The economy on consumption with supply produced to meet demand. But I think we are heading into an increasingly precarious position because what is demanded and supplied is no longer as it was earlier in economic history. Earlier, people demanded what improved their capabilities in some way, whereas now, a lot of what people demand degrades their capabilities. Of course, most people are convinced that what they buy is making their lives better, but most of us aren't actually evaluating whether this is true.
With a base of a hundred, I wonder how much each of us spend on actual improvement and how much goes toward what reduces our capabilities. For example, what percentage of your 100 spend on food is what makes you better, and what makes you worse? How much is spend on healthy eating, how much on junk? Junk comes in many forms. What about the spend on other goods and services? How much is time and energy saving, and how much of that saved time and energy is used for improvement activity? How much is spent on exercise versus entertainment, skill building versus, passive viewing?
And this is the problem with the economy perhaps, because it is incentivised to maximise profits, but the highest return is what harms us the most. This is the natural order of the economy, because there is always a trade being made between buyer and seller, and it isn't always just the cost of the product. When the incentive and process of maximisation is to sell products that reduce our capabilities and wellbeing, ultimately it will lead into a situation where the consumer doesn't hold enough value to earn value, meaning that they can't spend.
Attention is only financially valuable when there is money to spend.
For example, most of Meta's products are free to use, but 97.6% of their revenue comes from advertising. This means that while using the product is free, advertisers make money from us using their platforms, and Meta makes the bulk of its money from that advertising. And the bulk of their advertising doesn't add value to human life, and using the platform takes away a lot of potential for healthy interaction. So, where is the actual benefit for users? It is mostly just a cost.
And then, the majority of money being made is from companies in industries that will be able to continually automate and innovate away from the need to have people working for them. This maximises their profits further, but also means that there will be a decreasing number of people earning significantly to be consumers. And then, the investors who will always make more than the workers, will keep on consolidating and rolling in their wealth to generate more wealth, meaning it doesn't distribute and again, less people are able to spend.
The problem today is the wealth gap, which I think might be better understood as an asymmetry between passive investing and working activity. The more one can passively invest, the greater the gains they will make, while the value of working keeps getting pushed down relatively. And the more people who are pushed out of the workforce, the more downward pressure gets put on salaries of those that remain. Billionaires for instance increased their wealth by 16% on average last years and have added another 10% so far this year. In comparison, the global median salary increased by 1.4% last year, less than ten percent of the gain of the billionaires.
A massive asymmetry.
But it isn't just that the wealth gap is getting larger, it is also that how people are consuming is changing, where what we buy no longer improves our personal conditions. Instead, a lot of the percentage of the total spend is spent on various firms of entertainment and ego products, rather than what makes a positive impact on our life experience. And while we each make our choices, we are also influenced heavily by our environment, including the platforms and the content pushed by the algorithms that are all designed to keep us engaged and get us to react to the advertising flood that they make their profits from.
The economic system is designed to push wealth to the top and consolidate it there. However, this is happening at an in creating speed because not only is the gap subject to compounding effects, but the very things that are traded makes people less capable to to make good decisions for positive wellbeing advancement. It isn't a healthy trade, because we aren't buying what is useful and makes our lives better, but spending on what does the opposite. And that process conditions us to be more and more beholden to the system, where we are increasingly degrading the value of ourselves.
What happens when we reach zero?
Well, from an economic perspective, someone who can't produce or consume is worthless. It doesn't matter if they are a nice person with good ethics, they produce a zero on the trade balance. And that makes them worthless in society too, because society is aligned with value being tied to monetary trade, as if money itself is what brings wellbeing and opportunity.
From an investment perspective, we should be looking for asymmetrical positive returns, where the cost of investment is less than the return. The bigger the asymmetry, the bigger the gains. However, from a human trade and societal perspective, an asymmetry leads to gains for some and losses for many, which is where we are now.
Just imagine what a family unit would look like with asymmetrical relationship returns, where one takes all, while the rest give all. The average of the family is still the same 100 base, but one is taking say 80, the 20 is shared to the rest. Is it a good experience for those running on fumes? Is it a good experience for the one taking the lion's share?
But from an investment perspective, an investor doesn't see where the money is coming from, all they see is the gain (or loss) that they experience. When they make a profit, they don't have to see what the loss for others were, whether it be in the direct trade, or in the way the profits of a corporation were made, for instance through child labour, slavery, environmental harm or societal degradation. The shareholder sees the gains, but can remain insulated and blind to the consequences of action.
Another asymmetry.
But as said, eventually, this asymmetry between outcomes gets too much and the system will collapse. At that point, it can't be ignored by anyone involved, and we are all involved. But, unlike the past where the reset was revolution, we are far less capable of revolt, because of the very system that has pushed us into a corner where revolution would be the only way out.
A precarious position.
For all of us.
Taraz [ Gen1: Hive ]
Be part of the Hive discussion.
- Comment on the topics of the article, and add your perspectives and experiences.
- Read and discuss with others who comment and build your personal network
- Engage well with me and others and put in effort
And you may be rewarded.
