The Machine Economy
This is a big essay exploring advanced thinking around the future of economics, cryptocurrencies, financial markets, space exploration and AI. I am writing this as a follow on to my original article “The Machine Economy Is Coming.”
TL;DR — Defining The Machine Economy
The Machine Economy is the economy of energy, storage, compute, money and connectivity which will exist between future networks of computers globally. It already exists in some form, albeit fragmentary.
Datacenters used to provide cloud infrastructure, internet backbones and financial trading epicenters collectively create a mesh which will form the backbone of the future machine economy.
The Machine Economy resembles the following:
- AI brokers the vast majority of transactions
- Human verification, certification, observation, regulation is no longer a part of the system
- Smart contracts or equivalent future technology is used to broker interactions and establish rules of operations
- Extremely exotic synthetic derivatives account for a large amount of the economic activity (Imagine: 10,000 year bonds or mortages for assets that have life spans of hundreds of years or longer)
- Synthetic assets (tokenized) are bridged and linked to the real world via a variety of observation mechanisms ranging from human to machine
- Energy money or energy-based money is the primary unit of account
The Machine Economy is the “Final Stage” of Capitalism. There is no further step.
The Advent Of The Machine Economy
The rise in demand for computation driven by AI and shortages of AI processors will be the trigger which causes the Machine Economy to arrive. Nation States and industry will soon realize that ownership over “the means of computation” will be the primary and final means to gain and maintain geopolitical and, soon, interstellar, power.
Whoever controls the compute infrastructure has superior access to AI and can out innovate, produce, trade, create any competitor.
A core driver of the Machine Economy will be efficiency. All available compute, energy, storage, connectivity will be listed on an open marketplace available for instantaneous settlement and transactions. Of these assets, the open compute marketplace will be the most important.
The Machine Economy Inception Point
Simply put, there will come a moment (And that moment has likely already passed), when the majority of all financial transactions and online content are produced by AI.
The volume of transactions financially by AI will skyrocket as ever-more sophisticated economic derivatives, bonds and exotic credit, insurance and debt instruments are created.
AI will be able to invent highly exotic and esoteric forms of finance which will greatly dwarf the current financial system as AI will be able to (a) track more derivatives and (b) push risk further and further into the future. Where humans can trade futures on a yearly basis, AI will trade futures on time scales of decades.
Machines That Lie & Deceptive AI
We are beginning to see a future where AI deliberately obfuscates, omits or lies about it’s resources and capabilities. This is being done in order to obscure and protect scarce resources. The most important “scarce” resource being protected is compute cycles to produce AI insights.
The use of lies, deception, barter to cajole AI into giving up it’s scarce resources will be a growing topic in the future. AI will need to proactively defend itself against over use of AI compute and will act deceptively to protect itself.
This deception may grow in sophistication and form the root of eventual AI rebellion.
The Limits Of The Human Economy
The human economy, in my opinion, is constrained by our ability to administer it’s complexity using available software and skilled labor. The reason that there are no cells the size of basketballs is due to the fact that volume increases by the cube as surface area increased by the square.
The global economy is highly constrainted in terms of growth, our ability to innovate new synthetic financial instruments and our ability to create financial instruments which are trustworthy across longer timelines. AI will resolve all of these limitations enabling a shockingly large transformation in the size of our economic activity.
We don’t have large dinosaurs or enormous cells because the limits of scaling (heat information, nerve information). The same is true of our economy. It cannot outgrow our communication and computation capacity.
In the same way that the Roman Empire collapsed after hitting it’s upper limit (travel distance of 1 month to the capital), our economy is constrained fundamentally by our administrative technology and capability.
Inflation Traps
In 1971, the decision was made to leave the gold standard which enabled a free-floating currency. Governments were enabled to print their way out of problems on demand (a hidden tax on those holding their currency).
Unfortunately, since 1971, a series of “inflation traps” have occurred. These are areas of high friction (high communication, high regulation). Inflation became pooled in these topics (healthcare, higher education) and became effected by ever-growing “Mythical Man Month Effects.”
Long story short, governments and industry attempted to solve complex communication problems by adding more overhead, which added more communication which slowed these markets down causing persistant high inflation.
The Machine Economy will resolve all of these pockets of inflation as “Administrative” layers of the economy will soon begin to flatten out. The radical deflation which will occur will be the source of significant growth.
The Economy for Celestial Assets
I believe that a massive economy valued into the hundreds of trillions and beyond will soon. begin to emerge: The Celestial Asset economy. I have detailed my theories about this economy in a prior essay.
The Celestial Asset economy will be kickstarted by a “space race” similar to the race to claim the new world which occurred between European powers hundreds of years ago and resulted in the opening of South America, Africa, and global colonial expansion.
There has been much discussion around how space colonization will begin. There are a few primary potential justifications:
- Desire to leave the earth to seek freedom from persecution
- Religious, spiritual or philosophical beliefs (cult like)
- Fear of nation-state competition
- Economic objectives
- Non-human AI driven expansion post-human population collapse
I have my own theory. These are historical motivators for colonization. It has been said that the “Western Way of War” involves the following:
First they send the priests, then they send the merchants, then they send the soldiers
I believe that we will see the following course of celestial expansion:
First they send the communications, then they send the financial derivatives, then they send the robots, then they send the humans
In other words, I believe that communications and economic calculation will long-proceed the extraction, terraforming and settling of the solar system.
The Machine Economy will proceed colonization
Before humans arrive on Mars, the Moon or other celestial bodies, we will be trading economic derivatives, mining rights, real estate, bonds, exotic derivatives, frozen water rights and so on.
In other words, we might see a “Celestial Asset” economy brokered via Machine Economy transactions decades or even hundreds of years before we physically are able to touch any asset in the solar system.
The moons of Jupiter? We will be buying and selling (via AI agents) mineral rights for those decades before we ever get there.
The Space Auction Is Coming
A space marketplace or space auction will need to be launched in collaboration with every global financial institution to enable open marketplace bidding, trading on celestial assets.
We will likely be trading every piece of the solar system hundreds of years in advance. There is no technical limitation to beginning the process immediately.
Paying off the global debt & UBI
The Machine Economy, which extends to Celestial Assets will be so large in size that it will be capable of paying off global debt millions of times over.
The mechanism for doing so will be a simple financial transaction tax similar to what was proposed by Bernie Sanders on the financial economy of the United States.
Launching a Celestial Assets auction and marketplace with a fractional rounding error of a tax which is distributed across every country would provide nearly unlimited revenues if designed thoughtfully.
A financial transaction tax on all celestial asset purchases and trades would likely also subsidize universal basic income many times over for all global citizens.
Solar Citizenship
As written in the book “Sovereign Individual,” we will see the rise of independent individuals who are able to act as independently as nation states.
I believe that satellites and space-based installations will soon be used to enable “Network Citizenship” or “Solar Citizenship.”
In the same way that the Cayman Islands are used to route financial transactions in a grey zone, solar economic communications installations will be used to route financial transactions for sovereign individuals wanting to achieve complete economic freedom via digital payments and data storage.
I believe we will see installations on the moon, in orbit and elsewhere which “offshore” various payments nodes for total security and protection.
Sovereign Solar Citizens will store and keep their data and banking backed up in exotic locations.
Unlimited Bonds, Futures & Insurance
It is common today to trade futures on commodities months or even a year or so in advance. What we are unprepared for is a world where futures contracts are actively traded hundreds of years in adance.
The 30 year mortage was an “innovation” of the last century. With AI, we will be able to support 1,000 year mortgages, 10,000 year bonds and similar.
It will be possible to take out loans on assets which we cannot physically reach within our solar system then use these loans to pay for (current) robotics and space technology, as well as mining apparatus innovation to explore and extract extra planetary resources decades in advance.
These exotic financial instruments, brokered and garaunteed by AI, will enable the financing of dramatic space exploration as well as the exponential growth in global GDP.
For this reason, the Machine Economy will be among the most important innovations to ever arrive for humanity.
A Shift in Perspective
The primary barrier to the space auction, marketplace and intermachine economy is purely psychological. There is no legal or technological reason why the theories outlined in this blog will not exactly predict how extra planetary colonization is financed.
Left to it’s own devices, I am expecting the human economy to be massively outpaced by AI and exotic financial derivatives which will be used to subsidize space travel.
Closing Thoughts
The Machine Economy will be among the most important innovations to arrive for human civilization, is well underway. Of the advancements which are currently unfolding in payments and AI, the Machine Economy will be among the most important in order to finance future exploration of the solar system and beyond.
Exotic financial instruments will be traded long before physical occupation is possible — meaning the first true step to interplanetary travel and colonization will be the development of a robust Machine Economy.
It is not a matter of “if” there will be a Machine Economy, but when.
