112. The Age of Regulation [Update 04-04-2025]
Promoted as "Slayers of Regulation", who's avatars like to swing chainsaws, the current US administration is engaging in unprecedented regulation, triggering a regulation war.
What is regulation? This is how governmental regulation is broadly described:
One regulatory tool is tariffs:
In Adam Smith’s “Wealth of Nations” (1775) he argued that if allowed, members of a society would create a complete healthy economy where all goods were supplied in necessary measure just out of self interest. This is his “Invisible Hand of God” concept. This made the case for free markets, and over the last 250 years we have built a global economy based on this concept.
Smith was self-aware enough to realize this would fail if people moved all production to where it was cheapest (which would be in line with self interest) as this would destroy the economies of industrial leaders like the UK (and the USA). But he argued that people would place country ahead of self interest and not do this. Well, this wasn’t his best prediction. And he was not living in a world with so many corporations. Corporations are not sentimental and tend to not be nationalistic. They care about profits, not which country benefits from those profits.
Corporations in countries like China, where they are under strict governmental control (highly regulated), DO care about their country by design. So if every country is unregulated except just one (hypothetical example, not true. This is for ease of explanation.), and that one has regulations that favor it over all others, that ends up creating an economic black hole that all resources ultimately are dragged into.
This is an example of an economic war, and I think it is fair to say the world has been in the middle of one for at least 30 years. While this has been obvious to me, even before I became an economist, this has somehow just gone on without much reaction from the prey in this scenario. The OPEC embargo, in October of 1973, really made it clear how devastating economic wars can be. I was 7 years old at the time and this hit the USA hard, and did more domestic damage than all of WW2. The whole experience of standing in lines for hours with my mother for a tank of gas, just to have them run out when we got to the front, wired my brain for economics, and perhaps economic warfare. A severe drought a year earlier which caused water rationing in Los Angeles, really opened my eyes to scarcity and supply and demand.
The adults around me didn’t understand so I would spend day after day in the library trying to get answers. I feel like history is repeating itself here, but really this is one long continuum that never went away over the last 50+ years. As anyone that has ever played a “4X” game like Civilization knows, you start off behind but gain a few % every turn. Pretty soon you are so powerful your opponents have no chance. This is the power of compound interest. Idle games take this to an extreme. The designers of the recent Civilization VII tried to solve this imbalance and failed, perhaps making the problem even worse. When I was brought in to figure out why CivWorld was failing, I identified the two main problems as a “double compounding” in the food economy, and a very weak monetisation model.
So these systems can be very complicated, even for people who presumably are economists or mathematicians. Here the USA has woken up to the fact that they have been the prey in an economic war that they seemed oblivious to. I tend to favor the underdogs as that’s where the challenge is. So 50 years ago, I would be on the side of China here. But sadly, after 50 years of sleeping, the USA is now the underdog. I think I’ve made it clear across my papers that I am no nationalist. I am a globalist. But I am also a Druid. I seek to restore balance on Earth.
Trump (or at least his administration) is acting as a force of equilibrium here, trying to restore homeostasis. Good on him. I generally don’t comment on politics at all, unless it affects gaming. But, as with Brexit, I know what’s coming. And as with Brexit, the people around me didn’t. I’m a big fan of education so I want to help everyone understand what this game is and how it plays out.
By using tariffs (a form of regulation), on a level never before attempted in my lifetime, the USA is detaching from the Black Hole. This is a reactionary action, perhaps even attempting to be the next Black Hole. Trying to “Out Black Hole” the Black Hole. The corporations, which backed Trump because he said he would cut regulation, are about to go into system shock.
As tariffs are sequentially and progressively raised in the USA, almost all but the weakest (like Australia) trading partners are going to respond with “retaliatory” tariffs. This is like a game of “chicken” where two cars drive headlong into each other and the first person to try to avoid the crash is the loser. No one wants to lose so we may just get a head-on collision. As nationalism rises in every country, the pressure on leaders not to be “the chicken” is going to intensify.
This is the part that pretty much everyone understands on some level. How much people consider the consequences, well that varies widely. In this scenario, prices go up on almost everything. Prices on some things could go up 50% or more without your income going up at all. In fact, chances are you will become unemployed, at least initially. If your government responds effectively, new businesses might be created to fill gaps in the local economy that were cut off by tariffs. That means new opportunities for those nimble enough to adapt.
Unfortunately, that’s not the scenario. The real scenario is that for 50 years corporations have spread out their supply chains all across the world in order to get every component at the cheapest possible price. No concern has been given to the environmental damage of shipping something half way across the world instead of just getting it from down the street. These tariffs will disrupt supply chains globally.
In a “hot war”, you don’t win by killing more of the other guy, as much as I’m a fan of Patton’s famous retort: “No bastard ever won a war by dying for his country. He won it by making the other poor dumb bastard die for his country.” Wars are won by breaking the supply chains of your opponent. If the enemy needs 100 parts to make or run a tank, and you can eliminate just one of those parts, it’s game over. You’ve won. As anyone who’s ever played with me knows, I’m absolutely ruthless in economic games. This is my jam.
For 50 years China has attempted to monopolise so many key elements in various supply chains, in order to make any attempt to resist an auto win for them. We were right at the tipping point so now it’s a question of whether the USA can rebuild it’s supply chains domestically faster than they can collapse globally. It’s hard to know if they can, but the USA still has a lot of friends. They may be burning those friendships at record speed, so that’s where the mathematical uncertainty comes in. “Weak” countries like Australia have some of the richest supplies of rare earth metals outside of China. So does Russia and Ukraine. Thus the USA isn’t cosying up to Russia all of a sudden just because of some “peepee tape”. And Russia better watch it’s back… They have all this land and not enough military to hold onto it. Their opportunistic war has depleted them.
But attempting to pull out of the Black Hole right at the cusp of the Event Horizon is going to require tariffs and “other measures” that are completely out of the experience of everyone reading this paper. That’s the easy part. The hard part is, can you as a member of whatever country you live in survive the suffering that is coming? As supply chains break, goods on the shelves in your local store are going to become empty. Prices on remaining items will skyrocket.
At the start of the pandemic I had to fight with old ladies who were rushing to the stores to buy up all the toilet paper. I don’t know why. They were trying to wipe their way to safety somehow. But this will affect food, vehicles and their parts, computer parts, fuel prices, other utilities, everything. Maybe only housing prices will fall as countries drop into depression (not recession) and people lose their incomes while prices go up. Does your “stable” job depend on an international supply chain? Do you even know?
Effects on Gaming
As the USA becomes the greatest regulator of all time (probably even surpassing China), alliances are under incredible stress. The UK already split from the EU, and the EU is going to circle the wagons to try to maintain an EU-domestic supply chain with no tariffs between member nations. I recently wrote 3 papers explaining what the Digital Fairness Act is, and why I was recruited to help create it in 2013. It’s planned to go live next year in 2026. That’s thirteen years to implement the rare legislation that is universally desired by consumers.
Regulators have been underfunded in almost every country all over the world as companies get stronger and governments get weaker. I think everyone understands this at least on an intuitive level. As companies increasingly get what they want through bribes and lavish political donations, consumers keep losing.
But ironically (and this is about the most ironic event imaginable) regulators world-wide are about to get a HUGE boost in funding and manpower. Not to regulate their own people, but everyone else’s people. And that’s why, if your business model is dependent on the Digital Fairness Act being killed by lobbyists…, you should go grab a coffee, open up a window, and smell the air. What is that new scent? It’s Winds of Change. I’m generally pro regulation because I’m pro consumer. But regulations are about to happen that I’ve never dreamed about or had nightmares about.
As a gamer, this is mostly good news. But so many leaders in the gaming industry are so dependent on the concept of ineffectual regulation that they won’t be able to adapt. Investors, once they figure this all out, are going to defund established game development in a big way. Studios will collapse, and the layoffs will just accelerate. I’ve been preparing for this fringe scenario for a long time, so I will explain over time (not in this paper) how the industry can find the path out of this.
The obvious way is to provide a service that consumers actually want, and to abandon all these attempts to trick players out of their money. I’ve been describing these tricks since before 2013, which is why they are all being eliminated in the DFA. That leaves you with small independent retail games, and a desire to make Games as a Service (GaaS). I’m the world’s biggest promoter of GaaS, both as a developer and a player. That’s why I sacrificed my career to help regulators. But the DFA will kill off all the bad actors in GaaS. Which, is pretty close to 100% of them. The “good” developers, the ones that complained about microtransactions and such… they were all fired years ago.
You are going to need new business models if you want back in the GaaS game. Otherwise, just stick to retail games because the DFA makes all GaaS (except my post 2014 designs) illegal. Consumers will be okay with this, because GaaS has gone through so many years of degradation that they have a difficult time mustering any enthusiasm for them now.
Liberation Day
Buckle up and good luck everyone. LIBERATION DAY is here. This is the Age of Regulation. Not “internal” regulation, but “external” regulation. Tariffs are paid for by internal consumers, so ultimately everyone goes under the bus here. But external regulators (the ones there to regulate other countries) are going to get funding boosts like they’ve never dreamed of. This is war. The CPCN that created the DFA, is essentially an external regulator.
The idea of an internally unregulated country surrounded by an externally fully regulated barrier, will be an interesting Wild Wild West. Countries that depend a lot on exports and imports will suffer the most. As Adam Smith pointed out, in 1775, those are the ones with access to navigable water. This creates a real leadership moment where leadership will matter a lot and a new world order will be the result. For me that’s both dread and excitement. So I guess the mood is dreadfully exciting.
[The more I think on this, the more insight I get. Math is music to me and right now so much of the math across the world is changing that I’m in this huge rock concert. When two supply chains are linked, one collapsing affects the other, and vice versa. This creates a 2nd order mathematical system. But when 1000 supply chains are linked, if they all are put under stress simultaneously, then this can create a 1000th order compounding effect. This might not make any sense to a non mathematician.
The result is that changes that normally might happen slowly over a human’s lifetime can happen in hours, or even minutes. This is one of those moments. The prediction I made less than 24 hours ago in this paper, human actions I predicted to occur in the future in the EU, happened just hours or even minutes after I predicted them:
https://www.channelnewsasia.com/world/eu-target-us-online-services-trump-tariffs-trade-war-5041921
Normally you would expect boring and careful regulators to take months to respond to real world events. This mega acceleration is happening all over the world right now as it wakes up to the fact that the world people used to live in is gone and the world is being reshaped at thousands of times the normal rate. Some people won’t survive this turmoil. Many companies won’t survive. Maybe even some countries won’t survive.
The idea of a “boiling frog” not reacting to change has been going around the internet a lot. The pot has just been tossed on the floor and there are pissed off frogs all over the place. From my Druidic perspective, this is a Great Reset, so ultimately good in the long run. For humans, who prefer stability, this is really not going to be comfortable for you.
“And those who were seen dancing were thought to be insane by those who could not hear the music.”]