oftwominds-Charles Hugh Smith

AI and the Delusions of Increasing Productivity

2026-08-10T11:20:50.219-07:00

Most of AI isn't productive, it's just another form of consumption.

Like GDP (Gross Domestic Product), economic Productivity is an unquenchable spring of delusions, delusions being pushed to new heights of delirium by promises of endless leaps of productivity as AI is deployed in every nook and cranny of the global economy.

Let's start with what Productivity measures. Like GDP, Productivity distills everything in the world down to money: the cost of all inputs (labor, capital, resources) and the monetary value of the output (goods and services). If the output goes up while the input costs remain the same or decline, Productivity is going up: we're producing more with the same basket of inputs (work, capital, etc.).

On the surface, this appears commonsensical, but as with GDP, AI and many other sources of confusion and delusion, what matters is what's not being measured or even recognized. Exhibit #1 in the cavalcade of delusion is Corporate America's sleight of hand way of boosting Productivity by offloading work onto consumers and households.

It's not that Corporate America actually generated more goods and services with the same inputs: what they did was transfer work they should have done to consumers and households. Consumers and households are now burdened with unending shadow work dealing with Corporate America's rubbish products and services, doing unpaid work to fix or maintain products and services that break down or don't work reliably and are "black boxes," i.e. unrepairable without "customer service," which has degraded to the point of parody.

We all perform this unpaid shadow work every day: pump our own gasoline, scan our own groceries, and waste hours dealing with kludgy services and maddeningly dysfunctional AI "customer service" chatbots and 3-item menu choices that don't have an option for the problem we have-- a problem that should be the company's responsibility, but it's been dumped on us.

If we measured the billions of dollars in unpaid shadow work forced on consumers and households by state agencies and Corporate America, Productivity would be falling off a cliff. But that doesn't support the self-serving claims that the casino-economy is doing great because corporate profits are rising.

What's left out of the glowing claims is the corporate profits come not from producing quality goods and services but from dumping all the consequences of shoddy products and services on consumers and households.

Exhibit #2 is the collapse of product durability and the quality of services. Durability isn't measured in the the calculations of Productivity, so the fact that appliances that routinely lasted 30-40 years now fail in 3-4 years is not even recognized, much less measured.

The same is true of the decline in the quality and utility of services, and the soaring costs of repair. Recall that "output" is a dollar amount. So when we take our out-of-the-paltry-one-year-warranty vehicle in for a $3,400 repair that used to cost $1,400, since the parts and labor didn't change in any material way, the higher price boosts both GDP and Productivity: woohoo, 4 hours of labor and a handful of parts now generated "more output" and "higher GDP."

You see the insanity here: the reason why we're paying higher prices is the quality of the products and services has cratered, but this is measured as "wonderful" because GDP goes up and Productivity is higher, too, since the input costs went up less than the value of the output.

Monopolies and cartels thus boost the wondrously wonderful trifecta: corporate profits, GDP and Productivity all go up as quality goes down and costs and risks are transferred to hapless consumers and households, who have no other choice in a fake "marketplace" of state and corporate monopolies.

Exhibit #3 is the self-serving hype about AI automating limitless gains in Productivity, which is shorthand for limitless gains in corporate profits. This too is delusional for a number of reasons:

1. Most of AI isn't productive, it's just another form of consumption. Conversing with a chatbot, having AI compose another worthless term paper or conjure another worthless song or graphic image--these are all consumption, not productive applications of capital. They're superfluous forms of consumption that are the direct result of AI's true costs being subsidized. If everyone had to pay the actual costs of running these stupendously costly operations, these superfluous forms of consumption would plummet accordingly.

2. There is precious little evidence that AI is actually improving real productivity. As with all casino-economy hype, outliers are touted as examples of AI's transformational magic: AI found a math proof, AI conjured a new virus, etc. That these are A) atypical and B) examples of how AI can be used for malicious purposes just as easily as it can for good is ignored.

How will Productivity be affected when a rogue player uses AI to conjure a super-virus? Nobody dares ask this because it might tarnish the casino-economy hype that AI will make us all wealthy beyond measure.

The problem with AI will boost productivity everywhere claim is a consequential share of all "work" is needless bureaucratic churn created not by actual need but by the apparently permanent abundance of huge surpluses that can be squandered on make-work, churn and profiteering.

So AI will automate worthless churn, marketing and make-work. Is this actually boosting the quality, durability and real value of the economy's output, or is it all just an illusion of "value" created by endless surpluses of cash to squander?

The problem is the surpluses are declining and being replaced by borrowed money. Debt is another input that is glossed over in calculations of GDP and Productivity.

Last but not least, there is evidence that AI's initial illusion of increasing productivity and lowering costs transmogrifies into lower productivity and higher costs as maintenance of complex systems kicks in. The kludgy nature of AI's "almost good enough" magic only becomes visible as all the "not quite good enough" starts piling up and breaking down complex systems.

Economics is akin to an ancient cult glorifying a temple of fabricated gods. The priesthood (naturally) claims extraordinary powers that can only be wielded by those with temple-granted credentials. That the cult is nothing more than a collection of beliefs claiming to be "science" is cloaked by measures that leave out everything of true value and consequence to serve the illusion that these beliefs are "how the world works."

GDP and Productivity are the functional equivalents of waving dead chickens while dancing the humba-humba around the campfire at midnight, delusional claims of "how the world works" that set up a world-shattering encounter when the real world doesn't obey the claims.

Economics measures what's easy to measure, not what matters, and eventually that will matter more than the temple's believers can possibly imagine.

When economists start measuring durability, the quality of services, unpaid shadow-work performed by consumers and households that should be done by the companies providing the services, the perverse profiteering of monopolies, state and private, and the true costs over time of fixing AI's "almost good enough" magic, then their cultish claims to being "science" might have a shred of credibility.

Until then, prepare for impact:

The eventual consequence of AI's "almost good enough" magic:

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I'm Asking You to Support My Work This Month

2026-08-06T10:33:22.341-07:00

Of Two Minds serves this purpose: taking control of and improving our own quality of life and security.

Once a year I ask you to support my work. In the past, I've struck a humorous note--rattling the begging bowl. This year feels different. The veneer of normalcy is peeling off faster than it can be glued back on, and this decoherence is accelerating, which is why I'm writing a series for subscribers entitled The Revolution No One Sees Coming.

Of Two Minds content ranges over so many fields that it doesn't fit into any one conventional category. But beneath the surface jumble it's always about solutions, macro and personal/household, solutions derived from understanding the dynamics at work beneath the conventional surface explanations, all of which ultimately serve this purpose: taking control of and improving our own quality of life and security.

I am especially interested in social evolution and change, as this process is neither transparent nor predictable. Our era is one of vast wealth-power inequality, resource depletion and technological changes (AI, social media, etc.), dynamics that are changing the global order at every scale, which is why I focus on navigating instability via self-reliance, avoiding burnout / Ultra-Processed Life, and investing in ourselves and the revolution that no one sees coming.

The Revolution No One Sees Coming will not just be a series of external events, it will be personal, as each of us will face situations we didn't choose whose novelty and scale may exceed our previous experience. History is full of changes no one thought possible a few years earlier. No one else is writing about it like I am, so a subscription--which costs the same as a few sushi--is a unique value. Thank you for supporting my work.

I have always felt that if even one single idea presented here changes your life in a positive way, then the subscription will pay for itself many times over in the advance of your security, self-reliance and quality of life. Thank you for your readership, and I greatly appreciate your financial support via any of these methods:

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The Joyless Pantomime of Optimizing Ennui

2026-08-05T10:32:08.223-07:00

The joyless pantomime of optimizing our alienation is not a substitute for authentic fulfillment.

We all know that geopolitics, the stock market, AI, the unemployment rate and all the rest of what's presented as "explaining" everything is "important," but all these analytic abstractions ignore what we actually experience. This divide between what we're told we should be experiencing and what we are actually experiencing is what I call the politics of experience, a term coined by R.D. Laing in the 1960s.

The basic idea is that there's a widening gulf between what we actually experience and what we're told we should be experiencing, and this disconnect is inescapably deranging. Since the entire realm we inhabit is telling us everything's great and the sky's the limit, we pantomime this same claim as if we're actually experiencing authentic joy because everyone else seems to believe it.

If we confess that we don't feel everything's great and what we actually feel is a complete disconnect from everything we're supposed to be feeling, then we risk an internal and social divide that threatens our entire status quo: if we recognize it's all a joyless pantomime, then what?

But everyone else doesn't actually believe it, either; they're just going through the motions in the hope that the joyless pantomime will keep everything they're afraid of losing glued together. But if we've substituted an optimized-for-optimization pantomime for authentic experience, then we've already lost ourselves and our ability to discern the hollowness of the civilizational psychosis that claims a life of ennui and alienation is "living our best lives."

The gulf between what we're told is joyful and wondrously promising and our lived experience is now so wide that the cracks are showing. Consider these excerpts from recent articles:

The Strange Feeling So Many Adults Can't Explain: The quiet epidemic not enough people are talking about. (medium.com)

Now I hear the same sentence from people all the time. "Nothing is wrong, I just don't really get excited about anything anymore."

They're not saying they're depressed. They're still working. Paying bills. Taking care of their kids. Walking the dog. Going to the gym. Life keeps moving. But the excitement isn't the same. That spark that used to make ordinary things feel meaningful doesn't seem to show up anymore.

What's strange is how many people seem to be feeling it at the exact same time. Spend a few minutes on TikTok, Reddit, or Instagram, and you'll find thousands of comments from people describing the exact same experience. Different ages. Different careers. Different backgrounds. But they're all asking a similar question. "When did I stop looking forward to life?"

Why does everything feel so joyless? Welcome to the age of decadence without pleasure: Decadence in our era comes in technologically mediated forms, emptied of desire and obsessed with self-optimization. (theguardian.com)

AI marks a triumph of artifice more sweeping than the old decadents could have imagined. Yet far from bolstering our capacity for perceptual intensity, AI presents new threats to both. Its productions are eerily hollow, with no felt experience, embodiment or sensation behind them. AI is the pleasureless decadence machine.

"There is no pleasure or pain for an AI, no skin in the game," the philosopher Carissa Veliz writes in her recent book Prophecy. As a result, an AI "cannot care, and therefore cannot value." Without some felt relation to pleasure and pain, judgments of value and taste become abstract and bloodless.

Art, sex, nature: why is everything sold to us as a means to an end, rather than an end in itself? How a reductive worldview is stripping meaning from our most valued activities. (theguardian.com)

I have seen countless other examples of all the things that are good in life being promoted not for their own sake but for the material benefits they bring. This instrumentalization has become normalized so insidiously that we don't even notice that it is odd, let alone wrong. Nor do we seem to be aware of quite how pervasive it is. Yet its effects are profound, leading us to lose sight again and again of what is truly of value in life.

Our autonomous agency has increasingly been expressed through our status as consumers. Freedom is above all the choice of how to spend our money, with the promise that everything we need can be obtained in exchange for cash. The consumer mindset has affected how we relate to everything, not just the things we buy.

The result is that the world has become essentially transactional, meaning that everything is an instrument for getting something else. It is no coincidence that dating apps give the impression that we are shopping for partners because we approach even relationships with the consumer framing.

Combine an inflated belief in personal autonomy, a transactional consumer mentality and a reductionist attitude to how things work, and it is inevitable that we treat the world as a collection of resources we can plunder to promote our own well-being. The tragedy is that when we do so, we neglect rather than serve our deepest needs.

The cornucopian fantasy of AI generating super-abundance is the joyless pantomime taken to the highest level of civilizational psychosis. The more we strive to optimize ourselves and everything around us, the more we rely on metrics as guides to "living our best lives," the more we strive to work harder and work smarter in the hopes that more stuff and more transactions will finally become fulfilling, the farther we drift from ourselves and our own experience.

The joyless pantomime of optimizing our alienation is not a substitute for authentic fulfillment. The pantomime--going through the motions of finding fake fulfillment in ultra-processed products, experiences and optimizations--is not just joyless, it drains our life force, leaving us in a depleted state of ennui, burned out and wondering why we don't feel the fulfillment we're supposed to be feeling in our hyper-optimized existence.

We don't need therapy and supplements, we need out.

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The Joys and Tragedies of Naivete

2026-08-04T19:33:30.562-07:00

Our naivete is being exploited so ruthlessly and with such abandon that the golden age of the Big Con is consuming itself.

Naivete is interesting because it's so easily confused with confidence, native optimism, youthful enthusiasm, and a host of delusions, including mistaking idealized fantasies and fairy tales as templates for the real world. In a culture that prides itself on not being a chump, to be called naive is an accusation: don't be naive means don't be an easily conned chump.

In contrast, being confident, optimistic and filled with youthful enthusiasm are praised as the core of American Practicality, Idealism and Vigor, i.e. the can-do spirit. That naivete lends itself to youthful enthusiasm, sunny optimism and can-do confidence is rarely remarked upon.

So what is naivete other than credulity? It's a willingness to trust leaders, institutions and mythologies without running them through common-sensically skeptical filters, and a belief that everything will work out just fine regardless of what happens if we just keep working hard and working smart.

The difference between a willingness to trust leaders, institutions and mythologies, sunny optimism and youthful enthusiasm and naively mistaking self-serving fantasies and fairy tales for the real world is, well, there isn't any. Believing that an unending stream of patently transparent self-serving fairy tales accurately reflect "the real world" is the pinnacle of naivete, and that describes the entire American society, culture and economy: this is the golden age of the Big Con.

Which brings us to Herman Melville's under-appreciated classic, The Confidence-Man. Why read a book from 1857 which flopped so badly as commercial literature that Melville stopped writing and ended his career as a customs official? Because this book masterfully explores the entire nature of trust, confidence and cons. Though the setting is a riverboat on the Mississippi River just before the U.S. exploded into Civil War, its insights cross cultural boundaries.

This is not an easy book to read for several reasons. First, it is undoubtedly one of the first "post-modern" novels which breaks from traditional narrative storytelling. ( Another example: Dostoevsky's Notes From the Underground.) The Confidence-Man is a collection of 45 conversations between various people on the riverboat--beggars, absurdly dressed frontiersmen, sickly misers, shysters, patent medicine hucksters, veterans (of the Mexican-American War) and the "hero" in the latter part of the book, the Cosmopolitan.

In typical Melville fashion, you also get asides--directly to the reader, in several cases, as if Melville felt the need to address issues of fiction outside the actual form of his novel. The lack of structure, action and conclusion make this a post-modern type book, but if you read each conversation as a separate story, then it starts to make more sense.

For what ties the book together is not a story but a theme: the nature of trust and confidence. In a very sly way, Melville shows how a variety of cons are worked, as the absolutely distrustful are slowly but surely convinced to do exactly what they vowed not to do: buy the "herbal" patent medicine, buy shares in a bogus stock venture, or donate cash to a suspect "charity."

In other chapters, it seems like the con artist is either stopped in his tracks or is conned himself. Since the book is mostly conversations, we are left to our own conclusions; there is no authorial voice wrapping up each chapter with a neatly stated ending. This elliptical structure conveys the ambiguous nature of trust; we don't want to be taken, but confidence is also necessary for any business to be transacted. To trust no one is to be entirely isolated.

Melville also raises the question: is it always a bad thing to be conned? The sickly man seems to be improved by his purchase of the worthless herbal remedy, and the donor conned out of his cash for the bogus charity also seems to feel better about himself and life. The ornery frontiersman who's been conned by lazy helpers softens up enough to trust the smooth-talking employment agency owner. Is that a terrible thing, to trust despite a history of being burned?

The ambiguous nature of the bonds of trust is also explored. We think the Cosmopolitan is a con-man, but when he convinces a fellow passenger to part with a heavy sum, he returns it, just to prove a point. Is that a continuance of the con, or is he actually trustworthy?

The book is also an exploration of a peculiarly American task: sorting out who to trust in a multicultural non-traditional society of highly diverse and highly mobile citizens. In a traditional society, things operate in rote ways; young people follow in their parents' traditional roles, money is made and lent according to unchanging standards, and faith/tradition guides transactions such as marriage and business along well-worn pathways.

But in America, none of this structure is available. Even in Melville's day, America was a polyglot culture on the move; you had to decide who to trust based on their dress, manner and speech/pitch. The con, of course, works on precisely this necessity to rely on one's senses and rationality rather than a traditional network of trusted people and methods. So the con man dresses well and has a good story, and an answer for every doubt.

Our naivete is being exploited so ruthlessly and with such abandon that the golden age of the Big Con is consuming itself. Delusions are now the norm, as if our unhinged optimism that everything will turn out just fine as long as we believe in Technology and Finance, for that will be enough to stem the tsunami of consequences building up beneath the surface euphoria of stocks and AI making us all wealthy beyond measure.

These are the joys of naivete. The tragedies are still over the horizon, a gathering storm we are unprepared for.

NEW PODCAST: We Don't Have Capitalism Anymore--We Have Privatized Totalitarianism (60 minutes)(host Daniel H.)

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Get the Flock Out of Here

2026-07-29T12:35:29.490-07:00

The government gets the privately collected data and in return dismantles or disables the guardrails that once protected the public from state and private-sector encroachments on privacy.

One of the core traits of a 1984-type totalitarian dystopia is 24/7 surveillance of every prisoner, oops, I mean citizen. Surveillance collects the data that leverages the tools of control: without surveillance, the structures of control do not have the data needed to monitor, track and control the populace in a profitably fine-grained manner.

As I have endeavored to explain, surveillance is no longer the unique purview of the central state; it has been fully privatized for profit by Big Tech and Corporate America, creating a vast, sprawling structure of control I call Privatized Totalitarianism as the mechanisms of data collection and profiting from this data collection are privately owned but the data is for sale to anyone, including government agencies of every stripe.

We thus have a hybrid mix of public and private control structures. The government (with a monopoly on force and declaring what's legal) has its systems and tools to collect data on the citizenry, and corporations (platforms, monopolies, quasi-monopolies, cartels) have their privately owned and operated "black box" systems and tools to collect data on the citizenry.

Both profit when the privately harvested data is shared with the government. The government gets the privately collected data and in return dismantles or disables the guardrails that once protected the public from state and private-sector encroachments on privacy.

In a centralized system in which power and wealth are concentrated in the hands of the few, everyone in power benefits from this cozy marriage of corporate and state exploitation of data collected by surveillance and whatever is conducted or transacted online, which together increasingly includes every aspect of daily life.

Whatever is digitized can be collected and sold, whatever is surveilled "for our own good" can be harvested and sold, and whatever is sold becomes a means of control.

When it comes to data collection, the more data collected, the greater the profits and the means of control. It's important to note here that the control structures of Privatized Totalitarianism differ from the rigid enforcement of tradition state-totalitarianism, where no dissent is allowed.

In the marriage of self-serving State and Privatized Totalitarianism, a narrow band of ultra-processed, i.e. carefully curated and controlled "debate" and "dissent" is not just allowed, it's constantly lauded as "proof" of our "free markets" and "liberty", in the same way a starchy, grease-soaked, heavily sweetened goo dyed orange is lauded as a "healthy veggie snack."

Ultra-Processed Life (book)

In both cases, the fake facsimile is highly profitable but destructive over the long term. The individual who falls prey to the ultra-processed snack become ill, and the society that falls prey to the fake facsimile of a "marketplace of ideas freely debated" also weakens to the point of collapse.

In other words, as long as the public dialog remains corralled within the sterile, dead-end "debates" of obsolete, divisive and distracting cliches--left vs. right, socialist vs capitalist, blah-blah-blah--then the centralized concentrations of power and wealth can enjoy watching the peasantry toil away from their castles on the hill, amused by how easy it is to maintain the one-sided status quo with a managed spectrum of phony "debate" and 24/7 data collection and surveillance--all sold as "for our own good."

Who Will Solve Our Real Problem--The US is a Neofeudal Autocracy

So cameras on every lightpole--for our own good. Cameras above every doorway: for our own good. Drones monitoring traffic: for our own good. Data collected by platforms, Big Box store cameras in the parking lots, and so on: all for our own good.

All to serve you better. Indeed. To serve humans. This reminds us of the classic 1962 episode of The Twilight Zone TV series To Serve Man, in which an alien race visits Earth claiming to bring "peace and prosperity" via their program "to serve man", which turns out to be a plan to harvest humans as edibles.

We're being consumed, too, by Privatized Totalitarianism, along with our democracy and liberty. Consider the digitization-enabled surveillance of vehicles I touched upon in Driving Big Brother.

As a thought experiment, let's go through getting in your car to attend a community meeting. Our new car is a wonder of technology. Yowza! Unbeknownst to us, much of this digital technology is not visible. Neither are the cameras, drones, etc.

While fiddling with the "entertainment"/audio features, we miss our signal turn, and since there's no other traffic around, we brake hard, pull a quick U-turn and exceed the speed limit to make the meeting on time. The meeting is being held by the Stop Surveillance Now Coalition (SSNC), and it's being held at a public space rented for the evening. We're attending because we're concerned about the steady erosion of privacy and the increasing potential for abuses of power as all this data is sold / distributed without our knowledge or consent.

When one speaker mentions the recent spate of privately installed and operated security cameras being destroyed in "monkey-wrench" fashion, the audience cheers.

The following day, our auto insurance is canceled, the IRS notifies us we're being audited for the first time in our lives, and the FBI pays us a visit regarding sedition, destruction of private property and various other criminal activities. Hmm, why this sudden truckload of punishments, public and private, being heaped on us?

It's all legal, because remember, in a Neofeudal Autocracy, what's moral is what's legal, and what's legal is for sale (per analyst Simons Chase) So it's not just legal, it's also moral and therefore righteous, because, heh, it's for our own good. To serve humans. (Yum, you look like a tasty snack!)

Then there's the marketing onslaught that clutters our inbox as soon as the sun rises. Oh, the irony. Here's an advert for a device that jams Bluetooth, hmm, I wonder why a retailer suddenly sent this to me? Here's an advert from a tax service that specializes in dealing with IRS audits. Well, that's certainly timely, eh?

Experts warn 2.2 million cars could be at risk of hijacking via Bluetooth (via John D.)

Correspondent Christopher M. left a succinct public comment on Medium that describes a key dynamic in the seemingly hopeless task of limiting not just data harvesting and surveillance but the distribution of the data being harvested to the highest bidders in the auction of Privatized Totalitarianism:

"There's no organized, sustaining, citizen movement powerful enough to push back against the relentless "gravitational pull" of government apparatchiks and corporate interests to monitor and direct every aspect of our lives."

Well said, Christopher, thank you. The boiled-frog analogy comes to mind, along with the herd milling around in the corral, each believing they're free-range.

As I noted in AI Is the Apex of Ultra-Processed Life,

Privatized totalitarianism expands without limits: our data is harvested and sold (you "opted in" by using the platform), we're banned or shadow-banned by black-box-algorithmic private monopolies (you violated the shape-shifting "community standards" that have remarkable overlap with whatever the government is presenting as "the correct choice"), and all this is presented--cue the laugh track--as "free market capitalism" and "individual choice" when it's actually a Kafkaesque facade masking the reality that the entire system is the opposite of what's being sold: it's not authentic, it's fake. It's not progress, it's Anti-Progress. It's not beneficial to us, it's malefic, and it's not actual agency-liberty, it's a profitable simulation that we sense but can't quite identify because it's everywhere.

So here's the corral labeled "free and open debate." Just don't stray or you'll find yourself shadow-banned or worse. Not by the government--they have their own means (welcome to Digital Siberia)--but by the Privatized Totalitarianism of privately owned and operated corporate platforms whose extraction and exploitation is legal--and for sale to the highest bidder.

One wonders if we have the collective will to say Get the Flock Out of Here. Sadly, even living on a remote island isn't a solution:

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Driving Big Brother

2026-07-27T11:19:32.567-07:00

Big Brother is now slouching in the passenger seat, making a mockery of ownership, right to repair and our agency.

Buyers of new vehicles have an odious passenger they are powerless to eject: Big Brother is now slouching in the passenger seat, making a mockery of ownership, right to repair and our agency--control of our lives and what we nominally own.

This is of a piece with the global emergence of Neofeudal Autocracies that supersede all the obsolete ideological divisions--left and right, "capitalist" and "socialist," etc.--that we're constantly bludgeoned with to keep us distracted from the oh-so-profitable immiseration of our daily lives and agency via a remorseless dialing down of quality, durability and true choice and a relentless dialing up of Big Brother schemes of extraction and extortion: what I call the Mafia Economy of privatized Totalitarianism:

What's the difference between a totalitarian autocracy of "free market" corporations and billionaires and a totalitarian autocracy of Party Insiders? There is none. In both cases, a delusional fantasy--"free market capitalism" on the one hand, and "egalitarian Communism" on the other--are deployed as inspirational cover stories for totalitarian control mechanisms being passed off as "Progress," with technology being the cudgel used to beat us into submission.

A correspondent neatly summarized this centralized-autocratic global tightening of control:

"What we see is a Government legislating our agency into the history books and doing a persistent job of turning average people back into Serfs. The regulation burden that prevents people from doing productive things that are good for themselves, their families and the communities they live in is getting more and more crushing by the month."

Which brings us to the odious backseat driver in every new vehicle: Big Brother in all his "for your own good" manifestations that just so happen to generate we-can't-escape profit streams for the Mafia-Economy corporations and the politicians they're enriching via the 24/7 auction of political influence.

Mechanic Sends Huge Warning: Don't Buy New Vehicles in 2026. (16:50 min)

Then there's the inexorable clawbacks of the right to repair as owners are being forced to use dealerships for simple repairs and computer re-programming at exorbitant costs.

The Biggest repair scam in todays Auto repair! You need to Hear this. (21:43 min)

An expanding number of young people are waking up and seeking to own older cars, as part of a larger movement to own analog rather than Big Brother digital.

Old Cars and The Analog Resistance (11:53 min)

States are starting to pass pernicious emission-control laws that end up preventing the driving of older vehicles.

The New Laws That Can Make Your Classic Car Illegal to Drive (10:05 min)

Since we own a 1998 Honda Civic, I have skin in this game. This is a 28-year old car. I can report that our original but well-maintained CVCC engine easily passes smog checks.

Isn't it obvious what's going on? Big Brother not only wants to monitor your vehicle and force you to pay stupidly overpriced repair and maintenance costs, he also wants to force us to junk our perfectly functional old vehicles so we're forced to buy stupidly overpriced crapified, loaded-with-Big-Brother vehicles.

There's no hiding from Big Brother. Even poor Gilligan on his remote island is affected.

And we all know how reliable digital devices that need constant reprogramming are:

And of course there are now AI control features, too:

Thank you, S.T. for the topic suggestion.

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Who Will Solve Our Real Problem--The US is a Neofeudal Autocracy

2026-07-22T11:34:06.130-07:00

So who will solve our real problem: the centralization of wealth and power in a Neofeudal Autocracy?

My essay on America's ten social classes was the appetizer to the main course: beneath the purposefully distracting PR of "democracy" and "free markets," America is a Neofeudal Autocracy, i.e. a system in which real power, control and wealth are concentrated in the hands of the few at the top of a complex neofeudal arrangement of a secular nobility ruling the commoners with monopolistic powers cloaked in the sleight of hand of "democracy" and "free markets" serving up endless dollops of "Progress" and "prosperity."

The Conflicts Brewing in America's Ten Classes

The key to autocratic / totalitarian arrangements is the concentration of power via centralization of control / power. This centralization is not unique to governments; it works just as well in the private sector--the privatized totalitarianism of corporate monopolies and cartels--and in organizations ranging from religious orders to sports.

Centralization has positive and negative features. Centralizing control enables efficiencies and obedience--militaries and global corporations being examples--but it also enables a handful of self-serving incompetents to destabilize vast systems, and the straightforward replacement of the ruling elite with a new elite, as outlined in Edward Luttwak's classic guide Coup d'Etat: A Practical Handbook (1968).

This makes autocratic / totalitarian arrangements tempting targets for overthrow, and fuels the paranoia and palace intrigues that come with highly centralized regimes. In other words, the stability of such structures is illusory.

Behind the happy-story narrative of "efficiencies," the real purpose of autocratic / totalitarian arrangements is to eliminate transparency and accountability so those at the top and the insider-lackeys who serve them can maximize their private gains behind the moats and complexity thickets of centralized power.

The other way to replace autocratic / totalitarian arrangements is the citizenry concludes their interests are no longer being served by the bread and circuses the regime distributes to co-opt and distract the exploited commoners.

Alternatively, in repressive regimes that rely on coercion, the commoners must find sufficient common cause with other classes to rise up as a mass movement that overwhelms the regime's coercive forces.

I summarize such social movements in this way: one by one, people decide that what was previously acceptable is no longer acceptable. That sounds simple, but it's not.

My essay on America's ten social classes sets the stage for a real problem-real solution discussion:

1. The real problem isn't who's currently holding the reins of power: the centralization of power is the core problem. Playing musical chairs--"democracy" swapping out who sits in which chair--won't solve the real problem, which is centralization.

Call it "socialist" or "capitalist," in either case you're missing the point: the choice is between centralization of control and power (i.e. Neofeudal Autocracy) or the radical decentralization of control and power, which translates into the radical decentralization of ownership, capital and agency.

2. Spewing endless paeans to "free market capitalism" in a economy dominated by privatized totalitarian monopolies and cartels won't solve the real problem--centralization of wealth and power--either. The wealth and power that's supposedly held by commoners is counterfeit, illusory, phantom: the "wealth" is an illusory artifact of serial credit-asset bubbles fueled by a relentless expansion of credit "money" chasing tangible assets, not by increases in utility.

The "power" to replace Tweedledum with Tweedle-dummer won't solve the real problem, which is the concentration of power and control, not who's currently holding the levers of power.

The phrase golden handcuffs is bandied about to describe the servitude / loss of agency that is a trademark of neofeudal systems. In classic feudalism, the commoners are bound by law to the estates of the nobility. In neofeudalism, you can't move because you have a 3% mortgage on your house you can't afford to give up, and you can't change careers because you can't afford to lose the healthcare insurance provided by your current employer.

These aren't golden handcuffs; they're gold-painted leg-irons, chains whose ersatz "value" is an artifact of a corrupt, exploitive Neofeudal Autocracy. Control what's affordable, what's "necessary to get ahead" (credentials), healthcare and lower-cost credit, and voila, you no longer need the legal niceties of direct servitude: indirect servitude works even better because it fosters illusions of power, wealth and agency.

So who will solve our real problem: the centralization of wealth and power in a Neofeudal Autocracy? The only source of a solution is the mass of powerless commoners who currently buy into the notion that the system is still serving their interests, or they're frozen by fear of losing what they have.

In other words, we'll lose everything if the truth comes out. This perverse state of denial and fear is the trademark of neofeudalism, in which those who have already lost power and agency now cling to a corrupt, unstable Neofeudal Autocracy because a real solution--radical decentralization, transparency, accountability, competition, agency--would collapse the putrid credit-asset bubbles propping up the illusions of "Progress" and "prosperity."

We've already lost everything of real value and can only regain them if the truth comes out. Each class has cut a deal with the devil, i.e. the Neofeudal Autocracy: I've got X-Y-Z--a low-interest-rate mortgage, healthcare insurance, some form of state-funded welfare, either subsidies for the rich or subsidies for the poor, or subsidies for everyone in between--and I have job security serving one fiefdom or another: either an extractive, venal corporation or an extractive, venal state.

One of the primary points of my essay was to highlight how each class lives in a completely different world than those above it. We're accustomed to regional and cultural diversity in the US. Life in one place is quite different than life in another place.

But amidst this dizzying diversity, we share some common interests: air, water, soil and food that isn't poisoned, a level playing field for every citizen, not of outcomes, but of opportunity, agency and freedom of movement, and a decentralized structure in which transparency and accountability cannot be extinguished to serve the interests of those at the top and their willing insider-lackeys.

Nothing will change until the various social classes find common cause in the most basic fundamentals: rather than fear that the truth will come out because we'll lose everything if it does, we accept the hard truth that we've already lost everything of value by accepting the hidden servitude and obfuscation of Neofeudal Autocracy.

Rather than fear the truth, we must come around to realizing embracing the truth is our only real path to restoring what's been lost to centralization and the concentration of wealth and power that comes with it.

Credit-asset bubbles concentrate wealth and power via concentrating capital which then buys political power. All this "wealth" is illusory. The power is real.

As for "AI will save us"--ahem... oops, AI is just another tool of our Neofeudal Autocracy:

NEW PODCASTS: Charles Hugh Smith on the Risks, Costs and Uses of AI (31:28 min)(host Richard Bonugli)

The Government Created an Ultra-Processed Economy--and It's Destroying America (1:04 min)(host Daniel Horowitz)

My book Investing In Revolution is available at a 10% discount ($18 for the paperback, $24 for the hardcover and $8.95 for the ebook edition). Introduction (free)

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The Conflicts Brewing in America's Ten Classes

2026-07-20T11:16:44.673-07:00
What we do know is that things have internal structures with dynamics that operate whether we "like" them or not.

Correspondent Manoj S. recommended an essay from the always-insightful John Michael Greer on the dissolution of unproductive classes behind the smokescreen of AI: A Game of Musical Chairs

"You can sell Americans on anything, no matter how wretchedly unsatisfactory it is, by labeling it as progress. That's what's being done now, with AI being used as a justification for firing useless workers, deleting unnecessary departments, cutting office staff down to scales that actually make sense, and shutting down the classroom-to-cubicle pipeline that once poured new graduates into salary class jobs. We can expect that process to accelerate dramatically in the years ahead."

Greer begins by laying out a compelling taxonomy of class in America, four self-explanatory classes defined by this question: how do different groups in today's America get their income?

1. investment class: income from investments (i.e. capital)

2. salary class: income from a monthly salary with benefits

3. wage class: income from an hourly wage with no benefits

4. welfare class: income from welfare programs

Greer argues that the salary class is now the gravitational center of power in the U.S., absorbing much of the national income in unproductive faux-problem-solving for fabricated problems explicitly devised to justify generous salaries and benefits.

The nation can no longer afford this staggeringly costly unproductive work force and so "replacing cognitive work with AI" is the cover story for the mass evisceration of this class, in a parallel to the previous gutting of the factory work force by automation and offshoring.

I've been addressing the class taxonomy of the US since 2012, and I'd like to add some commentary on the dynamics Greer so succinctly describes. In America's Metastasizing Class Wars (August 27, 2020), I laid out ten classes, based not just on sources of income but on several additional criteria:

Systemic Power: political control of the state's monopoly of force / coercion; financial control of the system's taxation, incentives and optimizations; corporate control of essential technologies - platforms; corporate-state "soft power" control of cultural, social and intellectual belief structures and sources of influence: media, social media, think-tanks, foundations, the Higher Education Clerisy, etc.

The power to protect bureaucratic-institutional fortresses from budget cuts, transparency and accountability.

Agency: the power to leave employment or a locale and change one's life; freedom from debt-servitude / employment bondage.

My ten classes: yes, this is more complicated that Greer's four classes but since power has sources other than income, accuracy demands an accounting not just of income but of power and agency, which is an individual form of power with systemic consequences such as social mobility.

1. The Deep State. Unelected, unaccountable, they wield state power. Call them if you're about to be renditioned. But you need either power or relationships to have their number. Relationships are a form of power.

2. The Oligarchs. Top bidders in the auction for political and financial influence. The top .001%. Able to rig the structures of power to serve their private interests.

3. New Nobility. The super-wealthy class just below the Oligarchs. The top .01%. They have the means to serve their private interests via lobbyists and campaign contributions. $10 million in campaign contributions nets $100 million in tax breaks / subsidies.

4. Upper Caste. The technocrat/professional class that manages the Status Quo for the upper classes. This includes wealthy entrepreneurs and owners of enterprises: rich but not rich enough to rig the structures of power to serve their private interests.

5. State Nomenklatura. Well-paid government administrators with ironclad job security and power.

Together, the Upper Caste and the Nomenklatura comprise the upper-middle class. Owners of enough capital (real estate and stocks) to cheer serial credit-asset bubbles. Since I'm doing well, the system is working great.

6. The Middle Class. Wage-earners and salaried employees, owners of traditional sources of financial security: family home, 401K retirement funds, etc. Due to high debt, many qualify as debt-serfs / wage-slaves with minimal agency despite their ownership of middle-class status signifiers.

7. The Working Poor. Households with earned income but it is not sufficient to secure the basics of middle class life. Many qualify for social welfare programs such as food stamps and Medicaid. Due to high debt, many qualify as debt-serfs / wage-slaves with minimal agency.

8. State Dependents. Though often labeled "poor," those with cash / black-market income often live better than the working poor, due to generous social welfare benefits.

9. Mobile Creatives. Self-employed independents, entrepreneurial sole proprietors with adaptive skills. They may collaborate with other Creatives rather than have employees, and may have part-time conventional jobs. They have mobility between sectors and ways of earning income sufficient to acquire capital / assets. They "own their livelihoods." Their credo is trust my network, not the corporation or the state.

10. Gig economy precariat. May supplement insecure employment (limited hours, no benefits, etc.) with gig work, may combine cash work with rideshare gigs, may juggle several delivery / eBay sales / rideshare gigs. The difference between precariats and Mobile Creatives is precariats are generally in survival mode (high debt, unreliable income, etc.) and are unable to acquire capital / assets. They "rent" their livelihoods rather than "own" them.

Here is a curated list of my essays on the taxonomy of class in the US:

The Three-and-a-Half Class Society (October 22, 2012)

America's Nine Classes: The New Class Hierarchy (April 29, 2014)

What the Global Status Quo Optimizes: Protecting Elites and the Clerisy Class That Serves Them (September 26, 2014)
Explicitly describing what the system optimizes would trigger social instability.

The New Class: Mobile Creatives (May 1, 2014)
The key characteristic of the Mobile Creative class is that they live by this credo: trust your network, not the corporation or the state.

When Belief in the System Fades (March 12, 2008)

Let's distill the key dynamics this structure reveals.

1. This is a neofeudal society passing itself off as a free-market democracy. Power is concentrated in the top state-private sector classes. No one below has any real power. Electing another leader or party changes nothing: life gets more difficult, insecure and expensive for commoners regardless of who's in office. The Imperial project grinds on, regardless of the delusional hope that electing someone else will change anything. Everything else is an illusion of power, not real power.

Try switching the 37% tax rate on labor to capital gains and all income from capital, and see how far you get.

2. Debt and social engineering are the foundations of America's neofeudalism. The essence of neofeudalism is debt penury and wage-slave bondage to the owners of the debt, which is capital that generates income. Commoners have no agency because they have to work for corporations or the state to service their debt. They can't change jobs because they'll lose healthcare insurance, and so on.

Social engineering: as Greer highlighted, Americans can be sold anything, no matter how destructive, unhealthy and exploitive, as long as it's packaged as Progress, especially technological Progress and novelty-as-progress. This is the power of The Mythology of Progress.

3. Beneath the endless marketing of "free market capitalism," few have any real agency. Stripped of PR gloss, the majority of workers have a false choice of servitude: they can serve their current oligarch / state agency / corporation, or they can toil in another noble's domain. Six one way, half-dozen the other.

4. America's neofeudalism now depends on inflating an endless series of credit-asset bubbles that generate phantom wealth, financial claims that are easily inflated without actually creating any real value via increasing income streams by means other than inflation and monopoly extortion.

This has worked so well for so long that recency bias has kicked in and we now believe this is a well-oiled permanent mechanism we can rely on. Alas, credit-asset bubbles are inherently unstable and the current system-wide bet on AI being something that will actually generate value / massive new income streams is an all-in last-ditch bet. When this bubble pops, the conditions enabling a future bubble will no longer exist.

But nobody says that, do they?

5. Here is a chart of the income distribution from owning capital. Note that it follows a power-law distribution: the few collect the lion's share of the income generated by capital. The vast majority don't own any income-generating capital, and the top 20% are delighted by the steady rise in their phantom wealth as the bubble-du-jour inflates the nominal price of the assets they own, setting up the inevitable crash when tulip bulbs revert from "investments" to flowers.

Meanwhile, those collecting 95% of the income from capital look down on the toiling peasantry from their Kafkaesque castles with amusement. Student loans, mortgages, 27.99% interest rate credit cards--it's really quite marvelous, isn't it?

6. Symbolic work versus productive work. Much of the work Greer describes as unproductive is considered highly productive because our exploitation of hydrocarbons and technology has generated such a vast surplus that we could spend it on symbolic work--meetings about meetings, compliance reports, marketing plans, projections, consulting, and so on, work that despite claims to the contrary has little to do with harvesting grain, connecting pipelines, replacing transformers, making beds, performing surgery or any other real-world work.

What If the Work We're Busy Automating Is Needless? (June 19, 2026)

Try telling the priesthood of the temple gods that their work is symbolic. Ours is the most valuable labor, as we're the ones keeping the whole thing glued together. If we stop, the gods will be angered and all will fail. Indeed.

As a result, we have no experience of a way of life stripped of symbolic work based on seeking positions of status, accumulating credentials, and so on.

7. The number of Mobile Creatives is modest. Some years ago I dug into IRS data on types of income and found that only a tiny sliver of the workforce is truly independent / self-employed, i.e. they earn a middle-class income from royalties, ownership of enterprises or professional services. Out of roughly 160 million employed people, around 16 million are self-employed, but only 6.9 million are professional-class with some form of incorporation, and around 3 million others make enough income to live well. So around 6% of the work force is truly independent.

We're inundated with glowing accounts of individuals earning big bucks on "passive income" schemes, just as there are endless posts about how to make six figures using "can't lose" techniques that just so happen to cost $200.

The reality is it's extremely challenging to live outside the peasantry-Nobility arrangement. In my experience, it takes a willingness to constantly absorb risk and failure, and wear an absurd number of hats: accountant, manager, programmer, laborer, creative wizard, psychologist, consultant, student--and even after all that, success is not guaranteed. The difference between living in a shack and "success" is often some form of luck.

8. Something's gotta give. Soaring debt, public and private, rampant corruption, extortion, exploitation, dynamic pricing, unaffordable shelter, utilities and food, tulip-bubble scale euphoria, moated bureaucracies, complexity thickets that stifle competition, neofeudal lords digging bunkers and hiring private armies as they sense the peasantry's distemper--something's gotta give, we just don't know what will break first.

The usual explanations no longer explain anything. Their incoherence is obvious but lacking anything more coherent, we go back to insisting that all will be well if only everyone would wear their Silly Hats. What Once Explained Everything Now Explains Nothing.

What we do know is that things have internal structures with dynamics that operate whether we "like" them or not. I put together this chart of the Lifecycle of Bureaucracies some years ago to illustrate how institutions decay as self-interest replaces the original purpose of the organization. This leads to implosion - collapse. Again, whether we "like" it or not.

Greer's forecast of the end of white-collar symbolic work may well be prescient. Costs are funny things. We can play games with "money" and think we've solved the problem of costs, but costs are weirdly embedded in the real world, and so thinking that we can overcome all those costs by requiring everyone to wear Silly Hats doesn't actually work.

As Peter Drucker observed, enterprises don't have profits, they only have costs. This is also true of governments, households, institutions and, well, everything else. Calling tulip bulbs "wealth" works like magic for a time, and then reality intrudes.

NEW PODCASTS: Charles Hugh Smith on the Risks, Costs and Uses of AI (31:28 min)(host Richard Bonugli)

The Government Created an Ultra-Processed Economy--and It's Destroying America (1:04 min)(host Daniel Horowitz)

My book Investing In Revolution is available at a 10% discount ($18 for the paperback, $24 for the hardcover and $8.95 for the ebook edition). Introduction (free)

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AI Is the Apex of Ultra-Processed Life

2026-07-16T12:12:51.071-07:00
We are Superman strapped to a carefully machined chunk of Kryptonite we can no longer detach.

I wrote Ultra-Processed Life to describe a peculiarly perverse structure of control that now dominates our entire culture and way of life: what's presented as marvelously beneficial to both sellers and buyers / leaders and the citizenry is actually only beneficial to the sellers / leaders while it actively degrades and deranges the buyers / citizens.

The essential dynamic of Ultra-Processed Life is to channel us into realms where the choices are limited to whatever benefits the sellers at the expense of the buyers. This artificial, synthetic realm is presented as brimming with authentic choice and agency, when in fact it's purposefully designed to be a choiceless illusion of choice.

What was once authentic has been hollowed out and been replaced by a simulation of what was once authentic, a simulation that mimics what has been hollowed out to persuade us that what's presented to us--an artificial, synthetic simulation--is real, because if we believe this artifice the seller reaps immense profits while we suffer the consequences of an artificial, house-of-mirrors realm of anxiety and distraction.

So the sellers present an orange-dyed confection of potato starch that is devoid of any nutritional value as a "veggie snack" replacement for an actual carrot loaded with nutrients and fiber. The sellers of ultra-processed snacks and glop make billions of dollars in profits while the consumers who were conned into believing the unwholesome snack was a "healthy alternative" become ill, mentally and physically.

Then another set of sellers channels those made ill by Ultra-Processed Life into another false-choice realm in which the sellers reap billions in profits not by curing illnesses but by addicting consumers to meds they must take for life.

In the political realm, no matter who we vote for, life gets more expensive, precarious and totalitarian: protections for consumers and citizens are reduced to benefit the few at the expense of the many, and choiceless choices abound--two insurers that offer the same simulations of actual insurance, two big-box stores filled with the same low-quality products, and two service providers offering the same maddening AI-generated endless loops of misery that's laughably presented as "customer service."

Privatized totalitarianism expands without limits: our data is harvested and sold (you "opted in" by using the platform), we're banned or shadow-banned by black-box-algorithmic private monopolies (you violated the shape-shifting "community standards" that have remarkable overlap with whatever the government is presenting as "the correct choice"), and all this is presented--cue the laugh track--as "free market capitalism" and "individual choice" when it's actually a Kafkaesque facade masking the reality that the entire system is the opposite of what's being sold: it's not authentic, it's fake. It's not progress, it's Anti-Progress. It's not beneficial to us, it's malefic, and it's not actual agency-liberty, it's a profitable simulation that we sense but can't quite identify because it's everywhere.

Which brings us to AI, the apex of technological hype and Ultra-Processed Life. Beneath AI's oh-so-helpful prompts and sickly-sweet affirmations, it erodes our ability to even recognize our own loss of autonomy and independent thinking. The core traits of Ultra-Processed Life--the erosion of authenticity and the substitution of artificial, synthetic simulations that are immensely profitable to those selling the simulations--are the core dynamic of generative AI.

The ultimate totalitarian structure of control isn't a police state; it's the helpful servant who does everything for you so you lose touch with the real world of choices and consequences. Most importantly, we lose the ability to discern that all the servant's choices just so happen to profit the few in control of the helpful servant system at the expense of those delighted by the convenience and ease of the helpful servant doing all the thinking and making all the decisions--not directly, of course, because we might notice that, but by limiting our options to choiceless choices that all yield the same output.

As our mental and physical health spirals into a black hole of addiction, dependencies, anxiety and distraction, we're powerless to discern the spiral because we turn to our helpful servant for answers. The helpful servant assures us all is well, we're remarkably intelligent and grounded, and there's a pat answer for everything.

All of which is false, but it relieves our anxiety to hear these assurances. And so we distract ourselves with dopamine-stimulating media and consumption, buy-buy-buy, as the core mechanism of Ultra-Processed Life is transactional: buyer and seller meet in a faceless, frictionless transaction that triggers some dopamine hit of novelty or illusion of value, selfhood and agency: I'm somebody because I bought something.

Meanwhile, the relationships underpinning a healthy life and society are unraveling. The endless aisles of Ultra-Processed snacks, frozen glop, canned glop and sugar-water beverages are an analogy for the endless aisles of media-slop and the 24/7 "news" which is so ultra-processed that it is now resistant to parody--there's no way to parody what is already a self-parody.

The term social engineering has a disturbing sound, because it suggests that the "free market" and "individual agency" are perhaps more profitable facades than they are real-world experiences. For this is the destructive heart of Ultra-Processed Life: we sense something's off about the constant state of hyper-everything anxiety, precarity, uncertainty and dopamine-receptor exhaustion we experience, and we sense the disconnect from what we experience and what we're told we should be experiencing: the endless bliss of Progress and Prosperity.

This disconnect has a name: the politics of experience. We're constantly bombarded with contexts, prompts, agendas, narratives and signifiers persuading us that the artificial, the fake, the simulated, the facsimile, the mimicry, is all real, and we're the ones who are at fault for experiencing something other than what we're told "everyone else is experiencing."

But this too is misdirection, because in reality, everyone else is experiencing what we're experiencing, the disconnect, the anxiety, the solace of distraction and buying something, but they're trying to believe the artifice because facing the reality of our disconnect from ourselves and the real world is too disturbing, for Ultra-Processed Life has eroded our ability to trust our own experience as superior to what's presented in the house-of-mirrors Mouse Utopia we inhabit.

It's also disturbing for another reason: the only way to return to authentic experience, autonomy and agency is to go Cold Turkey and turn it all off. And of course the ability to do so is what Ultra-Processed Life and its most powerful handmaiden, AI, disables: we are Superman strapped to a carefully machined chunk of Kryptonite we can no longer detach.

NEW PODCASTS: Charles Hugh Smith on the Risks, Costs and Uses of AI (31:28 min)(host Richard Bonugli)

The Government Created an Ultra-Processed Economy--and It's Destroying America (1:04 min)(host Daniel Horowitz)

My book Investing In Revolution is available at a 10% discount ($18 for the paperback, $24 for the hardcover and $8.95 for the ebook edition). Introduction (free)

Become a $3/month patron of my work via patreon.com

Subscribe to my Substack for free

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Offload Risks onto the Bottom 90% and Immiseration Follows

2026-07-13T11:46:07.728-07:00
The underlying story of the past 50 years has been the offloading of risk onto workers and consumers.

On my map of how the world works, we start with structures of control that distribute the good stuff--resources, assets, income and power--and the bad stuff: costs, losses and risks. As I explained in The US Economy In a Nutshell: Privatize the Gains, Socialize the Costs, the current arrangement distributes the gains to the top 10% and the costs and risks to the bottom 90% via privatizing the gains and socializing--i.e. dumping them onto the biosphere and the public--the costs and losses.

This follows a power-law distribution: the few at the top reap most of the gains, and the leftovers, scraps and crumbs are distributed in descending order, with most of what's left going to the top 9.5% and a diminishing dribble is scattered over the lower 90%, so that by the time we get to the bottom half of households, 170 million people own a grand total of 2.5% of the nation's financial assets, while the top 0.1% own 16.6%--6.6X the bottom 50%.

A key mechanism in this wildly asymmetric distribution of gains and costs is the system favors capital over wages. As the charts below illustrate, the financial gains go to the owners of capital, and since ownership of capital is highly concentrated, these few owners siphon up the vast majority of the gains.

One way to understand how the current arrangement favors capital over wages is to reverse the tax liabilities of capital and wages. Employers and employees pay 15.3% of every dollar of wages in Social Security / Medicare taxes, plus income taxes that quickly rise to 22%, for a total tax rate of 37.3% on wages. (Note self-employed people like myself pay the full 15.3% ourselves, as we're both employer and employee.)

Capital gains are taxed at 20%, but only when the asset is sold, so the wealthy borrow against their unrealized gains and live off this borrowed money to avoid selling and having to pay tax on capital gains. And since the system depends on debt to survive, the interest on debt is deductible, giving the wealthy borrowers a tax deduction for avoiding capital gains.

Now imagine all capital gains, realized or unrealized, were taxed at 37% and the first $80,000 of wages were tax-free. The median wage is around $80,000, hence my picking that number. As for the hue and cry about unrealized capital gains being taxed, that's easily addressed: unrealized gains in primary-residence owner-occupied homes and retirement accounts would be exempted. Every other gain made playing in the casino would be taxed.

Reversing the asymmetry of tax liabilities would dramatically alter the distribution of gains and costs. Wages have lost ground for 50+ years, and the favoring of capital is a key driver of this decline in the share of the economy that's distributed to wage earners.

Half the nation's households--170 million people own a grand total of 2.5% of the nation's financial assets:

The winner-take-most arrangement favoring capital:

Another key driver is the offloading of risk from owners to consumers and workers, a perverse process that has been obscured by incremental degradation. Risk is a strange phenomenon that defies easy definition. Risk isn't a direct loss or cost; it's the probability of losses and costs arising in what appears on the surface to be a stable arrangement.

Consider the stunning decline in the quality of durable goods such as appliances, and global industry adopting a laughably valueless one-year warranty across the board. Appliances that routinely lasted 30 years before "Progress" took the reins now routinely fail in 3+ years.

In the good old days before "Progress" took the reins, manufacturers absorbed the risk of premature failure of the goods they produced. Now this risk has been offloaded onto consumers, who are now forced to buy "extended warranties" as the only means of mitigating the risk they now carry of premature failure.

This is in effect a form of extortion: "nice refrigerator you got there, too bad it's at risk of breaking." Well, if current manufacturers had the same standards as previous generations, we wouldn't need "extended warranties." Welcome to the Mafia Economy: low quality goods and services force "upgrades," i.e. extortion.

Consider the offloading of risk onto workers. Employment other than casual labor once included healthcare insurance and other basic benefits. In the "gig economy" of contract employment and gigs, the worker is now responsible for paying their Social Security / Medicare taxes, healthcare insurance and retirement contributions.

The decline of hourly wages is another offloading of risk onto the worker. The percentage of workers paid by the hour has declined in favor of salaried positions with open-ended demands on workers: where hourly workers get paid for hours on the job, salaried workers are now on the hook for work beyond a conventional 8-hour work shift.

Then there's the immense mass of risk and labor that's been offloaded onto consumers and workers as shadow work, often the result of having to fix failures in goods and services that were once the responsibility of the provider or employer and have been dumped on consumers and workers. This is a topic I've often addressed.

This Is Why You're Drowning in Busywork: We have been told that A.I. will take people's jobs. What no one mentions is that many of those jobs are landing on us. The A.I. revolution involves a huge transfer of labor-- not from worker to machine but from worker to consumer. (nytimes.com, paywalled)

Another source of risk is the dependence on debt to fund the lifestyles we deserve: as the purchasing power of wages has declined, the easy "solution" is to fill the gap between what earnings can buy and what we want / need / expect / deserve with borrowed money.

As we all know, debt comes with risk, as falling behind greases the slide to default, bankruptcy and ruin. 27% interest rates on credit cards steepen the slide into a cliff: one missed payment can trigger a cascade of events that cannot be reversed. This is why I often observe that fewer bad things can happen if you have no debt.

Last but far from least, is the current arrangement's dependence on serial credit-asset bubbles as the sole driver of "growth", a dependence that has led to a casino economy in which wage earners lose ground and in desperation turn to gambling as their last-ditch hope of gaining ground.

But despite 24/7 assurances that "this isn't a bubble," all bubbles pop with devastating consequences for those who believed the assurances of those operating the casino.

The underlying story of the past 50 years has been the offloading of risk onto workers and consumers, with the inevitable consequences being higher costs and losses leading to impoverishment and immiseration. We're frogs in water that's getting measurably hotter, and it's getting harder to muster the means to jump out of the simmering pot.

My book Investing In Revolution is available at a 10% discount ($18 for the paperback, $24 for the hardcover and $8.95 for the ebook edition). Introduction (free)

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Without Subsidies, AI Is Unaffordable

2026-07-08T08:35:12.686-07:00
Let's pull all this into an undeniable conclusion: AI is based on massively subsidizing users' costs.

What's already abundantly clear but verboten to say as it would pop the bubble of AI valuations and triumphalism is that AI is unaffordable once the direct and indirect subsidies are withdrawn. Nothing that consumes this much electricity and requires such an immense scale of costly processing and memory capacity can be low-cost, never mind free.

The major AI platforms and vendors are subsidizing corporate and individual users in the hopes that they can achieve AI sector dominance --and the pricing power that comes with it--via the network effect, the dominance generated by having the majority of users bound by habit or dependence to your platform or tools.

This battle for network effect dominance is playing out in full view:

AI Giants Are Handing Out Tons of Free Computing Power to Grab Startup Share: (wsj.com) Pitched battle for business users comes as AI companies seek lasting streams of revenue.

Hans Ibarra, a founder building an AI-voice startup, has found himself on the receiving end of a big opportunity: Top artificial-intelligence companies such as OpenAI, Anthropic and others desperate to win his business are ramping up discounts.

Across Silicon Valley, startup founders like Ibarra are enjoying a wave of computing credits and fielding competing offers from AI-model makers racing to land new enterprise customers. Cursor, the AI-coding company bought by Elon Musk's SpaceX, offered a 75% discount through July 5.

"If I'm choosing between a really cheap Chinese model that I actually have to pay for, and a very expensive Anthropic model that I don't have to pay for, I'm going to pick the Anthropic model," Acker said. "I'm always going to pick the one for which I have free credits."

Meanwhile, back in the real world of costs, AI Costs More Than The People It Replaced (forbes.com)(via Tom D.)

It turns out that experienced human workers doing the work right in the first place is cheaper than having AI run a probability distribution process that needs vetting and corrections. And remember, AI isn't actually "intelligent," it's just a probability distribution using natural language.

As management guru Peter Drucker observed, enterprises don't have profits, they have costs. Purveyors of AI platforms and tools have costs, and so do their customers. Those costs are currently being funded by investors, who are in effect subsidizing the AI companies' "free" giveaways of horrendously costly "tokens" in a manic, desperate attempt to grab the brass ring of network effect dominance before their cash runs out.

This raises a question: Is this any way to run a railroad? In other words, is this actually a viable business model, burning billions of dollars in cash to lock in network effect dominance in a field that is rapidly obsoleting every iteration of an innately limited mode of computation? Is claiming that a probability distribution is "intelligent" in the same way humans are intelligent a viable business model when there is ample evidence this simply isn't true?

AI and human intelligence are drastically different--here's how (scientificamerican.com)

What happens when enterprises have to pay the unsubsidized costs of AI is they immediately curtail their AI spending because the customer-facing / financial benefits of AI are at best elusive and often negative. Peter Drucker was onto something that is currently being lost in the PR-propaganda push of those trying to cash in on the AI euphoria: enterprises don't have profits, they have costs, and the real-world costs of AI are extraordinarily high while the payoffs are ambiguous.

There are many other hidden subsidies within the AI machinery. There are corporate tax write-off subsidies, energy subsidies, tax credit subsidies for building data centers, and so on. If these were stripped out, what would the real unsubsidized costs of AI be? No one knows, but they would be higher than what's presented as the cost now.

Then there's the if it's legal, it's moral, and what's legal is for sale subsidy: AI is built on the systemic theft of copyrighted content. Last month alone, AI scrapers gorged on 246,000 pages from my Of Two Minds server, and hundreds of thousands of pages of my copyrighted works on my mirror site and other sites posting my work.

This is legal, but is it moral? Nobody asks such questions because the important thing is to avoid saddling AI users with the real costs. So if all those content creators get nothing--in effect, subsidizing both AI companies and the users of their AI platforms and tools--well, so what, because if it's legal, it's moral, and what's legal is for sale.

Well that's just peachy, but let's do a thought experiment where every creator of copyrighted work got paid for supplying AI with its database, and every user of AI had to pay us content creators. How about a penny a page / image / sound clip? so 246,000 pages per month (again, only a fraction of the total volume of my work that was scraped by AI companies for their "free" use in a single month) would be $2,460 a month paid to me by AI users benefiting directly from my copyrighted work. Wouldn't that be fair, i.e. moral?

Recall that US copyright law is explicit: all creative content is copyrighted upon completion, period.

How many current users of AI are willing to pay the full unsubsidized costs for their use of AI? We can safely say far fewer than are using the tools for "free" due to subsidies both direct and indirect.

Let's pull all this into an undeniable conclusion: AI is based on massively subsidizing users' costs. Once those subsidies end, what's left are costs, not profits. Play that any way you like, but massive subsidies are not sustainable, though they generate a temporary illusion of viability that can be exploited by those selling a fantasy of future profitability to credulous investors and enterprises.

Left unsaid is a lot of money is being gambled on the illusion that subsidies are sustainable. They're not. Enterprises don't have profits, they have costs.

My book Investing In Revolution is available at a 10% discount ($18 for the paperback, $24 for the hardcover and $8.95 for the ebook edition). Introduction (free)

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Sailing the Stormy Seas of AI

2026-07-06T07:53:01.187-07:00
Forecasts of AI's future impacts must be viewed with skepticism, as AI and its promoters are adept at saying what we want to hear rather than telling us the discomfiting truth, as the truth might prompt us to turn AI off.

Small business owner and San Francisco correspondent 'Sparx Eightthreetwo' (found on facebook under the same name) has a metaphor of the sea and boats that illuminates some of the key dynamics in the AI era. Here is Sparx's description of the metaphor:

"Overall, I would suggest that every business is akin to a sailing vessel (microeconomics) in an ocean of financial liquidity (macroeconomics). Some businesses are as small as rowboats, whereas others are as large as aircraft carriers.

Regardless of the size involved, knowledge of how water works is fairly important for long term survival.

On the microeconomic front, it's quite important that every business owner builds the best possible boat that he or she can relative to other boats (competitors).

However, on the macroeconomic front it's also important to understand how the ocean works (and/or whatever specific type of body of water that the client is sailing in).

In general, you want to sail with the currents, not against them.

And if the client is indeed sailing in the ocean, it's imperative to understand when hurricanes and other types of significant turbulence are on the horizon, and to react accordingly long in advance.

If done properly, the client's boat has a significantly increased chance of not sinking, while many other boats likely won't be so lucky.

In the end, I'll simply ask questions. If the client wants to talk about their boat, then I'll talk about their boat.

If the client wants to talk about water, then I'll talk about water."

My application of this metaphor starts with this question: is AI changing the currents and tidal forces of the seas, as its proponents believe, or is it an uncontrollably destructive force akin to hurricanes and tsunamis, or is it neither? To its proponents, AI will change everything, i.e. the nature of the economic, social and political seas, forever, in an inevitably positive way.

Alternatively, as I suggested in these recent posts, the negative uses and consequences of AI--i.e. Anti-Progress--are expanding far faster than any positive effects, effectively overwhelming the one-meter wave of "progress" with a 10-meter tsunami of Anti-Progress sweeping away all before it.

Risk and AI: It's Tricky

What AI Is and Is Not-- or, When Electrocution of Innocents Becomes Profitable

AI Data Centers Are Not the Railroads of Today

AI's Insurmountable Flaw: "Mass Regurgitation of Misinformation"

Is AI Reversing Anti-Progress or Is It Accelerating It?

What If the Work We're Busy Automating Is Needless?

The core of realistic skepticism is this: beneath the sci-fi fantasies, the only real purpose of AI is to increases profits, period. Everything else is PR. An immense chorus of euphoric voices are ecstatically proclaiming that AI will soon be churning out miracle drugs like popcorn, but nobody is saying a single one of the patents of these highly anticipated miracle drugs will be offered to the public for free so the drugs will be low-cost and affordable to the world. No, the real euphoria is generated by the dreams of billions of dollars in new profits generated by quickly developed AI miracle drugs.

In other words, AI isn't going to fix what's broken, it's simply the latest technological tool being deployed to maximize profits. Put another way, it's just a continuation of the dominant zeitgeist of civilizational psychosis: We Don't Need the World, We Only Need Money.

Developing new AI tools or platforms won't fix what's broken, because what's broken isn't fixable with technology.

What's broken is the moral foundation of a sustainable socio-economic order and our ability to relinquish the civilizational psychosis of growth at any cost / waste is growth / Landfill Economy based on optimizing profits by any means available--privatizing gains and socializing costs--for a way of life that balances the shared interests of society with financial-market forces: The US Economy In a Nutshell: Privatize the Gains, Socialize the Costs.

Here's one of the planet's endlessly expanding gigantic landfills of "growth" in Bali:

So in terms of AI transforming the seas into some sustainable balance of the shared interests of society and financial-market forces: no. That's PR fantasy, not reality. The reality is: privatize the gains generated by AI and dump the costs and consequences of AI on the public and the planet's biosphere.

In other words, AI won't change the seas, it will just accelerate what we're already doing, i.e. expanding immiseration and ruination as the socialized costs of optimizing the expansion of profits.

Which brings us to the boats. As the AI trawlers disgorge their profits on insiders and shareholders, it's possible that those navigating stormy seas in rowboats might find ways to use AI productively in their own lives and enterprises. But in a rowboat, there are few ways to offload costs onto others or the biosphere; costs and gains both remain in the confines of the boat.

Without the distortions wrought by large-scale AI privatizing gains but socializing costs and consequences, then the true gains, costs and consequences emerge. Only then will we be able to discern the value--and Anti-Progress--of AI, boat by boat.

Forecasts of AI's future impacts must be viewed with skepticism, as AI and its promoters are adept at saying what we want to hear rather than telling us the discomfiting truth, as the truth might prompt us to turn AI off.

My book Investing In Revolution is available at a 10% discount ($18 for the paperback, $24 for the hardcover and $8.95 for the ebook edition). Introduction (free)

Become a $3/month patron of my work via patreon.com

Subscribe to my Substack for free

NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Alan J.W. ($70), for your superb generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Nick H. ($7/month), for your marvelously generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Mary B. ($7/month), for your massively generous subscription to this site -- I am greatly honored by your support and readership.

Thank you, Melanielcd ($70), for your splendidly generous subscription to this site -- I am greatly honored by your support and readership.

Go to my main site at www.oftwominds.com/blog.html for the full posts and archives.