I’m coming to GUELPH, ONTARIO TOMORROW (May 8) to deliver the Musagetes Lecture.
I am on record as saying that every economic bubble is terrible, but some bubbles do at least leave behind a salvageable productive residue while others leave behind nothing but ashes; indeed, this is the thesis of my next book, The Reverse Centaur's Guide to Life After AI:
Here's a historical comparison that's illuminating: Enron vs Worldcom. Both were monumental frauds, the CEOs of both companies died shortly after the frauds were discovered, but they have very different legacies. Enron – a scam that pretended to secure billions of dollars' worth of new efficiencies through "energy trading" but was actually just engineering rolling blackouts in order to jack up energy prices – left behind nothing.
Well, not quite nothing. Enron did leave behind a little useful residue after it burned to the ground: a giant repository of emails. You see, after Enron went bust, it was sued by its creditors, who demanded access to relevant emails from the company's Outlook server. But the company execs decided they didn't want to spend the money to weed out the irrelevant emails before the court-mandated disclosure, so instead they published all the emails ever sent or received by anyone at Enron, including tons of extremely private, personal, sensitive information relating to Enron's employees and customers:
https://en.wikipedia.org/wiki/Enron_Corpus
This became the "Enron Corpus" and it was the first large tranche of emails that were in the public domain and available to researchers. As a result, it became the gold standard dataset for researchers investigating social graphs, natural language, and many other subjects that subsequently became very important computer science fields and commercial applications.
As legacies go, the Enron Corpus is pretty small ball, and even so, it is decidedly mixed, both because the Enron Corpus constitutes a gross, ongoing privacy violation for a huge number of people; and because a lot of that social graph and natural language work that it jumpstarted has been put to deeply shitty purposes.
Then there's Worldcom: also a gigantic fraud, Worldcom falsified billions of dollars' worth of orders for new fiber optic lines, which it then dug up streets all over the world and installed. When Worldcom went bankrupt, all that fiber stayed in the ground, and many people are still using it today. My home in Burbank has a 2GB symmetrical fiber connection through AT&T that runs on old Worldcom fiber that AT&T bought up for pennies on the dollar.
So while you have to squint really hard to find any benefit that can be salvaged from Enron, it's really easy to point at Worldcom's productive residue – it's a ton of fiber and conduit running under the streets of major cities around the world, ready to be lit up and bring the people nearby into the 21st century. Fiber, after all, is amazing, literally thousands of times better than copper or 5G or Starlink:
Even though Enron's CEO Ken Lay and Worldcom's CEO Bernie Ebbers both received prison sentences after their fraud was revealed, the bubbles never stopped, and indeed, they only got worse. AI is the biggest bubble in human history, worse even than the South Sea Bubble:
https://en.wikipedia.org/wiki/South_Sea_Company
And like those earlier bubbles, some of our modern bubbles will leave behind nothing, while others will leave behind some productive residue. Take the cryptocurrency bubble. Crypto will go to zero, and when it does, all it will leave behind is shitty monkey JPEGs and even worse Austrian economics:
https://www.web3isgoinggreat.com/
As with Enron, you can find some productive residue from cryptocurrency if you look hard enough. A lot of programmers have had a heavily subsidized education in Rust programming and cryptographic fundamentals, both of which are unalloyed goods in our otherwise very insecure digital world.
Some of the underlying mechanisms from the crypto are useful, even without blockchains. Take Metalabel, a system that lets collaborators on creative projects automate how they handle revenues from those projects by plugging DAO-like logic into traditional, dollar-based bank accounts. They're recycling some of the tooling from the crypto bubble to create a very useful utility, without the crypto:
https://www.metalabel.com/
But, as with the Enron Corpus, this is pretty small ball. The world has flushed away hundreds of billions to get paltry millions' worth of value out of crypto – the rest of that value disappeared into the pockets of crooked insiders who defrauded the public into parting with their savings.
If crypto will be Enron-like in its post-bubble life, what about AI? I think AI is more like Worldcom: there's a bunch of useful stuff that AI can do, after all. Take away the bubble and we'd call the things AI can do "plug-ins" and some people would use them, and others wouldn't, and some of those uses would be productive, and others would be foolish, but we wouldn't bet the world's economy on them, nor would we squander our last dribbles of potable water to cool their data centers.
After the AI bubble pops, there will be a lot of durable residue. The data centers will still stand. The GPUs will still be there, and if we don't "sweat the assets" by running them as hot and hard as they can tolerate, they won't burn out in 2-3 years. There will be lots of applied statisticians, skilled data-labelers, etc, looking for work. And there will be lots of open source models that have barely been optimized (why make an open source model more efficient when you're raising capital based on the promise of outspending everyone else in order to dominate a world of ubiquitous, pluripotent, winner-take-all centralized AI?):
That's a situation not unlike the post-dotcom bubble of the early 2000s. Almost overnight, the legion of humanities undergrads who'd been treated to subsidized training in perl, Python and HTML found themselves looking for work. Servers could be purchased in bulk for pennies on the dollar (with user data still on them!). I bought a "dining room set" of six $1,000+ fancy office chairs for $50 each (still wrapped in plastic!) from a dotcom founder who was selling them on the sidewalk out front of his failed startup's office in the Mission. He offered to sell me ten lifetime's supply of branded t-shirts for $20. I turned him down.
That was the birth of Web 2.0. All of a sudden, people who wanted to make real things that were good could do so, because they could find skilled workers, hardware, and office space at such knock-down prices that they could be funded out of pocket or put on a credit card. People got to pursue the web they wanted, free from asshole bosses and VCs. Not everything that got built in those heady days was good, but many good things got built.
I can easily imagine that the post-bubble AI scene will produce benefits comparable to Web 2.0 – projects built by and for people who want to do useful and fun things, without being distracted by the mirage of illusory billions promised by the stock swindlers who created the bubble.
I can easily imagine that I will find some of those post-bubble tools useful, and that in 20 years I will still be using them, just as today, I am still using some of those early post-dotcom bubble services and tools.
And despite all that, IT IS NOT WORTH IT.
The residue that is left behind by every bubble is subsidized, but that subsidy doesn't come from the deep-pocketed investors who are gripped by "irrational exuberance." It comes from mom-and-pop, normie, retail investors who have been tricked into giving their money to the insiders who inflated the bubble.
From Worldcom to Enron, from crypto to AI, the point of the bubble wasn't ever the residue or lack thereof – it was a transfer from working people to crooks. Bubbles are a system for moving the painfully sequestered life's savings of people who do things to people who steal things.
Since the Carter years, workers have been forced to flush their savings into the stock market, after the traditional "defined benefits pension" (that guarantees you an inflation-adjusted sum every month until you die) was replaced with 401(k)s and other "market-based pensions" (where you only get to survive after retirement if you bet correctly on the movement of stocks):
Despite this having all the appearances of a rigged game – finance industry insiders are always going to be better at betting on stocks than teachers, nurses, janitors and other productive workers – proponents of this system always insisted that workers weren't really the suckers at the table. But the stock market is like Kalshi or Polymarket in that one bettor's losses are another bettor's gains, and in those markets, nearly all the money is harvested by less than 1% of bettors:
Somehow, supposedly, we could beat those insiders and survive into our old age without having to eat dog food or become a burden on our kids by betting on the whole market, through index-tracker funds:
Supposedly, this would "diversify" our portfolios, which would insulate us from risks we could not understand, much less estimate. But thanks to private equity and the AI bubble, betting on "the whole market" is basically "betting on AI." 35% of the S&P 500 is tied up in seven AI companies, who are engaged in the obviously fraudulent (and Worldcom-adjacent) practice of passing the same $100b IOU around really quickly and pretending it's in all their bank accounts at once:
When the AI bubble pops, it will vaporize (at least) 35% of the US stock market and wipe out everyday savers who have been swindled into betting their futures on AI, based on the fraudulent representations of AI pitchmen. Millions of people who worked hard all their lives and deprived themselves of small comforts in order to save for their retirement will be wiped out. They will be made dependent on the Social Security system that Republicans are determined to starve into bankruptcy and then turn into (yet another) "market based system" that you will be required to convert into chips at the stock market casino where you're up against professional players who hold all the cards:
Because wiping out the life's savings of everyone else will tank consumption for a generation. Retirees who have to sell their family homes to pay their medical bills won't be buying breakfast at the local diner or catching a Tuesday night movie. They won't be indulging their grandkids with nice birthday presents or helping their own kids buy their first home.
Worse still: the only thing our society knows how to do about economic catastrophe (for now, anyway) is to impose brutal austerity, and austerity drives voters into the arms of fascist strongmen, who blame all their woes on a scapegoated minority in order to win office, and then steal everything that's not nailed down:
Which is all to say, there's a world of difference between recognizing that the AI bubble is the superior sort of bubble in that it will leave a productive residue, and endorsing the AI bubble as a productive or morally acceptable way to produce that residue. It's one thing to anticipate salvaging something useful out of a catastrophe, and another thing altogether to deliberate induce or prolong that catastrophe so as to maximize the amount of salvage.
The swindlers who created this bubble are crooks who have set out to destroy the futures of a generation of savers. They are monsters, and their bubble needs to be popped as quickly as possible.
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
A. How does a Post-Reagan Ponzified Stock IPO ‘Punp and Dump’ work?
B. Does it apply to the Space X IPO?
C. How would a Pump & Dump negatively affect the non-investing Public?
A. Let the Trump Truth Social IPO-to-Present be submitted for your consideration as an example of PRP P&D:
Trump et al engaged in the following
Hyped the IPO to attract the Trump Cult Fans so that the Speculators felt confident there would be enough naive fans involved.
Price it at something fans would find acceptable ($49.95 for Truth)
Release a limited number of shares (5% Truth) to insure hyped up fan Demand exceeded Supply without surrendering any voting majority.
Speculators and fans bid the price up (high of $79+).
Speculators sell out when they think the price has peaked.
The high price insures the stock ticked off the regulatory boxes that allow the Index appraisers to give the stock a high grade fast/track into [**here’s the Ponzified part**] the non-speculator/non-fan retirement mutual funds of the public and private employees (pensions, IRAs, 401ks).
The Speculators recouped their bets and the Ivy League finance bros running the Mutual Funds ‘holding’ our ‘investments’ made their quarterly bonuses.
The rest of the stocks (96% of Truth) are ‘valued’ by the financial markets and ALL corporate owned media as if the Demand was such that these stocks could be sold for the highest share prices.
Corporate corner office cronies borrow against the inflated value of the stocks.
Reality sets in. Any fans holding stocks lose most of their investment.
Big enough Ponzi and the whole economy collapses (again).
Your Retirement Mutual fund’s Ivy Leaguers bought Truth Social stocks for $49-79 per share which are now worth less than $8.
A massive loss in the retirement funds of Private and Public Employees
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B. Does Space X IPO smell like a Ponzified Pump & Dump?
On Friday, June 12th the hyped Space X IPO offered 4% of shares at $135. In trading on Monday, June 15th shares are at $187. Mutual Funds have already joined the Gold Rush.
The $5 Trillion employee payroll deductions that were added in 2025 to Mutual Funds have to be invested in something. New industries would be nice. [ There’s a diatribe below questioning what profits are expected from space rockets ]
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C. AFFECT on PUBLIC.
In October, 2008 those of us who had retirement accounts in mutual funds watched life savings evaporate when the sub-prime toxic mortgages - rated Triple A by indexing watchdogs - collapsed the world economy. The culprits settled out of court and paid fines. We got zip, zero, nada,
Trump and DOGE removed the regulations put in place to prevent a repeat of 2008. Dems and the GOP collected a lot of ‘campaign donations’ over the last 50 years to also - quietly - dismantle most ALL FDR’s New Deal and most ALL Teddy’s Fair Deal regulations. Trumps just burned any regulations left standing.
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Why Invest in a Rocket Company? - A Diatribe
Space X competes -at a loss- against 16 nations with satellite launching capabilities PLUS private competitors with launching capabilities like Blue Origin, Rocket Labs (New Zealand), United Launch Alliance, Arianespace (Europe), Firefly Aerospace, Land/Space (China), Galactic Energy PLUS 5-10 start ups.
What Economic Demand does ‘yet another unprofitable Musk-run company’ have that it garnered more money in its IPO than all other U.S. IPOs in the last two years?
A rocket to the moon?
The Moon and near-earth asteroids are the only celestial bodies from which humans can potentially visit and return.
If there was any commercial value in the moon there would have been robotic landers crawling all over it for decades.
The USA feels compelled to return to the Moon after ignoring it for 50 years because <gasp, clutch pearls> brown nations China and India are contemplating besmirching where only European-descendent males tread.
A Rocket to Mars?
If Moon has virtually no commercial value a measly three days away from earth then Mars at 7 to 11 months away has ZERO value.
It would 10,000 times more feasible to colonize and grow food on the Antarctic continent than to fantasize colonizing Mars.
The lie that raced around the world before the truth got its boots on.
Take away every consequential activity through which AI harms people, and all you’ve got left is low-margin activities like writing SEO garbage, lengthy reminisces about “the first time I ate an egg” that help an omelette recipe float to the top of a search result. Sure, you can put 95 percent of the commercial illustrators on the breadline, but their total wages don’t rise to one percent of the valuation of the big AI companies.
For those sky-high valuations to remain intact until the investors can cash out, we need to think about AI as a powerful, transformative technology, not as a better autocomplete.
We literally just sat through this movie, and it sucked. Remember when blockchain was going to be worth trillions, and anyone who didn’t get in on the ground floor could “have fun being poor?”
At the time, we were told that the answer to the problems of blockchain were exotic, new forms of regulation that accommodated the “innovation” of crypto. Under no circumstances should we attempt to staunch the rampant fraud and theft by applying boring old securities and commodities and money-laundering regulations. To do that would be to recognize that “fin-tech” is just a synonym for “unlicensed bank.”
The pitchmen who made out like bandits on crypto — leaving mom-and-pop investors holding the bag — are precisely the same people who are beating the drum for AI today.
-Ayyyyyy Eyeeeee: The lie that raced around the world before the truth got its boots on
