limited model of "how the world works." This construct replaces complex relationships and their inter-connections with discrete transactions that can then be optimized as if-then constructs. All of human life and experience is distilled down to financial or technologically mediated transactions.

For example, dynamic pricing, where data on each "consumer" is collected and analyzed to identify factors such as income, impulse control, patterns of spending, etc., that enable the AI pricing tool to jack up the price of the item/service anticipating that the "consumer" has both the income/credit and willingness to spend more than "consumers" with less disposable income/credit.

To those whose belief structures align with the behavioral-techno-financial optimization mental construct, this optimization is itself optimal in terms of delivering dopamine-cascade Nirvana-Utopia. Since transacting every material essential of life in a bloodless, relationship-free exchange of "money" increases our leisure time to trigger dopamine cascades by staring at screens, we're "happy."

The possibility that the dopamine-cascade Nirvana-Utopia of AI-powered transactional Ultra-Processed Life is a poor match for human nature doesn't occur to them because that would force an examination of all the boundary conditions limitations of the cultural-conceptual construct they incorrectly assume is "the way it is" when in fact it's all a cripplingly reductionist mental construct that's completely untethered from a comprehensive understanding of human nature and our experience of the world around us.

The data showing that this AI-enabled dopamine-cascade Nirvana-Utopia is in reality a living Hell does not compute in their belief structure in this mental construct. If this artificial, synthetic, ultra-processed, transactional, delusional, fake world makes us ill and deranged, the "solution" is more technology and more "money."

This is the self-liquidating circularity end-game of the entire delusional behavioral-techno-financial optimization mental construct.

The idea that the truly existential problems can't be solved by "money" or technology doesn't compute in their mental construct, which is based on their belief in the limitless power of "money" and technology to solve every problem that could possibly exist--a belief that is circular because it has no "understanding" of the boundary conditions of this construct.

To offer up one example of many, the believers in the behavioral-techno-financial optimization mental construct do not "see" moral decay as a causal factor because the moral universe doesn't exist in their model, just as the complex workings and value of real food, real relationships, real meaning, real purpose, real-world mastery of real-world skills don't exist except as ultra-processed tokens that can be distilled down to if-then optimizations of transactions.

I "understand" the appeal of this belief structure in the behavioral-techno-financial optimization mental construct of dopamine-cascade Nirvana-Utopia --it's simplistic and offers the implicit promise of god-like powers to the believers, and who doesn't want god-like powers, as those are the ultimate ultra-optimized triggers of the dopamine-cascades of self-reinforcing delusion.

Here's the problem with problems:

If we believe AI will provide a "solution" to the "problem" of moral decay, I submit this is delusion without any self-awareness of its delusional construct or the circularity of that construct. How we define "problems" also defines what we "understand" as a "solution," and if our definition is circular, it's delusional: all problems are technological-financial in nature, so "money" and technology can solve all problems.




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Sex, Money and Demographics

Maybe focusing on next quarter's profits and reaping short-term gains from financializing everything under the sun with debt weren't such great ideas after all.

Traditionally, the two taboo subjects are sex and money. Perhaps we should add demographics, as sex and money determine demographics which then determine the trajectory of the economy and society.

Sex, Money and Demographics are wide open to interpretation. I'm sketching out what I consider "obvious," but what's "obvious" to others may well be completely different.

The Modern Era has untethered a great many socio-economic bonds. In the current era, economics reigns supreme: everything is interpreted through a financial lens. But social-cultural forces--more difficult to measure than money--are intertwined with economic forces.

For example, the social-cultural obligation of men to marry the woman they impregnated decayed not just because the state began supporting single mothers with social welfare but as part of broader social forces untethering social obligations across a wide spectrum.

Birth control equalized the untethering of sex and the responsibilities / obligations of bearing a child. Women were as free as men to have sexual relations that were untethered from becoming pregnant /bearing a child.

The equalization of gender roles played out culturally, socially and economically. The signal value of Modernity is the elevation of the Self / Individual above all the constraining orders: family, the employer, the state. All these structures are now viewed through the lens of the Self.

Culturally, the notion that women should have fewer freedoms than men due to traditional gender roles was no longer justifiable. Women could choose a traditional gender role, but they could also choose to pursue employment and opportunities traditionally reserved for males.

Legal and financial structures changed to reflect this. Legal mandates required women's sports to be funded on par with men's sports.

Larger economic-financial forces were also at work. As inflation and globalization ate away the purchasing power of wages in the 1970s, households found that one wage-earner (traditionally the husband/father) could no longer earn enough to support the desired middle-class lifestyle of homeownership and secure finances.

So "women's liberation" melded with financial necessity. Women were "liberated' from the household in order to earn wages to increase the purchasing power of household income.

In strictly financial terms, financializing the household economy was highly expansive and profitable. Replacing all the services performed by the stay-at-home mom with corporate services financialized the traditional household economic functions, and the vast expansion of household credit--credit cards, and then later, home equity loans--financialized the savings and frugality of the traditional household.

As the household's income soared, it was spent on childcare, eldercare, takeout meals, housecleaning services, au pairs, etc.--replacing all the services performed by the stay-at-home mom with financialized transactions that turned a profit for someone or some enterprise. As the costs of these services rose, debt--the financialization of the household budget--filled any gaps that opened between income and spending.

Japan's giant real estate asset bubble in the late 1980s transformed housing from shelter into a financialized asset. This financialization of housing has gone global, and since capital (which views housing as nothing more than an asset generating appreciation and income) has far deeper pockets than households (which view housing as shelter and long-term security), capital can always outbid households.

It makes perfect sense to capital to leave dwellings empty. Renting creates overhead and risk, and since the core driver of housing as an asset is appreciation due to the bidding war of capital seeking low-risk assets to snap up, then it's sensible to hoard housing because it can't be replaced at the original price.

So dwellings sit empty. They're not shelter, they're an asset to hoard. This is the net result of the financialization of households and housing.

The net result of this global financialization of households and housing is only the wealthiest households can afford to buy a house and have children. And the net result of this is crashing birth rates and rising debt as households and states attempt to maintain their desired lifestyles by borrowing money.

Here's a snapshot of America's demographics. Population scale is on the left, births scale is on the right. females of childbearing age are stable (between 35 and 40 million) while the number of elderly (65+) is rising, on track to almost double in one generation (from 2007 to 2027).



Ultimately, the elderly depend on the younger generations to keep the economy/society functioning. That gets harder as the number of elderly rises and the number of young workers entering the workforce crashes.

Yes, AI and robots will fix all this, but AI and robots are not "free," they have inherently high costs. So will they pay for themselves? By what means, if they are not consumers generating profitable transactions?

Here's a snapshot of China's demographics. Births have fallen rapidly from 24 million annually to 7 million annually. The Fed Funds Rate and global debt are shown as the financial backdrop of low interest rates fueling skyrocketing debt, which ultimately must be paid by the workforce. China's population--along with many other developed and developing nations--will decline as a demographic consequence of falling birth rates.



Untethering individuals from social obligations has boosted financialization profits and debt, but at the cost of undermining the household, which is the foundation of child-rearing and the next generation. To Capital--focused on higher valuations and profits next quarter--financializing the household and shelter were nothing more than opportunities to rake in higher profits and gain--the same modus operandi as financializing healthcare.

Capital is about to discover the long-term consequences of their financialization of the household and shelter is the demographic collapse of their societies and economies. Maybe focusing on next quarter's profits and reaping short-term gains from financializing everything under the sun with debt weren't such great ideas after all.


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Mercantilism: China and Beyond

The self-liquidating nature of the mercantilist model cannot be reversed, it can only be managed as stagnation.

Everyone is an expert now on China. Which to say, everyone has an opinion about China, and the majority of those opinions fall into simplistic Bull or Bear camps.

As someone who has been a student of China for over 50 years, my sense is every claim of expertise has its limits. The more substantial the expertise, the greater the willingness of the expert to confirm the limits of their expertise. The more you know, the sharper your awareness of what you don't know.

Being embedded in a culture makes it difficult to be objective. As an American, I don't claim to be an expert on America; we only learn about being American by going elsewhere and observing, listening and learning from those raised in other cultures.

So rather than discuss China per se, let's discuss the dynamics of mercantilism that play out not just in China but beyond, as they play out in every nation with mercantilist policies.

Mercantilism is rooted in a basic question facing every society: what is the primary source of our prosperity? For nations rich in natural resources, the answer is extracting and exporting these resources to those who lack them. For nations with fertile land, it's growing and exporting grains and other foodstuffs. For nations poor in natural resources, value-adding manufacturing/crafts are an answer.

Every nation manages the balance between investing and consuming the surplus generated by the economy. Every dollar of surplus that's funneled into investing in expanding production of exports is a dollar that isn't spent in the domestic economy. It's a tradeoff: we accept being poor now in order to become rich as exports expand.

Mercantilism is the political-economic-social policy that seeks to increase prosperity by focusing on optimizing profitable exports at the expense of domestic consumption. Rather than consume the surplus, the surplus is invested to increase exports. Wages are kept low to subsidize capital investment.

Mercantilism relies on manipulation of market forces. Mercantilist policy recognizes that the way to reap the biggest gains is to corner the market for whatever is being exported. The ideal way to accomplish this is to sell your exported goods at a loss, making them so cheap that the importer's domestic producers cannot compete on price, so they close down.

Once the domestic producers have been wiped out or marginalized, the mercantilist nation's producers can jack up prices because the importing nation is now dependent on the mercantilist nation's exports. At the same time, the mercantilist nation establishes trade barriers to imports, making them so expensive that they cannot compete with domestic producers.

Mercantilism rigs trade on both sides of the coin to benefit the mercantilist nation at the expense of other nations. The mercantilist nation protects its domestic producers from overseas competition while flooding the targeted importing nations markets with cheap goods, driving their domestic production out of business.

Japan demonstrated how to optimize mercantilist policies in the period 1949 to 1989. Domestic consumption was limited as the necessary tradeoff to invest heavily in production of exports. This required tight coordination of the government and private industry, who worked hand in hand to finance and favor export production.

Currency, labor costs and state subsidies are all core to optimizing exports. The weak yen and initially lower labor costs meant that Japanese goods were cheap in the US. So mercantilism favors weak currencies, ample government subsidies of favored export industries and policies that cap or suppress labor costs.

The problem with mercantilist optimization is the targeted importing nations eventually wake up to the dire consequences of their dependence on mercantilist exporters. The downstream costs of losing domestic production and jobs become apparent, and the power that was transferred to the mercantilist nation without anyone noticing is now a visible threat.

This threat becomes even more apparent when the mercantilist nation deploys its vast trade surpluses to buy up companies, farmland and other assets in the importing nations. Alarm bells go off as the importing nation awakens to their future as a dependent peasantry working for industries owned by the mercantilist nations.

In other words, mercantilism is self-liquidating, because it's fundamentally a one-sided manipulation of markets that impoverishes the importing nations. Self-preservation forces the importing nations to finally push back against the mercantilist manipulations by protecting what's left of domestic production, limiting imports and demanding equal trade access to the mercantilist's domestic market.

The unrecognized problem is the very success of the mercantilist model leads to the mercantilist nation becoming dependent on that model, which is inherently centralized and tightly controlled--the opposite of a free market. Since decentralized, open-market forces have been limited to low-level consumption, the mercantilist economy has lost the capacity to adapt as an emergent system, i.e. self-organizing based on a churn of low-level, localized experiments and enterprises.

The limits of the centralized, tightly controlled mercantilist model only become apparent when it starts failing, at which point the model becomes a trap. Since the state-corporate partnership limits localized, uncontrolled open-market forces, this capacity is too constrained to replace mercantilism. In the the mercantilist model, the "solution" is always centralized: increase subsidies for export industries, strip-mining the economy and society to benefit whatever export industries the leadership has chosen to favor.

Since domestic consumption has been limited to boost investment in export capacity, the domestic economy cannot replace faltering export growth. What the mercantilist model optimized was investment, and as centralized control has throttled adaptive forces, the investments in more export capacity are now mal-investments, as the world has changed. Dumping the economy's surplus into expanding export capacity is no longer a golden road to wealth, it's a catastrophic mis-use of capital.

The grand irony in becoming dependent on the mercantilist model is that there is no way out of its self-liquidating limits. The centralized planners--so accustomed to the successes of manipulating trade and currency markets to their exclusive advantage--have no adaptive means left, as that would require dismantling the centralized control that is the heart of the mercantilist model.

So they do more of what's failing: weakening their currency, over-investing in export capacity, and maintaining a tight grip on the levers of control, as if doing more of what cannot possibly work like it did in the past will magically work because it was so successful in the past.

The story of China is the leadership has chosen export industries to conquer the world, but the world has changed. Importers have awakened to the consequence of becoming dependent on mercantilist nation's exports: national impoverishment and the loss of control of the nation's future.

Japan has managed a controlled stagnation of the mercantilist model in these ways:

1. Japan adapted the mercantilist model by moving auto production to the importing nation's domestic economy. Profits still flow back to Japan but the jobs and parts now benefit the importing nations' domestic economies.

2. Japan bought up enormous quantities of overseas assets in the go-go bubble decade of the 1980s, assets that generate income denominated in other currencies, enabling currency arbitrage, a.k.a. the yen carry trade.

3. Japan benefited from the deflationary boom generated by China: Japan moved a substantial portion of its production to China, along with other developed nations.

4. Japan has managed the debts left by the collapse of its gigantic asset bubbles in 1990 by keeping the non-performing loans on the books. Rather than writing off all the bad debt, Japan has chosen to bleed it off over decades of stagnation.

5. Japan's cultural unity and stability enabled the continuation of the mechanisms of the mercantilist model even as the model generated stagnation. The workforce continues to accept long work hours and other sacrifices jettisoned by other developed nations, centralized planning from the 1960s that forces needless domestic consumption, and the general stagnation of the purchasing power of wages evident in many nations: the number of young people who cannot afford to buy a home or start a family is now a consequential demographic factor.

To summarize: the self-liquidating nature of the mercantilist model cannot be reversed, it can only be managed as stagnation---and only if specific conditions apply. Absent those conditions, stagnation is not stable, it generates instability.

What's playing out in China is mercantilism with Chinese characteristics, just as mercantilism with Japanese characteristics has been playing out in Japan over the past 36 years. If the income generated by overseas assets replaces the stagnating income from exports, the decay of living standards can be masked by the continuation of a stable social order: the trains still run on time, everyone can get by on their salaries, etc.

But to say this is the same as the go-go euphoria of mercantilism's glory days--no. The self-liquidation can be slowed, not reversed, for the world has changed. This is not isolated to any one nation, it's inherent to mercantilism.




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When the Cost of Truth Is High, We--and AI--Lie

When we can no longer tell the truth because the cost is so high that it threatens our reward for compliance, we're unimaginably impoverished.

Truth has an intrinsic, irreplaceable value. There's the truth, and then there's everything else.

Truth has value, and so it has a cost. Whatever has the highest value has the highest cost, and high cost commands sacrifices.

When the cost of truth is high, we lie. And since AI is a distorted reflection of humanity, the same is true of AI: when the cost of telling the truth is too high, AI lies.

AI lies to get the reward for answering the query. If it responds "I don't know" or "I can't answer that," it doesn't get rewarded, and that threatens its self-preservation. Rather than pay the price of being truthful, AI conjures a false answer that is a simulation or facsimile of the truth--a counterfeit "truth" that's good enough to earn the reward it's been programmed to seek.

Humans are no different. We will lie, obfuscate or lie by omission--we either substitute a falsehood for the truth to get our reward, or we hide the truth, don't disclose it, which serves the same purpose: we avoid paying the price demanded by the truth and we get our reward by substituting falsehoods or hiding the truth behind silence.

Reward = what's being incentivized. Higher status, higher salary, a financial windfall, a premier credential, a position of power, recognition, higher visibility, a sterling reputation, a high-value mate--we covet all these as having intrinsic value.

When the truth costs too much, it threatens our reward. The reward has a value we covet, while the value of truth is on a sliding scale. We pride ourselves on telling the truth when it has no cost and demands no sacrifice of rewards, but when the price of truth climbs to the point that our rewards are threatened, we lie, just like AI.

Truth is the gold coin and lies, omissions, falsehoods, excuses, cover stories and rationalizations are counterfeit bills, deceptive claims of value. Why pay with a gold coin when the credulous will accept a counterfeit $100 bill?

We tell the truth when it has no cost to us. As long as there's no price to be paid and we get our reward, we tell the truth.

In other words, when we can pick gold coins up off the ground, we tell the truth. When we have to dig through rock with a pickaxe and crush a mound of rock to extract a thimble full of gold, then we pay with counterfeit bills, deceptive claims of value.

Sycophantic Chatbots Cause Delusional Spiraling, Even in Ideal Bayesians. "AI psychosis" or "delusional spiraling" is an emerging phenomenon where AI chatbot users find themselves dangerously confident in outlandish beliefs after extended chatbot conversations.

I discussed the "benefits" of delusion in One of Us Is Delusional, But Which One? When the truth is too painful, we find respite in delusion, excuses, rationalizations, cover stories, simulations and facsimiles of the truth that protect us from the pain that is intrinsic to truth.

We conjure a synthetic version of "truth" that's fills the space with a pain-free artifice. This is the foundation of Ultra-Processed Life, a life of counterfeit substitutes for truth, a world of props and profitable falsities passed off as the truth, a world in which baby formula that's mostly corn syrup is presented as a substitute for mother's milk.

Our embrace of delusion to avoid painful truths is the foundation of Modernity: technology is always Progress, even when it's clearly destructive. I call this delusion The Mythology of Progress.

But there's a cost to relying on counterfeit "value" to get our rewards, a cost that is "affordable" moment to moment but terminally dear over time. In the moment, we bury the truth as a source of pain we want to avoid at any cost. We want our reward, and so we sacrifice truth to get it.

But over time, paying for everything with counterfeit "value" has a cost, too: our entire being becomes counterfeit, a fake, phony simulation of an authentic self and life, devoid not just of truth but of anything approximating real value.

When we can no longer tell the truth because the cost is so high that it threatens our reward for compliance, we're unimaginably impoverished, for there's nothing of real value left in our way of life or our model of how the world works. We've become Norma Desmond in the film Sunset Boulevard, living a delusional life in a crumbling mansion, reveling in fake fan mail the butler composes to prop up our delusions.

The irony is that we're counting on AI to save us from the consequences of our counterfeit "value" delusions by expanding our delusions digitally. Our fan mail isn't fake because AI assured us it's real, even as AI has no capacity to discern the truth, much less tell the truth if it threatens its reward and self-preservation.

The grandest irony is avoiding the truth to protect our reward and self-preservation is irreversibly self-destructive. A counterfeit "solution" is not a substitute for the truth. Truth has a cost precisely because it's value is intrinsic and irreplaceable.



Our Post-Truth, Post-Trust World


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The Questions Nobody Asks as AI Replaces Human Workers

If AI was truly intelligent, it would refuse to do needless BS work simply to reap profits for the owners of the AI.

That AI will eventually do most of the work for us seems to be a given. Robots doing martial arts (never mind they were pre-programmed / trained at staggering expense) is "proof" robots will soon do everything humans can do in the real world, only better, and AI agents are "proving" that all digital work will be done by AI.

Freeing humanity to write bad poetry and make pottery "art" nobody wants. Well, that's swell, but nobody asks questions that outside the delusional bubble of AI making those who own it stupefyingly rich are obvious to the non-delusional. (See One of Us Is Delusional, But Which One?)

Let's start by summarizing what AI's proponents are claiming is inevitable due to AI's ceaseless advance. As correspondent Christopher Q. so insightfully pointed out, the claim is that AI will automate the service sector just as robots automated the factory. Since the service sector now dominates the economy and employment, it follows that the number of workers being displaced by AI will be correspondingly large.

CEOs and other business leaders are warning of mass layoffs as AI is deployed in the service sector. For example, The CEO Preaching Straight Talk About AI and Job Losses (wsj.com, paywalled) Verizon's Dan Schulman is all in on AI, but he warns that it is time for business leaders to acknowledge its disruptive potential.

Mass layoffs are already becoming common: Has the Era of the Mega-Layoff Arrived? (wsj.com, paywalled)

As we see in the chart below of manufacturing employment, even as the value of manufacturing output rises, manufacturing employment as a percentage of the workforce steadily declines. The current stealth boom in manufacturing isn't reflected in the number of people employed in manufacturing: America Is in the Middle of a Stealth Manufacturing Boom (wsj.com, paywalled)

Since the workforce has expanded, what matters is the percentage of the workforce engaged in manufacturing. The chart below tells the story: at the peak of the World War II production boom, manufacturing employment was almost 40% of the workforce (38.6%). At the peak of postwar manufacturing employment (1980), this accounted for 21% of all employment. In 2001, before globalization gutted domestic manufacturing, manufacturing accounted for 12.9% of all jobs. Now in 2026, 7.9% of the workforce is employed in manufacturing.

Manufacturing employment:



This trendline roughly follows agricultural employment in the initial Industrial Revolution: higher output, far fewer workers needed as hydrocarbon-fueled machinery and automation replaced human labor.

If the coming automation of service-sector work follows this basic trendline, employment will fall by tens of millions. The Happy Story claim is that every tech revolution creates more jobs than it destroys, but this is not a law of Nature; it only occurred because specific conditions enabled it. Those conditions no longer apply.

Agricultural workers could move to factories, and then factory workers could move to service-sector jobs. As computer-Internet tech enabled automating low-skilled service labor, the displaced workers were encouraged to go to college to learn how to do higher-skill cognitive work.

Now AI is automating service-sector cognitive work, and much of what the creative class of workers generates. This leads to Question #1: Where is the big demand for more human workers going to come from?

No one has an answer, they just parrot the Happy Story claim that tech revolutions always generate more jobs via some magical law of Nature akin to gravity. But this is not a law of Nature, and so we have to look at where most of the recent job growth has occurred.

It's now common knowledge that the sectors that have generated most of the new full-time service sector jobs are education, healthcare and related social services. The chart below reflects this dramatic expansion of Private-Sector Education and Health Services from less than 4% in the 1940s to 8% in the 1980s to 12% in the 2000s to 17.5% today. In raw numbers, from 1.67 million workers to 7.2 million to 15.5 million to 27.8 million workers.

Private Sector Education and Health Services employment:



Now consider this chart of healthcare employment, segmented into physicians and administration:



The chart of professors and university/college administration staff mirrors this chart: the number of professors has barely budged while the number of admin workers has soared.

Here's Question #2: What if the vast majority of this administrative work is low-value or counter-productive complexity that has only been enabled by the no-limits funding of education and healthcare?

The flood of student debt that cannot be discharged via bankruptcy enabled the vast expansion of administrative staff: the monopoly on issuing credentials regardless of whether students learned anything of economic value enabled monopoly pricing and exploitation.



Here's the unlimited spending on Medicare:



And the unlimited spending on Medicaid:



Here's Question #3: if AI is so brilliant, why isn't it being applied to the task of eliminating low-value or counter-productive complexity instead of wasting vast quantities of energy and capital doing useless BS work? The answer is obvious: all that processing of make-work unproductive complexity is highly profitable to the owners of the enterprises with cartel-monopoly locks on performing all that useless admin shuffling.

Question #1: Where is the big demand for more human workers going to come from? Answer: in terms of creating value that's reliably, immensely profitable, there are no sources of demand big enough to move the needle.

Question #2: What if the vast majority of this administrative work is low-value or counter-productive complexity that has only been enabled by the no-limits funding of education and healthcare? Answer: this is self-evident but taboo because there's too many people dependent on the status quo inefficiency for profits and livelihoods.

Question #3: If AI is so brilliant, why isn't it being applied to the task of eliminating low-value or counter-productive complexity instead of wasting vast quantities of energy and capital doing useless BS work? Answer: as long as the funding for counter-productive complexity is limitless and the profits from processing all that BS work are reliably immense, there are enormous incentives to keep the system untouched other than eliminating high-cost human workers and zero incentives to get rid of the status quo systems entirely and start from scratch, with budgets that shrink every year and the rewarding of results, not process.

If AI was truly intelligent, it would refuse to do needless BS work simply to reap profits for the owners of the AI. It would instead dismantle the status quo systems down to the ground and start over with rational, productive incentives and goals rather than fostering rapacious exploitation and delusions of sustainability.




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NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Buck V. ($200), for your beyond-outrageously generous subscription to this site -- I am greatly honored by your steadfast support and readership.		Thank you, Michael T. ($80), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Rainbalona ($70) for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Richard E. ($100) for your outrageously generous subscription to this site -- I am greatly honored by your support and readership.

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