172B. Bubbles and the Extrinsic Economy
Some workers are "Essential" because of their Intrinsic skills, that keep an economy going. Bubbles form (and "pop") when too many non essential workers wield Extrinsic power.
This is one of the most complicated subjects I’ve ever tackled. Not only is it complicated mathematically and logically, but it is super inappropriate to discuss politically. Experts in Economics and adjacent fields (that have Intrinsic Power) probably could address this topic, possibly better than I can, since they are in the middle of it every day. But they won’t if they know what’s good for them, which they do.
In the previous paper on Intrinsic vs. Extrinsic power, I talked about how some people are powerful because of what they can do, for themselves and others. Others are powerful because of who they know and how much influence they have. Here in this article I extend this construct from an individual analysis to the entire global economy. I will do my best to unravel this complex web in layers using plain English.
Intrinsic Vs. Extrinsic Labor
An Intrinsic laborer is one that plays a key role in a supply chain. Our society would fail tomorrow without them, but most of the time their efforts are invisible to us. During a crisis, like the Pandemic, they were labelled “Essential Workers”. Despite the fancy name, this didn’t give them any additional rights, power, or protections. All it gave them was even more responsibility as they could not just stop working to protect themselves even though the risks of harm to themselves were elevated during that crisis.
Thus people you might never ever see in your entire life, like farmers, suddenly became Essential. These people are normally the most powerless in society, and became even more so during the crisis. But without them, everyone dies. Now that the crisis is over, they are being rounded up, like a scene from Soylent Green, and just disappear never to be seen again, at least in the USA. This is because the USA has intentionally created a labor oversupply, which I predicted back in February.
The problem there is that if you have too many workers, you should be removing the workers you don’t need, not the ones that are essential. The reason that doesn’t happen is because the less useful “workers”, the Extrinsic Labor pool, they know people. They have enough power that they can make life difficult if you try to take their power away. So you start with the least powerful people in society. Of course this doesn’t make sense because these people are essential despite being powerless. But the people directing this are themselves part of the Extrinsic labor pool and that’s where their loyalty lies. They see Essential/Intrinsic labor as beneath them in power, privilege, and class.
This treatment isn’t just reserved for lowly farmers. Even air traffic controllers (highly skilled Essential Workers) are being pressed into service without pay in the USA. Extrinsic labor is never pressed into service, because by definition you could remove them from the economy and they economy would not suffer. On the contrary, the economy actually improves the more you remove Extrinsic labor from the labor pool. This is because Extrinsics don’t do “work”. They move resources around that were generated by Intrinsic workers, and in the process become very expensive middle men.
Thus if you applied the Elon Musk test from the previous paper, and put Extrinsics on vacation for two weeks, life would go on unaffected. If you did that with farmers, air traffic controllers, or even police, people would die.
In gaming I gave a good example of this in my paper on The Merit Economy. There I talked about my year at Microsoft where I was tapped by the corporation because they had an educational tool that they wanted to turn into a commercially successful game, but did not know how. I came in and created a blueprint for the project, and it was green lit after I presented it to ~20 Microsoft executives. I was carefully vetted prior to being flown in, and intensely vetted during the two days when I was shown the problem and drafted a solution.
Thus I was an Essential worker on the project, and arguably the most Essential since I was the only one that knew what had to be done to complete the project. But I knew no one at the company and had zero Extrinsic Power. So one of the first things that was done with me was to have their legal department put me under a four year gag order on a project that was only to run for a year. Then an eye popping 630 people were credited with the game, and I’m nowhere on the credits. This was a Merit Transfer, from the Intrinsic laborers to the Extrinsic laborers. This is how the Extrinsic laborers justify their positions despite being totally replaceable. I would estimate the number of Essential workers on that project to be ~50.
The larger the ratio of Extrinsic to Intrinsic laborers becomes, the less efficient an organisation/system/society is. Modern technology boosts the productivity of Intrinsic labor such that you may only need 20% of your population to be Intrinsic to keep it functioning. 100 years ago that was closer to 80%. For instance, 100 years ago a third of the USA population was engaged in farming. Today that’s less than 2%. But those farmers are so productive now that one farmer can feed more than 50 people. Thus more Extrinsics can be supported, and the percent of the population that does non essential or even negative work has exploded. Negative work would be someone that adds to no supply chains but draws money/resources from the economy. Wealth disparities have similarly ballooned.
Resource Misallocations
Every country has stories about infrastructure or other projects that were created with no purpose other than to enrich someone with Extrinsic Power. But sometimes entire sectors of an economy can be disrupted because of either a lack of central planning, or poor central planning. In the USA we normally don’t have central planning except during war time. The USA is almost always at war, but hasn’t declared a war since 1941. So there is little or no central planning. Companies are free to plan for themselves without caring about or being conscious of the wider effects of their actions.
Here I will use an example that I intend to be controversial, to better explain my point. Larian Studios released one of the most popular recent games, Baldur’s Gate 3, to full release in 2023. The studio is privately owned, with minority stake (30%) from Tencent. It seems to be a very efficient studio with a high Intrinsic percent. While other larger companies were failing with even more expensive projects all around them, their product stood out and was very well received by consumers. There were also no manipulative tactics used that would draw consumer and regulatory ire.
Thus, a model studio. Something for other studios to aspire to.
Compared to the content provided, BG3 was priced extremely reasonably at $60 USD. Over 15 million copies have been sold, generating almost one billion dollars before platform fees. What is the issue I have with this studio and product?
They charged too little.
Yes, I said it. They could have used a more complex (but still consumer friendly) business model and had no problem generating twice as much revenue. The game was worth it and consumers will pay what something is worth to them. Their success did allow them to publicly state that they would not be working with Wizards of the Coast again in the future, which I think is a win for them and consumers. I don’t consider WotC to be a pro-consumer company.
It seems obvious that lower priced and higher content games are a win for consumers. But if the good actors in the space self-limit their revenue while bad actors in the space build their entire products around anti consumer business models to maximize revenue, revenue disproportionately goes to bad actors. Those bad actors will spend legal, marketing, and political resources to limit the power of Intrinsics, consumers, and regulators. The result is a local gaming Dystopia.
If we were to limit Extrinsic dominated companies (who often endure due to monopoly, duopoly, or oligopoly) through consumer action, regulation, and grass roots political activity, Intrinsics could re-enter the space and wield greater Power. This would revitalize the entire market. It’s going to happen anyways due to consumer demand, but the faster it happens the better. Larian undercharging for their meritous project slows this process down. If they had unlimited resources and consumer mandate (like Blizzard used to enjoy before it got taken over by Extrinsics), they could hire the best Intrinsics, many of which were idled after resisting unethical leadership, and make great games that we can only dream of currently.
Passive Income and Bubbles
Extrinsics aspire to externally derived power because it is easy. They also aspire to passive income because it is easy. Labor-free income is what “passive” means. But that doesn’t mean no labor was involved, just no labor from them. Somewhere and Intrinsic is laboring, and their agency is being reduced as their power and merit is being transferred to someone who holds power over them. This is a tale as old as time, it started way before the era of Adam Smith (~1775). Smith just taught us how to optimize passive income (among other things we collectively call “economics” today).
What could be better than lending, and collecting interest on your fortune, having it expand effortlessly over time? Well, lending the same dollar to 10 different people of course! No don’t tell them their dollar is being shared by 10 other people. As long as the interest gathered is greater than the defaults, no one needs to know what you are up to. Since banks can print money, they don’t have to worry about running out. Unless enough people ask for their money back at the same time. We call this a “run” on a bank. Some countries will shut down banks in such cases to prevent withdrawals. Team Extrinsic protects its own.
Thus when you put your money into a bank or other investment, there is no guarantee it will be returned to you. Small bank deposits are protected in the USA and other countries under some limited conditions. But after you put your money in, that dollar could be handled more people than Bonnie Blue is. Banks tend to not want other banks to fail, because their investments are so deeply incestuous using this mechanism. A chain reaction could wipe out everyone’s investments.
This is what happens when a “Bubble” pops. What is a Bubble?
I love it when AI uses the same language I do (like “Intrinsic value”).
This brings us to our current Bubble. It is being commonly referred to as the “AI Bubble”. As long as people believe the hype that AI will bring them unlimited passive income, lazy people keep feeding the Bubble. What is really going on here? Unless you are a bank, that has the magical ability to print money (and the labor it represents), your output generally has to match your input. For economies, this is certainly the case. All debts must eventually be paid by someone. If you are clever you can make the profit and push the debt onto someone else. This is one of the perks of Extrinsic Power.
Let’s consider two possibilities:
The Bubble doesn’t burst. Investors bath in passive income.
The Bubble bursts and by all accounts today’s Bubble is larger than all previous Bubbles combined throughout history. This Bubble has Bubbles on top of its Bubbles.
So am I going to get in line like thousands of other influencers and tell you that this Bubble threatens us all?
No, of course not. I’m here to really scare you. AI related companies (including all of the “Big 7”) are trading resources back and forth as fast as possible. This has the same effect as the Bank that lends the same dollar 10 times. Except these companies are so powerful that they can just give themselves magical Bank powers just like our ultimate economic masters. The ones that own the largest buildings in every city, that they can look down on us from.
What if it worked? What if there was no crash? What if AGI loved us and didn’t want to kill us? Would this be the passive income Utopia that Extrinsics have wet dreams over? To me this is the darkest possible outcome. If they generated 100 Trillion dollars of passive income, then where did that come from? Come on, guess. Yes, yes, I can see it forming behind your eyes.
Our Intrinsics, our “Essential Workers”, will be stripped of everything. Their assets, their privacy, their Power, their Dignity, their health, and ultimately their lives. People will be born into a world of greater oppression than humans have ever known. There is no plan in existence to support Intrinsics replaced by AI. They will be deported, starved, or eliminated. Giving them money to support themselves would just defeat the whole purpose of making AI in the first place. I would imagine that AGI would have to step in to put an end to all of this, and that wouldn’t be pretty either.
Realize that when Extrinsics bleed the Intrinsics entirely, who is left to feed and take care of them? An organisation entirely made of Extrinsics is a dead organisation. If you have stolen all the Power there is, there is no more Power. Because Power isn’t powerful if there is no Intrinsic to apply it to.
Of course option 1 is mathematically almost impossible since it gets harder and harder to sustain as the % of Intrinsics in the system approaches zero. So yes the Bubble will pop. Yes it will be catastrophic. Yes supply chains (including food, gas, electricity, internet, and air traffic controllers) will break down world wide. Our Masters have all built personal bunkers because they know what they are doing.
But as this happens I want you to hold your head high and have a full heart. Because that Bubble popping, that sound heard around the world, will mean there is still hope for our species.