192. The 1970 "Lemon Law" Predicted the Age of Slop
Ironically, AI is triggering the Lemon Law. Understanding information asymmetry can explain and predict trends in both gaming and in the wider labor market.
In 1970 George Akerlof wrote The Market for Lemons. I just learned about this and the “Lemon Law”. It’s an important piece in the puzzle that is currently vexing society as AI upends the labor market and… almost all markets. I was only 4 years old in 1970, and when I returned to university at age 41 to study conventional economics, I was older than a lot of my professors. So I can understand if perhaps they had never heard of this either.
Despite the simplicity of the clever name, the Lemon Law talks about asymmetry of information. What that means is that one party has more complete information about something than someone else. Specifically the Law covers scenarios where the seller has more information about the product they are selling than the buyer does.
This also relates to the Latin phrase Caveat Emptor which translates to “buyer beware”. The meaning is that the risk in a purchase transaction is almost always on the buyer, not the seller, and so the buyer needs to be extra vigilant. This is a recurring theme in my work going back to 2010, where I usually talk about these dynamics in gaming, dating, and the wider labor market. I actually advise both buyers and sellers, but it just happens that buyers (consumers) tend to be more vigilant (as they should) so they read my content more than sellers. Thus I often get labelled as a consumer advocate, and this is why regulators tap me for this expertise.
While I seem to get read less by “sellers” these days, the Lemon Law predicts seller behavior just as much as buyer behavior so there is benefit in understanding it for both groups. As the Lemon Law predicts many things that are confusing people right now, understanding how it works can help us predict our immediate future.
The Lemon Law talks about sellers offering products that are low quality (junk) but marketing them as high quality. If the marketing is convincing, buyers will pay high quality prices for low quality goods. They then feel like they were ripped off. In the “Con Era” of gaming from 2009 to 2025, which I wrote about recently, the gaming market was dominated by sellers who admitted they didn’t know how to make games but were expert at marketing. Here I would hold up Machine Zone and Zynga as prime and well documented examples, and it was their entrance into the gaming market that defined this Era. In 2018 MZ (the new name for Machine Zone) laid off 125 marketing employees, as consumers adapted and the business model ran its course. It was part of this cohort that moved to Wargaming. They were directly responsible for blocking my rehire after the Catfish was fired and also were the source of the radical culture change at WG during this time.
The Market for Lemons Meets Third Tier of Game Development
40 years after The Market for Lemons was published, I published Third Tier of Game Development. There I predicted a near future where catfishes and Cons would become so dominant in labor markets as to cause a labor market crash. The remedy which I proposed was a future construct for authenticating and allocating labor globally and instantly. A Metaverse. It turns out that I ended up predicting and describing the Metaverse better than anyone else. At least that’s the conclusion that large research teams from both Microsoft (2012) and Unity (2020) both ended up concluding, independently, after surveying all relevant academics.
The problem of Cons and Catfishes are both very similar. I’m going to describe both of those as “Lemons” in this paper to make it simple since George Akerlof and I were both talking about the same problem, 40 years apart. George was talking about goods, and I was talking about people. But George’s Lemon Law also applies to people.
This labor market crash which I predicted in 2010 has arrived. I predicted then that the labor market crash would force the production of a future Metaverse by the year 2030. I also explained what the prerequisite techs would look like in 2020. We completed those prerequisites right on schedule.
But then something strange happened.
Instead of building the Metaverse, we built AI. Both would have had similar price tags, and required similar technology. Microsoft, one of the leaders in the AI race, went to great lengths to vet me and all my papers in early 2012 due to Third Tier and also my Supremacy Goods microeconomic model.
But instead of building the Metaverse, they built AI:
Metaverse: A global virtual construct to boost the average labor value of all people on Earth via authentication and skill-job matching. Lemons are eliminated from the Labor pool.
AI: A global virtual construct that creates AI agents that can assist and ultimately replace human labor. During the transition, quality labor is replaced by “Lemons”.
I find it fascinating that the same tech, which Microsoft was well aware of, could be used to either improve humans or replace humans. I would call people promoting the first solution (including myself) as Transhumanists. They want to build better humans. I’m not sure what the second group would be called, so I asked AI:
I think Automationist works so I will use that term. Last year I warned that Third Tier would fail in the 2030 prediction (but successfully predicted 2020, including the pandemic’s effects on labor) because there was a Divergence. Thus it will be my first prediction paper that is not entirely accurate. The Divergence was because of my pro human bias I assumed we would want a Utopia where people were more productive and could work less hours and still survive. Our Masters were not as fond of this Utopia idea. They chose the Automationist path and began the process of eliminating humans from the labor pool. This is a path with a high probability of creating what most would consider a Dystopia.
Last year I predicted that Automationists in the USA would begin to purge the country of people, and that’s exactly what is happening. As I non-publicly predicted this years ago, I self-purged by moving to Australia in 2019.
The Lemon Law predicts that when consumers don’t have access to complete information about things they want to purchase (or hire in the case of workers) and the market is flooded with Lemons, consumers have no choice but to assume everything is a Lemon. Note that companies are consumers of labor. They then react by only buying things priced as lemons, that way they can’t get Conned. Thus companies assume that every human they hire is a Lemon and will price (pay) them accordingly. I would also go as far as to say they will treat them like Lemons also.
The Lemon Law then predicts that all high value goods [and workers] will exit the market because there will be no buyers at the price point necessary to justify producing that higher quality product. This asymmetry of information results in a market entirely populated with Lemons as only Lemons will find buyers.
The Lemon Law Predicts the “Age of Slop”
While the EU’s Digital Fairness Act looms on the horizon, in the meantime we now have experienced in Default Reality the hypothetical “all Lemon economy” that George Akerlof hypothesized about 55 years ago. Only Lemons are selling and high value goods are off the market. The exception would be that there is still a luxury goods market for the top 1% of society due to the accelerating wealth disparities created by unfair market conditions. That’s a tale of two economies and I’m focusing here on the primary economy that the other 99% of us live in.
As humans we think that 1970 was the Dark Ages, where people had to find a landline phone to make a call and had to mail their photographic negatives away to get the finished pictures back. Thus today we don’t call this “The Age of Lemons”. We call this “The Age of Slop”. Slop is everywhere. You have humans using AI to masquerade as high value employees. You have game developers putting out AI generated slop, masquerading as quality AAA product.
Employers have responded by just not hiring anymore. They don’t need cheap human slop to do entry level work, they have AI to do that now. They are afraid to hire anyone they don’t know, so now nearly 100% of all hires are nepotism hires. I predicted-explained this a few months ago.
Akerlof said there were a few ways to solve the Lemon problem:
Provide a way to give consumers enhanced knowledge of the value of what they are buying.
Improve regulation.
Require sellers to guarantee or warranty their products.
Promoting high brand reputation as a hedge against more opportunistic sellers.
Number 4 is totally not happening because of Lemon Law endgame. Blizzard used to be the gold standard but then they juiced their reputation for short term profits. Number 3 used to happen. Steam strictly guaranteed games played less than two hours. Now they often fail to honor their own warranty, and developers make their tutorials 2 hours long so that information asymmetry is maintained. The first two things are happening, but not at the rate of “enshittification”, so until things catch up, we get The Age of Slop:
3rd party “review sites” allow consumers to share knowledge, balancing the information asymmetry. In gaming, indie developers are increasingly providing free demos, which used to be rare. Being able to try before you buy creates information symmetry.
Consumers demanded regulation in response to exploitation. Now they are going to also demand it in response to Slop. It’s almost here, but in the meantime better install a fresh pair of windshield wipers, it’s about to get juicy.
Free to Play used to provide this information symmetry, but AAA companies that increasingly didn’t want symmetry moved to “retail plus microtransactions”, what I called “Retail Plus” in a paper earlier this year. This gives the developer all the power and allows them to sell Lemons.
Even Sam Altman seems to realize we still will need the Metaverse I described in 2010, unless we decide to get rid of 99% of the humans. He’s got a startup named Tools for Humanity which appears to be the 2020 era authentication tools I described in Third Tier, but on a large scale. Basically, he wants you to pay him to prove you are human. He doesn’t seem to be offering tools to prove AI is AI as that might reduce the value of his main product. I’m sure others will do that.
The Big Picture
When you think about it, all this money and even nuclear reactors to power ginormous data centers… why? To create information asymmetry. Exactly what Akerlof warned us about 55 years ago. The result, while humans are still part of this whole adventure, is going to be a World of Lemons. Hmm, World of Tanks, World of Warships, World of Lemons! It could be what’s next!
Sam is all about information asymmetry that benefits him. Right now companies enjoy having more information about the products they sell than you do. Potential employees have more information about themselves than companies have about them. By convincing you that you need to authenticate yourself, this removes any information asymmetry that you currently enjoy.
The Metaverse I described in 2010 would have provided information symmetry at every level of society. That’s why it’s not being built, because the people benefiting from an unfair society want to keep it that way or make it even less fair.
The goal here with AI, other than the rapid automation of military worldwide, is to be able to sell people Lemons at the price of a high quality good. The problem, as Akerlof predicts, is that in a world full of Lemons, consumers only pay for Lemons.
Thus the AI business model, at least the public facing one, is going to collapse as revenues will under perform. Privately, these companies are expecting to be paid for military contracts, so perhaps they’ve already anticipated this. The group that doesn’t have that information is investors, and they are likely to get burned.
For gaming, the Lemon Law predicts that consumers will treat everything that AAA produces as Lemons. That seems to be exactly what is happening. Unless enough consumers review and rate a game as outstanding, and provide their peers with the information they need to make these purchase decisions, they will be cautious. Even GTA VI, which would previously be an auto-buy, will likely be received with caution by gamers.
There’s only two ways that I see this Age ending:
VERY strict regulation just utterly wipes out all the Lemon sellers as their business models fail completely. This is likely going to happen and a lot of entitled Lemon sellers are going to be crying foul.
Pro-consumer brands establish themselves. Pre-2016 Wargaming and Pre-2012 Blizzard would be previous examples before they both began worshipping the Microtransaction gods. Proper regulation will incentivise pro-consumer behavior so I expect that a number of good studios will rise above the Sea of Slop and be provided with the resources they need to finally meet consumer demand.
Lemons and Dating
In the world of dating, everyone is complaining about Lemons. It seems like every option out there, at least on dating apps, is a Lemon. The Lemon Law actually predicts this exact scenario. As over 90% of participants are misrepresenting themselves, almost everyone is a Lemon. The non-Lemons quickly learn that no one is going to pay a fair price for their quality level and so they exit that market.
Only Lemons are left.
As the Lemons complain that everyone else is a Lemon, without admitting that they are themselves Lemons, frustration mounts and people feel entitled to treat each other even more poorly. Over the the course of the 10 years (2010-2020) that I surveyed dating app participants to understand dating economics, I could see this trend in real time. Near the end it seemed like I was just learning how to classify Lemons and quickly identify the various grifts that people were running.
I addressed this problem in my Demographic Collapse series (92A to 97F) and advised there the same thing I advise here: We need a new branch of dating apps that focus on strict authentication to restore information symmetry. This will make the Lemons SUPER MAD. Because in an environment where Lemons are restricted (just like with our friend Ilkka Paananen from SuperCell) the Lemons will declare that they are entitled to keep misrepresenting their Lemons as quality goods. Just because you got away with it for years doesn’t make it an entitlement. It was an opportunity that opportunistic people benefited from.
The whole idea of authentication and lack of anonymity is going to scare a lot of people. But right now we are rocketing towards a world of information asymmetry where some people know almost everything and others know almost nothing. Authentication will allow quality goods/people to return to the market, and will essentially eliminate Lemons. We don’t need to force authentication. We create opportunities for authentication that the non-Lemons can opt into. The Lemons can remain in the “Lemon-only” zones of society and get a taste of their own medicine.
Since no one really likes buying a Lemon, just creating a non-Lemon zone will eliminate the Lemon Zones of society as Lemons can’t compete with quality goods. Also, then choosing to be in a Lemon Zone (using an app without strong authentication) is a de facto admission that you are a Lemon. People won’t want to be correctly labelled as such and will just opt out.
Because of the implications of Demographic Collapse, this is actually a species and national security threatening topic that will force us to seek solutions. Unless you are an Automationist, in which case you want to get rid of the humans so this becomes a plus not a minus.