As software developers we've been shielded from economic theory. This is by design of course, to avoid having a bunch of super brilliant and smart people start asking legitimate questions. However, this is not sustainable and no longer a "luxury" we can afford, for reasons I will try to explain as simple as I can in this article.
The purpose of the economy is to "economize". Economizing again simply implies taking an existing process, improving it, resulting in less resource requirements to end up with the same result. The best example that exists is agriculture, from where the ideas of economization was arguably born. To explain it as simple as possible with the best use case I can think about ...
As we invented tractors, one farmer could produce 10x as much produce, resulting in "more for less"
This freed up resources, allowing us to spend our time on other things, lubricating society as a whole, and creating new innovations that increased our living standards. Basically, some process X has a cost of Y, and some new invention Z makes process X twice as fast - At which point the value of invention Z becomes the delta of the cost of process X before and after invention Z was applied. Invention Z has the same value as the result of process X, and "value was magically created".
If you invent something that makes some process 50% less resource expensive, the value of your invention becomes the value of the result from the original process, since now twice as much can be produced with the same process as previously, without increasing resource requirements.
The economy's purpose is to lubricate society ...
The Inmates are Running the Asylum
The problem today, is that the people who should be responsible for economic theories have basically gone bat shit crazy. Instead of focusing on economizing, their sole focus is short term profit, something I tried to explain in my Venture Capitalism is the Ponzi Scheme of the 21st Century article.
There is basically zero economization in the economy today, implying the economy is dead, and 90% of all "assets" on the planet are basically worthless
Pick any startup today with VC funding and ask yourself the following question; "How can this product economize my life?" Chances are you won't be able to intelligently answer that question - Implying there is zero actual "economic value" in the startup. Yet, often you will find that the startup employs hundreds of people, and have spent hundreds of millions of dollars, creating nothing, exclusively built upon "The Bigger Fool's Theory", where the investors have believed they would be able to get a return on their investment, by finding "a bigger fool to sell their crap to".
Mountains of Garbage
If you carefully look at the average investment firm's portfolio today, you will realize there is nothing of value! Zip, nada, null comma nix, tibota, nothing! At some point, all the VC funds on the planet basically started buying equity in companies using the same methodology they used to buy art. To put the gravity of the situation into context, let me ask you a simple question;
Would you pay 105 million dollars for this painting?
FYI; The above painting was sold for 105 million dollars ... 😂
With art the consequences are harmless. If some idiot buys some piece of Xerox copied Andy Warhol junk from another idiot, beliving it's somehow magically worth hundreds of millions of dollars, it's still just two idiots fooling each other to believe in value that doesn't exist, moving garbage back and forth, in exchange for money.
With equity and companies the situation is very much different - Because it's the foundation for people's abilities to make an income, feed their families, and have a roof over their heads. And rubbish startups built upon the bigger fool's theory have another negative side effect, which is that they first of all strangulate real companies ability to become profitable, in addition to that they make the world at large ignore actual value, resulting in that everybody actually starts believing in that they'll get rich if they just tell enough bullshit convincingly. We're living in a post-economy society, where all the value is in the hands of the bullshitters, and it cannot continue.
Basically all money is tied up in garbage. Piles of garbage the size of the Himalayas!
Which in theory might result in the complete collapse of our entire economy, resulting in the collapse of society as a whole.
Dead Cat Bounce
In theory the above could just simply continue for an eternity, slowly degregating our living standards, until we're ipso facto living in the dark ages, and nobody really understands why, because everybody is bullshitting each other, to sell bullshit products, for bullshit money, to other bullshitters, where everybody believes in that your amount of success on Earth, is determined through how much bullshit fairy tales you can tell.
However, something changed ...
When ChatGPT went viral in December of 2022, every single VC firm on the planet was close to collapsing and going bankrupt. Then came AI as a "Dead Cat Bounce", resulting in temporary relief, because now they could throw money at AI and LLMs, promising them fairy tale profits.
FYI, if you don't know what "Dead Cat Bounce" implies, it's what happens when a cat falls from a sky scraper. As it hits the ground, it bounces back up again, creating the illusion of that it's still alive. However, gravity will inevitably make the cat fall back down again, resulting in its inevitable death, visible for all to see.
AI was Venture Capitalism's "Dead Cat Bounce" moment!
Previously, Venture Capitalists' purpose was to hype their own rubbish, at the cost of strangulating real products, with real value, because they needed the sheeptards to believe their products was somehow superior - Even though their product consisted of roughly the same amount of value as a piece of human excrement, placed on a platter, and sold at Sotheby's for a million dollars as "art".
Today as they start realizing they've spent their entire funds on crap, strangulating real companies in the process, they're becoming increasingly desperate, and they will do whatever they have to do to try to survive - Even though the end is inevitable. This has the very real prospect of literally shaking our economy to the point where it cannot even move onwards in its current state. Our models of economy no longer works, because they were built on "the next hype cycle".
Artificially creating hype cycles to pay the losses from the last - AKA: Ponzi Schemes, and the bubble have burst!
Unless you're so hypnotized by this pyramid scheme that you still think you're going to get rich on it delivering ZIP, refusing to give up, the fix is actually ridiculously simple. The thing we're seeing in the economy today, is similar to a forrest fire in nature. Before the fire, the sick, old and tall trees would steal all the light from the small seeds on the ground, making it almost impossible to get some sunlight. What is happening all over the world today, is that one VC firm after another goes bankrupt, leaving empty space for new seeds to grow, giving you an opportunity without historical precedence to reach for the sky, prosper, and find light!
Build real value, in the long run you will win! And ...
Never, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever give up!
You are right and they are wrong! Period!
Hallelujah, it's the End of the World, and I'M HAVING A BLAST! 😁