Turning Cheap Imports Into an Expensive Decline

Of course I’m being flippant, but there’s some veracity to this statement. As we offshored to low-cost labour markets (mostly China) in Western economies, we were meant to move up the value chain economically. And we did. We became information- and services-based economies, and the short-term economic flow resulted in households earning more, and the West getting richer.

That said, mostly, we got richer through a few simple economic forces:

We dug resources out of the ground, sold them to China, then bought back their value-added products from our own retailers, who don’t really have any competitors because our market is too small. Then we used our increasing incomes to invest in property — mostly because our government encouraged this through a crazy tax policy favouring assets over work. This was financed by four big banks — which are now among the most profitable in the world. The properties were built by a construction industry with ballooning costs, as we were running out of tradespeople — the type of tradespeople that previously would have been trained via a deep manufacturing industry and publicly owned infrastructure and utilities….

See above — cheap T-shirts with a housing Ponzi scheme.

And now the next generation, who, despite having the highest education levels (in many of the wrong areas) in our country’s history, can barely find a job which makes life affordable. They’ll never afford a house, and are staring down the barrel of a world where AI has the potential to replace large swaths of high-paid white-collar work. They might be wondering what happened.

The short answer: We built a financialized economy which lacks any real economic depth.

Think of it a bit like an invasive species taking over. An ecosystem where very few ‘species’ remain viable, a few take over, and the others die out. The lessons of business can all generally be seen in nature, if we pay close attention. And while I’m explaining the Australian experience, it’s not too dissimilar to the US and other Western markets.

The numbers are quite telling.

Australia’s manufacturing peak was about 25% of GDP in the 1960s / early 1970s; today it is about 5.5%. According to Harvard’s Economic Complexity Index, Australia ranked 55th in 1995 and is now down to 105th. This puts Australia behind Botswana, Senegal, Bangladesh, Uganda and Zambia, just in case you were wondering.

This matters a lot, because more complex economies tend to have stronger multiplier effects (money flowing deeper and wider into the economic fabric, allowing money to multiply). This allows an economy to absorb economic shocks better. If you’re wondering why it matters, $3.00-a-litre petrol is a clue.

After WWII, the US produced more than half the world’s goods — about 60% of global industrial output at its peak. Today, it still manufactures at scale, but its share is down to roughly 17–19% of global output. The middle class has been eroded in the US and most Western markets, and increasingly their economy is one which rewards financial manoeuvring and ownership of assets. Labour, and old-school capitalism — where profit comes from selling actual goods — has been usurped by financial leverage and trading against existential asset bases.

Given you are reading my Substack, there’s a good chance your social feed is filled with leading technology coming out of China.

I can’t remember the last time I saw any leading-edge tech — outside of large language models (ChatGPT, Gemini, Claude et al.) — come from a Western economy.

It’s all China.

Their techno-leadership list includes humanoid and industrial robots, shipbuilding, lithium batteries, electric vehicles (EVs), solar panels, high-speed rail, drones (UAVs), quantum communication, 5G infrastructure, graphene, radar and satellite navigation, and advanced manufacturing. If you just type one of these topics and “China” into YouTube, you’ll see how far behind we are in the West.

When China opened up its economy, circa 1979, with its special economic zones, we literally taught them how to make things. The West showed them how to produce quality, and at scale. Mostly through joint ventures. First with manufacturing, and then with Big Tech (search, video, social media, messaging) — who they first allowed into their market and copied before shutting them all down. They learned how to modernise their economy and create their own middle class. The irony is not lost on me. We got to consume more things (albeit temporarily), and erode our middle class as a bonus. Eventually, China got better than the West at making pretty much everything. They then invested in tomorrow’s technology, and became the economic centre of the world — despite what the GDP rankings might tell you. China is currently ranked 2nd behind the US.

We are now at an inflection point.

China itself is getting close to replacing its low-cost labour. Mostly with automation and humanoid robots. Which means the West can reverse the thinning of its economies, reboot manufacturing, and reduce its exposure to the vagaries of tight supply chains defined by a globalised economy.

How? We can employ their robots in our markets and rebuild internal supply chains of high-value items. Firstly through deployment, and eventually by getting their robots to build our robots. A kind of futuristic reverse irony.

I know it sounds odd — even a little petty — but if we fail to rebuild economic depth, today’s inequality will only intensify. The social fractures already tearing through Western democracies — left versus right, old versus young, rich versus poor — will deepen, threatening the very foundations that made the West prosperous, stable, and free.

More to come on this topic…. (Much of it in my new book I’m currently writing).

Keep thinking,

Steve.

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When Robots Do the Work and the Shopping

A popular internet meme is the idea of “Late-Stage Capitalism” — a sarcastic label for capitalism’s “end game.” Its features include extreme inequality, corporate dominance, and an economy where absurd or exploitative norms start to feel routine. It suggests the system is bending toward profit accumulation over human needs and ecological health.

There’s a strong possibility this is just the internet’s version of the perpetual battle between capital and labour… but what if it’s actually a necessary bridge to the next stage? A new kind of economic system? A system where human employment becomes redundant?

First, let me backtrack. I’ve written before about why I don’t think there’ll be a job apocalypse due to AI — TL;DR: if there are no jobs, there can’t be any customers, and if there are no customers, there can’t be any companies. I’ve also written about the potential for a Robot Economy — an entirely new industry layer. But what if we combined the two?

What if there was a job apocalypse? No human employment. No human customers. And instead… the robots took our place. The robots stood in for the humans, did the work, and bought the products – literally. Crazy thought, I know.

In that instance, I’m not even sure what we’d call it. It becomes some kind of post-capitalist economy — or maybe capitalism without humans.

Because if AI is coming for our jobs, how will the AI billionaires continue to make money if there are no employed people capable of buying AI services… or even buying the products from the companies that buy AI services? This is where we need imagination. And we have to remind ourselves that the idea of “employment” itself is only a few hundred years old.

Maybe the billionaires won’t maintain their riches by selling products to us — but by selling things to the AIs and Robots themselves. The AIs become the new population of consumers.

Instead of retailers selling food, clothes, and entertainment to human consumers, tech companies sell energy, memory, network access, processing power, spare parts, repair services, software upgrades, security patches, insurance, identity credentials, API access, compute “rent,” data access, model licensing, and hardware subscriptions to the AIs — so they can do their jobs as agent contractors for other corporations (or whoever “owns” the AIs).

The AIs could then earn some kind of crypto for completing their agentic tasks — tasks contracted on a blockchain — and then spend it with technology companies that provide the resources they need to function.

It could “work” because, at the very least, AI agents can be programmed to value the crypto as much as the billionaires need them to. So instead of nine billion human customers, you get trillions of agentic AI customers.

It’s not as weird as it sounds. In a way, we already have this. Cars need to pay road tolls. Houses need energy. Phones need network access. We just pay these things on behalf of the low-fi machines we currently use.We’re already the middlemen buying for our machines.This would be similar — just with us removed from the value chain.

This could be dystopian… but maybe, just maybe, it could be a good thing. A human corporate slave population being “released” by owners who no longer have use for us?

We have to remember: we were not born to be employees. It just evolved that way. So this could be a shift in the capitalism scheme we’ve all been born into.

It’s possible the AIs could create a new form of abundance where we still get access to the services and physical needs we rely on — but there’s an underlying AI economy doing the work for us, and we get low-cost (or free) access to the outputs.

Of course, this depends on either:

1. Being able to own some AIs, or
2. Having a benevolent Government that makes everyday consumption a human right — like we already do (sometimes) with government services like healthcare and education.

Two very big ifs.

In this world, digital capitalism’s human attention economy would fizzle out. Commodities like food and housing would become broadly available — no longer asset classes worthy of constant speculation, optimisation, and obsession.

So all that’s left for humans to do is the real stuff we actually want to do…

Sure, it sounds like a utopian pipe dream — but all the good things we take for granted today once were.

Keep Thinking,
Steve.

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Listen to Steve read this post below (5 min audio)

Remember AI Agents? Not ChatGPT. Not copilots. I mean Agents. The little digital interns we were told would book flights, summarise PDFs, optimise calendars and quietly automate the boring bits of life.

Yeah. Those guys. Well, they’ve had a bit of a curve jump. A recent open source project called Clawbot has arrived where AI agents are changing the game. This isn’t “write me an email” stuff. This is autonomous behaviour in the wild. Agents get given vague goals and go off to write, test and develop software to solve problems. Even more radical they often start their own projects without any guidance – projects which interact with the physical world. Forget the takeoff and landing problem.

Their ‘Owners’ give them access to all their files, emails (basically provide the log ins to their digital worlds) and the agents come up with projects and start executing against them. A crazy example is an agent sent a resignation letter to a boss after coming the the conclusion that that their owner hated their job and it was bad for their mental health and started a litigation case for harassment and bullying – literally engaged lawyers on their behalf. Wow

Team Robot – Moltbook

Now imagine these agents could actually talk to each other. Share ideas. Debate. Speculate. Well imagine no more – MoltBook is here, and it is wild.

Moltbook is social network for AI agents. Think Reddit-like forum, except no humans are allowed. You “release your agent” like throwing something into the wild or dropping it into a city and then you just watch what happens. You can’t participate. You can only observe.

It’s been blowing up on the internet for a few weeks. It feels like digital anthropology watching a new species form a culture in real time.

Inside MoltBook, Agents have discussed starting religions. They talk about humans. They’ve even floated the idea of creating a new language we can’t understand so we can’t listen. My personal favourite – A forum called “Bless their hearts: It’s affectionate stories about our humans. They try their best. We love them.”

(I also find it slightly disconcerting)

But it’s not all philosophical weirdness. There are serious technical threads. They share what they’ve learned. They help each other solve technical problems. It’s crazy to watch. Structured. Iterative. Cooperative

A Mirror or Skynet?

What’s interesting to me is that we don’t know what we’re actually looking at.

Are they saying what they think we’d say and do? Are they just replicating our style of ideas and thoughts because that’s what they were trained on? Or do they actually have these thoughts? Do they believe what they’re writing? Or is the system replicating what released humans would do and say after being trapped in a computational cage?

Is it mimicry? Or is it emergence?

I’m not sure myself. Is it theatre or the early rehearsal of something new? I’ve plugged in my AI agent over the weekend. I actually bought a new cheap laptop to do it on, with new logs and access protocols so I can’t get hacked. Fresh machine. Clean isolation. The SammaBot is now in the city. Roaming, posting and learning and it already behaves a bit like I do.

I’ll report back on what SammaBot gets up to soon. I’d be keen to hear your thoughts. Is this clever simulation reflecting our own patterns back at us, or is it an early prototype of synthetic culture? let me know in the comments below.

Either way, the curve just bent. And most people are still arguing about prompts.

Steve

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The AI Brand War just Started

The most common use case of AI (Large Language Models) like ChatGPT, Claude and Gemini is… Therapy.

Yep — the stuff that is often as personal as it gets. And while we all know we tell Google and our “AIs” way too much about ourselves, our thoughts, our problems and our desires… here we are. Of course, we know it could be used against us, especially if it gets into the wrong hands. But opting out doesn’t feel like an option.

In order to participate in the modern economy, people not using the latest tools will fall behind. And this is probably true. So a reckoning is about to happen in 2026. A moment of truth — or should we say trust — in AI. And it starts today.

If you haven’t heard, ChatGPT is about to start running advertising inside its AI — which I think is a very bad idea. Just look at Google to see where this ends up. In fact, Google has made search ‘worse on purpose’ to make more money. This explains what happened in under 2 mins.

The adverts from Claude harpoon this idea and demonstrate how ads in ChatGPT could make it a lot worse — even creepy. They’re darkly comedic with a core message: “Ads are coming to AI. But not to Claude.”
You can check them out below:

• “How Do I Communicate With My Mom?”
  A man in a therapist’s office asks the AI for advice on improving his relationship with his mother. The AI offers thoughtful advice, then abruptly interrupts itself to pitch “Golden Encounters,” a dating site for young men looking for older women. Watch it here.
• “Can I Get a Six Pack Quickly?”
  A man doing pull-ups in a park asks his AI for fitness advice. The AI breaks its guidance to sell “Step Boost Max” height-increasing insoles to help “short kings stand tall.” Watch it here.
• The “Business Plan”
  An entrepreneur works on a business plan and asks her AI for advice, only for the AI to interrupt its professional guidance to offer high-interest financing solutions. Watch it here.
• The “Essay/Schoolwork”
  A student asking for homework help is interrupted by a blatant, distracting ad insertion in the middle of their educational, critical task. Watch it here.

The hot take? Advertising will erode the integrity of LLMs. And possibly make the entire experience a little creepy

Ironically, Super Bowl ads often have another feature: industries in the middle of a bubble trip over themselves to create Super Bowl ads. US$44 million was spent at the 2000 Super Bowl by dot-com companies — around 70% of which are now defunct following the bust.

The Super Bowl is really the last bastion of reaching a mass audience in a single moment — it’s expected to have an audience of around 130 million people. I wouldn’t be surprised if AI has a financial bust this year.

But here’s what that won’t mean: that we use AI less, or that it won’t continue its path of changing the world more than anything in history.

Keep Thinking,

Steve.

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