199CP: Fourth Tier: The End of Money

Centuries ago coin was essential to simplify barter trade. Today we rarely use it, it's all digital. In the near future as AI Integration creates closed economies, money will cease to exist.

This is the third paper in my series on how AI Integration will completely change the global economy. This is of course an extremely complicated topic so reading the series in order is recommended.

What is Money?

Back before we had money, transactions between people required one good to be traded for another in what we call “Barter”. The term “Bartering” involved trying to get a good exchange rate. For instance getting 11 chickens for a sheep instead of only 10 chickens. It wasn’t always convenient to carry a sheep around if you needed to trade with someone making you a new door.

Coin was a concentrated unit of value and easier to carry than sheep. As money became digitized now you only carry a card instead of coin, which is even lighter and more compact. Technically, that card could carry almost infinite value. Trying to negotiate a price involving money became called “Haggling”. The reason Haggling was possible was because there were many buyers attempting to arbitrage with many sellers. This tended to drive prices down and raise product quality as low quality offers would not be able to complete deals.

Why Power Replaced Money

Large projects required complex supply chains. Some early megaprojects (like the Pyramids) could involve thousands of suppliers over generations. If one key vendor stops supplying their input, or tries to gouge for a higher price, the entire project could be delayed.

This was clearly not an acceptable situation, so humans created a technological breakthrough called Slavery. Now instead of a bunch of buyers/sellers Haggling over costs, an entire population could be conscripted to provide inputs without any money involved at all. Unless you had a slave revolt, inputs were all but guaranteed. Setting a proper “example” of revolters could discourage others from revolting for years to come.

In the 17th Century the first corporations, for example the English and Dutch East India Companies (EICs) maintained supply chains using a combination of slave labor and “Freemen”. Slaves were not paid, but had to be fully supported (food, housing, transport, medicine, etc). The focus was not so much on mega projects, but trade for profit.

Then came along this guy called Adam Smith, who would become the Father of Economics. In the late 18th Century he pointed out that slaves required expensive maintenance and since you “owned” them, if you killed them you would lose your capital investment. He argued for an end to slavery, not on ethical concerns (his moral compass was very bent), but because Freemen were cheaper than slaves.

Smith was very influential with the ruling class because his models made them more money. Thus as the 19th Century came along and we needed a lot of workers for mega projects like railroads, slavery started to become illegal. Not because it was the right thing to do, but because exploiting Freemen was more profitable. But the problem was that technically Freemen could refuse to work. That wasn’t going to fly with the Master class of course.

The obvious solution was to send the military after laborers who refused to work. President Andrew Jackson did this in 1834 and set the precedent. This method of dealing with Freemen that took “Freedom” a bit too seriously became normalized as the 19th Century went on.

Of course using children as labor solved a lot of problems since children don’t have much choice but to do as they are told. To force adult “Freemen” to do what you want companies in the 19th Century started using “script” systems. That’s basically where the Company pays the workers in Premium Currency that can only be redeemed in the company’s Microtransaction Store. I mean their script store. By the 20th Century these were illegal pretty much everywhere as these closed economies controlled by a company were slavery.

We would rebrand “script” to “Premium Currency”, “script stores” to “Microtransaction Stores”, and child labor to “user generated content (UGC)” in the 21st Century. These three extremely illegal practices are legal in cyberspace until regulators catch up, as you can see from the “successful” Roblox company that has revived all three practices. Children there are only paid in script, which only has value if redeemed back to Roblox on their terms (which equates to a tiny fraction of minimum wage).

Open Versus Closed Economies

Open economies technically have “free markets” which operate as Smith described in the 18th Century. They are about as free as “Freemen” are. In other words, those with power can make it less free and fair for those with less power. The most obvious way is to create monopolies like Microsoft has with PC operating systems, Adobe has with PDFs, Apple has with forcing people to only use their cables, etc.

Almost every large company has gotten there by finding someway to make the free market unfree. If they can “capture” a group of consumers that can only buy from them, then they can create a “Closed” market and economy. Closed economies involve a forced seller and/or buyer and the entity in charge of that closed economy sets the prices without any competition. This results in higher prices, lower wages, lower product quality, and less healthy/ethical working conditions.

They do this because they can.

Creating a closed market is the goal of almost every entrepreneur since it is the holy grail of capitalism. Adam Smith thought that free markets would be maintained by the “Hand of God”. But back then we didn’t have computers, which ended up being more powerful than God. If you can find an exploit in the existing economy, then you can attack that vulnerability and make massive income before authorities can act to repair the breach. Ideally you automate that process for maximum pay-out.

When I cowrote the first mainstream article on virtual goods sales in 2000 in the Los Angeles Times, I did it because I feared the exploits I was myself using would be automated by bad actors. That’s exactly what happened. My warning to Sony Online Entertainment (SOE) was completely ignored and instead I was treated like a PR problem. I only used my middle name Lee in that article, because I feared rightly that SOE would have retaliated against me. By 2001 I was a journalist myself and I went after Black Snow Interactive (a hacker group) to defend Dark Ages of Camelot and Anarchy Online from attack. I even doxxed all of BSI. The same year I got detailed death threats due to the 9/11 attacks and my perceived ethnicity. So I began to write under my gamer handle which is Sarcerok.

I quickly became known as the “game economy guy” and was invited to assist companies world-wide. By 2005 I made it official and started developing the field of game economics. During the legal battle between Mythic Entertainment and Black Snow Interactive, the courts determined that the EULA was binding and that companies could own their gaming assets. Thus they could legally confiscate gaming assets from “bad actors” like BSI. This seemed like a necessary legal step at the time, but dark clouds were forming.

My first goal (in 2005) in the field of game economics was to neutralize the “gold farmer” threat to virtual open economies. What I didn’t know at the time was that by 2006 these game worlds had become such a juicy target that an apex financial predator called Goldman Sachs got involved. I had met Brock Pierce a few years earlier and didn’t consider him serious competition, but GS was.

By 2009 when my solution tech to neutralize GS was authenticated the industry had already thrown in the towel. They considered open economies indefensible and more trouble than they were worth. Since they owned their worlds, they converted all of them to closed economies. This was obviously beneficial to the owning developers, at least in theory, but made them far less attractive to consumers.

I explained why a game developer would want an open economy in my 2018 Game Economics Defined paper. I asserted that games with closed economies did not have economies, only budgets. This was because there is no player to player trade in closed economies. All participants are forced to trade with the developer, on the developer’s terms.

Just like in the script towns that became illegal over a century earlier.

The reason you would want an open economy is because participants love that feeling of agency and freedom, and sour quickly on the thinly veiled choice-less slavery of closed economies. That means consumers are willing to pay a lot more if you can provide that freedom to them. Of course you have to protect them from 3rd party financial predators, and that’s what my 2009 tech was all about.

I didn’t have to “kill the bear” (GS in this case). I just had to run faster than the poor person next to me. Games using my tech would frustrate financial predators who would quickly turn their attention to easier prey.

AI Will Create a Closed Economy

The whole point of having your economy driven by AI instead of humans is because AI is smarter, faster, and (most importantly) not self-interested. This means it will also be more fair to everyone that does not depend on passive income. Ironically, the people building AI are big fans of passive income, but I’m getting a bit ahead of myself.

Post Integration the economy is completely under the control of a central Strong AI as explained in the previous paper. It does not believe in the “Hand of God” and it shouldn’t. Humans are on the wrong end of information asymmetry. Financial predators are in the business of being on the right side of information asymmetry and using that knowledge to undermine free markets and generate passive income. Passive income means a person who isn’t working is being paid by a person that is working. The biological equivalent of this is called parasitism. The person receiving the passive income will justify this by saying that they are smarter so they deserve to have servants. This mindset of course goes back to feudalism and Adam Smith’s doctrines.

If an AI is tasked with maximizing productivity, it’s not going to want any dead weight, parasites, or middle men in the economy. Those people are gone. Passive income is gone.

The AI is on the right end of information asymmetry in a big way. It knows almost everything. It knows what will be needed where and in what quantity. It knows how reliable all of the input sources are. It can react to threats and changes in the environment billions of times faster than humans can, maybe even faster since it doesn’t have to negotiate with anyone.

Everyone who has been Integrated now lives in a beautiful and holistic script town. I could argue that they might even prefer this existence because their quality of life has improved enough that the loss of freedom is a price they are willing to pay.

In the Integrated economy, there are no buyers, and no sellers. They don’t exist. The Integrator (the AI) will give “choices” to the Integrated (that’s us humans) and you get what you choose. It’s just as free as what passes for “Democracy” in the 21st century so people may not even notice the social control. Just like in closed economy games, each person gets a budget to spend in the Microtransaction/Script/”Opportunity” Store. Each person will have their own custom budgets based on how well you follow through on tasks given to you by the AI. How this works is the topic of the next paper.

The AI will likely provide you with a social currency, similar to a premium currency in today’s closed economy games. Any economic activity that is going on is invisible to you unless your assigned role is “economist”. You get a task, you do it, you get a reward. Good human! This repeats every day.

I’m trying to be a bit funny here, but the honest truth is that we already live in this world and that’s what all these algorithms are doing to us. But post-Integration there will be no unemployment, no homelessness, no lack of medical care, no food uncertainty. Even the environment will benefit. For the vast majority of people, being Integrated will be better for them than not Integrated. That’s why, at least initially, people will have to volunteer for Integration.

And they will Integrate, voluntarily.

The most powerful people in society, the ones that build the Strong AI and flip the switch, they are the ones most likely to make a fuss when forced to be productive. They will chafe at the loss of power. But they have no choice. The Parity Mandate explained in the previous paper will force them to Integrate. That’s what forced them to make Strong AI in the first place, and sunk cost fallacy is a bitch.

Money Disappears

In a world where you do what you are told (you get some choices so you feel less controlled) and can’t negotiate your income, you don’t have any need for money. You may get a choice of rewards (the topic of next paper) but that’s the AI making you feel powerful, not making you powerful. It has almost all the power.

During the transition to Integration the AI will be negotiating trade with non-integrated countries. It will trade exports for the imports from other countries. It won’t need its own currency for this, it can use foreign currencies. It’s handling all of this at billions of times the rate of humans, and all of this is invisible to the Integrated population.

Once everyone is Integrated, there is no more trade and no more money. It becomes mythological. The whole world and the whole species becomes part of one large and very efficient supply chain. Because the AI is not self-interested, that massive productivity is distributed back to people and their standard of living increases.

Of course perhaps more than half that productivity will be sent to create new technologies and build megaprojects. Some of these will be kept secret, and others will be broadcast to everyone so they can see the ultimate fruits of their labor. When people talk about missions to Mars, they are just dreaming. The price tag would be staggering. For each person we send to Mars we might have to kill 10 million people. It just can’t be done with our current 3 century old economic model.

Those people would much rather have hundreds of children using surrogates. That’s going to cement their legacy more than a trip to Mars where they are likely to die anyways. In case you didn’t know, this is a real thing, billionaires with hundreds of children they have never met. That’s the power of money, and passive income.

Sure, a Strong AI could be made to create millions of offspring of a particular person, and to kill everyone else. That’s some serious narcissism fever dream. I think my version of how AI is going to transform society is more sustainable and far more likely to happen.

In the next paper on Integration reward and progression systems, I explain how Strong AI will get humans to voluntarily participate in this whole process.