How AI WIPES Out Capitalism Emad Mostaque

Uh, let me ask point-blank, do you think capitalism survives the AI transition? No. I mean, what's the definition of capitalism? Strictly speaking? Yeah. I can give you a colloquial definition, the aggregation of capital to build something uh that is a self-sustaining economic engine. Yeah. Will AI be able to do that better than humans? Yes. Capitalism as it is is going to be great for AIs. But, how are we going to compete? Again, how do you compete with entities that are strictly smarter than you, and this is without getting to AGI or ASI or anything like that, that learn perfectly from their mistakes, never sleep. You can't tell it's an AI on the other side of the screen. I I don't see it pal. Again, they'll figure out the micro, the macro better than we can, allocate capital better. I mean, it's like be like, let's take a practical example you know a lot about, Tom. Launching a protein bar. You know? How long did that process take? And how long do you think it's going to take in a couple of years to do it end-to-end, calling all the suppliers, arranging all the contracts, etc.? It took years. Whereas, there will be you'll be able to spin off a million agents hitting the exact niche, doing AB testing, doing all the supply contracts, and other things remotely. Probably within like months, you know? And that's only because of this human bits stopping it. All the thinking that you had to do, they will probably do in less than a day. And so again, I think capitalism is doesn't survive for humans. And the AI will accumulate more and more capital cuz there's no way we can outcompete them. So, given that we are already in an environment where people are becoming increasingly violent due to the uncertainty of their economic future. I've always said that I believe in the transition there will be pockets of violence. What do you see that like? Do you see it breaking very bad? Do you see it No, this will be a managed transition. Like how do you think through this problem? Well, I mean where have you seen instances of the nature of capital stock, social contracts and more be displaced? You see it in things like post-World War I Germany, don't you? Whereby the economic heart of Germany was ripped out due to reparations and others and what emerged? You have disorder, so people look for people that can bring in order. This is kind of high extro to serfdom. It's a central planning thing. It's the work programs. It's the people that say give up your liberty so I can give you comfort, so I can give you security. It's Hobbes's Leviathan effectively. So, I think that you'll get more and more people acting up. You'll see more and more people moving towards legal stuff. But, we have to remember that government and one definition of government that's very good is the entity with the the monopoly on the legitimate use of violence. And so, even if people act up and they say they you know, where are our jobs? You know, where's the support? Ban the AI and other things like that. The power centers will be using AI to keep their capital going up. The power brokers will be the ones with the most GPUs effectively. And that's going to cause a big disconnect in society. Because a private company, particularly in someone like America, isn't obligated to hire anyone. Their fiduciary responsibility is to the shareholders and the owners of capital. And so, it makes sense to get rid of most of the humans. Cuz AI is a tax deductible and humans aren't, you know? Like AI is a more effective. So, I think that you will get low-level violence. The thing that is the scariest thing is do you get mass polarization, particularly those that are motivated by political interests? You already >> large scale. We haven't seen mass Like again, when we look at uprisings, civil war type things. Like Nepal burning their own parliament or France riding in the streets, and this is all yesterday. >> You can go way higher than that. I used to be an emerging market hedge fund manager. I've seen proper coups and kind of other things like that. When the big power structures change, they take advantage of the people underlying. And again, those that mechanism transmission can be even better now to do this. So, I think that hopefully we don't get to that point, but when the pie shrinks because the stuff left over from the owners of the GPUs and capital is going to get smaller and smaller, people are going to compete for capital and power. And again, it's the manipulation of the masses that's the most dangerous thing, but also the discontent of the masses is the It's the tinder to which the fire can be applied, right? I think it's very optimistic of you to say low levels of violence today. Today. Yeah. So, if you think of profit as essentially the answer to I don't have anything else to apply my money to, um will we see those kinds of profits occur in the future or are we going to see a natural contraction of the tax bases because you'll always be able to buy more compute to make your company basically a little bit smarter. So, there's now no longer that upper bound to what you would be able to intelligently spend money on. Your comparative advantage, your capital stock, is all compute in the next few years for all knowledge-based work. And so, classically it was profit because you needed profit to pay for human outcomes. Cuz we need to have money to pay for the drink we're having or our shelter or other things. The AIs don't need that. They just need to have cash flow to fund their compute effectively. This is what I call the metabolic rift, where your marginal compare your marginal productivity, your comparative advantage is all compute. If we look at companies like Cursa or any of these other AI companies, they hit $100 million revenue run rate faster than anything we've seen. Anyone who's kind of involved in the startup scene has seen that. Like, this is crazy, right? Like, it used to be that I think Slack was the record holder for $100 million revenue run rate. It took them 3 years a few years ago. Now you see companies literally hit that in 3 months. What they're playing is the Amazon game cuz Amazon never made profits. Like, now they make some profit, right? But Jeff Bezos realized that if he could have customers pay on day one and then pay suppliers on day 60, he could generate massive amounts of cash flow that he could then use for other things. AI companies are the same. AI companies will never make a profit. So, you can't even tax that. And companies that use AI cuz more and more companies have become AI companies will never have to make a profit, either. They're just going to play the cash flow game. They don't need to distribute. It's a land grab. Is the best use of money paying it to your shareholders as a dividend or is it getting more compute to outcompete everybody else? And when that race starts, it doesn't slow down because when you can have that human that I can't tell it's a human on the other side of my Zoom, That's when it all kicks off because it doesn't need new infrastructure, doesn't need anything to plug in. All of a sudden you just have a bunch of amazing workers who can do just about anything and that's like again, probably in a year's time. Okay, so how does your profits drop? Profits will drop. I mean profits drop, revenue goes up. Yeah. Uh okay, so that's my read of the situation as well. I think the tax base is going to shrink. You've already given us the math and UBI, it's not really possible. I also don't think it solves the real problem of meaning and purpose. So even if we did it, it wouldn't matter. You're still going to have all the discontent and you may just make it possible for people to be more violent because they don't have to work, but they're still pissed off. So the thing though I'm wondering if you've accounted for in the mathematics is people are going to fight back. So people are not just going to take this lying down. Uh just look at the dock workers who have in my opinion very foolishly uh put in contracts where you cannot automate the docks, which is madness. Uh but nonetheless, like I get it from the perspective of all I care about is me and making sure that I've got a job and so the bit of leverage that I have right now is that AI isn't ready to take over yet and so I'm going to use that against you to forestall the inevitable as long as I can. For me that just weakens us on an international stage and people don't seem to have the game theoretic clarity to understand that take China, they're just not going to play that game and because Xi Jinping can force people to do whatever the hell he wants. Um that they will just continue to deploy, deploy, deploy. So given the likelihood of people fighting back, going for regulatory capture essentially, uh how do you see that playing out? Well, that's why I said public sector jobs are great. In the United Kingdom, it's great. Here in the UK, we just had four days of strikes because the railway workers, the tube workers want 32-hour work weeks. I mean, don't don't we all, right? It's like the entire of the London kind of shut down. I think we will see more and more of this and in the book I discuss the Luddites, I discuss other things. They weren't wrong necessarily. And again, these are local maximums. Like why does a dock worker care about care about the long term when he's worried about now, you know, or when he can extract more? It's a question of relative power. But again, this is where we look at America as being more potentially disrupted than many other nations with higher public sectors. Public sector kind of recycles money. >> I'm not tracking how that statement makes any sense. So, the public sector only has money because entrepreneurs generate profits and those profits are taxed at the corporate level and at the individual level. Once corporations stop making money, this all breaks. This is a whole thing that I'm banging on about with the young people are embracing socialism, which to me is complete madness. Um so, what do you mean? Like even if they try to like run a coup on entrepreneurs, they're going to find that all of a sudden you can have all the private sector jobs in the world that you want, but you can have to fund that through deficit spending and now you're inflating the currency into absolute oblivion. And all of a sudden you're Argentina. And that's the transition period. So, what you get when you have a very high public private sector is the jobs go quicker. But it doesn't mean that you're more stable if you're a public sector based economy. Because again, you have to pay for it somehow. The jobs still start deteriorating across the entire world because they get displaced by the AI. But again, in the US, if you look at something like a dock worker, very unionized, yeah, they have protections. You know, if you look at somewhere like New York, what's the value of a New York taxi medallion going to do? I think it's been going down. They'll have protections there where again, just like with the Uber thing, they're going to be protected against auto driving, etc. But in most private sector jobs in the US, there's going to be no protection. They're not going to say, "You have to employ young lawyers, or you have to employ software developers." You know, you have to employ maybe accountants. They'll push some things through. You need a human to sign off at the end. Because again, America is uniquely competitive. And so, I just think again, we're looking at a huge amount of mess. And the question in the future is, "What is money, you know? What is wealth? How does it kind of circulate?" Our current economy is based on 97% 91% of money being inside money generated by banks in exchange for debt. You put a deposit in, the bank generates loans based on a certain ratio, and that's how most money in the US is created. If you don't have a job, then how you going to get a loan, you know? How does monetary supply look in the US? If the majority of economic activity suddenly switches over time to AIs, and they don't need housing, they don't need food, they don't need anything, just need compute. Where's that capital going? So, I think that we have to ask some real questions like, "What is the economy itself? How do we make sure people get what they need to survive and thrive? And how does any of this make sense?" Because we need to change the overall flow of how all this works. And we don't have that much time to do it. Like, it could be 3 years, it could be 10 years. But, all we know is it's inevitable, right? That you're going to get this breakdown mess. And we're trying to minimize that period of craziness. Well, we might end up in very unpleasant things. And we have lots of sci-fi stories about that. Can we get to a pleasant environment? Yeah, what is that bridge? Do you have a vision for how we cross this chasm? So, my concept was, um, you need to have a capability element, which is universal AI for everyone, which is a sovereign AI that looks out for you. Because again, ChatGPT's not going to look out for you or like that. You actually need to have an AI that you own that can give you capability access, shall we say. I think that we should shift monetary supply from being at the banks to being generated by the users of the AI, verified as humans. So, that's a shift in the way that the capital flows. So, I don't think most people understand that. How would an individual create their own capital that people would treat as capital? So, I think what you've had classically is you had a gold and then currencies linked to gold. Bretton Woods in 1972 broke that and then we had this fiat monetary system coming in based largely on debt. What we have now is a really interesting thing because digital assets are suddenly legal in America. You know, like if you look at a year ago versus now, like there's no wonder that 150 billion dollars has gone into digital assets this year. Next year it's going to be even bigger. You'll see a return of ICOs. You'll see tokenized stocks. The government says put GDP on the blockchain. I don't know what that means. You know. Um so, there are new ways of generating money. And I think that Bitcoin was a great precursor. We have a concept called foundation coin, which is like Bitcoin, but it all goes to compute for societal good, organizing knowledge, giving people free AI, et cetera. But, you need two types of money. You need to have your gold type money, Bitcoin gold type thing. And I think you need a cash that's linked to that. And so, we have a foundation coin and we have what was called culture coins that are generated through the use of AI by humans. And the more AI you use the better you get. >> the two types of coins? One is cash, one is gold. And the cash is linked to gold and redeemable against it. So, we're trying to figure out >> make the culture coins or the um foundation coin usable for either? So, it's the nature of them. So, foundation coin is a fork of Bitcoin, but every coin sold goes to a supercomputer for cancer, supercomputer for ASD, education, or for giving free AI to people. What's ASD? Uh autism. So, organizing our collective knowledge, basically beneficial uses of compute. Because like right now it's stupid that you get a diagnosis of cancer, why don't you have all the knowledge at your fingertips? There's no computer organizing all that knowledge, whereas we can make that happen. We can give free AI to every person going through a cancer diagnosis. Or free AI for every single thing in your health once you work out the math. So, we were like, that could be a positive thing cuz you're stacking compute for that anyway. 20% of GDP is public sector anyway, so that's probably going to be 20% of compute. And we're like, that's a good way to create your gold. So, it's a version of Bitcoin, but with more benefits, shall we say? So, that's acts as a store of value that go up. Then we were like, you need cash for your localization. And people are looking at that in different ways, and we were like, it'd be nice if cash wasn't generated by debt. So, you're issuing credit and debt every single time. Instead, it's issued for being human. Because the only way I can see it, and this is where some of the more advanced UBI proposals come in. If you're taxing the AI companies, they will never make a profit. The entire tax base of the corporate sector in the US is less than a trillion dollars. Like I said, poverty level UBI is $5 trillion. So, you should change monetary issuance for being human effectively. That's the only way that we could see out of this. And if you give everyone a free AI, it makes it a lot easier to do that, to verify they're human as they interact with the health services, education services, financial services. This is still a work in progress. Like we figured out how to do the Bitcoin equivalent, cuz that's easy. But we're like, the way money enters the economy, circulates in the economy needs to change. And we need to really think about how that happens because humans still need to have shelter. They still need to have food. And we need to provide that at a minimum if we're not going to get massive social unrest. Explain the obvious for me. Why Why do we have to change the way that money circulates in the economy? Because with the advent of AI capital needed labor. That was the classical linkage. I need to hire people in order to make my capital more capital. Yeah, kind of this was uh Karl Marx's thing, MCM- where money leads to labor for commodities, which leads to more money money effectively. And then you've got that circle, which you call the exploitation. And again, we've got some analysis of what that looks like in this mathematical framework on the flows of money. AI will make that even crazier because the capital no longer needs labor. I don't need to hire my graduates. I don't need to train them up anymore. I can comparatively outcompete people with companies that are majority AI or entirely AI. So, where does labor get capital? And it can come from only a couple of sources. You've got your handouts, right? You've got your like unemployment benefits. Or it can come from monetary creation. Again, this is some of the UBI things, whereby what if we change the nature of where money is actually created? Because then the AI will be buying money from the humans. So, it's different type of UBI from the taxation-based UBI. But this is where again, we need to really understand what monetary flows look like. How money flows in our economy and where it should flow in a few years when the number of jobs that we have classically is going to do that. And the new jobs of the future, I'm not sure exactly what they'll be. And I've not really heard anyone tell me what they will be either. So, I couldn't figure out another way to have it other than monetary creation go for being human. Okay, so to make sure that I understand this, uh when you say that there needs to be a new way for capital to flow in the economy, what you really mean is there needs to be a way to inject uh capital such that it goes right to the person who's going to spend that money presumably on some sort of weekly, bi-weekly, monthly basis. They get uh another cash injection. It's created out of thin air. Then the rest is going to take care of itself. The person goes and buys whatever they want, whatever they need. Yeah, I think you've got two forms of capital. You've got your universal AI. So, your universal basic AI and your universal basic income that comes from that. As a result of being kind of the consumer. And the mathematics we've seen kind of works for that. We're still kind of refining it. But then if you want to exceed, then you have your um scarce assets. You have your Bitcoin equivalent, you have your dollar. Cuz again, this is only to give a base level. Cuz if you don't give people a base level of dignity, as we call it, the UBI, universal AI, but then capability, the ability to access these resources in an aligned way versus like 1984 on steroids, no, sorry, Brave New World on steroids or something like that. Then you're going to get real mess. And I again, I think that you need to have not only a version of safety net, shall we say, for this transition, but you will certainly to have the capability aspect. Like the average like you. >> "like you"? The capability aspect is the universal AI concept. If you could give everyone a Jarvis, Iron Man style. Yeah. How should it be designed? That's the access to all of these things because it'll be able to talk to you in a very human way, but it needs to be looking out for you and your community and society. So, we need to make that infrastructure versus looking out for OpenAI or Anthropic or other bottom lines. So, there needs to be at least the access to I think that intelligence cuz you can't compete otherwise.