From first principles: AI and Capitalism
You’re probably caught in a bit of confusion. You know AI is powerful. You know it will change everything. But you’ve tried to use it in your day-to-day life and found a false promise was somewhere introduced. It hasn’t made your job significantly easier. It gives advice you can’t always trust. You aren’t sure how it’s supposed to actually fit into your, or anyone’s life, let alone be such an omnipotent threat or savior to radically alter the fate of humanity. Are you crazy?
On the contrary. If you pay attention to the contradictions you notice in the reality vs. the perception of GenAI, you can use this case as a vaccine, inoculate your thinking against the lies that capitalism routinely parrots in order to convince you of its worth and necessity. Let’s hold up the mirror.
AI is a perfect reflection of capitalism itself.
1. Economics is a social construction to solve a social problem (how to value transactions – not how to deal with scarcity. Orthodox economics clearly doesn’t “deal” with scarcity in any way, especially natural scarcity; it's very neatly externalized in order to obscure the very real decisions made, politically and socially, about who does and doesn't deserve scarce resources).
2. Capitalism nominates a class of people who are value-deciders (owner class, now investor class) and, through business relationships between one another and a dialectic between that class and the working class (the non-owner, non-investor class), value is decided.
3. Capitalism’s value-deciders are the bourgeois, those who own capital. Traditionally capital was the means of production, i.e., the buildings and machines and land that created products which were sold for a profit. This class of owners were able to decide the value of those products among other owners based on their incentive to sell. But they are also able to decide the value of the labor that helps create the products by virtue of their willingness to buy. – Willingness to sell and willingness to buy are also subject to social creation in addition to material constraints. (Ads, psychology, the social distribution of the things needed to live, inflation, colonialism, etc.)
4. But capitalism has a major internal contradiction: because owners are not exposed to much risk, there’s not much constraint on available wealth – capitalism tends to monopolize. But it must have the appearance of being competitive or it will lead to unchecked inflation and the collapse of value. To solve this social challenge, capitalism seeks unlimited growth from its investments. Investments that fail to grow fail existentially and must be stripped for parts. This maintains pressure and participation in the economy. – But the failure only extends to the business and the workers. It does not extend to the owners – again, see the point that they are not exposed to risk.
5. Because growth is merely a social construction to solve the social problem of not enough risk exposure for wealth accumulators, it is essentially an illusion and can be endlessly gamed by those who are considered value-deciders, but only if it maintains the illusion of value coming from growth, from something “real” like scarcity or demand.
6. This tendency leads capitalism to abstraction, or “going meta” (Survival of the Richest). As “growth” in sectors is conquered by other owners or by an increasing concentration among the same owners, the need to demonstrate more growth (and therefore the validity of capitalism as a social enterprise) leads to the creation of levels of abstraction upon the original transaction (i.e., the original valuation – a bet on the 49ers to win the Super Bowl, upon which a surprising amount of abstraction can be layered: The stock price of the gambling company, the bets against the stock price of the gambling company, the mortgage owned by the better, the bets against that mortgage defaulting, etc. etc. etc.; not to mention the value of the stock of the 49ers, the Super Bowl ad space, ad nauseam).
7. Therefore, capitalism is an economic system organized by a class of owner-value-deciders who must consistently achieve the perception of growth. Since growth tied to physical scarcity will quickly exhaust itself and make the internal contradiction clear, their chief mode of growth is abstraction, where a new arena of value-determinations can be made.
8. Some initial value under capitalism is determined by a “market” via transactions: The creation of a product or service that is then sold.
9. But much of the value-determination under capitalism is facilitated through bets, placed through the stock market, or now through prediction markets; or in the holding of property; or in any accumulation of a certain capital.
10. Though the final payment of the bet is zero-sum, for both the arbiter of the bet and the outcome on which bets are placed, hype creates value (for the arbiter, on the cut; for the outcome, on the temporary infusion of capital which can be used to purchase value elsewhere and is not due back, since it’s the responsibility of the losers). – Also, bet-takers can hedge their overall investment in the bet to effectively “both sides” the bet while reaping real wealth from the benefits of owning bets (tax evasion, other benefits of being wealthy conferred by regulatory capture)
11. Therefore, hype – the perception of value whether there “is” or “isn’t”, whether it’s a “good” bet or not – creates real wealth under capitalism.
12. This is explains the AI tech bubble but it also explains why companies seem to legitimately think AI will improve their business outcomes: it is the perception of the offloading of work. And that’s why it DOES create value, at least among publicly-traded companies that are able to convince shareholders (betters) that the adoption of AI is valuable. Just the perception of being able to reduce labor costs or otherwise innovate creates real wealth. And because it is a bet, the value of the bet is largely determined by hype.
13. Similarly, the value or innovation created by AI itself, as in your evaluation of its output, is also determined by hype: by your ability or willingness to believe that its output is human, or super-human. It creates nothing but a perception. It is literally a machine that creates perceptions that are likely to be believable.
14. It’s basically the endgame capitalist technology.
Thanks for listening.
~