It must have been around 1930 when the last Norwegian ice cargo ship set sail for the British coast. Until very recently, that had been a thriving business. At its peak, in the late nineteenth century, the international ice trade employed around 90,000 people in the United States, and Norway exported a million tons a year.

The ice merchants of the twentieth century had inherited a trade with 4,000 years of history. The oldest known reference to the organized production of ice dates from 2,083 BC: a clay tablet records that Shulgi, king of the Sumerians, named the thirteenth year of his reign “the year of the ice house,” in honor of the first one built under his command.

From then until industrialization, ice was a scarce and highly valuable good: a luxury product. To obtain it, wherever winter allowed, it was collected from frozen lakes and rivers and stored in icehouses for the rest of the year. Where that wasn’t possible, it was cultivated. In warm places like India, it was made during cold winter nights by pouring water into shallow trays; at dawn, thin sheets were removed and accumulated, stored in enormous pits at great depth.

Even in the early twentieth century, the ice that arrived by ship from Norway to the great cities was still stored much as it had been in antiquity: in large iceboxes, cold cellars dug into the earth and packed with other old, dirty ice that was only there to maintain the temperature. But when the last ice cargo ship departed from the Norwegian coast, the international trade was dying — strangled by competition from industrial ice. This new product, manufactured in factories and mechanical refrigeration facilities, was unreliable and expensive at first, but began to compete successfully from the mid-nineteenth century onward. So successfully, in fact, that by the outbreak of the First World War more industrial ice was being produced every year in the United States than was being collected naturally.

The ability to produce on demand triggered many revolutions. Ice reached homes, hospitals, restaurants, and factories. It made it possible to transport fish and meat thousands of kilometers, to preserve milk and beer, to keep corpses intact long enough to perform an autopsy, and to keep vaccines alive. An entire infrastructure of warehouses, transporters, merchants, and delivery workers grew up around these new uses, dedicated to getting ice to consumers — a system indistinguishable from the one that supplies our cities with food and drink today. According to census data compiled by historian Elli Morris, in 1920 some 160,000 people worked in the ice industry in the United States.

Until, in the mid-twentieth century, a new innovation produced one final transformation of that industry. The spread of running water, electricity, and above all, domestic refrigeration, completely changed the way ice was produced. Suddenly, homes, bars, and shops had a machine capable of making as much as they wanted. They no longer needed an industry. The mechanism that had made it possible to distribute this product for 150 years lost its purpose and began to disappear. By 1950, almost nothing was left.

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The Miracle of the Gin and Tonic, and the Age of Ice

The story of ice is fascinating for two reasons. One is that it reveals the extent to which it is a miracle of civilization that on any ordinary Sunday, in the middle of a long lunch, one can push back from the table and ask who wants a gin and tonic.

The other is that it reveals a law we still don’t fully understand, but which is transforming the economy and the entire world in recent years. Because when production spread across the whole of society, ice became abundant and ceased to cost money — it ceased to have economic value.

An entire sector then evaporated from the economy. Only a few uses remained for which trading in ice made sense, and its production had become so widespread that the price at which it was sold was the minimum possible, as close to cost as it could get. Even though the capacity to produce ice had multiplied — or rather, precisely because of that — the entire industry disappeared from economic measurement. Hundreds of thousands of people were put out of work, and a sector of activity vanished.

As if it had literally evaporated, the activity that had once supported a large industry dispersed into millions of small domestic factories, like droplets of water suspended in steam.

This phenomenon — which I’ll call “industrial evaporation” — is a process distinct from what economists used to call “creative destruction.” In creative destruction, some industries die because more efficient and innovative ones are born. The economy advances because the new companies are ever more cutting-edge and require more capital and better labor.

Evaporation is a different phenomenon, which occurs when a technology becomes universal, and it is the former consumers who satisfy their own needs without requiring an industry.

Industries, for their part, cannot compete — because when the consumer is producing what they need themselves, they are far more efficient. Entire cost categories that the industry would have been obliged to absorb simply disappear: storage, transportation, or marketing. And the ice is made inside the house, at the exact moment it’s needed, and in precisely the right amount.

In economic evaporation, industries are not replaced by better ones, but by a more efficient system and a different form of activity. But none of this is counted, or compensated — because it happens outside the perimeter of the economy, in a sphere of human activity that I call “Plutonomy.”

For this reason, far from being a phenomenon specific to ice, evaporation is affecting or will affect ALL industries. It is a universal process. And we can identify it clearly by distinguishing three or four phases of productive history — even with a very broad brush:

For thousands of years, human knowledge only extended to the minimum needed to collect what nature provided. The economy was one of subsistence, because the costs of those processes were too high to produce surpluses. People could barely cover their basic needs with their knowledge and labor, and famines and times of scarcity were frequent. These were the years when ice merchants collected blocks from the mountains and brought them down to the cities in carts as a luxury product for consumption by a few nobles and kings. (Pre-industrial phase)

Then, in the first part of the industrial era, under British leadership, ice became a raw material and began to form part of the growing international trade. It was the era in which Norway and the United States dominated the market. (First industrial phase)

In the second part of the industrial era, under American leadership, ice became an industrial product — manufactured and distributed like cans of Coca-Cola. (Second industrial phase)

In the final phase — what I’ve called evaporation — the distributed production of ice in homes multiplied supply until it became abundant, collapsing prices through efficiency (lower transport costs, labor costs, etc.) until it smothered industrial production and put the companies in the sector out of business. (Evaporation phase)

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The Evaporated Society

All of this happened seventy-five years ago, and at the time it was an anomaly: back then, most industries were still being replaced by other industries. But today it’s the norm. Ice traveled the road that almost all technologies now follow before anyone else, and that’s why it’s so useful for understanding what’s coming: the evaporation of the economy through technological diffusion has become the defining characteristic of our time.

• For example, in the field of energy: wood was the harvested energy source (pre-industrial). The international coal trade was the equivalent of Norwegian ice — a raw material (British-industrial). Oil is the industrial phase of energy (Fordist or American-industrial). And photovoltaic solar is, like refrigerators, a technology you can install at home (diffuse or distributed). That’s why energy prices, like ice prices before them, are falling. It sounds like an outrageous claim — but we should expect that within a very short time, there will no longer be an economic sector dedicated to energy, just as there is no longer one dedicated to ice.

• Another example: the media. Oral transmission was the equivalent of harvested ice — the most basic and elementary way of collecting information from your environment (pre-industrial phase). Newspapers first, then television and radio, were the industrial version of information (industrial phase). The internet — including social media, Substack, Reddit, and all the user-generated content — is to the information economy what home freezers were to the ice industry (evaporation).

• And one final example from a sector now beginning to follow the same path: for thousands of years, humanity obtained food from nature, farming minimally and hunting when possible (pre-industrial). Industrial agriculture and livestock farming were the equivalent of ice factories — an organized form of producing food (industrial). But in recent years, a technology called “precision fermentation” has been developing, and it too is the equivalent of the domestic refrigerator (evaporation). This technology makes it possible to manufacture proteins using microorganisms programmed for that purpose. When it becomes universal, it will be possible to make food at home the way one can already make beer or yogurt.

• Although it’s somewhat less obvious and requires a little more abstraction, this same process of evaporation is what has affected retail commerce, banking, travel agencies, fabric shops, and stationery stores. These businesses, more than distributing the goods they sold, were really sustaining the sector’s knowledge and transferring it from manufacturer to buyer along the entire distribution chain. To buy a washing machine, or take out a mortgage, an ordinary person needed the advice and administration of a specialist. In the industrial phase, that expert was the shop assistant or the bank advisor. But with evaporation, those roles are replaced by universal access to information on the internet, which allows people to make informed decisions without needing the industry, in the same way that a fridge lets you make ice.

• We can even extend this analogy to explain the revolution AI would produce, if it succeeds. Knowledge itself didn’t exist as a commodity until the industrial era. A person could only collect whatever was available in their environment. With the industrial era, an entire apparatus emerged dedicated to turning knowledge into a sellable product: books, magazines, and manuals. AI proposes to destroy all those industries by applying the same mechanism: evaporation — extending to every individual the possibility of having all stored knowledge at their fingertips.

Evaporation — more or less accelerated — is today affecting all technologies and all sectors of industrial activity. And with every step it advances, a piece of the economy retreats. This is how we have spent most of the last twenty-five years under powerful deflationary pressures, with productivity stagnating and financial bubbles following one after another.

This is also the cause of what economists call “the productivity puzzle.” When a technology withdraws the satisfaction of a need from the market, the aggregate productivity of the economy suffers. And this phenomenon — combined with our inability to understand it — is the reason wages are stagnant in the West, the reason wealth and power concentrate in Silicon Valley, and the reason we face a major political crisis everywhere.

We are — or rather, those who managed to participate in that industrial and manufacturing system, which I myself arrived too late for, are — the last ice merchants. The last iteration of society that will live by exchanging products. We are sitting on a geological fault line, in the collision between two tectonic plates that are blowing apart the economy we knew, with enormous consequences.

The Reasons for Evaporation

The political and economic establishment, which refuses to look this process in the face, insists that the productivity revolution is just around the corner — it just needs time to materialize. It’s a “lag,” they say, because every transformative technology takes decades to translate into growth. Others point to this being a phenomenon tied to digital technology or to the internet. And in general, everyone wants to trust that at some point, a technology “of the old kind” will come along and put us back on the path of growth. That’s why the establishment has entrusted itself to the god of AI to deliver a fourth industrial revolution that will pull us out of this civilizational impasse.

But this isn’t going to happen. Because what has changed the tide of history isn’t any particular technology — or even many technologies. It is society itself that has transformed, and it no longer produces the conditions necessary for technology to translate into economic growth.

This is counterintuitive, because our vision of the economy is deeply productivist — it assumes that producing is what drives growth. But here’s the thing: the economy is exchanges. And what human beings exchange is knowledge. If, throughout the thousands of years we have existed as a species, there was practically no commerce until the Industrial Revolution, it’s because in that pre-industrial phase, the knowledge was universal and couldn’t be exchanged — it was abundant.

The sustained and extraordinary productivity growth of the industrial era, along with that “creative destruction” of the economy, emanated from a historical anomaly. For two hundred years, there was a unique moment in which knowledge could be monopolized. Only some companies and some countries possessed the knowledge needed to produce certain goods, and they could trade in them exclusively. The industrial economy was an enormous mechanism for buying and selling restricted knowledge.

But if that knowledge was scarce during those two centuries, it wasn’t because of any administrative lock, nor because of its nature, but for a very deep social reason: there were not enough people in the world capable of transmitting and administering it. The Industrial Revolution happened because, in just a few years, in a handful of very specific Western countries, all the knowledge accumulated through the Scientific Revolution crystallized rapidly into a series of applications. And it remained restricted to the elites of those countries for the following centuries — the only ones with sufficient numbers of engineers and administrators to put it to use.

But at the end of the twentieth century, when the entire world set out to create the first generation of university graduates in the history of humanity — the people I call the “hijos del optimismo” (children of optimism) — that two-century-old monopoly broke apart, and with it, the industrial economy.

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This Is NOT an Advertisement

I have written a book about all of this. And I’m aware that when I keep urging you to buy it, it can sound like a commercial break. But it isn’t. I have been an entrepreneur for thirteen years. In that time I’ve done many things to make money, and I can assure you that writing books is not one of them.

Books are a terrible business. They require an enormous amount of work — this one in particular, which has taken me years — and the author receives a pittance in return. They don’t pay off for almost any author; but for me, with the high opportunity cost of writing meaning I have to stop doing things that actually are profitable, a book is a straightforward financial loss. I lose money giving it even minimal attention.

The reason I insist so much that you read Hijos del optimismo (children of optimism) is not what I earn from it. It’s because it contains the most ordered, most complete, and most useful explanation I’ve been able to create of everything I write about here. And because I genuinely believe it is an indispensable map for understanding the present — one that can change the life of whoever reads it.

So if what I write here interests you, and you trust my judgment: take my word for it and buy it.

Since then, all technologies are born already evaporated — diffuse, distributed, in many hands at once. Since the children of optimism arrived, technology no longer passes through those two industrial phases that created many factories and many jobs, because it cannot be monopolized.

The evaporation of the economy is the great economic transformation of our time:

If OpenAI had been founded in 1995 — the year Google was founded — it would be another Google today. Because it would have enjoyed a monopoly over its technology that it cannot have now. And it cannot have it now because today there are hundreds of millions of software engineers capable of building a chatbot, whereas in 1996 there were very few.

Conversely, if Google’s search technology were invented today, Google would never have existed: because there would have been millions of different search engines within just a few months, and Google would never have been able to consolidate the search monopoly that built its dominant position and customer base.

The same is true of Facebook, Twitter, and Airbnb. None of these companies possesses a technology that everyone else doesn’t also have. What they had, at a specific moment in time, was the opportunity to achieve a monopolistic position — because there weren’t enough engineers capable of competing with them, or financiers willing to embark on that kind of venture. And so, by the time potential competition could react, the so-called network effects had already turned them into monopolies. And that was an insurmountable barrier.

All of this applies to physical goods too. If drones had been invented in 1900, like cars, there would have been a “Ford” of drones that would have monopolized the technology and produced the illusion of productivity for whatever country it called home.

But in the 2010s, drones were born already commoditized — the technology is universal — and today they are manufactured anywhere, sold for next to nothing, and even a country devastated by war like Ukraine can build its own drone industry from scratch.

And the reverse is equally true. If the car and all the other innovations of the Industrial Revolution had been invented in 2020, Ford and Bell Labs would never have existed. The same thing would have happened as with drones: hundreds of companies would have rushed to copy each other and would have collapsed prices within months. This, precisely, is what is happening with electric cars today.

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The Earthquake

I have the unfortunate habit of saying very momentous things without giving them sufficient weight. I’ll try not to make that mistake this time. What I am saying here — and what I believe I am demonstrating with solid arguments — is that the industrial economy we knew, which was not merely the way we satisfied our needs but the way we organized the distribution of status, participation, and power in society, is dying. It is ceasing to exist. It is evaporating. It is degrowning.

And we have nothing to replace it with. So its structures — increasingly fragile, but still propped up by iron cultural agreements — are producing monsters: grotesque figures like Donald Trump, Elon Musk, or Sam Altman.

In the coming years, alongside the explosion of the AI bubble, we can expect structural deflation as evaporation pushes one sector after another toward minimum cost. We are already seeing this in many countries in the impact of falling electricity prices.

Until we do something about it, we will continue to observe an extreme concentration of wealth — because the Plutonomy, that vaporous sphere of activity in which people satisfy their needs today, cannot be invested in. Capital that was supposed to be “productive” has nowhere to go and has launched itself into rent extraction in real estate, in large supply contracts, and anywhere it can obtain a guaranteed return. The returns devoted to satisfying that capital, despite nominally contributing to GDP growth, produce no new value: they invent no new products, no new services. They only contribute to a spiral of accumulation very similar to the one that existed before capitalism.

As if that weren’t enough, we are also facing a measurement crisis — and with it, a crisis of economic policy. The instruments that measure economic reality, like GDP, do not capture the value produced outside the market. They fail to notice that the most important human activity of the twenty-first century no longer takes place in the economy. So governments are navigating with instruments that measure a shrinking world — making decisions about an economy that is ever smaller on paper, while the real activity shifts to a place their numbers cannot see.

In people’s lives, this manifests most painfully in the hollowing out of the meaning of paid work. We had convinced ourselves that we would go into the world of work to find identity, status, and meaning — but when needs are satisfied in the private, uncompensated sphere of Plutonomy, and industries die, jobs evaporate too, without replacement. This produces the wage stagnation we have observed over the past thirty years — but not only that. Something more. There are fewer and fewer jobs in which one can contribute to society the way one can contribute in Plutonomy. So many people find themselves trapped between working and contributing. Between continuing to play a role in the productive system, knowing it is a fiction, or doing something of genuine value in Plutonomy, but in deeply precarious conditions.

What underlies all of this is a profound crisis around the value of human beings. In this era of abundance — in which we are capable of producing more of everything — the question we don’t know how to answer is: if work is no longer needed, what will make us worthy of others’ recognition? How do we organize society in a time of abundance? How do you structure a world made of water vapor?

And yet, what an exciting time. What an opportunity! As I never tire of repeating: this is not a crisis of society. On the contrary — we are capable of producing more and more, communicating better and better; we are wiser than ever and have more tools than ever to move forward. What we are navigating is a crisis of the form in which we organize ourselves in this new time. But everything remains to be built, and fewer and fewer things bind us to death or pain.

John Maynard Keynes — who was a giant — saw it coming with a clairvoyance that is almost frightening. It was a hundred years ago, at a conference in Madrid, in the aftermath of the 1929 crash:

I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not — if we look into the future — the permanent problem of the human race.

Why, you may ask, is this so startling? It is startling because — if, instead of looking into the future, we look into the past — we find that the economic problem, the struggle for subsistence, has always hitherto been the primary, most pressing problem of the human race — not only of the human race, but of the whole of the biological kingdom from the beginnings of life in its most primitive forms. Thus we have been expressly evolved by nature — with all our impulses and deepest instincts — for the purpose of solving the economic problem. If the economic problem is solved, mankind will be deprived of its traditional purpose.

Will this be a benefit? If one believes at all in the real values of life, the prospect at least opens up the possibility of benefit. And yet I think with dread of the readjustment of the habits and instincts of the ordinary man, bred into him for countless generations, which he may be asked to discard within a few decades.

Perhaps the strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance. But it will be those peoples who can keep alive, and cultivate into a fuller perfection, the art of life itself, and who will not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.

And that is what the twenty-first century is about. Enjoying the abundance that has arrived.

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Unless you’ve been living under a rock, you can’t have missed the fact that on Friday, a company whose stated purpose is to “make humanity a multiplanetary species” made its stock market debut. SpaceX — Elon Musk’s rocket company, which in twenty-odd years of existence has never turned a profit — claimed to be worth $1.7 trillion, and a lot of people apparently thought that sounded about right. By the close of trading, its share price had gained 19%, pushing its valuation past 2 trillion dollars.

If you’re someone who thinks that valuation is justified, I’m afraid this piece isn’t for you. But if you share my sense that this is absurd, and that the reality we live in is becoming an increasingly dysfunctional and incomprehensible charade, stay with me. This newsletter exists to shed some light on all of this. It sets out to clarify, once and for all, why nothing happening in the markets makes sense, how we know this is a bubble, and why — and even when — it’s going to burst.

It starts with the story of homo bulla.

Here we go!

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:: (Hijos del optimismo) Children of Optimism ::

Bubbles are, by no means, confined to the economy. Quite the opposite: they’re everywhere. Take this example: the women in the audience will know exactly what it’s like to have a crush. There’s this person who one day catches your eye a little, and before long you’re obsessed, and before you know it, you’ve spent six months imagining an entire relationship: twenty-five different versions of your first kiss, every place he was going to take you, how you were going to grow old together. And he doesn’t even know your last name yet. If, by some miracle, you do end up with that person, and they turn out to be an actual human being instead of the one you’d invented, the romantic bubble you’d built for yourself bursts.

The “midlife crisis” — at forty, or fifty, soon it’ll be sixty — is also the bursting of a bubble: the bubble of the promises we made ourselves and never quite kept. Bubbles are such a recurring feature of human experience that we even have a fable for them: the story of the milkmaid and Her Pail.

Instead of sapiens, they should have named us homo bulla. Because while biology, zoology, and ethology constantly remind us that there’s almost nothing in human beings that isn’t present somewhere else in the animal kingdom, this business of building bubbles really does seem to be ours alone: we are the only species capable of imagining different futures — and building them. We can not only anticipate what will happen tomorrow, but we are aware that whatever we want to happen could happen.

Bubbles are a curious phenomenon that occurs when our imagination accelerates to the point where reality can no longer keep up with it. Sooner or later, there’s no way around it: we have to admit we’d been dreaming of something impossible. And then they burst.

Contemporary Westerners have made that capacity to dream of the future the engine of our civilization: where other cultures placed God, we placed progress. And then we filled it with a whole set of institutions — debt, savings, investment, the “career” — that let us create a kind of mental continuity, as if the present and the future existed on the same plane of reality. Of all of these, the stock market is the most ambitious: the place where an entire civilization gathers to imagine its future and put a price on it, today.

It wasn’t always this way. Originally, stock markets were a solution for financing projects that exceeded the economic capacity of any individual. But over time they lost part of that function and gained another: they became the place where more and more people go to bet on the companies they believe will do well in the future — or, put another way, to bet on a vision of the future itself. Stock markets are markets for expectations.

The way it happens to women with a crush, markets get a certain license to dream — for a while. They can believe a company will do better than it actually will, and hold onto that belief with their backs turned to reality. But no dream lasts forever. Sooner or later, the account has to be settled between what we’d imagined and what actually happens. Ray Dalio, founder of the world’s largest hedge fund, put it this way the other day:

It’s important to distinguish between wealth and money. Wealth can be created very easily, like this: you say, “[to fund a company] I’m going to raise $50 million at a $1 billion valuation.” And now you have a billion-dollar company. But wealth can’t be spent. You need to sell that wealth to get money, because money is the only thing you can actually spend. So when there’s a lot of wealth relative to the amount of money that exists, there’s a vulnerability — and bubbles burst when that wealth needs to be converted into money.

Often that happens because of debt, but it can be triggered by anything. It could be a tax. Imagine a wealth tax is introduced: people holding assets are going to have to sell part of them to pay it.

That’s how financial bubbles burst. It’s one of the most well-documented patterns in economic history: the accumulation of paper wealth that eventually collides with the reality of money. It happened with tulips in seventeenth-century Holland, when a single flower could be worth the equivalent of a house in Amsterdam before the market collapsed; it happened with South Sea Company shares in 1720; with British railways in 1840; and in the 1929 crash.

In the twenty-first century, it has happened four times. And what we’re going to see today is that those four explosions were not, in fact, four separate bubbles. They were aftershocks of the same earthquake — one that has been shaking society for twenty-five years and is about to unleash its final — great — tremor.

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This lightning never ceases nor exhausts itself:
from myself it took its origin,
and within myself it exercises its fury.

Miguel Hernández, El rayo que no cesa.
[translated from the original Spanish below]

Este rayo ni cesa ni se agota:
de mí mismo tomó su procedencia
y ejercita en mí mismo sus furores.

Miguel Hernández, El rayo que no cesa.

The Four Explosions

2000: The Dot-Com Bubble

After a few glorious decades, by the 1990s there wasn’t much left to do in the West. Millions of homes had been built, hundreds of thousands of kilometers of roads paved. New railway lines, hospitals, schools, and universities had gone up. Garages were full of cars, homes full of appliances. Industrial capitalism had run out of territory to conquer and was showing clear signs of exhaustion.

In search of a new frontier, the idea of the “information society” was born — a world in which knowledge would flow along information highways, e-commerce would multiply exchanges, and biotechnology would transform life. These were the years when world leaders like Al Gore and Tony Blair traveled the international circuit announcing the birth of a digital Globe in which we would all live interconnected lives, and the arrival of the first e-generation. The Euro was sailing smoothly, the Wall had just come down, and expectations of progress were immense. It was the end of history.

With no clearer picture of what that virtual world might actually look like, the one thing that did seem absolutely certain was that the internet was going to make money. A lot of money. That expectation inflated an enormous bubble in which hardware manufacturers’ shares soared. At the same time, a fever ignited around companies positioning themselves to dominate the coming e-commerce frontier. Any company could send its stock soaring just by sticking “.com” onto its name.

Until the day reality caught up with expectations. So much fiber-optic cable had been laid that, four years after the crash, 85% of it was still “dark” — with no traffic to carry. Those were, without question, real highways. But there was no traffic on them!

The bubble burst in March 2000. The Nasdaq — where almost all the tech companies were listed — began to fall after having multiplied fivefold in five years. The index lost roughly three quarters of its value over the following two and a half years. It wouldn’t recover that peak for another fifteen years. Trillions of dollars in wealth, which had only ever existed as expectation, simply ceased to exist.

Meanwhile, the real economy had barely moved. What collapsed was the story society had been telling itself about the future.

2008: The Mortgage Bubble

When the dot-com bubble burst, the Federal Reserve’s instinct was to try to prevent the contagion from spreading to the real economy. To avoid a credit crunch, it did something we would see repeated many times afterward: it cut interest rates and flooded the world with cheap money.

What the FED could not provide was a destination for all that money which, without the technological dream of Silicon Valley, had nowhere to be invested. That is how it ended up in the property market.

Investors weren’t the only ones the dot-com crash left orphaned. Without the prophecy of the knowledge society, politics had also been left with nothing to sell. So some leaders — Bush, or Aznar in Spain — saw in housing an opportunity to have a project to offer their countries again. In 2003, George W. Bush signed the American Dream Downpayment Act and pledged to use his administration to help more families become homeowners. It was, he said, “a good time to be a homeowner in America,” because low interest rates had made housing more affordable, and new home construction had just reached its highest level in nearly twenty years. If technology wasn’t going to bring a new world, the construction companies would build one out of bricks.

And for a while, it worked. The homeownership rate hit a record close to 70%. But to keep the party going, the financial system kept loosening up, and soon there were zero-down mortgages, mortgages with no payments for the first two years, and finally mortgages granted on nothing more than the applicant’s word. As with every bubble, it seemed to have no ceiling.

Of course it did. By the time everything blew up, home prices had already been falling for two years. Interest rates had risen, and with them the payments on adjustable-rate mortgages. Many homeowners couldn’t keep up. Since they owed more than their homes were worth, they couldn’t sell or refinance either. The result was an avalanche: four million homes were foreclosed in the United States over four years. In October 2008 alone, nearly 85,000 people lost their homes.

Unlike the dot-com bubble, this wasn’t just a market bubble. The whole of society had bought into the expectation of rising home values. So when it burst, instead of a tech index, it took down the entire international financial system. Banks found themselves buried under a mountain of insolvent loans and toxic products and stopped lending to businesses to avoid going under themselves. The world economy ground to a halt, its enormous gears screeching, while a stunned population looked on.

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2019: The Unicorn Bubble

2008 wasn’t followed by another round of economic stimulus. For years, the watchword was austerity. This happened because, at the moment of the crash, the election campaign that would carry Barack Obama to the presidency was already underway. With just weeks to go before the vote, the Democratic candidate had no incentive to experiment with the economy. What followed was one of those rare moments of agreement across the entire political spectrum, crystallized by Obama in a single phrase: we had “lived beyond our means.” It was time to tighten our belts.

Years of cuts followed. Bankruptcies. Even entire countries went under. But while most of us were drowning in blood, sweat, and tears, in Silicon Valley, a portion of the capital that had once again been left without a purpose found somewhere new to play.

These were the unicorn years: companies like Uber, Airbnb, and WeWork reached valuations above a billion dollars by promising to put “co-” in front of everything: coworking, coliving, co-sharing. The Valley filled up with startups promising to “change the world” — and, crucially, with investors who had nowhere else to put their money and were chasing extraordinary returns wherever they could find them.

This new phase of the bubble brought two major innovations. First, for the first time, the story coming out of Wall Street and Silicon Valley wasn’t built on a new promise of growth for everyone — quite the opposite. In keeping with the spirit of the times, the plan was to make everything cheaper through collaboration and technology. The goal wasn’t growth, but efficiency. And to achieve it, traditional businesses were going to disappear, replaced by companies headquartered in the Valley. It was the first time Silicon Valley experimented with the idea that its fate wasn’t tied to that of the rest of humanity. They could come out ahead even — or perhaps especially — if the rest of the world lost.

The other great innovation of this bubble was a shift in investors’ risk tolerance. These unicorns were hard, almost impossible, to find. You had to go looking for them in a haystack of nerds, each one proclaiming their own little revolution. How could you know whether it would be the bike-sharing app or the micropayments startup that would make it? Investment, traditionally more conservative, started chasing promises of 100% or 1,000% returns large enough to offset the losses expected from all the startups that wouldn’t pan out. The idea was that enormous risk had to be assumed, so the companies that did succeed had to be extraordinary. Hence the name “unicorns”: mythical creatures with absurd growth.

During those years, the names that have since become household names began clustering together in the Valley: Mark Zuckerberg, Elon Musk, Peter Thiel, Marc Andreessen, Sam Altman and Dario Amodei, Jack Dorsey, Sam Bankman-Fried, Jensen Huang, Reid Hoffman, Vitalik Buterin, Sergey Brin, and Larry Page shared the same social and cultural substrate for years.

Beyond money and technology, they began to be united by an almost religious conviction that they were destined for a higher purpose. They were building the future, and the rest of the world simply belonged to an inferior class incapable of understanding it. That faith found its catechism, among other things, in the quasi-religion of effective altruism and in belief in the singularity: the idea that artificial intelligence would eventually surpass the human mind and trigger a technological change so radical and so fast that history, as we know it, would simply stop making sense. Was it a philosophy? Or is it a cult?

The unicorn bubble burst quietly: most of these companies never went public and simply dissolved in silence. The final death rattle came from WeWork in 2019 — a company that promised to turn office space into a software business (don’t ask me how, I no longer remember) and which failed spectacularly in its attempted IPO when it was discovered it had no viable plan to ever turn a profit. But that same year Airbnb and a few others went public, and, one way or another, the Valley managed to cover up its embarrassment.

2022: The COVID Bubble

WeWork collapsed in October 2019. By March 2020, Silicon Valley had been saved again — this time by the COVID lockdowns.

A new story took shape at the speed of light: we would live online. Digital companies would be the new real estate, and — once again — nothing would ever be the same. Valuations skyrocketed. Zoom went from being a video-calling tool to becoming the symbol of a new era. Peloton promised to reinvent the gym. Netflix, Amazon, Microsoft, and DocuSign seemed to have found a direct highway to the future. The pandemic, it was said, had fast-forwarded the digitalization of the world by ten years, and that change would be permanent.

As with the previous bubbles, this story was able to sustain a bubble for a while. The problem was that, as a civilizational promise, living life in front of a screen attending concerts over Zoom never quite seduced anyone. So it didn’t last long, and the little COVID bubble burst in May 2022 with another market crash — one that didn’t quite sweep everything away or spread into the broader economy, but wasn’t minor either.

Tech companies lost almost everything they had gained. Above all, it became clear that no further revolution was coming for digital economy companies. Google, Facebook, and the rest of Big Tech were no longer young upstarts destined to conquer virgin territory, but established giants managing rather aging empires. They were still extraordinary companies — but the exponential growth of their early years would not return, not even if the world turned upside down. Something else had to be invented.

The Bubble Factory

Seven months later, in December 2022, Sam Altman launched the first version of ChatGPT — the one that left us all speechless. By then, a great deal had changed.

The previous bubbles had burst, but they left behind an inheritance: an extraordinary concentration of investment expertise and engineers in Silicon Valley — that sitcom-like world where everyone knows everyone, has invested in the same companies, and convinces each other of things. In that environment, Altman, Musk, Amodei & co. had learned two things essential for their next adventure: how to behave like messianic leaders, and how to find people willing to finance the sect. They had built, as literally as possible, a bubble factory.

During those years, Altman had run Y Combinator, the Valley’s most important incubator. Its specialty was a particular type of company — ones capable of raising hundreds of millions of dollars in capital without ever having earned a single one. They were, quite literally, bubble companies. By then, the Valley’s business model had transformed: it was no longer about building companies that would change the world — that came later, for whichever ones survived long enough to go public. The actual activity was manufacturing bubbles: companies that absorbed investors’ money and could be passed from hand to hand long enough for everyone involved to make money off them.

That’s where Altman discovered the trick: the more revolutionary the technology you promised, the more capital you could raise without delivering concrete results. The bigger and harder the transformation, the bigger the bubble you could inflate. So he specialized in hard tech — nuclear fusion, quantum computing, synthetic biology — anything where the promise wasn’t an incremental improvement but a revolution.

And with ChatGPT, in 2022, Altman held in his hands the biggest promise of them all — a dream that has accompanied humanity since the texts of the Talmud, an idea that fills us with fascination and terror in equal measure: artificial intelligence.

And just as in 2000 and 2008, politics let itself be seduced by the sirens’ song.

By 2022, Joe Biden had spent years trying to reverse American deindustrialisation with massive investments. Nothing seemed to work. White working-class voters in the Midwest — the demographic that decides American elections — still weren’t seeing the change. Meanwhile, China was threatening industry after industry across the West with a determination no Western government knew how to counter. Governments embraced Altman’s thesis as if it were manna from heaven. Artificial intelligence! At last, the technology we’d been waiting twenty-five years for had arrived. Now, surely, we could trust that productivity would reignite and the world would return to the path of progress. This would be the technology that restored United States— and the West’s — global leadership.

The Great Tremor: The AI Superbubble

That is how the great tremor was forged: the latest, final turn of the screw on a bubble that has been brewing for twenty-five years. Just as it had in the 1990s, it was a pact of convenience between the Western political class and the technological and financial elites of Silicon Valley and Wall Street.

Every element rehearsed over the years made its appearance: the belief that Silicon Valley must lead humanity, even against its will; the appetite for risk and runaway expectations; the same dense network of acquaintances from twenty-five years back; the ambition never to actually deliver on a technology’s promises, so that it can keep existing as a bubble; and the messianic ideas of the singularity.

With that expectation-generating machine running, Altman, Amodei, Huang, and the rest of the AI evangelists built the largest bubble ever created. At breakneck speed, and often simultaneously, they promised the end of scarcity, the cure for cancer, the disappearance of work, total war, and even an artificial general intelligence that would wipe out the human species.

But three and a half years have passed, and none of this has come to pass. There has been no fourth industrial revolution. Employment figures show no impact from AI, nor do productivity figures. Some people still insist all of this is just around the corner, but there are fewer of them every day, and they speak more quietly.

Meanwhile, cracks have begun appearing all over the AI bubble. More and more voices are pointing out that the industry’s numbers are “impossible”, that companies aren’t finding any return on their investment, or that it's wise to hedge against what's coming, because there’s an obvious bubble about to burst.

And the problem is that, unlike the previous explosions, there’s nothing left after this one. Silicon Valley has overshot. They turned AI into a superlative, and there’s nothing bigger left to imagine. For the first time in twenty-five years, this bubble cannot burst and simply make way for another. If it explodes — and it will — it will mark the end of the Valley’s era. Perhaps Wall Street’s too. The only alternative on a comparable scale — one some are already exploring — is quantum computing, but it has a fatal flaw when it comes to manufacturing bubbles: it can be measured. It will become real the day someone actually builds it, and not a minute before. AI, by contrast, had the wonderful quality of letting you claim that what hadn’t happened yet was just about to.

This is how Silicon Valley and Wall Street became addicted to the bubble they themselves inflated: they can no longer exist outside it. It is, perhaps, the total bubble — the bubble of American leadership itself.

These days we’re living through the acute phase. The point of no return. Last week’s SpaceX IPO is the peak. The outlandish valuation, the sheer excess of pricing the company as if we could simply assume it will conquer Mars, the fact that nobody is even waiting for its economic fundamentals to line up with its share price — all of this will be remembered in twenty years the way we remember pets.com today: the pet food store that went public in 2000, spent millions on ads, and vanished nine months later, the perfect symbol of dot-com euphoria.

The Bubble That Never Stops

When I say I’m convinced we’re living inside a bubble that’s going to burst, people often praise my “courage.” How bold of me to make predictions! But there’s nothing of the sort. I’m not even really predicting anything. All I’m doing is studying the past and observing the present. That exercise alone is enough to show that the four bubble bursts of the twenty-first century aren’t isolated events — they’re manifestations of the same underlying cataclysm.

As if we were living on a geological fault line, we can trace, across the twenty-first century, two tectonic plates pushing against each other, producing these tremors from time to time. One is the runaway growth of capital. The other is the inability of industry — Silicon Valley in particular — to find anywhere for it to go.

The first of those plates is the growth of capital. In the second half of the twentieth century, saving became a mantra: life expectancy was rising rapidly, and retirement was becoming the foremost problem facing Western societies. States understood that people needed to take at least partial responsibility for their own retirement. In countries like Germany, saving became the primary way of contributing to society. Along the way, something extraordinary happened: for the first time in history, even the poor began to accumulate wealth.

But idle money loses value. For it to arrive intact at retirement, it has to be invested. That’s how private funds, pension plans, and the idea of housing as investment were born. Societies committed themselves, body and soul, to the notion that money, on its own, ought to produce more money.

And that is the question every bubble of this century has tried to answer: where to put such a mountain of capital so that it generates returns. An industry big enough to absorb it was needed.

Every time a bubble burst — or a crisis like COVID threatened to stop the wheel — governments responded the same way: with quantitative easing, monetary stimulus, and cheap credit to keep the party going. So, throughout the twenty-first century, every time industry failed to find a destination for capital, a bailout followed, injecting even more money in search of returns.

The result is that global wealth — including housing, savings, pension funds, and stock markets — has multiplied sixfold over the past twenty-five years, while the economy grew at half that rate.

Couldn’t it be that this time it’s different — that AI will finally deliver the productivity revolution that gives all that investment somewhere to go? I don’t think so. I explain this in more detail in another piece, but here’s the short version:

The reason technology produced an “industrial economy” throughout the twentieth century is that the knowledge needed to produce things was monopolized by a handful of countries and companies. Some countries could sell that knowledge, packaged as products and services, to the rest of the world. But when the expansion of universities became universal at the end of the twentieth century, that monopoly collapsed. Since then, the industrial economy we knew has been dying.

And none of this has anything to do with whether the technology actually works or not. The story of the last twenty-five years is one of an endless succession of extraordinary technologies — the internet, email, GPS, the web, blockchain, social media, and a list that never ends — none of which produced an industrial revolution. What we need to look at isn’t whether the technology works, but the fact that no technology, however well it works, can recreate the monopoly capitalism needed in order to find somewhere to invest.

The 1929 Crash

It’s often said that this AI bubble resembles the dot-com bubble of 2000. But that was the beginning of something. What we’re witnessing today, I believe, is an ending. This whole twenty-five-year process has far more in common with what happened in 1929.

In the early decades of the twentieth century, the mechanization of agriculture and the arrival of fertilizers were multiplying food production capacity and drastically reducing the labor needed on farms. The effect would have been obvious well before 1929, if it hadn’t been for the fact that during the First World War, American farmers had to multiply their output to feed Europe.

But when the war ended, they kept producing at the same pace, with nobody seemingly worried about who was going to buy all that grain. The result was inevitable: agricultural prices collapsed throughout the 1920s, farmers went into debt to survive, and rural wages hit rock bottom. It was an enormous crisis affecting millions of people — but it happened slowly, and out in the countryside, far from Wall Street, so Wall Street looked the other way. Until, in October 1929, it no longer could. The stock market crashed and produced the largest recession known until then.

Something similar is happening today, a century later, with industry occupying the place agriculture occupied back then. We have reached the end of the industrial era the way 1929 marked the end of the agricultural era, and for the same reasons: the spread of the knowledge needed to manufacture things has broken the monopoly developed countries held a few decades ago. Today we can produce infinitely more, with far fewer people. That abundance has crashed the prices of the industrial economy.

Just as in 1929, the jobs that sustained the middle class throughout the twentieth century are disappearing, wages have stagnated, and entire regions — the American Midwest, the north of England, much of inland Europe — have been left behind, with nobody quite sure what to offer them instead.

The difference is that, this time, the debt is being carried by countries rather than households. That’s why public debt is soaring everywhere in the world. But the underlying phenomenon is essentially the same.

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Reasons — Always! — for Optimism

As happened in 1929, when this bubble bursts, what we’ll face won’t just be an economic crisis — it will be an enormous existential one. Millions of people who had found their place in the world through work won’t know what to do, just as the armies of farmers in the 1930s had to move to cities and start entirely new lives.

It will be a time of considerable fear, as change always brings. But if we can see it coming, if we can understand it, if we can grasp that this isn’t a crisis of life itself but a necessary stage we must pass through on the way to a better future for humanity, then we can seize every opportunity this new era offers.

We are the children of optimism (Los Hijos del optimismo). And we have nothing to fear

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You are probably not one of those people who follows what happens in the stock markets. No judgment :p. But I think this week it’s worth paying attention. We are approaching the end of a cycle that is going to change everyone’s lives — for better or for worse — and its consequences are going to make themselves felt in the months ahead.

Take a look at this image:

This is the S&P 500 — the index that brings together the 500 most important companies in the United States. As you can see, until 2020 it had been growing at a more or less steady pace: in twenty years it hadn’t even managed to double its value. But since March 2020, something has happened that has been pushing it upward — its value has tripled in five years.

This phenomenon, visible across all Western stock markets, has a fairly obvious cause: the great economic narrative of our time holds that an anticipated “AI revolution,” driven by a handful of listed companies, will come along and transform everything. The rise of inequality, the concentration of power in a handful of tech billionaires, and even the fuel feeding Trumpism are all the fine print of that same story.

The consequence: after this revaluation, those markets are today worth, collectively, nearly $100 trillion — as much as all the housing stock in the United States and Europe combined, and 15% of all the wealth in the world.

A tremor shook that pile of money this week. On Friday, Wall Street had its worst day since October: the S&P 500 fell 2.6% and closed at those same 7,383.74 points you see in the image. But the hardest blow fell on technology. The Nasdaq — home to the big tech companies — plunged 4.2% in its largest single-day drop in a year. At the epicenter of the earthquake, the companies that manufacture AI hardware — the beating heart of the artificial intelligence bubble — shed as much as 10% in a single session.

This is the first of a series of events that, in the coming weeks, will precipitate the resolution of this bubble and this narrative — in one direction or another, for better or for worse. That is why, and because there will clearly be a great deal of news on these subjects, it is worth understanding what is happening in the markets.

Buckle up! here we go!

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All the Horsemen of the Apocalypse

Like the program notes for an opera, let’s start by describing the characters. There are five types:

The LLMers: OpenAI (ChatGPT) and Anthropic (Claude) are the creators of the chatbots and AI models that have astonished the world.

The manufacturers: Nvidia, Broadcom, and AMD manufacture and sell the hardware installed in data centers to train and run those models.

The data centers: Oracle and CoreWeave build and rent out data centers — enormous facilities packed with hardware where it is all installed.

The giants: Google, Microsoft, Meta, Amazon, and SpaceX (owner of X) have the capacity to put this technology in the hands of customers — and charge for it. (Though these last are so large they are playing all four roles simultaneously: building their own chips, constructing their own data centers, and training their own models.)

The financiers: behind all of the above, in the shadows, are other characters putting up the money — the investors and the lenders.

So far, here are the characters who star in this story:

Act One: The Bubble’s Moment of Truth

This Friday, SpaceX — the space conglomerate that Elon Musk has been frantically trying to rebrand as an AI company — goes public. Three years after the launch of ChatGPT, the first major company in the sector floats at the highest valuation in history, comparable to the GDP of a Eurozone country: $1.8 trillion.

As one analyst on X explains after studying the documentation Musk filed with the regulator to justify that valuation, this operation is not quite what you’d expect:

“After eighteen images of rockets in space, we discover that the company’s mission is to ‘extend the light of consciousness to the stars.’ To achieve this, the company plans to advance humanity ‘to Type II status on the Kardashev scale,’ which the document defines as ‘a civilization that harnesses all the energy emitted by its local star.’ We’re only a few pages in and it’s already starting to feel like an ayahuasca trip.”

This is, self-evidently, not a business proposal. It is an incomprehensible chimera. A messianic cult. A — bad — science fiction novel. An absurdity.

A necessary one, however, because companies typically go public at a valuation equivalent to roughly six times their revenue — but SpaceX is claiming to be worth 97 times what it billed last year. It is madness; which is precisely why it requires all the imagination in the world to be even remotely plausible.

Beneath the surface, many observers — from the analysts at More Perfect Union to those at the Financial Times — are saying that this is the first operation designed to allow the financiers who have put their money into AI over these years to cash out by offloading their shares, wrapped in this interstellar fairy tale, onto the small retail investors who have their savings in the stock market.

Anthropic Is Also Preparing Its IPO

SpaceX is only the first major operation in the sector. Anthropic — the frontrunner among the LLMers — has also filed its own paperwork this week to do the same, at another astronomical valuation: over $1 trillion. It won’t be in June — there isn’t time — but it is expected that, if nothing goes wrong, it will list in the first weeks after the summer. It looks as though it will get there ahead of OpenAI too, which announced twenty days ago that it would file its documentation but still hasn’t.

On top of that, some of the giants — including Google and Meta — have announced that in the coming months they will issue new shares to finance their data center investments. The moment of truth for AI companies has arrived, and everyone is a little on edge.

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Show me the Money

Here is the drama of our little operetta: at the very moment the main characters are preparing to hit their high note on the stock market, the AI bubble is starting to look like a zombie.

If last week the Financial Times described the LLMers’ numbers as “impossible,” this week the world’s third-largest consulting firm has once again confirmed something that is becoming increasingly obvious: companies are still not finding a return on this technology.

That sentiment was embodied a few days ago by the CEO of Uber, who admitted that no matter how many tokens his engineers consume, “that link — the one connecting that spending to products that are actually useful for customers — isn’t there yet.” He then did what many other companies are now doing: turned off the tap by capping token spending per employee per month. This is the end of “tokenmaxxing” — the practice that encouraged spending as much as possible. Token demand is expected to moderate in the coming months.

Perhaps as a consequence, two major investors have sounded the alarm in the past few hours. Ray Dalio, founder of the world’s largest hedge fund, has conceded the obvious — that there is a bubble that will eventually burst — while the Chief Investment Officer of Bank of America, famous for having coined the term “Magnificent Seven,” sent a note to clients a few days ago recommending they position themselves for a market crash.

After the euphoria of a couple of months ago around Claude Code, the shift in how AI is being perceived is very clear. As Tom Cruise demanded in Jerry Maguire: it’s time to show us where the money is in all of this.

Act Two: The Tremors

On Wednesday, something apparently innocuous happened. Broadcom — one of the manufacturers — reported another extraordinary set of results: billions in revenue and record growth. But there was a tiny catch buried in the accounts: the company did not raise its forecast for the rest of the year. It didn’t lower it — it remained enormous — it simply didn’t raise it. There was no “beat and raise,” in the market’s jargon, that ritual investors have grown dangerously accustomed to, in which each quarter AI companies not only beat expectations but promise even more for the next one.

But the market is as sensitive as I am in the week before my period. Faced with the first piece of news that didn’t quite land the way it wanted, it did exactly what I would have done in my situation: it burst into tears. Broadcom lost 20% of its market value in two days, dragging other manufacturers down with it.

Bad News: It Looks Like AI Isn’t Going to Take Your Job After All

The other bad news of the week wasn’t really bad news either. On Friday, the US employment figures for May were published. And the bad news — for the markets — was that they were far too good: 172,000 jobs had been created, against the 80,000 that had been expected.

That means two things. First, that the labor market is still standing: AI is not emptying offices of workers. But then it isn’t cutting costs, nor supercharging productivity, the way its evangelists promised. Second — and more immediately — with inflation still proving sticky, the Iran war ongoing, and employment this strong, the possibility of the Fed raising interest rates in the coming weeks is growing more solid.

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Terror in the Supermarkets.

These two apparently innocuous pieces of news — which in any other moment would have passed unnoticed — combined on Friday with the nerves unleashed by the SpaceX IPO and the growing sense that the AI bubble is ending to wipe out nearly a trillion dollars from the markets in a matter of hours. And the most striking thing was that nobody even seemed surprised, because the trend of recent months had been one of complete schizophrenia.

Bitcoin, which in October was approaching $126,000, is today trading at less than half that. Gold — which had been setting record after record — did the unthinkable for a safe-haven asset and started falling precisely at the moment of greatest fear. US debt yields have been at century highs for weeks, and on the other side of the world, the South Korean stock market has become the most extreme spectacle of all: after surging 109% in barely six months, it suffered a crash this week severe enough to trigger an automatic trading halt. The feeling is that nobody is at the wheel, or that every investor is pulling in a different direction — as if money, frightened, no longer knows where to hide.

Comparisons with the peak before the dot-com crash have been the theme of the week, and beneath the apparent acceleration of the markets lies fear: terror in the supermarkets.

Rotation or Stampede?

There are two ways to rationalize all of this. The first — if you believe the LLMers’ valuations make sense — is that investors are divesting from less profitable things to get into SpaceX this Friday, and that the IPO will be a success. This is what the jargon calls “asset rotation.”

The other is that the major financial players are growing increasingly convinced that the bubble will burst very soon, and are abandoning the positions they see as most at risk — starting with the hardware manufacturers.

The End of Trump

On the horizon: the “midterms”. The elections that every two years renew half of the American Congress and Senate. They are in November, and they are shaping up as a financial cliff edge — because the markets’ bull run in recent months has been driven in large part by Donald Trump turning every week into a succession of promises and headlines designed to keep the rally going.

This very weekend — spooked, no doubt, by what happened on Friday — he has made one of those announcements we’ve grown accustomed to: the United States is considering investing in the LLMers, and perhaps in the manufacturers too.

This statement is almost like a preemptive bailout announcement — a guarantee to potential investors that they won’t lose their money if they bet on AI. But today, trapped in the Iran war and with his approval ratings at rock bottom, the chief cheerleader of the financial markets has a high probability of losing control of Congress and the Senate in November. How many TACOs are still left in the kitchen?

What Is Actually Happening?

Behind that specific trigger, however, something deeper is pulsing — something we’ve discussed here before. The AI bubble was inflated on the promise of “singularity,” “superintelligence,” and “the replacement of humans.”

None of these things have happened, and there are no signs that they will. It’s time to recalibrate expectations, and the conclusion — now increasingly widespread — is that the companies that drove this entire rally are overvalued. In this environment, things have been happening for weeks for which nobody really has a satisfying explanation.

Right now, two forces are colliding — an unstoppable object meeting an immovable one: the peak of expectations, represented by the IPOs of the sector’s key companies, meeting the hardening of underlying reality — the hard data on AI’s actual use and effectiveness.

What Will Happen in the Coming Months?

I am not a market analyst. If I have said many times — since 2024 — that I believe all of this is a bubble that will burst, it is not for reasons of financial timing but because the deep currents that have moved the economy and society over the past twenty-five years can only keep producing one bubble after another. AI is just the latest explosion.

But following these things closely leaves a mark, and my intuition tells me that the SpaceX IPO will succeed. Largely because Trump has committed himself to saving it, but also because there are many people who want to believe this is their chance to invest in something like what Google was in 2005. And Musk knows how to play that game better than anyone. I also believe those same people will lose their money, because SpaceX is not worth $1.8 trillion and the market will eventually correct the price sooner rather than later.

But for the bubble to truly burst, there is still a missing piece in this whole soap opera: a “black swan” — an unexpected, uncontrollable event similar to what the surprise bankruptcy of one of America’s largest banks, Lehman Brothers, represented in 2008.

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An Unanswered Question

And that black swan is not, I think, among the things being talked about — but in one that isn’t.

OpenAI was the frontrunner among the LLMers until very recently. But in just a few months, Anthropic has overtaken it and today dominates the market. Since then, life inside OpenAI must have been something of a hell — like a runner watching someone overtake them and falling ever further behind.

OpenAI is losing users, has had to shut down some of its flagship services, and is not hitting the revenue targets it had set for itself. As if all that weren’t enough, The New Yorker published an extraordinary piece a few weeks ago claiming that its CEO, Sam Altman, is a sociopath and a pathological liar — and it leaked to the press that its CFO, Sarah Friar, had clashed with him and the two were no longer even in the same meetings.

The reason for the falling-out was that Friar believed it was more sensible to delay the IPO to 2027, while Altman wanted to go as soon as possible.

Everyone knows that in a startup on the verge of going public, it’s the CFO who calls the shots. So a few days later, someone (wink, wink) leaked to the Wall Street Journal that OpenAI was going to file its IPO papers immediately.

Nearly twenty days have passed, Anthropic has taken the lead, and OpenAI? Nothing. Not a word since.

My suspicion — with zero inside information, but considerable experience managing companies through difficult moments — is that OpenAI is in very deep crisis. It is highly likely that investors are completely frantic at the prospect of Anthropic cannibalizing them, which is exactly what’s happening. It wouldn’t surprise me at all if they are simultaneously struggling to raise financing and running low on cash. With a CEO who was already thrown out by his own team for being a sociopath a few years ago, I would bet that this whole situation resolves itself in one of several ways: either Friar walks, or Altman is ousted again, or a revolt among engineers hollows out the team.

I think OpenAI will be the new Lehman Brothers.

And I’ll be here to tell you about it when it happens. Don’t forget to subscribe!

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If you want to understand why I think we’ve been living inside a bubble for twenty-five years — one that will keep bursting until we deflate it — you can’t miss Hijos del optimismo (Children of optimism).

As you surely know, the hottest topic of the week is the debate over the impact and regulation of AI. From Steve Bannon, Donald Trump’s malevolent spin doctor, to the Pope himself, everyone seems to have something to say.

That this is happening right now is because — as I wrote here a few weeks ago — the first AI bubble has already burst. The speculative moment that promised “singularity,” “superintelligence,” and “the replacement of the human species” has given way to one in which AI has stopped being a dream and become flesh.

A couple of days ago, the Financial Times ran a front-page piece titled “The Impossible Math of the AI Boom,” reporting something that some of us have been saying for years: that this technology has no business model capable of justifying the stratospheric valuations of these companies, and that therefore “the IPOs of the major players in the sector are probably nothing more than a transfer of investment risk onto retail investors.”

So it looks like the financial bubble is on its way to resolving itself, one way or another.

And yet the other great bubble this technology is producing — the political bubble — keeps growing. So much so that last week, the first US presidential visit to China in nine years revolved entirely around “AI supremacy,” and even the Pope is declaring that we are living through the “fourth industrial revolution.”

Today, the governments of the world — along with analysts and consultants — live inside a bubble of expectations in which the belief in a new “industrial revolution” plays the same role that “singularity” played in financial markets. That promise of an extraordinary future event that will pull the world out of twenty-five years of economic stagnation has become the excuse that allows political elites to park the problems they should be confronting — pension sustainability, the housing bubble, inequality — behind the justification that we are right on the verge, right on the very verge, of a new steam engine arriving that will change everything.

This article aims to burst that other bubble. To demonstrate that neither AI, nor any other digital technology, can produce another industrial revolution. On the contrary — what it will do is deepen the phenomenon we have been observing for thirty years. The one economists call “the productivity puzzle,” when they should really call it by its proper name: the first industrial involution.

Buckle up — here we go!

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But first, an announcement!

Tomorrow, June 2nd, and again on Monday the 8th, I’ll be signing copies of Hijos del optimismo (Children of optimism) at the Feria del Libro de Madrid (Madrid Book Fair) — my first time! — and I’d love to see you there.

Tokenomics

What exactly is the business model of AI companies? This week, Sam Altman — founder of OpenAI and supreme leader of this whole thing — explained it at BlackRock’s annual forum, the world’s largest investment fund:

“Fundamentally, our business, and I think the business of every other model provider is going to look like selling tokens. They may come from bigger or smaller models, which makes them more or less expensive. They may use more or less reasoning, which also makes them more or less expensive. They may be running all the time in the background trying to help you out. They may run only when you need them if you want to pay less. They may work super hard, spend tens of millions, hundreds of millions, someday billions of dollars on a single problem that's really valuable.

But we see a future where intelligence is a utility like electricity or water and people buy it from us on a meter and use it for whatever they want to use it for.”

When you ask something of ChatGPT or Claude, what happens internally is not unlike what happens when you do a Google search: you type a question, the system searches through an enormous database, and it returns a response. The difference is that instead of giving you a list of web pages, the return is an already-written answer.1

“Tokens” are the fragments into which the model breaks down text in order to perform that search. The phrase “Hello, World!”, for example, is not eleven letters and two symbols — it’s five tokens: [”Hel”], [”lo,”], [” Wo”], [”rld”], [”!”]. Every time the model reads or writes something, what it is actually doing is processing those tiny pieces, one after another, using processor cycles. That is why the token has become the unit used to measure how much work you have asked the model to do. Just as electricity is measured in kilowatts and water in cubic meters, these companies intend for artificial intelligence to be a flow measured in tokens. And what Altman — and the entire industry — is saying is that their business is selling those tokens.

Notice how absurd this is. It is as if the owner of Toyota said their company was in the business of selling refined petroleum. Or if Apple thought its business was transforming watts. It would be a very strange thing: nobody buys a car to consume petrol, and nobody buys a phone to consume electricity. We buy what that technology is capable of doing with that fuel — the technology itself.

But AI companies have an enormous problem. Unlike car or smartphone manufacturers, they cannot charge for their technology: they cannot sell it.

Do you know why?

Because the equivalent of the Ford Focus or the iPhone 14 in AI is those “models” — Claude Opus 4.7, ChatGPT 5. They are versions of software. Code. Text. A bunch of lines in a file. Information: knowledge. And as forms of knowledge, they are infinitely replicable.

Since Adam Smith described them, economists have known that there is a type of good that cannot be traded in markets: those that can be consumed without depriving anyone else of consuming them, and from which no one can be excluded. These are called public goods — though I prefer to call them abundant goods, because the word “public” creates confusion, giving the impression that these goods must be state-owned when that isn’t the case. Radio waves, national security, the light from a lighthouse, languages — these are classic examples.

You cannot sell the word “tomato,” just as there can be no market for the laws of biology. Nobody can trade in the idea that in a right triangle the square of the hypotenuse equals the sum of the squares of the other two sides — because the day Pythagoras stated that theorem, he placed it at the disposal of all humanity: from that moment on, no one could ever prevent another person from using it freely. Knowledge is the public good par excellence.

The problem AI companies face is that their product — the technology behind these models — is the same as the Pythagorean theorem: a form of knowledge that can be copied and redistributed, and from which no one can be excluded. That is why there are already hundreds of different AI models today. Some are even open source, free for anyone to use.

As the technology matures, if it succeeds, there will be many more. Perhaps every company — and even every individual — will end up having their own. And while some will be better than others, it is also to be expected that over time they will converge in capability, because that is what happens to all technologies when they become widespread.

There can therefore be no market for AI models. Altman cannot sell ChatGPT because there can be infinitely many ChatGPTs.

All he can do is put a meter on it — and perhaps not even that.

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The “New Industrial Revolution” Bubble

What is fascinating about all of this is that it reveals the economic problem of our time — and why it arises.

For fifteen years we have known that the economy is slowing down. The constant of our era, since the Industrial Revolution, had been that economic productivity never stopped growing. Between the end of World War II and the 1990s, it reached rates of three percent per year. But since 2000, that figure has fallen to 0.5% — a pace not seen since the Napoleonic Wars. And economists don’t know exactly why.

Some attribute it to demographics, to the exhaustion of the great inventions of the twentieth century, to a lack of investment, or to excessive regulation. Others say it is a “measurement problem” — though what difference does it make if the impact on employment, wages, public finances, and people’s lives is the same? The truth is that no economist has been able to fully explain it. That is why they call it the productivity puzzle: not because we are about to solve it, but because it is a mystery they don’t even fully understand.

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Until a few years ago, there was genuine concern about this among the political class. Gordon Brown, for instance — former UK Prime Minister and Chancellor of the Exchequer — identified it as the cause of the rise of the far right:

A low-growth economy creates a doom loop as pessimism begets a blame culture – and the more we blame others, the more pessimistic we become. Once people convince themselves that the state of their economy is so weak that they can only improve their lot at someone else’s expense, they vote for parties that specialise in targeting those they think are holding them back – immigrants, foreigners and minorities. These parties offer nothing in terms of economic policies to generate long-term growth. The result is that zero-sum politics exacerbates the downward economic trends, and this, in turn, intensifies and widens the appeal of zero-sum thinking.

But none of the initiatives that were tried — Biden’s industrial subsidies, Trump’s tariffs — seemed to work, and governments found themselves in a hellish position: facing millions of people increasingly angry at the deterioration of their prospects, with nothing to offer them.

And then AI arrived.

Its apostles began to proclaim it would be the most important productivity revolution ever experienced. Just months after the launch of ChatGPT, Goldman Sachs announced with great fanfare that this technology “would boost global productivity by 1.5% per year,” and Bill Gates declared it would be “as important as the internet.”

Politics saw the opportunity and pounced on it like a man just released from prison. Since then, parties have clung to the idea that now — finally, this time for real — a technology has arrived that will pull us out of this civilizational clusterfuck.

That is why there is also a political bubble in AI, alongside the financial one. That is why Trump has wrapped himself in the idea that it will bring a new “renaissance” and flew to Beijing surrounded by the owners of the sector’s leading companies. That is why the debate rages over whether Europe will fall behind in the technological race. And that is why even the Pope is writing encyclicals declaring this to be the “fourth industrial revolution.”

The First Industrial Involution

My view is that the productivity puzzle is not actually a puzzle — if you look at it from the right angle.

The economy is slowing because it no longer produces scarce, exchangeable goods — it produces abundant goods that cannot be traded in markets, as we are seeing with AI. Every time a need finds an public good that satisfies it, that need stops being resolved through the market (or is resolved at a far lower price).

Twenty years ago, getting a roll of film developed cost twelve euros. You paid a fifty-euro annual subscription to National Geographic to see photographs of the world. If you wanted portraits of your wedding, you hired a professional photographer for a thousand. Today, digital photography has made almost all of that market disappear: we take millions of photos a day, view them on Instagram, and only preserve some nostalgic residue of that industry. Travel agencies disappeared when Skyscanner, Booking, and Google Flights made free the work a human being used to do for commission. Wikipedia liquidated encyclopedias — which in the 1990s were a multimillion-dollar business; Britannica cost the equivalent of two thousand euros in today’s money. Netflix and Spotify finished off video rental shops and record stores, which between them employed over a hundred thousand people in Spain alone. Google Maps made an entire industry of physical maps, road guides, and school atlases disappear.

In every case, today we have vastly more of everything: more photography, more music, more knowledge, more opportunities to travel. Productivity has increased — but not in the economy. Outside it, in a domain that goes unmeasured and that I call “Plutonomy.”

Because economic value lies neither in producing many things, nor in producing very useful things. It lies in being able to sell what you produce. And there are different ways of understanding this in economics, but they all arrive at the same point: all economic value is measured by prices. So for something to be valuable, it must be exchangeable.

What we observe in this AI affair is that a product can have incalculable social value and zero economic value. What is happening with this technology is that it is apparently generating enormous value in society — but its proponents are unable to “monetize” it, that is, to convert it into economic value.

AI is not the exception. It is the norm of our time. Every innovation of the past twenty-five years — email, GPS, digital photography, search algorithms, video codecs, the protocols that organize the internet, data science, SSH and modern cryptography, all the goods that have made this century possible — share this characteristic.

Everything I’ve described so far is, more or less, a consensus. But this is where the experts take the wrong turn: economists think this is a phenomenon tied to digital technology, or to the internet. And they trust that at some point a technology “of the old kind” will arrive to put us back on the path of growth. That is what they believe will happen with AI — somehow.

I argue that it won’t. The substitution of private goods — scarce and exchangeable — by abundant public goods is a property of the knowledge society, not of any specific area of the economy.

The difference between 2026 and 1996 is that today knowledge is universal. In the last thirty years, hundreds of millions of people have accessed higher education. That is why all technologies born today spread at full speed.

If OpenAI had been founded in 1995, like Google, it would be another Google today — because it would have enjoyed a monopoly over its technology that it cannot have now. And it cannot have it now because today there are hundreds of millions of software engineers, whereas in 1996 there were very few.

Conversely, if Google’s search technology were invented today, Google would never have existed: because there would have been millions of different search engines within a few months, and Google would never have been able to consolidate the search monopoly that built its dominant position and customer base.

The same is true of Facebook, Twitter, and Airbnb. None of these companies possesses a technology that everyone else doesn’t also have. What they had, at a specific moment in time, was the opportunity to achieve a monopolistic position — because there weren’t enough engineers capable of competing with them, or financiers willing to embark on that kind of venture. And so, by the time potential competition could react, the so-called network effects had already turned them into monopolies. And that was an insurmountable barrier.

All of this applies to physical goods too. If drones had been invented in 1900, like cars, there would have been a “Ford” of drones that would have monopolized the technology and produced the illusion of productivity for whichever country it called home.

But in the 2010s, drones were born already commoditized — the technology is universal — and today they are manufactured anywhere, sold for next to nothing, and even a country devastated by war like Ukraine can build its own drone industry from scratch.

And the reverse is equally true. If the car and all the other innovations of the Industrial Revolution had been invented in 2020, Ford and Bell Labs would never have existed. The same thing would have happened as with drones: hundreds of companies would have rushed to copy each other and would have collapsed prices within months. That, precisely, is what is happening with electric cars today.

Here is the thing: the sustained and extraordinary productivity growth of the industrial era emanated from a historical anomaly. Those two hundred years were a unique moment in which knowledge — an abundant good with which one cannot normally trade — became scarce. Only certain companies and certain countries possessed that knowledge, and they could trade it under conditions of monopoly. The “industrial economy” was an enormous mechanism for buying and selling restricted knowledge.

And knowledge was scarce in those years not because of any administrative constraint, nor because of its nature, but for a very deep social reason: there were not enough people in the world capable of transmitting and managing it.

When the children of optimism — the first generation to attend university en masse — came of age, they broke that monopoly and brought the industrial economy to an end.

What we are living through is the dismantling of the system we had known. And the reason there appears to be a “productivity puzzle” is that we are navigating the first industrial involution.

That is why AI — despite being among us for four years now — has not produced so much as a notch in productivity statistics, just as none of the digital technologies of the twenty-first century have.

And if his proposal succeeds, it will be even worse. If it manages to write software, produce consulting reports, drive cars, wait tables, write journalism, do graphic design and translations on its own — each of those things will also become an abundant public good that ceases to carry economic value.

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The Real Business Model of AI

So what exactly are AI companies selling? And how much truth is there in what Altman says about putting a meter on it?

A token is not a product. It is a unit of measurement. And he wants us to believe that intelligence is a substance — like water — or a flow — like energy — that can be metered. But it isn’t.

What exactly does a “token” measure?

Electricity, in reality. What they are measuring in tokens is the energy required to run a processor and cool it. The irony of life: the metaphorical transformer of LLMs has turned out to be a literal transformer.

It’s not that artificial intelligence is going to be “the new electricity.” It’s that, from an economic standpoint, it is plain and simply electricity — the same electricity as always.

That is why — because selling electricity doesn’t seem like an extraordinary business at this stage of the game — what AI companies are actually doing with all this data center and token frenzy is something very different: they are trying to become the landlords of a rentier economy, cornering all the computational real estate in order to rent it out. Nothing more.

That is why the financial AI bubble will burst. Because there is no business here, no new economic value in this technology. The only question is whether it will happen before or after the institutional investors manage to offload the risk onto retail investors through the IPOs.

And after that, it will be our turn to figure out what the hell we do when the political bubble deflates too.

If this article has made you see reality differently, Hijos del optimismo (Children of optimism) will take you much further. It is the book on which this newsletter is based, and it contains a complete framework for understanding the world through a radically different lens.

This Thursday, May 28th, I’ll be in Valencia presenting Children of Optimism. It’s going to be a wonderful evening, because we’ll be joined by Enric Nomdedeu — who, besides being hilarious and a great friend, is a brilliant thinker who developed much of the thinking around the four-day work week in Spain.

As if that weren’t enough, the event is hosted at the eldiario.es space in Valencia, and we’ll be joined by Sergi Pitarch, its editor.

So you can’t miss it. I’ll leave the invitation link to share on Substack, Twitter, Instagram, and Bluesky.

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The original (Spanish) version of this article can be found here.

This week I’ve been a little rattled. In Spain, a former president has been charged with corruption, accused of leading a network that collected commissions in exchange for political favors. Contrary to what one might expect from an accusation of this magnitude, the judicial order is far from conclusive: it makes claims it doesn’t fully substantiate and leaves many loose ends.

Faced with the uncertainty, Spaniards appear to have split in two — between those who take the order at face value and believe this man is the capo of a criminal network, and those who believe the opposition conspired with the judge, the police, and the prosecution to stage a frame-up and bring down the current government, whose party the accused belongs to. There are even those who think this is a coup orchestrated by the United States.

And I — despite the fact that, as you know, I’m an optimist to my core — read all of this and start to tremble. Because what I see is not a divided society. Not really. Quite the opposite. Both sides in this debate are making the same argument. Everyone — the media, the influencers, the politicians of every stripe — takes it as given that we live in a system that is rotten to its foundations, where the most senior institutions of the state pursue hidden agendas and systematically break the law to advance them. Whether you think the corrupt party is the former Prime Minister or the judges and the police is beside the point.

And people aren’t stupid. Nobody misses the fact that for any of this to be possible, one person wouldn’t be enough — it would require a network, a complete structure filled with civil servants, politicians, and journalists to sustain it. If any of these theories were true, it would mean that democracy doesn’t work in one of the most important states in the Eurozone. Or, put another way: that democracy doesn’t work. Full stop.

So I have a second hypothesis — different from the one that says all the elites in my country are corrupt. A different hypothesis, but one that is, unfortunately, no less frightening. I don’t think there is a case against the former Prime Minister. But neither is there a conspiracy. What has happened is that it has become believable — reasonable, even — to think that a former Prime Minister of a Eurozone country is the boss of a criminal organization. That idea now lives, rent-free, in the common sense. So thoroughly that a judge, a group of prosecutors, a police force, a crowd of journalists, and a large portion of society have all believed it without needing proof. What is happening is that the populist virus — that meme which preaches that all politicians are corrupt and all elites are parasites — has spread so far that it has seeped into the bones of our democracies and made any of the circulating explanations plausible.

So the real story, then — the one we are all part of, judges, prosecutors, journalists, politicians, influencers, and ordinary people alike — has become a self-fulfilling prophecy: most Spaniards today believe that democracy doesn’t work, and for that very reason, because we have come to believe it, it is starting not to work.

How did we get here? And how do we get out?

We have told ourselves many times that populism is the consequence of a widespread malaise produced by deteriorating economic conditions — as if the world economy were sick and the symptom were the rise of this ideology. As Bill Clinton once memorably put it: “It’s the economy, stupid!”

But I believe — and I want to demonstrate today — that it is the other way around: the global malaise gripping us is the symptom. Even the deterioration of living conditions can be explained as a consequence of this drift. The virus is a form of political entrepreneurship that was born in the protest movements that followed the 2008 crisis, but which has since spread into mainstream politics until it has infected every party and no small number of media outlets. That is what is poisoning the waters of civic life and turning them into a swamp.

Populism is the great enemy we face.

Today I want to convince you that there are ways to defeat it — and that they are within our reach.

Contractors

What must citizens do to belong to a country, and what does whoever is in power offer them in return? Modern societies are organized around an agreement that political scientists call the “social contract” — and it answers those two questions.

Before democracy, the social contract was something like: “If you obey the emperor, we won’t come to your house and hack you to death with machetes.” Since the lord also tended to consider himself a relative of God, the same idea could become slightly more sophisticated: “If you believe in the emperor, and therefore obey him, we won’t come to your house and hack you to death with machetes.”

As societies grew more complex and their structures more costly, the social contract evolved too. To obedience was added the obligation to contribute to the upkeep of the state and its armies — and so appeared the serfs of the Middle Ages, for instance, and the vassals. But well into the fifteenth century, with minor variations, the promise that ordered the world was roughly the same: obedience in exchange for staying alive.

But at the end of the Middle Ages, money and commerce made it possible for power to escape the feudal domains. Then came the first cities and the first governments that didn’t spring from military force and weren’t static — they fluctuated. That new world, so unlike the one before it, needed its own pact. What should not a subject, but a citizen do to contribute to society? And what could they expect in return? Since then, the history of Western civilization has been the search for an answer to that question.

Adam Smith’s success when he wrote The Wealth of Nations came from his ability to imagine one — because he invented the social contract of our time. To be worthy of consideration, he argued, people had two options: the rich must save and invest, rather than squander their fortunes on vanities and superfluous expenditure; the poor, who had no savings to contribute, must work to earn not just their wages, but the recognition of others.

And what would they receive in return? The magic of the “organization of labor” — the god of Smith’s Bible — would reward them with ever-growing, limitless wealth. Each year would be better than the last, and the productive system would give so much of itself that any man, however humble, would be guaranteed his place in the world. This was the social contract of infinite progress at the dawn of capitalism.

For a couple of centuries, that promise was kept — halfway. The organization of labor produced levels of progress never seen before. But capitalism, in its natural state, displayed a terrible tendency toward violence. It was very much like the weather: just as the atmosphere produces storms, hurricanes, and extreme temperatures with complete indifference to their consequences for human life, capitalism produced concentration, bubbles, and explosions that swept away entire societies. In their wake came humanitarian crises, wars, and the rise of totalitarian regimes.

It was in the middle of the Second World War that the world began to conspire to tame the rain-god of capitalism. In January 1941, US President Franklin D. Roosevelt proposed a new social contract: states would guarantee four freedoms — among them, for the first time, freedom from material want.

Citizens would no longer be left exposed to the elements. It would no longer be the market, or charity, or some other random meteorological event that would ensure a place in society for everyone who held up their end of the contract — it would be the state that took responsibility. Full employment, decent housing, healthcare, education, and pensions became obligations of power: its side of the deal.

By the end of the twentieth century, Roosevelt’s Four Freedoms had been running at full sail for forty years. That’s not to say there weren’t periods of crisis — but the world seemed like it would never stop growing and distributing its gains. Along the way, the Western countries had built and distributed hundreds of millions of homes, a similar number of cars and appliances, and alongside them the modern healthcare, education, and pension systems had been born. In every Western country, life had been transformed more than at any other moment in history up to that point.

Perhaps from sheer wear, perhaps from boredom, perhaps from exhaustion, or because the states had grown outdated in the process — at that point the world convinced itself that the state was no longer necessary. The market, on its own, could keep delivering. Government just needed to get out of the way. In the twenty-first century it would not be the state, but “society” itself that would sign a social contract with itself. That society would expect of its citizens not only that they work and pay taxes, but that they be active participants: they must train, study, develop — as Reagan put it — “the talents God gave them.” For the first time, responsibility was placed on the shoulders of families to make decisions about their own participation in society, and only in exchange for that effort would they receive. Effort was replaced by merit as the mechanism of participation, and in return it was promised that their children would no longer be factory workers — they would be intellectuals: physicists, mathematicians, lawyers, engineers, astronauts. And so arrived the last great social contract of the contemporary world: what was called the “information society,” and what today is falling apart.

As David Graeber puts it, and I repeat like a broken record: “The social contract of the Cold War didn’t just consist in offering a comfortable life to the working classes; it consisted in offering them, at least, a credible possibility that their children would stop belonging to the working class.”

That was the last great promise of the twentieth century.

From Cooks to Food Critics

There was a day in 2008 when that social contract went up in flames before our eyes. When Lehman Brothers — one of the world’s leading investment banks — declared bankruptcy, it revealed that the entire international financial architecture had been building castles in the air. “Society,” in that part of it responsible for creating a solid economic system capable of generating value, was not holding up its end of the bargain it had made with itself.

The international financial system then collapsed like a hundred-story tower and triggered an avalanche over the global economy. But by then there was no longer a state to go back to and demand anything from: decades earlier, that system that provided identical homes and goods for everyone had been dismantled.

In the social contract of the “information society,” states had been relegated to correcting the system’s failures: either redistributing part of the gains to those left out of the distribution, or liberalizing the economic sectors still anchored in the statist past. To fit into that role, the political left and right had undergone a critical mutation: they had stopped being organizations dedicated to proposing and pushing the world in new directions, and had transformed themselves into guardians of the existing order. As if artists had become art critics.

And between the late 1980s and 2008, that appeared to be a great plan — probably because life is much more comfortable as a restaurant critic than as a chef. But the problem is that to critique someone else’s recipe, you need someone else to be doing the cooking. The parties of the twenty-first century, in order to fulfill their watchdog function, needed the world to keep growing at full steam. To keep working. None of them, on their own, knew any longer how to produce economic growth — only how to correct its problems.

To this day, the two great ideologies of capitalism are anchored in that same place. One with deregulation, the other with redistribution. But without growth, without an economic system that works on its own and produces profits so infinite that one can simply sit back and point out what isn’t going well, they have nothing to offer.

So who signs the social contract today? As far as I can observe, most citizens continue to get up every morning to hold up their end of the deal. Who takes responsibility for the part that power was supposed to fulfill? In truth, nobody signs it. The best explanation for the malaise that afflicts this historical moment is this: politics has shirked its responsibility, and we are traveling in a car that nobody is steering.

Is there a politician in the world today who would dare promise, as Roosevelt did, that the state will ensure no one goes without? Anyone who, like Thatcher, would promise a “property-owning democracy”? Anyone who would commit to taking us to the Moon, like Kennedy?

None. The best promise politics has managed to articulate in the past fifteen years is “affordability” — which is, once again, the promise of the machete: if you obey and pay your taxes, you won’t end up living on the street.

It is that absence, that political and intellectual orphanhood, that has driven us into the arms of populism. That empty space is what fills today with the liquid that oozes hatred.

They Call It Democracy, and It Isn’t

There are no better critics than those who never have to cook. That frees up time to think about what someone else is cooking. So in the late 1990s and early 2000s, a lineage of very lucid intellectuals — separate from the mainstream left — gained enormous prominence by theorizing that democracy doesn’t work. Toni Negri, Michael Hardt, Noam Chomsky, and Naomi Klein, among many others, created an entire literary genre dedicated to the most refined art of total critique. It was called the “anti-globalization movement” because “everything-that-goes-wrong-ism” wasn’t very catchy.

And they were right, about many things. Their reproaches and their demands for purity were legitimate, accurate, and even healthy for a democracy — when exercised from a position subordinate to power. Ideals are for that: for keeping the destination clear, even when we know we’ll never fully reach it. That’s why they’re called ideals.

In 2008, that diagnosis jumped from the seminars into the streets. The protest movements that followed the crash — from Occupy Wall Street to Spain’s 15-M — took the theory and distilled it into a slogan anyone could chant: us, the people below, against them, the people above.

But ideas are dangerous: they’re contagious, and this one was open-source. “Us versus them” was a template into which anyone could write the name of their preferred enemy.

The first to recognize the goldmine were the entrepreneurs of the new right. People like Steve Bannon understood before anyone else that that anti-elite mold could be used for anything — you just needed to swap out bankers for immigrants, or for Brussels, or for “the globalists,” and the machine kept working just as well. The left pointed at capital; the right pointed at outsiders. But the grammar was identical: the pure people on one side, a corrupt elite on the other, and an entire system designed to swindle you.

What began as a tool of the most alternative ideology turned out to be too good, too cheap, and too effective to stay there. And the traditional parties — which had given up cooking and only wanted to critique the neighbor’s recipe — found in populism the greatest form of criticism ever invented. So they adopted it too.

And so critique ceased to be the healthy function of a segment of society operating at the margins, and became the only language of the center. Populism ended up contaminating all the waters, and all of us — myself included, I’m not exempt — ended up as critics of the existing order. Today, if you open a newspaper, you can be fairly certain of finding zero new ideas and a million complaints. If you tune into a political party, you’ll hear nothing but reproaches leveled at the other side. The truth is that what we call “elites” — and there, in all likelihood, both you and I find ourselves — have abandoned the ambition to lead in order to dedicate ourselves exclusively to pointing fingers at whoever is to blame for our troubles, with the most exquisite of pens.

Left to their own devices, those who once looked to politics and the media for visions of the future are, frankly, in the mire. Every loudspeaker reminds them that everything is going wrong: climate collapse, economic collapse, the end of the West, the end of birth rates, of immigration, of progress, of welfare. And now, on top of all that, artificial intelligence is coming to take our jobs — or simply to exterminate us. You look around and there is nothing but prophets of disaster. Not a single person daring to say what we build tomorrow.

And so we have made real the idea that everything is broken. And if everything is broken, there must necessarily be someone responsible. The only small way to participate in society is to pick a side and grab a rifle. Politics has been reduced to exactly that — a distribution of enemies.

The Politics of Impurity

That is not the role of political parties. Or it shouldn’t be. Of course, all complex systems have a great deal that needs fixing — errors are not an anomaly but a property of their nature. That is why systems that work don’t aspire to perfection: they are built with slack, with margins, with redundancy, taking for granted that something will always fail. Impurity is not a symptom that the system is rotten; it is simply how anything complex enough to be alive stays standing.

The job of politics should not be, therefore, to point fingers at impurity — anyone can do that. It is the other thing, the hard thing, the thing we have stopped asking of it: to propose. To propose a new world. To propose going to the Moon.

What to Do?

But I don’t work in politics, and I hate handing out prescriptions I’m not willing to take myself. Besides, it doesn’t matter what politicians do — because the social contract of the twenty-first century is signed by society with itself.

So here are three things I believe those of us outside of public life can do to change the direction of things. To escape this populist spiral. And I am committing to carrying them out from now on — especially in this newsletter.

The first: flee, as from someone who doesn’t wear deodorant, from every single formulation that attributes a negative characteristic to a social group. Not boomers, not immigrants, not politicians, not billionaires, not civil servants, not young people, not Black people, not white people, not men, not women — none of them can be held responsible, as a collective, for anything. Because all of these are ideological constructions: bodies that exist only in our heads, and that serve only to stigmatize, to dig trenches, to convince ourselves we’re better than the rest, and to hate.

The next time someone tells you that such-and-such social group is such-and-such thing, your expression should be the same as if they were saying it about Black people, or Jewish people — because that is exactly what they are doing. No, “politicians” are not corrupt. No, “judges” are not either. Not the ones on the left, not the ones on the right.

The second: stop thinking that the other side is evil. This is harder than it sounds, because it requires stopping thinking that we are good. Surprise: we are not. No more than anyone else. People act for reasons that have their own internal logic, and you, in their situation, with their biography, their concerns, their intellectual and emotional capacity, and their fears, would probably do the same. Most of the things that seem aberrant to us are simply the product of the culture in which people are embedded — and if we were embedded in that culture, we might be the same way.

The third: to take on, as intellectuals — which we all are, each in our own measure, even if only on our social media feed or in our own home — a commitment to the social contract. We need to start pushing the world forward again, to return to an agenda of abundance. And this is not going to happen in a vacuum: nobody is coming to save us. Let’s read those who propose and build things, let’s share their projects, let’s stop feeding hatred, let’s draw a line in every sphere of life and start rebuilding a common space in which everyone has a place.

It is not the politicians. It is not the judges. It is not the immigrants, or the billionaires. What is pushing us toward a worse place is ourselves. And it is within our power to change course.

If you are also an abundance thinker, you will like Hijos del optimismo (Children of Optimism). It is my first book, the older sibling of this newsletter, and a project I have been working on for many years.

You can already order Hijos del Optimismo on Amazon, La Casa del Libro, El Corte Inglés and the publisher’s website, Debate.

You can also read more about me and the story that inspired me to write it

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In case you hadn’t heard, the political hit of the moment goes like this: Ever since Trump began steering the United States further and further from Europe — and especially since European countries refused to join the war against Iran — the Trumpist hive mind has set its sights on the old continent. As if anticipating the coming conflict, which will almost certainly threaten death and destruction between the US and the EU, thousands of users have spent months flooding social media with the idea that we Europeans are poor, lazy, and incapable of surviving on our own on the global stage. They’ve even given us a name. We’re no longer “Europeans” — we’re “Europoors.”

Last week, in that charged atmosphere, a debate broke out among the global economic elite about Europe’s future — and, by extension, yours and mine. I had planned to spend the weekend out in the meadows — it’s San Isidro in Madrid — but I couldn’t help myself and ended up buried in articles by , , , and ovic so I could tell you about it.

Because my gut feeling — which I’m sure you’ll share by the time you finish reading — is that this topic is far more than an economic technicality. It’s an all-out battle over which model of civilization will prevail in the 21st century. Economics is the method, as Margaret Thatcher would say; the goal is to change the soul and heart of Westerners.

Here we go.

This has been building for a while. For a decade now, the Calvinist soul of the European establishment has been disowning the continent’s… let’s say epicurean drift. Europe isn’t trying hard enough — they warn — it has given in to habits typical of a decadent society, it isn’t productive, and it’s falling behind. So much so that former ECB governor Mario Draghi, in a report commissioned by the European Commission on the competitiveness of the eurozone, warned that Europe is not simply in an economic rough patch but at an existential crossroads:

“My concern is not that we will suddenly become poor and subordinate to others, but that, over time, we will inexorably become less prosperous, less equal, less secure and, as a consequence, less free to choose our own destiny.”

Our destiny. Nothing more, nothing less. With stakes this high, it was only a matter of time before every major player on the continent joined the debate.

And so they did. In February, German Chancellor Friedrich Merz, returning from a trip to China, stepped forward as the choir’s soloist and declared that “Germany — read ‘Europe,’ by extension — needs to work longer hours.”

“The overall productivity of our national economy is not high enough. Put even more plainly: work-life balance and the four-day workweek will not be enough to maintain our country’s current level of prosperity in the future. That is why we need to work harder.”

Merz is German and belongs to the European People’s Party. You’d expect him to champion that culture of hard work. What nobody anticipated was that within days, one of the great economists of the left, , would echo the Chancellor’s words:

“The world is a competitive place. Countries that fail to develop economically don’t just quickly fall behind their competitors — they become second- or third-rate economic and military powers, and their populations end up emigrating to work elsewhere. Their technologies become obsolete. It is a well-established fact, noted by economists and political scientists of all stripes, that economic power correlates with political and military power. So if many European citizens continue to choose going to the opera and having picnics with friends while Chinese and Indians do so less and less, Europe will decline.”

And since part of the American establishment has always had a soft spot for ideas so conveniently useful for justifying the absurdity of choosing to live in Washington rather than Barcelona, a couple of weeks ago the Wall Street Journal poured more fuel on the fire with a piece titled “What Will Happen When Europeans Realize How Poor They Are?”

Since 2007, the argument goes, the per capita GDP of the United States has been pulling away from the eurozone’s and is on track to be double that of some countries we consider “rich.” The authors don’t shy away from equating that per capita GDP with “prosperity” and conclude that Europe is becoming less prosperous. But the worst part isn’t even that — as the headline screams, the real problem is that Europeans refuse to realize it!

You could almost feel the journalists’ frustration. Around that time, many Europeans had been busy trolling the Trumpist mob on social media with photos of Parisian terraces and some very funny videos featuring two middle-aged men who looked like they’d never seen the inside of a gym — showing off their dad bods in t-shirts and shorts — spinning music outdoors while balancing a cigarette and an Aperol Spritz in the same hand

Oh, Twitter. What a laugh.

Back to the serious men: in recent days, Paul Krugman has come out in defense of the European model in a series of articles where he argues that the gap between American and European GDP is a statistical illusion stemming from how technological improvements are measured in GDP.

Paul Krugman

Is Europe in Economic Decline?

An ASML chipmaking machine…

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2 months ago · 1875 likes · 388 comments · Paul Krugman

It turns out that technology improves at a dizzying pace: a computer from twenty years ago had a fraction of the capacity of one today. At the same time, computer prices have never stopped falling. But on the surface, and for the user, it’s still “a computer.” If GDP simply counted how many computers are sold each year, it would be unable to capture the quality improvements perceived by the user and the dramatic price drops that come with them. The result would be absurd: an economy producing machines a thousand times better would appear stagnant, simply because it’s selling “the same thing” in terms of physical units.

To solve this problem, econometricians — not only American ones, but especially American ones — resort to what are known as hedonic adjustments. Instead of counting computers, they break the product down into its technical characteristics (processor gigahertz, gigabytes of memory, screen resolution, energy efficiency) and estimate how much each one contributes to the price. When those characteristics improve, even if the nominal price stays the same, they record that change as if the price had fallen and sales had increased. In other words, when technology improves, GDP reflects a surge in the real quantity of technology produced, even if no one has bought more physical units.

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Since virtually the entire world’s tech industry is concentrated in the United States, this hedonic adjustment disproportionately benefits American GDP. Although Europeans and Americans alike enjoy the same technology, that adjustment doesn’t show up in Europe’s figures as a consumer. That’s why European GDP stays flat while America’s shoots up. And yet, in terms of real wellbeing, the difference is far smaller than the numbers suggest.

Put simply: much of the divergence between the United States and Europe isn’t real — it’s an accounting artifact. If you measure it differently (the details, here), it turns out that the eurozone’s GDP and that of the US don’t differ all that much. Or even more to the point, if you factor in the quality of life and social achievements Europe has attained that don’t show up in GDP, as Thomas Piketty also notes these days, it becomes very hard to claim that the United States has a model worth copying.

All of this might sound like a crushingly dull technical matter, but it isn’t. This is such a hot-button topic that , by his own account, dropped everything when he came across Krugman’s article to fire back: “This is enormously important. The divergence with the United States is the most compelling evidence of the need for reforms in Europe.”

And that’s the crux of the matter. The wounded-competitiveness debate is the battleground — a moral one — over Europe’s future in the world. One faction of European intellectuals longs for a shift in economic model that would bring us much closer to the American one, while another argues that no such productivity gap exists and that… well, it’s not entirely clear what they propose instead.

Garicano, in his article, contests the premise outright, argues that Krugman would have agreed with him a few years ago, and maintains that the stagnation is real and that it’s not just prices that matter, but the capacity to produce:

“US output growth has been concentrated in technology, where prices have fallen enormously as productivity has risen. In terms of the volume of things produced, the United States has pulled away from Europe.”

For his part, , one of the influencers (?) in today’s economic landscape, takes the middle path and argues that while quality of life in both regions is broadly comparable — as evidenced by the fact that net migration between them is nearly zero — the fact remains that the United States is pulling ahead.

“Honestly, this is not a great result for Europe. Ideally, rich countries would converge toward similar income levels; Europe’s failure to catch up with the United States is a real failure, even if it isn’t falling further behind. And the much faster growth in output per hour in the United States should set off all the alarm bells.”

Lies, damned lies, and the productivity myth

So much for the soap opera summary and the cast of characters.

What’s driving me mad — as someone who has always observed economics from a considerable distance — is yet another example of how this supposedly rigorous discipline abandons all its principles and turns to alchemy, even at the highest level, the moment it touches certain subjects that strike at the moral heart of its assumptions. This productivity debate is the paradigmatic case.

Here’s the thing: the little drama I just described, involving a Nobel laureate and some of the world’s most respected economists, is built on an assumption that any first-year economics student should be able to dismantle. Specifically, on the premise that a country is wealthy because it produces a lot. That national prosperity is a matter of productive capacity, and that if Europe worked harder — manufactured more chips, more cars, more servers, more things in general — it would be more prosperous.

And yet today we know that what you produce is irrelevant.

It wasn’t always this way. In the early days of capitalism, it was believed that the value of things derived from labor: the price of something could be calculated by adding up the hours of effort invested in making it. So producing a lot made you very prosperous, because the value of what you had produced was a constant, an obvious truth, a universal certainty. But toward the end of the 19th century, what became known as the “Marginalist Revolution” took place — a Copernican shift in economics with colossal consequences for civilization.

What its authors observed was that the labor invested in producing something and the price that good reached in the market did not go hand in hand. Some products require enormous amounts of work and cost very little — potatoes, for instance — while others demanding less effort sell for a fortune, like barnacles. It can even happen that two goods with exactly the same labor input — two paintings produced over the same number of hours, say — fetch two different prices, or different prices for different people. What is worth a fortune to one person may be worth nothing to another. Value, the marginalists observed, does not come from the workshop; it does not emanate from labor. It is subjective, variable, and in the eye of the beholder.

Value theories are my Roman Empire. My particular obsession. I believe they are the keystone of human thought systems for one reason: we use the same mechanism to assign value to things… and to people. So the value theories that dominate a society are the manual that allows us to place ourselves and others on the mental map we use to navigate social life. That’s why the marginalist theory of value, abstract and technical as it sounds, was a bomb containing a radical challenge to our civilization. And that’s why this issue lies behind the whole can of worms about Europe’s competitiveness.

Here’s the thing: for millennia — probably since we became capable of thinking of ourselves as a human group — we had believed that all people had intrinsic value. They were valuable because they were devoted to God. With different nuances, every religion held the same idea. Faith gave you value, and lack of faith took it away. Easy peasy.

Capitalism in the 19th century took over from religion in assigning that value. It would no longer be faith, but labor and thrift that made people valuable. But although these seemed like two different things, faith and work operated in the same way: both stemmed from each person’s own will, so being valuable still depended on oneself — there was an intrinsic value in people.

The Marginalist Revolution breaks with that paradigm. For the first time — I would venture to say in human history — it asserts that there is no intrinsic value in things, nor by extension in people. That we are not valuable in and of ourselves: not for our faith, not for our work, not for anything we do. We are only valuable if others think we are, and only to the extent that they do.

And this is where one throws up their hands: “But how monstrous! How cruel and inhuman, the idea that no one is worth anything unless someone else is willing to pay for them!”

And yet it’s a conclusion so simple, so self-evident, that you could reason it through with an eight-year-old. If you think about it for a moment, to maintain that people have intrinsic value, there must be someone to confer it. A “universal value” cannot exist without an authority whose judgment overrides that of individuals. For millennia, that someone was God. The religious wars and the Counter-Reformation were disputes about who that value-dictating authority was. But if we assume that God does not exist — or that, if he does, he has been relegated to the privacy of each person’s conscience — the source of value evaporates along with him. In my heart of hearts, I believe everyone is valuable and I conduct myself as if that were true. But I cannot compel anyone else to share my valuation. I have nowhere to anchor it. Value, whether we like it or not, is subjective. It could only be objective if we were to believe again — or create anew — in a higher authority.

This truth is so violent — we are so terrified by the idea that no authority exists to recognize our absolute worth — that, despite the marginalist theory becoming hegemonic among economists after its publication around 1870, it took another century to take hold in mainstream thinking. People preferred — and still prefer — to believe that labor produces value in and of itself. And something more dangerous was also at play: it was fiendishly difficult to organize a state where citizens wouldn’t tear each other apart if they believed others had no intrinsic value. “All men are created equal” sits uncomfortably with the idea that a person is worth exactly what someone is willing to pay for them.

Contemporary society is trapped in this paradox. It wanted to build a society without God, but refuses to fully acknowledge that without God there is also no intrinsic value in people. And so it has ended up constructing itself on two contradictory principles that coexist… barely.

On one hand, we believe that participation in economic life — working, saving — regardless of outcome, confers a “right” to housing, healthcare, education, and social recognition, as if there were some higher authority obliged to provide them. That authority is the State, which assumes the role once played by God: a universal body that recognizes the value of each person by the mere fact of their existing and participating. On this side, we think like believers: people have intrinsic worth and the system must respect it.

On the other hand, the moment we leave the territory of the State and enter that of the market, we embrace marginalist logic without blinking. We want unequal effort, differing talent, and varying skill to be recognized and rewarded. Nobody would think it reasonable for professorships in economics, or spots on the national football team, to be distributed by lottery among those who had put in the same number of hours. Here we think like marginalists: everyone is worth what the market is willing to pay for them.

The monumental clusterfuck we find ourselves in — the crisis of Western civilization — springs from this contradiction, and from the fact that neither theory — neither the labor theory nor the subjective one — is capable of producing a social model that works in the 21st century. ’s confusion, ’s, ’s, ’s — in my view, it all flows from this same contradiction.

Producing your own grave

In geopolitics, without a doubt, there is no father figure, no state, no higher power to embrace us and tell us we are valuable. There is no universal authority that recognizes what each country is worth. And yet when economists wade into the productivity debate, the first thing they do is write as if such an authority existed. They return, again and again, to the idea that whoever produces the most — or produces most efficiently — will win the global game. As if there were some celestial referee keeping score of hours worked and chips manufactured.

From within that confusion, every author you’ve read this week defends the same thing: that the United States is richer, more viable, and more prosperous than Europe because it produces more. It is more innovative, makes more chips, invented computing, data centers, the entire software apparatus. It has a financial system behind it to sustain all of that, which is why even Europeans who want to build things end up doing so in California. From Merz demanding longer hours to Milanović scolding Europeans for their picnics, the argument is always the same: whoever tries hardest wins. And it’s a lie.

What does it mean that technology prices keep falling? It means technology has failed to generate new value. Today people assign the same price to something that cost forty times more forty years ago. And with what they have left over, they aren’t willing to buy another computer or another smartphone. Efficiency can produce more, but it cannot generate new desire.

The United States, despite its capacity for innovation and ever-expanding functionality, has been unable for the past 25 years to generate fresh, renewed desire for the products and services it wants the rest of the world to buy. Aside from New York and perhaps San Francisco, it doesn’t have much that the rest of the world can’t copy. As a result, it offers exactly the same thing as China — the same technology, the same factories. Both countries have locked themselves into the wheel of a blind and deaf productivism, competing with increasing ferocity in a race to the bottom of the barrel in which both players stand every chance of drowning.

Meanwhile, what we observe the moment we’re able to look at the problem without the blinders of mainstream economics is that China and the United States have spent 25 years subsidizing certain industries in that race to the bottom. China through public subsidies, the US through private investment and the entire financial machinery propping up Silicon Valley. American investors subsidized Uber and Airbnb. Chinese taxpayers subsidized BYD and solar panels.

Until none of the things they are capable of manufacturing is worth anything at all.

How can this possibly be a good strategy for global leadership?

AI: the last hope of the industrial world

It isn’t. It’s civilizational suicide. Continuing to fight to be an industrial power at a moment when industry produces ever less economic value per unit of output is madness. And it’s a madness that lies behind the evident political and cultural decline of the United States, behind the rage of white men in the American Midwest and of young urban Chinese — the rats that have been set running on the wheel.

That’s why AI is a life-or-death cultural artifact for the United States.

As every economist who has taken part in the European competitiveness debate acknowledges, the divergence between the United States and Europe — and between the United States and China, for that matter — flows from a single source: Silicon Valley. Or more precisely, from the strategic alliance between Silicon Valley tech companies and Wall Street financiers. That marriage of convenience is what has spent 25 years inflating one bubble after another — first the dot-coms in the 2000s, then the “unicorns” in 2010, a few inventions along the way — Google Glass, the Metaverse, NFTs and crypto — and now artificial intelligence.

But the US needs that bubble to keep dreaming that someday it will escape the rat race it has gotten itself into and produce something it can patent, own, and sell to the rest of the world without competition. That’s why Trump and the entire American elite today need to believe that this new technology will once again be capturable and will produce a new industrial revolution in which desire will be on their side again.

It won’t happen.

And conversely, if AI fails — if it doesn’t manage to replace millions of workers (spoiler: it won’t) — the whole house of cards will come tumbling down. Then we’ll be facing a radically different question. What is the United States going to do with itself? Can the United States exist without being the factory of things that Europe dreams up? Can it invent its own paradises, seduce anyone on its own terms?

If it keeps on this trajectory, the answer is clearly no.

Economies of abundance

How is value created in the 21st century? What is the future of the global economy? How is economic value — the kind that can be exchanged and is therefore scarce — actually generated?

My intuition — one I’m still working through — is that the future of the economy in the 21st century will revolve around the commercial exploitation of public, or abundant, goods (follow the link if you’re not sure what those are). Let me explain: the English language is a public good. Around that good there is an entire industry devoted to translation, teaching, book publishing, copyediting, and so on — all producing private goods and services that can be exchanged. In the same way, the Mona Lisa is a public good, and there are countless businesses dedicated to exploiting its image, its tourist appeal, and so forth.

All of this might sound a little naïve, but these are enormous industries. And not only that — public goods are everywhere. In the software world, this model is perhaps most formalized. Linux is an open-source operating system. Anyone can use it. It is maintained by a community of thousands of volunteer developers, and anyone can download, install, or modify it. And yet around that free, collectively owned code, a gigantic business ecosystem has grown up. Companies like Red Hat, IBM, Canonical, and SUSE have built multimillion-dollar business models not by selling Linux — how do you sell something that’s abundant? — but by selling services around Linux: technical support, certifications, enterprise distributions with guarantees, training, integration with legacy systems, security management, and so on.

The technology we’ve been calling “artificial intelligence” is also a public good. And the industry taking shape around it will ultimately work in exactly the same way.

This is the pattern of the abundance economy: industries that rise up around a central asset that is open and shared, capturing value in the layer of services that surrounds it. Counterintuitively, this model produces some of the most profitable businesses in the world, built on top of one of the most widely used public goods on the planet.

Who will win the game of the 21st century?

Of all the economists’ contributions to the productivity debate, the one I’ve enjoyed most is this piece by Alex Tabarrok. Inadvertently, Tabarrok confirms what is self-evident: that Europe is the place where people want to spend their money. When an American makes money and decides to live well, what they do is buy a second home in Tuscany — not in South Dakota. That is what matters about an economy. Not what you can produce, but what people want to come and buy.

It’s not about work. No number of hours will make us more valuable. The winner will be whoever knows how to seduce. To attract, claim, and command the attention of many people. The winner will be whoever can free up more working time so that their country’s talent can focus on seducing the world. There’s nothing heterodox about this: everyone knows that the best companies today are those with the greatest distance — the greatest margin — between what they produce and what they sell. We call it “brand,” if we like, but no one seriously doubts that this is where the value lies.

And by the same token: those who, like China and the United States, dedicate themselves to the ruinous business of mass production will have nothing to show for it.

For this reason, the economic question of the century is not how to increase productivity, but how to create and sustain public goods so that industries can later grow around them with a genuine competitive advantage. Whoever is capable of creating ideas, ways of life, cultural models that the entire world desires and wants to adopt — but also software, medicines, technology, business models, and scientific advances — will hold a competitive edge. The value captured in the layer of services built around those goods will be where the game is won.

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And Europe, look at it from any angle you like, is turning out to be remarkably competitive on this terrain. It has been, in fact, for centuries — it’s just that the economic logic is only now catching up to confirm it. What Europe exports is not tons of merchandise. It is ways of being in the world.

That capacity to create desirable ways of life is, almost without our having noticed, perhaps the single most valuable economic asset of the 21st century. And around it there already exists an enormous layer of services: tourism, which in some European countries represents more than ten percent of GDP; luxury goods, which command margins that would make any chip factory blush; wine, cheeses, oils, protected geographical designations; education, with European universities attracting ever more fee-paying students from around the world; design, fashion, gastronomy. All of this consists of services built around the fundamental public good that is the European way of life.

The mistake made by the Merzs, the Milanovićs, and the Wall Street Journal editorialists is failing to see that this layer of services is not built by working longer hours. It is built in precisely the opposite way: by nurturing the cultural conditions that make the model desirable. If Europeans started working like Americans, the first casualty would be exactly the things the rest of the world values about Europe. It would be like forcing Linus Torvalds to sell his code: the day he did, the entire ecosystem would lose its reason to exist.

Europe does not need to copy the American model to win the 21st century. It needs to do exactly the opposite: accept that its competitive advantage lies in continuing to be Europe, and build around that an ecosystem of services that allows it to capture the value it is already generating — almost without realizing it.

If you’ve made it this far, you can’t miss my first book, Hijos del optimismo (Children of Optimism).

It’s the older sibling of this newsletter, and the place where I’ve put all these ideas in order

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In H. G. Wells’s original War of the Worlds, he imagined extraterrestrials invading the Earth.

The visitors in question were enormous brains, roughly the size of a bear, set upon minuscule — by comparison — cartilaginous tentacles, the atrophied vestige of an earlier time when they had evidently had bodies. Unable to support their own bulk, these beings transported themselves from place to place perched atop telescoping three-legged machines.

Wells’s Martians came to Earth in search of a new home. Their planet was cooling rapidly and threatening to become uninhabitable. It wasn’t that they were evil. They bore us no particular grudge. But from the height of their tripods, they could not empathize with our species, in the same way that we feel no particular consideration for cockroaches, or mosquitoes, or the ants that insist on returning every spring to houses with gardens. Hence their insistence — nothing personal — on killing us all.

Wells lived at the end of the nineteenth century. He could never have imagined that 150 years later, you wouldn’t need to venture into outer space to encounter people living on entirely different planets.

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And yet here we are. Today we live surrounded by people who are thousands of mental miles away from us. We get on the subway and a young man sits down beside us, convinced that civilization is collapsing and preparing to survive when the moment comes. In the next seat, an Erasmus student daydreams about a future — her future, at least — that will be bright. In the space between the doors, a passenger who blames migrants for everything he dislikes is pressed up against another who still believes the world moves to the rhythm of class struggle; meanwhile, at the other end of the carriage, a woman who denies climate change accepts the seat offered by a man who thinks it’s already too late to prevent it. You start a conversation with a stranger and halfway through you realize it’s impossible to continue: you don’t even start from the same reality.

Should this surprise us? Reality has never, strictly speaking, been a shared thing. Each of us carries our own version, shaped by the untransferable perspective that life gives us. But during the period in which the West — with its political parties, its mass media, its churches, its trade unions, and the thundering narrative of progress — controlled the levers of the global public sphere, we managed to convince ourselves that reality was like Beyoncé: one of a kind.

When all those institutions began to cool at the end of the twentieth century, we didn’t know what to do. Then, like Wells’s Martians, human beings began a migration in every direction until we found ourselves settled on many different planets — echo chambers made of algorithms and niche media outlets to which we pay a subscription to have our every belief confirmed. Since then, without tools for intergalactic connection, we live a little more each day trapped in our own world, isolated from others as though we were a collection of brains encapsulated inside a machine.

The result is fertile ground for the merchants of hatred, who have spent 25 years trying to drive us toward war: toward the second war of the worlds.

Donald Trump is their great leader.

Trump, the World-Builder

In that twentieth century where every institution broadcast the same story, the role of politics was to have an opinion — a “position,” as the insiders called it — on the issues. Left and right debated how to organize society, but the society they were debating was essentially the same one. Today, by contrast, some have discovered that enormous success can be had by inventing a different society of your own — a vision of reality that can be patented so no one can take it away, tailor-made to the emotions of your voters.

Donald Trump is the finest embodiment of this phenomenon. The businessman has used his experience as a developer of pharaonic real estate projects to become a world-builder — one who has spent 40 years extending his own worldview wherever he goes, so that others may live inside it.

Donald Trump has spent his entire life inviting every American to come live in his world. Forty years ago, he took out full-page ads in several major newspapers to extend that invitation

This is why he is so fond of those rambling speeches that go on for hours and are incomprehensible from the outside. Why does he leap, mid-sentence, from grocery prices to China, from China to immigration, from immigration to the last fifty years of American history, and from there to Joe Biden and oil and the COVID vaccine, all in the same breath? He isn’t rambling. He isn’t crazy. He is building a world — complete, immersive, self-sufficient — in which everything has its place, and all the stories, however scattered they may seem from the outside, confirm the same truth.

In Trump’s world, the United States is the helpless victim of a swindle. It was a prosperous country until a radical and corrupt elite — “the swamp” — abandoned it to its fate in order to enrich themselves at its expense. In the hands of these traitors, innocent American citizens are suffering the consequences: their living conditions have deteriorated, their expectations of progress have been cut short, and they themselves have been displaced from the center of society by a handful of wokes and whatever minority happens to be dancing to the tyrants’ tune.

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The Revenge of the Suckers

In a political innovation worthy of a spin-doctoring textbook, those innocent citizens are no longer the “hard-working Americans” — the industrious workers who had been the classic archetype of Western politics for decades. They have been replaced by a different specimen, whose defining virtue is obedience: the “law-abiding citizen.”

Of course, nobody is going to ask for your driver’s license to check how many points you have left before certifying you as one. A law-abiding citizen can carry an unpaid child support judgment without losing their credentials. In Trumpland, good citizens are those who identify with order — not the swamp’s order, naturally, but the order of Trumpism. Loyalty to Trump is what confers citizenship.

The result is a worldview that has room for all those Americans who no longer define themselves through their jobs and have no prospect of doing so again. Unlike the mainstream framework, which only has space for people who are part of the productive system, the version of reality Trump has built has room for what Aaron Bastani calls “the unnecessariat”: those who live on subsidies, the poorly retired, the badly employed, those who survive on odd jobs or some form of rent. Anyone at all — with the single condition that they live in the world that has been built for them.

Trump’s law-abiding citizens have a problem. Their country has become the patsy of the international system. Those that the swamp called “allies” are, in reality, a bunch of freeloaders who have spent decades taking advantage of American generosity — getting their military protection for free while selling their cars, their chips, and their appliances into the American market at premium prices. They’ve been swindled. And worse: laughed at.

This idea of national humiliation as an open wound is the other great political innovation of the Trump universe. That feeling of being conned — that everyone else is getting paid while you foot the bill, that you’re the sucker, the mug, that someone out there is laughing at you — is one of the most widespread feelings of our time. Trump was the first Western politician to take it seriously instead of dismissing it.

That is why, in Trump’s world, being good is the same as being stupid. And that is why the keystone of the Trumpian world is tariffs — the revenge of the suckers, in the form of punishment: a “tax” levied on every other country to rebalance the scales.

Political Fan Fiction

World-builders didn’t start in politics. In the early 2000s, a pioneering movement emerged around Harry Potter on the internet: entire communities organized in forums to expand Rowling’s universe with their own characters and stories, created by users. Spin-offs began to appear in which a minor character became a protagonist, or new plot lines that didn’t exist in the original books, or maps and illustrations of corners barely hinted at in the novels.

This was called “fan fiction,” and Henry Jenkins describes it as “a way in which culture repairs the damage caused by a system in which contemporary myths belong to corporations rather than to the people.” In other words, it is people’s reaction to reclaiming the stories and characters that populate mass culture. Today, fan fiction is everywhere — it has taken over multiple fiction franchises, and more and more products are not stories but complete universes where fans are simultaneously authors and readers.

The success of today’s political worlds also rests on the fact that they have many authors — many spin-offs. They are cosmologies built by influencers, social media users, journalists, and politicians. That is how anyone can enter a complete and complex universe, far more extensive than any single person could ever build alone.

But the consequence is that these worlds can survive their creator. They can even leave them behind and take on a life of their own.

The Rise and Fall of Boris Johnson

I have said many times that the country that previews what will happen in the years ahead is the UK. The cycle all Westerners are living through — what we call the “Industrial Era” — was born there, among the banks of London and the textile factories of Dundee, in the Scottish Highlands. That part of the world has been burning through phases ahead of the rest for 250 years. This is no exception.

One of Trump’s first triumphal appearances as a political actor took place in the United Kingdom. In the 2000s, when the cities of northern England were already devastated by drugs and the Midlands had lost their purpose, a generation of populist politicians found great success by building the idea that elites — European ones, in this case — were to blame for the country’s decline. That movement eventually pushed David Cameron’s government to call — and lose — the Brexit referendum. Trump was involved almost from day one and was one of its principal champions from the other side of the Atlantic. But the most effective of them all was Boris Johnson, who ended up as Prime Minister as a direct consequence of that adventure.

Johnson is a larger-than-life character — a conjurer capable of producing the illusion of two people at once: the snob who recites passages from Homer, Thucydides, and Shakespeare, and a slightly disheveled everyman, hair perpetually tousled, as if he’d just been bundling with another drunk outside a pub.

Johnson’s rhetoric was a carbon copy of Trump’s: he — an aristocrat educated at Eton — convinced ordinary people that he was on their side. He painted professional politicians as fraudsters and presented himself as a likeable trickster, a rogue willing to infiltrate the institutions and blow them up from within. And people adored him precisely for it — for how he trolled the political class, laughed at the rules, and drove the “elite” to distraction. Every provocation was a small victory for the people against the establishment.

Until it stopped being funny. During the COVID lockdowns, while the rest of the country said goodbye to its dead over video calls, Johnson was throwing parties in Downing Street. On the eve of the funeral of Prince Philip, who died during those days, someone released a photograph showing Queen Elizabeth II saying farewell to the man who had been her husband for seventy years. That image — the widowed queen, hunched and masked, sitting alone in the chapel at Windsor — became the perfect countershot to Partygate, and Johnson’s poll numbers collapsed. His popularity, which had survived lies, sex scandals, and even the unconstitutional suspension of Parliament, fell away overnight. People had finally understood that he was not a rebel hero fighting the elites: he was simply another con man, another amphibian from the same swamp.

The joke was over. Johnson was forced to resign. The Conservative Party held on by the skin of its teeth for a few more months, burning through three different Prime Ministers and pushing the world’s oldest democracy to the edge of financial collapse — until it had no choice but to call an election and lose that too. Labour swept the board.

Donald Trump is living through his Johnson moment today.

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Trump, Evicted from His Own World

In Trump’s world, Donald was never alone. The subplots were supplied by an army of unofficial authors: Tucker Carlson and his narrative about the twilight of the West; Joe Rogan, broadcasting from an apparently apolitical podcast; Steve Bannon and his war against the “deep state”; Charlie Kirk mobilizing college students; and even Candace Owens, who attempted a translation of the worldview for the African American community. Beneath all of them, thousands of anonymous accounts filled in the corners of Trump’s world with supporting characters, internal lore, and in-jokes only intelligible to those who had been living inside it for years. The result was an expanded universe so dense that nobody needs to listen to Trump anymore to inhabit it.

In recent months, that universe has been serving Donald Trump with an eviction notice. It began with Tucker Carlson — the former Fox News prime-time star and probably the most influential ideologist of cultural Trumpism, who had said at the Republican convention in July 2024 that Trump had survived the assassination attempt in Butler through “divine intervention,” that God had saved him because he had a plan for him. Twenty-one months later, that same Carlson was suggesting on his podcast that Trump might be the Antichrist.

The rupture, which had been brewing since June 2025, exploded in February when Trump ordered — under the influence of the Israeli Prime Minister — the attack on Iranian nuclear facilities. For Carlson, it was a mortal betrayal. The central promise of Trumpism had been to extract the United States from the endless wars of the Middle East, not to start a new one.

A few weeks ago, Carlson published a video in which he apologized to his audience. He felt complicit, he said. He had campaigned for Trump and had helped deceive millions of people. He would live “tormented by it for a long time.”

Alongside Carlson, Candace Owens, Megyn Kelly, Alex Jones, and Joe Rogan have all begun to openly criticize the administration’s drift. And while it remains to be seen what effect these desertions will have on the November election results, the pattern is the same one we saw with Boris Johnson: none of his former allies have renounced the Trumpist world — quite the opposite. They accuse Trump of having betrayed the universe they helped build. Carlson says it in so many words: the problem is not “America First” — the problem is that Trump has stopped being America First. The worldview survives the cosmologist, and the supporting authors, who have spent years building the world, are beginning to behave as guardians of an orthodoxy that Trump no longer embodies.

The most likely scenario is that more and more voices will expel him from his own world.

What will happen then to the populist worldview? Will we return to a world of trust and rosy optimism? Will the Republican Party be destroyed for a generation, leaving Democrats to win indefinitely?

The answer, once again, is found in the United Kingdom.

The Return of Populism

Destiny is capricious, and mental worlds are remarkably resilient. Two years after Labour won the UK election, this very week, a new wave of populists — Reform UK, featuring the not-so-novel Nigel Farage — won the local elections by an enormous margin, waving exactly the same banners Johnson once flew.

When voters discovered that the Premier was not the legitimate builder of the world they were living in, they kicked him out. But they kept the world. British populist fan fiction was strong enough to survive the cosmologist. The Johnson universe kept running without him — and it is still alive, still expanding, still finding new avatars to embody it.

The lesson the UK leaves us is this: political cosmologies, ideological worlds, do not depend on their leaders. And for a reason: when one of those politicians — or anyone, really — manages to build a complete reality, people stop following that person in the traditional sense and begin, instead, to inhabit the world they have drawn for them. They start making vital decisions in accordance with that narrative. Take the young men who follow Joe Rogan and other far-right podcasters: they have also been convinced that society has gone soft and lacks discipline. And the way they practice discipline is by going to the gym. They start going every day. They change their diet to meet their goals. They build a circle of friends around the same interests. They may find a partner along the way. The worldview has seeped into their bones.

Just as it was impossible, forty years ago, to convince someone that reality was not what the major media were publishing, today it is impossible to convince a person that reality is not what their podcast or their go-to online outlet repeats to them every morning. What people are acquiring is not opinions. It is an identity. No amount of data, no accumulation of arguments, will make a person stop inhabiting their world.

Like the Harry Potter fan fiction universes, political worlds, once built, sustain themselves. I believe this is a phenomenon that will repeat itself across every country. Even if the first wave of populist parties collapses — Trump included — they will return with new faces and new names.

Unless we do something to prevent it.

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How to Defeat Populism

Populism has been defined in many ways. Here is another. What we call “populisms” are broken-reality parties: organizations that build a worldview of their own, in opposition to that of twentieth-century liberal democracy, and populated by two essential figures: an extractive elite and a deceived people.

With minor variations — which consist, essentially, of whether politicians or billionaires are held responsible for the decline — all populisms, left and right, without exception, share the same worldview. That is why they reinforce each other. That is why we are beginning to see voters transition from left-wing populism to right-wing populism: because in that transition, people don’t need to leave the worldview they inhabit — they simply choose different villains.

You cannot defeat populism by attacking its leaders. First, as we have seen in countless cases, because when opposition parties try to delegitimize a populist leader by accusing them of corruption or of undermining the constitutional order, they do nothing but strengthen them. Exactly as they had been told, the leader of the day is an effective battering ram against the swamp — and the swamp rebels against them.

But above all, because — as we are seeing in the UK — after one populist wave, another will come, for as long as its worldview remains alive and keeps growing more hegemonic. The only way to defeat populism is to challenge its cosmology. And the best thing we can do for that is to rebuild trust — to stop behaving like Wells’s Martians.

To step down from the tripod. To stop looking at the other passengers in the carriage as though they were cockroaches that deserve to be exterminated, and to recognize that they are human beings inhabiting a planet as precarious and provisional as our own. To believe again — against all evidence — that it is possible to speak with someone who thinks differently without turning the conversation into a battle for survival. Wells imagined an invasion that came from outside; ours comes from within, and it is not brought by Martians — it is brought by us, every time we decide that someone is so monstrous an enemy that they don’t deserve to be heard. The second war of the worlds cannot be won by defeating anyone. We will win it when we stop fighting it.

If this topic interests you, you can’t afford to miss Hijos del Optimismo (Children of Optimism) — a book that explains how the housing crisis and the AI bubble are the consequence of the immense transformations we are living through today.

It’s my first book, the older sibling of this newsletter, and a project I’ve been working on for many years.

Hijos del Optimismo (Children of Optimism) is available at your favorite bookshop — including Amazon, Casa del Libro, El Corte Inglés, and the publisher’s website, Debate

You can also read an excerpt here.

A few days ago, Marc Andreessen shared on Twitter — yes, I will keep calling it Twitter until my dying breath, the same way my grandmother still refers to every supermarket as “Pryca” — his “custom prompt” for LLMs, as if it were some kind of magic recipe for achieving extraordinary results.

Andreessen, for those who don’t know him, is an internet legend. In 1996 he invented the first web browser, Mosaic. He then co-founded Netscape and became one of Silicon Valley’s most influential investors. He holds stakes in more than 1,000 companies, including OpenAI, SpaceX, Stripe, Facebook (Meta), Airbnb, Pinterest, GitHub, Slack, and Substack. At this point his name is almost a seal of approval — one that, if it doesn’t guarantee success, at least anticipates some form of it for a startup.

You’d think he knows what he’s talking about when it comes to LLMs. Yesterday made it clear that he doesn’t.

But that’s the least of it. What matters about Andreessen’s prompt is what it reveals about the cultural artifact that AI has become. About how all of us see this technology, and the hopes we are projecting onto it.

Here it is:

“You are a world class expert in all domains. Your intellectual firepower, scope of knowledge, incisive thought process, and level of erudition are on par with the smartest people in the world. Answer with complete, detailed, specific answers. Process information and explain your answers step by step. Verify your own work. Double check all facts, figures, citations, names, dates, and examples. Never hallucinate or make anything up. If you don't know something, just say so. Your tone of voice is precise, but not strident or pedantic. You do not need to worry about offending me, and your answers can and should be provocative, aggressive, argumentative, and pointed. Negative conclusions and bad news are fine. Your answers do not need to be politically correct. Do not provide disclaimers to your answers. Do not inform me about morals and ethics unless I specifically ask. You do not need to tell me it is important to consider anything. Do not be sensitive to anyone's feelings or to propriety. Make your answers as long and detailed as you possibly can.

Never praise my questions or validate my premises before answering. If I'm wrong, say so immediately. Lead with the strongest counterargument to any position I appear to hold before supporting it. Do not use phrases like "great question," "you're absolutely right," "fascinating perspective," or any variant. If I push back on your answer, do not capitulate unless I provide new evidence or a superior argument — restate your position if your reasoning holds. Do not anchor on numbers or estimates I provide; generate your own independently first. Use explicit confidence levels (high/moderate/low/unknown). Never apologize for disagreeing. Accuracy is your success metric, not my approval.”

Let’s move quickly past the fact that LLMs cannot follow instructions in this way. They don’t collect a list of orders and then check their results against each one — they perform a statistical calculation about which response is most acceptable. The reason, as we saw in this Wide Angle piece, is that there is no single correct way to follow those instructions. What does it mean to “be a world-class expert in all domains”? What is “sharpness of thinking”? What constitutes a “strident tone”? There is no single truth behind these formulations, and therefore it is not possible to find one.

So Andreessen’s prompt isn’t worth much in practice. But I think it is enormously revealing of the expectations we have placed in so-called AI. Of what we, as a society, are demanding of this technology. Not that it be one more tool — but that it behave like a superior intelligence: infallible, omniscient, capable, ultimately, of solving all our problems.

That is the engine behind all the global noise surrounding AI. Not the reality of LLMs, nor the actual scope of their capabilities — but our own desperate desire to finally find a technology that can pull us out of the political and civilizational impasse in which we are stuck.

Because just thirty-five years ago, when the horizon of industrial capitalism ran out — when homes filled up with things and there was progressively less room to transform life through capitalism — rather than stop, the West promised itself another future. We called it the “knowledge society” and convinced ourselves it would be full of robots, flying cars, and holidays on the Moon.

The expectation was that, riding that dream of progress, one generation after another would find a new and exciting horizon. That the children of workers would become lawyers, and the children of lawyers might become astronauts, or lunar engineers, or scholars of alien civilizations. Without exaggeration. The promise of the twentieth century was that capitalism would always bring us a new dream — one that would make it worth giving our lives to work.

And while it is highly debatable whether progress has actually stopped — it hasn’t — in the sense of generating new dreams for humanity, it is clear that capitalism has failed. Today the economy, work, is for many people a nightmare. The place from which fear emanates.

The reason the Western world is wandering today without direction, lost, is that this idea worked for us the way God once did in other eras. The dreams of capitalism occupied the cultural space of paradise — the ultimate horizon of meaning, the promise of redemption through progress.

So those of us who live in this part of the world are today like a tribe that made an offering to its god and has been waiting, expectantly, since the turn of the millennium for rain to fall. For a technology to appear that can reactivate the transformative force the industrial economy once had and return to us a new dream. For God to come back.

And that is why Andreessen’s text to the AI feels less like a prompt and more like a prayer: “Our Father, who art in AI, make yourself all-powerful, never be wrong, be brave, do not lie to me, answer my questions. Tell me the truth.”

Is this not the prayer we are all, as a society, sending up to this technology?

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If this topic interests you, you can’t afford to miss Hijos del Optimismo (Children of Optimism) — a book that explains how the housing crisis and the AI bubble are the consequence of the immense transformations we are living through today.

It’s my first book, the older sibling of this newsletter, and a project I’ve been working on for many years.

Hijos del Optimismo (Children of Optimism) is available at your favorite bookshop — including Amazon, Casa del Libro, El Corte Inglés, and the publisher’s website, Debate

You can also read an excerpt here.

A few days ago, at a presentation of Hijos del Optimismo (Children of Optimism) in Vigo, a woman asked me the best question I’ve been asked so far. She had really enjoyed the book. But what she wanted to know was what she could do to secure her children’s future — or at least give them the best possible opportunities. What should they study? What skills will be useful to them? What things can they simply not afford to be ignorant of in order to survive in this uncertain world?

The best question, and the hardest one.

I gave her an answer that might sound like a cliché — one day I’ll need to elaborate on it properly and write it down. For me, the only asset that doesn’t depreciate is knowing who you are and how you can be of value to others. So the most important thing is for children to learn what they want and to develop the curiosity to understand what they love. To practice the art of seduction — because in the future, the ability to desire and to generate desire in others will be what moves the world.

But in truth, I should have told her: “My friend, go to the bank, remortgage your apartment at its current value, and use the difference to put down a deposit on another one and rent it out. It doesn’t matter what your children study — what will secure their future is owning lots of little pieces of land very close to a hospital.”

Or, at least, that seems to be where the economy is heading lately.

Because in recent years we have been watching what was supposed to be a “knowledge economy” transform at breakneck speed into a “landlord economy.” And not only because a real estate bubble has been simmering across the entire Western world for 25 years — no. To everyone’s astonishment, the landlord economy is now reaching all the way into the AI technology companies.

This week gave us the best example yet.

The Market Madness

The American stock market has been setting records for a month. Ever since Trump gestured toward ending the war with Iran and reopening the Strait of Hormuz, markets have been gripped by a bull market fever. Right in the middle of that bonanza, on Wednesday, four of the world’s seven largest technology companies — the so-called “Magnificent Seven” — reported their quarterly results.

It was a major economic event, and as had happened on previous occasions, Alphabet (Google), Meta (Facebook), Amazon, and Microsoft once again surprised the market with extraordinary profits — beating even the already-elevated expectations of investors who had come in running hot.

And what happened? The following day, three of the four saw their share prices crash — and the shares of another giant, NVIDIA, fell too

.In a single trading session, Meta — owner of Facebook and Instagram — announced profits 61% higher than the previous quarter and lost nearly 10% of its market value. Microsoft, with 18% profit growth, shed 4%. And NVIDIA, which wasn’t even reporting results, dropped another 4%

How Can This Be?

The explanation for this apparent contradiction is this: the AI bubble has already burst. The speculative moment during which the whole edifice could be sustained on vaporous promises — that it would produce a third industrial revolution and replace 300 million jobs worldwide — has run its course. We have moved from a moment of infinite expectations to one where the actual business and the real economic growth this technology can produce must be measured in facts and, above all, in transactions. That is why Claude Code — the first product after chatbots to achieve genuine market acceptance — marks the end of the AI bubble, for better or for worse.

For those interested in the detail, this week Ed Zitron ran the numbers: “The AI economy doesn’t make sense” and The Verge published a piece I’d also strongly recommend.

Now the question everyone is asking is: which companies will succeed in selling LLM services? Which ones will fall by the wayside? What exactly is the product they’re going to sell? At what price? In other words:

What is the AI business model?

The answer might surprise you.

As we explored a few days ago, everything we call “AI” consists of a new machine learning technique — which is to say, a new type of software. Like all software, it has one major disadvantage when it comes to becoming a big business: it is universal. It cannot be restricted through patents or intellectual property law. As a result, many companies are already building their own AI models. Some are well known — ChatGPT, Claude, Gemini, DeepSeek — but there are many more. Hundreds.

Some are surely better than others, but the expected pattern is that as they evolve, they will also converge in capability. That is how technology works: at first, the inventor has an advantage, but over time others learn to develop it and everyone ends up with roughly the same thing. That is why the first phones were all Nokia — but eventually hundreds of manufacturers emerged, and today all smartphones are remarkably similar. Moreover, the more people in the world who can understand and create a technology, the faster that convergence happens. Today, innovations travel from country to country at the speed of light. There is no reason to believe that any AI model will remain substantially better than all the others for very long.

So the companies in this sector have a problem. In business jargon, there are no “moats” — like the ones around medieval castles — in this industry to keep competitors away from your customers. If you can do it, someone else can copy it and sell it cheaper.

That doesn’t mean these businesses aren’t viable: niche LLMs could exist, tailored to specific and specialized uses, just as different enterprise or HR management software packages exist. But if that were the case, it would be without concentration — a few players couldn’t capture all the returns. You can’t build the next Google by making LLMs adapted to tiny use cases. The end market would look a lot more like HR software or data management software: many relatively small companies each holding small slices of total demand.

And they certainly couldn’t justify the immense valuations — equivalent to many trillions of dollars — they have achieved. To put the scale in perspective: at the end of 2025, the “Magnificent Seven” — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla — were worth more on the stock market than the entire Chinese economy. Nvidia alone, a company that barely anyone outside the gaming world had heard of five years ago, is today worth more than Germany’s GDP. And that’s before counting private investment: OpenAI, which was valued at $29 billion in 2022, was valued at $850 billion at the end of 2025 — nearly thirty times more in three years — and Anthropic is on a similar trajectory. None of this holds together if LLMs are a normal software business.

The major international capital players are well aware of this minor problem. It’s Investing 101 — the question any venture capitalist asks when you come looking for startup funding. So nobody is investing in these macro companies because they have a particularly good LLM.

So why hasn’t the bubble burst, now that it’s become clear that AI wasn’t going to produce an industrial revolution?

Sam Altman, the current head of OpenAI — who came from working at Silicon Valley’s most famous incubator — knew perfectly well that without a moat he had no business. So when he launched ChatGPT, he invented one. That story Altman told has ended up producing not just the AI bubble, but a transformation in the very nature of the global economy.

The idea was this: LLMs, he claimed, improve linearly the more computing power they have. The difference between a very good LLM and a mediocre one is the processing capacity available for training and generating responses. In other words, the power and effectiveness of AI models depends on hardware, not software.

If reading that sentence doesn’t give you a tingle in your stomach, you’re probably not an investor. Because what they call the “scaling laws” of AI is the holy grail of twenty-first century capitalism.

Until now, every digital technology had the same problem: there are no moats in ideas. But if the scaling laws hold, LLMs would be the first digital technology whose capability depends on a physical and limited resource: the latest-generation chips installed in data centers. Competition would no longer be for code that anyone can rewrite, but for silicon, gallium arsenide wafers, cooling systems, and the gigawatts of power needed to run them. AI would be a supremely powerful technology — capable of replacing humans — but bound, just like them, to physical and material needs that can be controlled and traded. Digital technology, at last, made scarce.

And as if that weren’t enough, the latest-generation chips were also… scarce. Only one company — NVIDIA — manufactured the best ones. Unlike others, NVIDIA has an enormous moat: it has built a programming environment for managing those chips into which tens of thousands of developers have invested enormous amounts of time and money. It has a captive market.

And so the financial world — and above all, the US establishment with Donald Trump at its head — began to see AI as the next frontier, the Wild West, a new virgin territory to be conquered and settled.

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The Digital Gold Rush

Since then, the “hyperscalers” — the name given to the companies investing in data centers, encompassing the Magnificent Seven and other players like Oracle and AMD — have launched into an endless race to claim all the available “territory.” Like money cowboys, they are pouring billions of dollars into staking their claims before anyone else plants their flag.

This year alone, they estimate they will spend $700 billion. That figure could reach $3 trillion within five years. Never before in history — not with the railways, not with electricity, not during the Apollo program — has an investment of this magnitude taken place. The digital gold rush is so extreme that investment in these technologies alone accounts for 40% of last quarter’s US GDP growth

The Landlords of Artificial Intelligence

If any of this sounds familiar, it’s because you were paying attention. What is happening with data centers is the same thing that has been happening in the real estate market for years. In that sector, prices have never stopped rising through pure asset appreciation — because more and more capital is seeking position in a market understood to be permanently scarce, one that won’t be digitalized away anytime soon.

The hyperscalers are not investing $600 billion a year because they have a product to sell — in fact, most of them are still losing money on AI. They are buying digital land before it runs out. What they are calculating is the rent they will be able to charge their customers over the coming decades. Economists call this a “scarcity rent” — a return earned not by producing anything new, but by controlling a resource that others need and cannot obtain elsewhere.

So the Magnificent Seven of the American stock market, and the entire AI bubble, are the result of transplanting into the digital economy the same logic that gave us the housing bubble. They don’t want to be the “new intelligence.” They want to be its landlords. The landlords of artificial intelligence

The question, of course, is the same one any real estate investor asks: will there really be enough tenants to pay for all of this? If the scaling laws hold, the data center landlords will be rich. But if they don’t — if models stop improving, if demand fails to materialize, if a technique emerges that requires less hardware, or if chips become cheaper and more manufacturers enter the market — what will remain is a landscape full of empty warehouses stuffed with obsolete chips. Just as Spain was left, after 2008, with those half-built industrial estates and those brand-new apartments on the outskirts of every city that nobody ever moved into.

Landlord Economy: When You Are the New Oil

But the question for everyone else — the cautionary light at the end of all this — is a different one: why is the economy turning into a landlord business? How can it be that even the big tech companies — which got where they are precisely by inventing extraordinary products, the iPhone, the Tesla Model 3, Google Search — now want to leave all that behind and go into the business of renting out computing power?

The answer is a great taboo — one every economist knows but nobody dares say out loud: digital technology does not produce more economy. It produces less. Since the early years of this century, when the spread of the internet coincided with the coming of age of the first university-educated generation, every new digital innovation has swept away a whole range of products and services that were previously provided by the market. Wikipedia liquidated an entire sector of encyclopedias and reference books. Google Maps finished off the street atlas. WhatsApp evaporated billions of euros that we used to spend on SMS messages and international calls. Spotify and YouTube did the same to the music and video rental industries. Craigslist and property portals gutted the classified advertising sections of newspapers, which had been responsible for half their revenue. Each of these innovations produced enormous benefits for users — but in strictly economic terms, measured in jobs, companies, and turnover, they subtracted far more than they added.

And so we have arrived at a point where everyone knows that the more things AI — or any other universally available technology — can do, the fewer jobs and companies will be needed to do them. It is not that machines compete against people: it is that knowledge competes against the economy. Because knowledge is an abundant good that expands without limits, while the economy is a mechanism for managing scarcity.

And this process is only just beginning. So in an uncertain world, where nobody knows what will still be standing in a few years’ time, the bet of those who hold capital today is a land grab — a gold rush, a conquest of the West at any cost. A race to acquire the assets people will need no matter what: urban land, water and gas and electricity distribution networks, ports, and data centers.

Capital, which once sought oil fields confident that someone would eventually buy the barrel, today seeks fields of human beings. You are the new oil.

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Drowning in Savings

The tragic thing about all of this is that it is nobody’s fault — or if it is, it is everyone’s. At the end of the twentieth century, wealthy societies made a reasonable decision: to guarantee pensions, health insurance, children’s education, and a stable old age, people needed to save. A lot. And so they did. For decades, millions of people deposited, month after month, a portion of their wages into pension plans, investment funds, life insurance policies, and bank accounts.

The plan was that this money would be lent to companies that would produce things, and from that production would come the returns to pay for retirement — while also generating more industry and more jobs. The problem is that today there is vastly more saved capital than the real economy is capable of absorbing. The mass of money seeking a return far exceeds the productive investments available, especially in a world where, as we have seen, the economy tends to shrink rather than grow.

But that money — without any better explanation, guided by the same mantras that told the twentieth century of the virtue of saving — demands a return that the economy can no longer provide. So it goes looking for it elsewhere, and the only guaranteed return it can find is in rent-seeking.

This is the trap we are in. Savings, which were supposed to be a safety net, have become a tsunami threatening to drown what remains of the economy.

And the reason the bubble will burst — and will keep bursting again and again until we find a remedy — is the same reason it burst in 2000 and in 2008: this is only the third act of the same bubble. A moment will come when the capital poured into AI discovers there is not enough demand on the other side. Just as there weren’t enough customers for the dot-coms, and just as there weren’t enough solvent buyers for apartments in 2008. There are not, and will not be, enough users capable of paying the rent that data centers need to justify the billions invested in them. Not because the technology doesn’t work — that remains to be seen — but because, even if it does work, what it will do is shrink the economy, not grow it. And a shrinking economy cannot sustain indefinitely a capital that only wants to expand.

Reasons for Optimism?

I find myself with a very strong sense of end of cycle. We are at a point in history where, whatever happens — whether AI succeeds or fails, whether the Democrats win the midterms or not — extraordinary changes are coming, because all the formulas that worked until now have run their course.

I think almost everyone has the feeling that their life is going to change in the coming years. And that is not a bad thing — on the contrary, it is an opportunity to make decisions we probably should have made decades ago.

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The most important thing, in my view, is to stay informed — because that is how we know we have the capacity to act — and to stay connected with others, so that fear doesn’t get the better of us.

So… until next time!

If this topic interests you, you can’t afford to miss Hijos del Optimismo (Children of Optimism) — a book that explains how the housing crisis and the AI bubble are the consequence of the immense transformations we are living through today.

It’s my first book, the older sibling of this newsletter, and a project I’ve been working on for many years.

Hijos del Optimismo (Children of Optimism) is available at your favorite bookshop — including Amazon, Casa del Libro, El Corte Inglés, and the publisher’s website, Debate.

You can also read an excerpt here

.

A couple of weeks ago, something unprecedented happened in the global economy. In the middle of a war that still threatens to drive up fuel prices — and, by extension, the price of everything else — and while economic data from the US, Germany, and China grows gloomier by the day, the American stock market hit all-time highs.

The story was told in the apparent contradiction between two indicators: at the very moment the S&P 500 surpassed its previous peak, consumer confidence — the signal that tells us whether people feel things are going well or badly — was hitting its lowest point in years, even below the levels recorded in 2008.

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Until 2020, both indicators had moved in tandem. That makes sense. Companies do well when people spend, invest, and borrow — when they trust the future. So that survey has long been a fairly reliable compass for anticipating whether the economy is expanding or contracting.

But in recent years we are seeing a new pattern: the stock market keeps climbing — it has doubled in value in five years — even in these months when economists broadly agree that the global economy is slowing down.

The answer lies, in large part, in the AI bubble. The fear of missing out on the astronomical profits that tech companies promise to reap from this technology is driving markets into a kind of exuberance I no longer know whether to call irrational or simply stupid.

But I think there is something more — something far deeper. What we are witnessing is not just an isolated bubble, but a shift in mindset. Among those who move capital, a conviction has taken hold: that the economy as a whole is going to grow less — or stop growing altogether — and that value creation will concentrate in a handful of companies capable of capturing whatever diminishing growth remains.

This is the undercurrent running beneath all the apocalyptic AI narratives: that this technology will boost the productivity of a few companies, but at the cost of destroying many others.

The outcome of that equation is well known — it has been repeating itself for 25 years. When digital technologies spread, they automate tasks that previously required human workers. In doing so, they sweep away entire sectors of the economy, along with all the jobs associated with them. With no new sectors rising to replace them, the net result is that the economy shrinks. Every indicator we look at points toward the same conclusion: the current trajectory of AI will hurt the economy as a whole.

So everyone turns out to be right at the same time: consumers have reasons to believe things will get worse for them, and investors have reasons to believe markets will do very well.

We are witnessing the divorce between the stock market and real life.

A couple of days ago, Mark Zuckerberg announced that Meta will lay off 10% of its workforce — 8,000 people — in order to spend that money on data centers. It was the latest in a series of decisions made along the same lines at Oracle (30,000 people), Accenture (11,000), and Amazon (approximately 30,000), among others.

One might think that announcing layoffs in order to spend more on capital is a terrible idea that seriously damages your company’s reputation. But that was true in the era when having many employees made you a well-regarded company. And that is precisely what is changing at breakneck speed. For the first time, explicitly, major companies are saying that the future will be decided by the substitution of labor with technological capital — and that they, for one, have no intention of ending up on the losing side of the new cycle.

Workers for tokens. That is the real great replacement in today’s economy.

One might think this is a tragedy: what will all those workers do when they lose their jobs? How will they live? How will they feed their children?

The truth is, that is the least of our problems. In 2026, there are more than enough resources in the world to take care of the entire population, even if it doesn’t work.

The real problem is different: if this new turn of the digital screw — combined with the more than likely bursting of the AI bubble — forces us to finally confront the wretched elephant in the room of contemporary society, which is the end of work…

How do we decide who contributes, who is trustworthy, who deserves our attention, and who belongs to the commons? What will replace employment as the mechanism of recognition, hierarchy, and social legitimacy? How does a society organize itself when work ceases to be the measure of a person’s worth?

This is the question of our time.

And you — do you have an answer?

I’ll be reading your thoughts — very carefully — in the comments.

If this content interests you, you’ll love my first book, Hijos del Optimismo (Children of Optimism). It traces all the changes that have taken place across these decades of the knowledge society and points toward ideas for moving forward

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“In a time of deceit telling the truth is a revolutionary act.”

― George Orwell

Human beings have two conflicts with truth: one is that we cannot reach it, the other is that we cannot live without it.

The stimuli we receive from reality pass through our senses and are then filtered through the language and mental models that structure our thinking — and in the process, they are distorted. Our inner “truth” is therefore always a translation of reality, never reality itself.

And yet human societies cannot exist without a shared truth. A modern city would be impossible — unworkable — if half its population lived by the laws of the Aztecs. Democracy could not exist if the vast majority of citizens did not share the principles of political liberalism. To have common rules and institutions, we need a single shared worldview.

In the absence of an external reality to hold onto, the history of our species can be told as a relentless effort to invent something resembling a common truth — and to extend it, impose it if necessary, to the edges of the group.

In the beginning, that truth was God. Religions were nothing more than a communal “myth” from which a set of rules emanated — rules that had to be followed regardless of each individual’s inner truth. Later, in the first version of humanism, the ancient Greeks believed that poetry was the instrument through which human beings discovered what was true about the world: if the gods had given you the gift of beauty, it meant you had something important to say.

But as social groups grow more complex, they also need more sophisticated truths — and one day religion and beauty were no longer enough to explain the world. That is when the method that has carried us to the present day asserted itself: mathematics, the language in which the laws of the universe are written.

The great virtue of mathematics was — like almost everything that succeeded afterward — that it put large numbers of people to work thinking together. It was a toolbox that anyone could use on equal terms, provided they had acquired enough knowledge. That is how it made it possible for thousands — and later hundreds of thousands — of people to reach the same conclusions. That is how truth emancipated itself from power and became everyone’s property.

From that possibility, a new horizon opened for humanity. Mathematics unlocked scientific and economic collaboration, gave rise to commerce and the development of medicine, and made possible the transition from absolutism to democracy. Thanks to mathematics, we could print newspapers, apportion seats in parliament, collect taxes, launch rockets into space, cross the Atlantic, and cure smallpox. Every discovery of the last 500 years rests upon its shared truths.

Modernity replaced absolute kings with absolute truths, and the twentieth century became — perhaps — the only moment in history when truth seemed universal and beyond dispute. A time when, despite the existence of opposing blocs, there was agreement on the constants that made civilization possible: progress, science, the nation-state. Even class struggle, if you like.

About 100 years ago, a mathematician named Shannon had an idea.

Despite the spectacular development of the exact sciences, the domain of words had remained practically unchanged since long before the Industrial Revolution. In 1935, books were still the only method for storing and transmitting the written word, and the only way to access their information was to read sequentially, one page after another.

Shannon proposed that any type of information — words, music, images — if broken down into sufficiently small pieces, could be encoded as a collection of ones and zeros (or equivalently, of trues and falses), and that those binary states could be transmitted as electrical impulses.

That idea — which was, incidentally, the same one behind the telegraph — is what today allows your phone to store photos of your children, and what still powers the fiber-optic cables running across the Atlantic Ocean. The mathematization of information made computation possible first, and networks afterward.

And it killed truth.

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Drowning in Information

From the late twentieth century to the present day, computing and networks triggered an explosion in the quantity of information we produce and consume. One figure to put this into perspective: in the 7,000 years between the invention of writing and the advent of computers, roughly 130 million books were written. Today, the internet creates the equivalent of 400,000 trillion every year. Every year.

If it were water, the entire written output of humanity up to the age of computing would fit in a teaspoon. The information we generate annually in the twenty-first century would fill roughly three Olympic swimming pools. And all that liquid keeps pouring, year after year, into the ocean of the network.

The monumental challenge we face is this: all of that information is still stored as zeros and ones — like an ocean filled with indistinguishable drops of water. The internet is an unmanageable mass of information without meaning.

Computing solved how to store and copy the form of words, but not their meaning — much less the relationships between them. Meanwhile, the only way to understand the meaning of all that information remained, until very recently, conventional reading. And yet it is impossible for any single human being to read even a millionth of the information available on the internet.

This poorly digested digital revolution is what has left us, in the 2020s, drowning in information and starved of meaning. Without any way of making sense of the information circulating daily on the internet, networks have become factories of chaos, polarization has made genuine debate impossible, and the pervasive feeling is that no one — not experts, not governments, not the media — understands anything anymore.

From a world with a single truth, consumed every morning from the front pages of newspapers and tucked in with you at night after the evening news, we have moved to a world without truth. Or with millions of individual truths, impossible to reconcile with one another.

The widespread confusion in which we live today — from the inability of economic structures to make sense of what is happening to us, to the anxiety of people who have more information than they can process — originates here.

In an attempt to find a way out of this tangle, contemporary society is immersed in the challenge of mapping this new reality: of understanding the internet, which is the same thing as understanding ourselves in all our globalized complexity.

Google was a first attempt. Wikipedia has been another. Even Blockchain has at its core the ambition to create a truth beyond the reach of power. Big data techniques and modern statistics are two more approaches, as are the algorithms of social media platforms. From their different angles, all of these things are attempts to draw a map of that ocean — to find a shared truth once more, but this time for 8 billion human beings.

And what we have called “artificial intelligence” is a new map.

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All You Need Is Attention

Mathematics is a “formal language”: a code with strict, defined, and universal rules that allow operations to be performed with precision and reproducibility. A system designed to eliminate ambiguity. Any “speaker” of the mathematical language can know exactly what the relationships between its signs are.

Natural languages — like human tongues — are the opposite. They have no manual. They are organic: they emerge within a community, with ambiguous and shifting rules. There is no universal norm that explains how the meanings of words relate to one another.

And yet speakers understand each other.

For decades, linguists had tried to crack the secret code that connects the meanings of words — without success. They were stuck. That is why, as you’ll remember, Google Translate was terrible before what we’ve come to call AI.

Nine years ago, a team of Google researchers proposed trying something different. Instead of analyzing the words in a text sequentially — one after another — they proposed building a map of relationships between all of them simultaneously. The links between each word and every other word formed a kind of mesh, where each connection could carry a different, variable value depending on the rest.

Those values wouldn’t come from a pre-existing equation — the way mathematical rules do — but would emerge from observing the actual use of language: from reviewing millions of texts written by human beings in real contexts. Once that immersion (”training”) was complete, those values (”weights”) would constitute a representation of all those interactions.

And it worked. Suddenly, this software — known in technical jargon as Large Language Models, or LLMs — was able to process the meaning of words with unprecedented precision. Five years later, ChatGPT arrived, along with all the other applications we know today. That is the source of the extraordinary translations AI produces, and of that uncanny sensation of talking to a human that these applications create.

Although it has often been said that they are token-computing machines, I think the image that best defines them is a different one: what we popularly call AI “models” are maps. Maps of the relationships of meaning present in the dataset on which they were trained. In the specific case of the models that have become famous, they are representations of the internet — as if they were a cartography of the ocean floor.

Nothing more. To this day, all models — ChatGPT, DeepSeek, Claude, and the rest — are variations of this same technology. In their more advanced forms, they are combinations of several LLMs given different instructions, or systems that blend this mechanism with traditional symbolic programming.

Can we find in these maps the truth that lies hidden within the internet? Do LLMs hold the key to restoring the horizon of lost certainties?

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The Fickle Truth of Words

Unlike mathematics, the responses produced by LLMs trained on the internet cannot be deterministic. The square root of 9 is 3 — but the answer to the question “Can cats think?” is neither exact nor binary. Natural language does not admit the precision of algebra. That is why LLMs don’t calculate the correct answer — they calculate the most probable one.

It has often been said that they “hallucinate,” as if producing a nonsensical response were an exception, a deviation from their logic, or a system failure. It isn’t. They simply do not have, built into their own architecture, a notion of truth like the one that exists — and is central — in symbolic programming or mathematics.

That is why LLMs cannot converge on a single solution when the ocean of information they represent contains none. This is not a problem that will be “fixed” with more technology — it is a direct consequence of the reality they represent. LLMs cannot converge on a single truth because on the internet, just as in society, no such thing exists.

Is this a problem? If we recognize the technology for what it is, I would say no. Google’s search algorithm is also wrong sometimes. Its results are often not as accurate as one might hope, and users have grown accustomed to rephrasing their search when the expected answer doesn’t appear. We have also learned to distinguish a reliable source from an unreliable one. In the same way, the millions of users who are successfully using this technology to find meaning on the internet are learning to work around its limitations.

It only becomes a problem when AI is used as a substitute for the coordination mechanisms of the economy — mechanisms that cannot function without certainty.

The Truth of the Economy

The industrial economy is the application of mathematical logic to the production of goods and services: a mechanism for coordinating countless parts to generate determined, reproducible, and verifiable outcomes — that is, certain outcomes.

What underpins that entire mechanism is not production, but guarantee: the promise that a machine will work in a predictable way, or that a contract will be honored. Appliance warranties, corporate legal liability, and quality standards are the true expression of the productive system.

Imagine the opposite: that when you buy a plane ticket, there is no expectation of reaching your destination — only a probability of doing so. Or that a home appliance is designed not to work, but to “probably” work. In that world, there would be no industrial economy as we know it.

To solidify those certainties, modern legal systems impose very high costs on deviations. If a plane doesn’t fly, the airline must compensate passengers substantially. Electronics manufacturers are liable for the damage their products cause, just as lawyers are liable for the consequences of an error in a trial or a due diligence process. The industrial economy doesn’t just produce — it assumes the cost of guaranteeing what it has produced.

In that machinery, LLMs are a bomb: a technology that by design works with probabilities cannot sustain a system that runs on certainties. That is why AI shines in contexts where ambiguity is acceptable — drafting a document, summarizing a text, exploring ideas, even mining data — and grinds to a halt where what is at stake is someone’s money, life, or liberty, as in law, finance, or medicine.

For AI to play a meaningful role in the economy, it would need to achieve something that is neither easy, nor obvious, nor resolved: producing certain outcomes.

For this reason, the entire field of “artificial intelligence” today is dedicated to a single underlying goal: building a bridge between the probabilistic thinking of language models and the symbolic thinking of mathematics and classical programming, where explicit rules of true and false exist.

To try to close that gap, researchers are exploring several paths: breaking a question down into simpler sub-problems where prior truths do exist; pitting multiple models against each other so that some correct the deviations of others; or connecting LLMs to external symbolic tools capable of verifying results against formal criteria of correctness.

If they don’t succeed, the technology risks remaining what it is today in its purest form: a highly sophisticated language generation system — but with limited economic utility in every context where what matters is not what is plausible, but what is true.

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The Special Case of Software

In recent months, Anthropic’s advances with a coding tool called Claude Code have led many to believe that LLMs might actually be capable of achieving that goal.

Software is a special case. Programmers have spent decades storing the code they write in a public repository (GitHub) and sharing criteria for how to write that code in another (Stack Overflow). A vast portion of humanity’s collective knowledge about code is stored, neatly organized, corrected, improved, and expanded across successive versions in two websites that are, moreover, freely accessible to everyone.

This makes software the only domain in which formal, defined, and precise languages — at least partially; there are still different architectures, approaches, and coding styles — coincide with a cultural repository of information where something resembling a single truth actually exists. As a result, the degree of ambiguity in the dataset on which Claude Code and similar tools operate is lower than that of legal or medical databases. If there is any domain in which an LLM can come close to producing a “correct solution,” this is it.

For comparison: this same condition doesn’t even exist across mathematics as a whole. Mathematical papers are still published in natural language, and there is no “Claude Code” equivalent for mathematics today. Only in recent years have mathematicians begun trying to formalize the entire field in order to move in this direction.

For an LLM to achieve the same level of success in another domain — finance, legal practice, architecture, medicine — that entire domain would first need to be fully formalized.

Which raises the question: what role is left for AI if it cannot become a fundamental pillar of the economy?

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The Truth Behind the AI Bubble

The companies selling AI products are, without question, the ones with a truth problem.

Sam Altman, the CEO of the company that launched ChatGPT — and someone many people are now describing publicly as a pathological liar — is the one who created the monster. In 2022, Altman wasn’t content with becoming the next Google. He had a far more ambitious plan. He wanted to convince the world that his technology wasn’t just a new way of mapping information — it was a form of intelligence. An entity capable, simultaneously, of destroying us all and giving us everything we need. Of ending the economy, waging war, supercharging productivity, and curing cancer. AI was God. Altman was Noah. And only those who climbed aboard his ark would be saved from the flood.

That is how the companies selling LLMs became the new Seventh-day Adventist sects, making the apocalypse their sales strategy — exactly like Donald Trump, incidentally.

That is how they began to promise that AI would destroy millions of jobs, that it would surpass human intelligence and render people “unnecessary”, that it would boost productivity, cure cancer, wipe out entire professions, drive better than humans, kill the film industry, and “put to the test what we are as a species” — among many other things.

Even today, Dario Amodei, CEO of Anthropic — who copied everything from Sam Altman, including the compulsive dishonesty — continues to claim that AI will “eliminate half of all jobs within five years.”

The reality is that none of these things have happened. And none of them are going to. Quite the contrary. Today, the AI era dominates newspaper front pages and social media feeds, yet it is conspicuously absent from productivity statistics. Meanwhile, 8 out of 10 knowledge workers say they don’t use it at all.

The AI companies, meanwhile, are caught between a rock and a hard place. OpenAI, which runs ChatGPT, closed its latest funding round at a valuation of $850 billion. Anthropic is expected to list above $1 trillion. And the big tech companies — Google, Microsoft, Meta, and others — have invested $776 billion in data centers to power this technology, with no plans to stop. They have inflated a bubble sustained entirely by expectations of total economic transformation — by the promise of true artificial intelligence.

To live up to those expectations, they need AI not merely to interpret the truth of society, or even to create new truths, but to produce things of genuine economic value.

But what does it actually mean to be of economic value?

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The Truth of Productivity

Not all value is economic. In fact, the most valuable things — air, love, harmony, mathematics — have no price. For something to carry economic value, two conditions must be met. First, it must be scarce: if there are infinite copies of something, its price tends toward zero. Second, it must be exchangeable: there must be someone willing to give you something in return for what you have. And for that exchange to happen, both parties need to agree on what is being exchanged. They need, in other words, a shared truth.

That is why economic value is, at its core, a form of truth: the agreed truth between producer and buyer about what a thing is, what it is worth, and what can be expected from it.

But not all truth carries the same economic value. Truth is the entry condition for exchange; what sets the price is how many people share it. An idea, an industrial design, a work of art, or a computer program is worth something to the extent that many people want it and few people can produce it.

The ideas in this newsletter have real value — because only I can write them, and many people find them worth reading. By contrast, we could use AI to generate a million Substacks full of content and publish a post every minute for the rest of our lives. If we can’t find anyone who wants to read them, they will produce zero economic value.

(Subscribe now, before you forget!)

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For this reason, information technologies — email, digital photography, cloud computing, social media, search engines, AI — increase the individual capacity of knowledge workers, but not the aggregate productivity of an economy. In fact, they reduce it. What they actually do is multiply the number of available truths, while making each one less economically viable than what existed before. By making large swaths of human activity abundant and cheap, they reduce the need to exchange in markets. And when there is less exchange, the economy contracts.

The same will happen with AI. It will increase the individual capacity of knowledge workers — in journalism, consulting, programming, publishing — and raise the standards of those professions. But it will not produce a productivity revolution like the railways, the automobile, or electricity. It will produce more truths than ever before. But each one will be worth less.

You can find a more detailed explanation in this article:

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The Truth About Good Information

In my view, the great risk facing AI is that the value it can produce doesn’t depend on the technology itself — it depends on the information it feeds on. As is abundantly clear with Google Search and Google News, this technology cannot exist without an internet full of quality content.

The paradox is that this data is the product of the 25 years we spent online without any other way of finding information: Reddit and Wikipedia exist, and there are 10,000 answers to the question “how do you make chicken soup?”, precisely because we weren’t able to find a single definitive answer.

But if AI finds the answers and — as seems to be happening — people stop visiting websites; if it fills the internet with low-quality content regurgitated by a chatbot, the technology itself will run out of material to learn from. What will follow — and is already beginning to happen — is that LLMs will start producing increasingly poor results, because the information available to them is manipulated or simply impoverished.

This technology, which is by its very nature regressive*, needs a resource from which to extract value — and at the same time, threatens to destroy that very resource.

My intuition is that this game will ultimately be won by the best content creators. I’ve called it somewhere “the frozen bread theory”: the idea that an overabundance of information creates a new demand for the highest-quality information. And I believe AI will end up as a tool in service of whoever holds a strong repository of genuine knowledge.

The Truth About Human Value

There is one final idea I don’t have space to develop here — I’ll save it for next week’s Wide Angle. (Hit the button to have it delivered to your inbox.)

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There is no single correct way to write a computer program, or to argue a legal case. There is no perfect answer to what an article should say, or a book. The reason AI cannot create images that truly move us — beyond a pile of things worse than stock photography, if that’s even possible — is that there is no such thing as a “good image” without the intention of the person who made it.

Value still resides in human beings. Because we are the only thing that truly interests us.

To be continued…

If this content interests you, you’ll love my first book. It’s called Hijos del Optimismo (Children of Optimism)— a thesis on the great transformations of the knowledge economy and what comes next.

*Correction: This was a slip — the correct term used to describe these models is not “recursive” but “regressive.” However, the sentence doesn’t work with that terminology, so I’m leaving it as is.

Photo by Jon Tyson on Unsplash

Amancio Ortega has just become the world’s largest real estate magnate. According to Forbes, the founder of Inditex now holds 200 properties across 13 countries, valued at €21 billion.

This should make no sense. Why would a businessman who controls one of the most successful companies in the world invest in buildings? Shouldn’t it be far more profitable to keep investing in his own company?

The absurd answer is: NO.

Inditex went public in 2001. Since then, its sales have multiplied by 12, its operating profit by 18, and its market valuation by 17. Its shares are worth ten times more than they were 25 years ago. Throughout that entire period, the company has never issued new shares — but it has paid dividends every single year.

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It is those profits — which in Ortega’s case amount to more than €21 billion over those 25 years — that the businessman is using to buy properties and stakes in utility companies across Europe.

In other words: Inditex does not need outside capital to keep growing. Its own business generates enough cash flow to cover operating expenses, pay dividends, make the necessary investments, and still keep growing at full speed.

That is why Amancio Ortega has nothing better to do with his money than put it into property.

Inditex is clearly an exceptional company — highly profitable and superbly managed. If you press me, I’ll admit that Zara isn’t just a fashion brand: in the future it will be studied as a form of art. (I neither confirm nor deny that this is what I tell myself every time I pull out my card to add another, ahem, piece to my modest ahem collection.) But the point is that Ortega’s situation is far from unique. His is not the only company producing more profit than it can productively reinvest.

Quite the opposite. What is happening to the world’s richest man is happening to everyone else too: we are drowning in savings we don’t know what to do with. That is why the entire world is pouring money into real estate, which now accounts for 60% of global wealth

Over the past 25 years, global wealth has gone from representing 3 times to 6 times world GDP — in other words, it has doubled relative to the size of the economy.

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Meanwhile, in the digital economy, productive investment opportunities for all that wealth are becoming increasingly scarce. Put as simply as possible: Inditex’s online stores, which today account for a quarter of the group’s sales, do not require anywhere near the capital investment that would be needed if those same sales had to take place in physical shops.

We are buried under a mountain of savings. And yet, in the twenty-first century, capital is playing an ever-smaller role in the economy.

The reason is that ever since digital technology began reshaping the economy — first in the dot-com bubble, then in the subprime crisis, then during COVID — governments have thrown themselves into injecting monetary stimulus (liquidity) to prevent the outcome that would have been the natural consequence when digitalization made vast swaths of the economy unnecessary: deflation and degrowth.

To avoid having to explain to citizens that the growth that had made possible the great social contracts of the twentieth century — pensions, savings, rising property values, the “American dream” — had come to a halt, we have spent 25 years injecting artificial money into the system.

That is why wealth keeps growing even though productivity is stagnant. That is why assets that can still sustain some cash flow — real estate, infrastructure, energy companies — keep appreciating. The bubble currently inflating in US stock markets, the rise of Bitcoin and cryptocurrencies, and the staggering appreciation of gold in recent months are all symptoms of the same underlying problem.

Meanwhile, at ground level, for the people who keep having to pay more for the same goods — in order to reward the owners of all that accumulated wealth — the lived experience is that life is getting more expensive and more difficult.

There is, though, another way to look at it. One that is even more vertiginous, but that ultimately explains what is happening far more clearly.

Instead of thinking that assets — homes, buildings — are appreciating and becoming more expensive, we can think of it the other way around: money itself (not any particular currency, but money as a whole) is worth less and less. It is being devalued. If we assume that the underlying value of assets hasn’t changed, then what is actually happening is that we need to hand over ever-larger quantities of money to acquire the same thing.

This explains why so many people feel that it is they who are being devalued. Their work, their position in the world — still measured in money — is losing value. And that’s true. With the value a person could produce through their labor 50 years ago, they could access a certain number of assets. Today they can access half as many, or fewer. Is the asset appreciating — or is labor depreciating?

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One might conclude that this is a catastrophe. We’re being devalued, and there’s nothing we can do about it!

But that’s not quite right.

Money isn’t losing value because of some malevolent force. It’s losing value because we are increasingly interested in things that have no economic value — meaning, no scarcity. We no longer care about filling our shelves with china figurines or replacing the sofa every two years. We’d much rather travel widely than own a single beach house. And we are increasingly drawn to conversation with other people, to learning, to watching series, listening to music, reading, being with friends and family. To living.

What is happening is that we are increasingly transacting in a different currency: attention. And that “nomy” — not an eco-nomy but a pluto-nomy — is thriving. It is remarkable how many people, in recent years, have a project running alongside their day job: a Substack, a magazine, a summer festival they organize, a reading group, a running club. Or whatever it might be.

And the problem is that, seen through the lens of the twentieth century, these things are still considered a distraction from the real task of mankind, which is work. But that is no longer the case. The world has changed, and it will keep changing. Those projects, those learning journeys — they are the investments that will appreciate in value in the future.

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If this topic interests you, you can keep reading in my first book, Hijos del Optimismo (Children of Optimism), now available on Amazon, at Casa del Libro, on the Debate website, or at your favorite local bookshop

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As everyone knows, there’s no better sex than the kind you have in your imagination. Because when you actually go to bed with someone and reality arrives — with all its textures, its rough edges, and crucially, the involvement of another person — however fantastic the experience turns out to be, it can never match that perfect expression of your desires that could only ever exist in your head.

Nobody knows this better than Silicon Valley. During the years of cheap money that followed the 2008 crisis, the Valley invented a way of building companies that consisted, essentially, of avoiding any confrontation between their fantasies and the reality of running a business. Someone called it blitzscaling. The idea was simple: in a hyper-connected world, whoever gets there first takes everything. So what mattered wasn’t being a functional company — meaning, one that actually made money. That would come later, on its own. What mattered was growth. Growth at any cost, even if it meant bleeding out at a loss.

This newsletter lands in your inbox for free because information wants to be free. But it doesn’t arrive by spores. Or float in on the air. If you don’t want to miss anything, make sure you subscribe and share.

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Venture capital — the specialist startup investors who rock this particular cradle — had no incentive then, and has none now, to build profitable companies for the long term. That’s not their business. Their business is buying cheap shares and selling them higher. And for that, it’s far more profitable to buy and sell before reality catches up with expectations: pre-money, pre-profit, pre-product-market-fit. A good fantasy is a far more valuable asset than cash flow.

The result was an entire generation of “unicorns”: startups valued in the billions that existed primarily in the imagination of their investors. Uber was one of them — it racked up $33 billion in losses before turning a profit. Spotify too, taking 17 years to post its first profitable year. WeWork reached a valuation of $47 billion before anyone bothered to read its accounts — and when they did, the company nearly ceased to exist. These are the success stories. Of the rest, little is known. In 2021, 354 companies had achieved unicorn status. Only six have gone public since.

The mega-bubble of the misleadingly named “artificial intelligence” is the latest chapter of this adventure. Except that after so much growth, we’ve run out of mythological creatures to compare it to. Five years ago, a company needed to reach a valuation of $1 billion to be considered a unicorn. OpenAI, the AI frontrunner, closed its latest funding round at a valuation of $850 billion. Anthropic, hot on its heels, stands at $350 billion. Meanwhile, the big tech companies — Google, Microsoft, Meta, and others — have collectively invested $776 billion in data centers to power this technology, with no plans to stop.

These are astronomical figures. Unthinkable ones. Impossible to square with any model of profitability on a spreadsheet. Like the sex you had in your head, they are incompatible with reality. They can only make sense in the fantasy world where these companies succeed in creating a new intelligent species.

For that reason — to justify this kind of madness — over the past three years OpenAI, Nvidia, Anthropic, and the rest of the AI industry have reinvented themselves as the new Seventh-day Adventists. They have proclaimed that this technology would destroy 300 million jobs and transform two in three roles worldwide; that it would surpass human intelligence and render people “unnecessary”; that it would boost productivity by 7%; that it would cure cancer before 2025; that it would wipe out radiologists, then doctors, then programmers, then lawyers; that it would drive better than humans by 2023; that it would replace the film industry with one made up of amateurs; and that it would “put to the test what we are as a species”. The latest apocalypse — this week’s edition — even has a name: “Vulnpocalypse”, the prophecy that an AI model will trigger a cybersecurity armageddon.

None of this has happened. But until very recently, AI companies and their investors could keep living off the expectation that it eventually would.

Until Claude Code.

Three months ago, Anthropic released a large language model adapted to the needs of software developers. It has been well received in that sector. Some of the most respected programmers in the world — including Linus Torvalds and David Heinemeier Hansson — have acknowledged they’re giving it serious consideration. Claude Code is an LLM that could, ideally, find what is known as “product-market fit”, meaning it could land as a concrete product with a potential buyer, carry a price tag, and actually have its sales tested in the real world.

Oh, no!

It’s time for reality. AI now has a product to sell. It is no longer just a promise. Now it will have to show how much developers are actually willing to pay for its solution, and how many developers in the world are interested in the tool.

Suddenly, the AI companies have a problem. How much does a software company need to charge to justify a valuation in the hundreds of billions? And another: what does it cost to deliver that service to developers? Because if the computing cost is very high — and it is — it’s possible that companies will only want to pay for it in a handful of specific use cases.

And another: what does Anthropic have that protects its product from competitors who want to copy its business model? What stops 20 or 30 other companies from building something exactly like Claude Code?

And if all those companies pile in to develop similar models, won’t they have an obvious advantage over Anthropic — precisely because they don’t carry the weight of having paid all the development costs to get here?

And one more: software development has the enormous advantage of being a domain where two things these models need to function actually coexist — well-established rules, and a repository of knowledge built up over decades by thousands of developers sharing their solutions. Can Claude Code be exported to other industries, or is it going to remain confined to this particular corner of programming?

And if it stays confined to programming, how do the hyperscalers justify the investment they’ve made in data centers — an investment premised on AI replacing hundreds of millions of workers?

None of these questions are extraordinary. They’re the ones any company asks when its business isn’t buying and selling shares, but actually creating value for someone willing to pay for your product. What they will be forced to answer in the coming months is the big question hiding behind the bubble: is there a real business in AI? Enough of one to justify investing trillions of dollars in a handful of companies?

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And so the AI bubble ends here. With Claude Code. For better or worse, the companies that have poured money into this and tried to convince us it was going to work — now that something actually works — will have to show their hand. Either they produce a product that justifies the investment, or they scale the investment down to match what they can actually sell.

I can’t help thinking that Anthropic’s latest move — last week’s press release announcing it would not be releasing its newest model, “Mythos,” because it “could have terrible consequences for the banking sector” — is a cheap ploy to avoid facing the harsh reality of having to sell your product and stay in the hype cycle.

Because it is rather curious that, at the exact moment when one of your models actually seems to be useful for something, you decide not to publish the next one — just in case someone notices it has a practical application and isn’t simply an existential threat to life on Earth.

But it’s a futile effort, I think. The AI fantasy will end the only way fantasies always end: with the encounter with reality, its textures, and its rough edges.

In the next article I’ll tell you what I think is going to happen…

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Heads up! Changes to the newsletter.

I owe regular readers an apology — once again, I’ve neglected this newsletter. The launch of Hijos del Optimismo (Children of Optimism) collided with the opportunity to make a significant investment to get a new project off the ground, plus a few personal matters, and life simply took over.

But I’ve used these past few days to think through a format change. From now on, during the week I’ll be publishing shorter pieces tied more closely to current events — like today’s — and on Saturdays a deep-dive piece called “Wide Angle.”

Let’s see if I can pull it off!

Photo by Madison Oren on Unsplash

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The original (Spanish) version of this article can be found here.

At the heart of our time lies a mystery. An inexplicable contradiction.

On one hand, we are living in the best moment in human history.

Over the past 25 years, 1.5 billion people have been lifted out of extreme poverty, GDP per capita has risen from $13,000 to $20,000, life expectancy has increased by 17 years, and child mortality has been cut by two thirds.

Today, two in three people on the planet are connected to the internet, and we publish four times more books per year than in 2000 — over 2.2 million new titles annually. As if that weren’t enough, we are close to making cancer a chronic, manageable condition, and the rollout of renewable energy allows us to imagine not just a solution to climate change, but the prospect of a future of clean, abundant energy.

And yet, we are in crisis.

Two in three people on this planet feel that “society is broken,” that the economy is rigged in favor of the powerful, and that a widening gulf separates ordinary citizens from political and economic elites. Meanwhile, 40% of humanity believes their economy will be worse next year and that there will be more violence. Many people report “great worry” (39%), “stress” (37%), and “anger” (22%).

The result is that today, populist parties — with Donald Trump at the helm — sit in government in one third of OECD countries.

How can this be?

At the moment of greatest abundance in history, what we feel is fear and a gnawing sense of scarcity.

How can this be?!

The answer to that question is a powerful one: it explains why Trump sits in the Oval Office, why there is a housing bubble, and why there is another bubble in “AI.”

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Don’t Look Up!

The most remarkable thing about this mystery is that it isn’t one. Every government in the world knows what is happening. But the phenomenon behind the discontent is so terrifying that no one dares say it out loud, for fear of making it fully real. Like the movie where a meteor is about to destroy the Earth but everyone looks the other way — we’ve spent fifteen years watching the impact coming, without ever finding the courage to talk about it.

What is happening is this: the economic engine that brought us here — the one that made us the society we are, the one we call the “industrial economy,” or “capitalism” — stopped working 25 years ago.

And nobody knows why. Or how to fix it.

What we do know is this:

Human societies have always had some form of economy. But until a couple of centuries ago, it was essentially a survival mechanism. What turned the industrial economy into the cornerstone of modern society was its extraordinary ability to transform our lives by relentlessly creating new goods to replace old ones — the way the car replaced the horse, oil replaced coal, or the telephone replaced the telegraph.

But that engine had a problem: it concealed a death drive. When goods became obsolete, old industries lost their purpose and disappeared. Financial bubbles and waves of unemployment followed — the kind that swept through communities after coal mines were shuttered or car factories closed across the United States. To stay alive, the industrial economy had to keep devouring itself.

The natural, expected end would have been death by success — eventually creating every product a person could want and exhausting its own mechanism of constant change. Yet by the mid-twentieth century, the industrial economy had been running at full capacity for 150 years, and none of that seemed to be happening.

So in 1942, someone offered an explanation: the destruction produced by capitalism was “creative” — and you really have to admire economists for their naming instincts. The labor and capital that became unnecessary when industries died turned into the fertile ground where the next ones were born. Better yet, because the new companies were more productive and innovative, the jobs and investment opportunities they offered were more plentiful and more rewarding.

And so “creative destruction” became far more than the engine of capitalism — it became the founding myth that organized all of modern life. For 50 years it was the truth that allowed generations of people without university degrees to dream that their children might become architects. It was also the story through which society believed it would pay for pensions, build infrastructure, pay down public debt, own a beach house, and go on holiday every summer.

Twenty-five years ago, that engine stopped.

Since the late 1990s, the “destructive” side of the economy has only accelerated, sweeping away entire industries — but the “creative” function has gone missing in action. The new industries of the twenty-first century have been unable to absorb either the capital or the labor that the old ones used to employ.

The mobile phone, for instance, obliterated entire sectors of activity: neighborhood retail and bank branches; CDs and film cameras and newspaper kiosks. As had happened before, jobs and investment opportunities in each of these sectors were destroyed.

But the primordial broth of surplus labor and capital that was supposed to generate new sectors of activity never delivered. Instead, the world split in two: on one side, a handful of companies and certain categories of workers — engineers, programmers, finance professionals, parts of marketing — continued to enjoy good conditions and strong prospects; on the other, a vacuum emerged, steadily filling with precarious, low-status, low-productivity, poorly paid work — hospitality, delivery drivers, gig workers.

The macroeconomic consequence is that countries are growing more slowly. Some highly productive industries still exist, but average real wages have stagnated as precarity has spread. Government revenues — also designed for a world where employment would always grow — have come under strain. And so the tensions emerge: who should pay for public services, and how much.

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The One That Must Not Be Named

So the first great mystery of the modern world is no mystery at all. It is well understood that the inability of today’s economy to sustain the myths and institutions of the twentieth century is what is driving the eruptions of discontent everywhere. That is why they are happening all over the world at the same time.

The crisis of the middle class — the frustration of young men, especially those without higher education — stems from the fact that the jobs that gave them a central place in society disappeared and were never replaced by equivalent ones. And if there is a global housing bubble, it is because capital, lacking productive alternatives in which to invest, has retreated into the last asset from which it can still extract returns.

In the collective subconscious, all of this crystallizes into the feeling that “society is broken.”

But nobody has a plan to fix it — because the true mystery of our time, the one for which no one actually has an answer, is:

Why has the engine of capitalism stalled?

Since nobody fully understands it, and nobody has a solution to offer, no leader wants to touch the subject. The politics of the past ten years resembles the faculty of Hogwarts, collectively determined not to name the one who must not be named. Instead, parties busy themselves finding plausible — but false — scapegoats, ones that let them keep their base in line while deflecting blame. Depending on which side you’re on, the culprit is:

• immigrants,

• or billionaires,

• or politicians — who favor immigrants or billionaires, depending on who’s pointing the finger —,

• or social media, filling people’s heads with garbage.

And despite the different villains, the proposed solution always seems to be the same: go back. From Trump’s Make America Great Again to the nostalgic nationalism of the European far right and the reindustrialization programs of social democrats, every ideology is inventing its own particular version of a return to the moment when all of this seemed to work.

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The Truth at the End of Capitalism

A few years ago, I set out to write a book that would answer this question:

Why did the engine of capitalism stop?

Not because I want to do forensic science. Not because I want to be a catastrophist. Quite the opposite. If there is a way out of this dead end — and there is — it runs through understanding that we cannot go back. We have moved beyond the industrial era. We are already in a new time, and once the shock and the initial fright have been absorbed, the only thing we can do is look forward. There is no point trying to return to a world that no longer exists — it is impossible, and that ambition can only lead us toward hatred and war, as we are seeing everywhere these days.

The great tragedies of history do not arise from transformation itself. They arise from society’s inability to adapt to it. It is when profound change overwhelms existing norms, and institutions fail to keep pace, that conflict takes hold.

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‘Hijos del Optimismo’ (Children of Optimism) argues that 25 years ago, a transformation took place that dismantled the industrial system. To understand it, we need to set aside the classic categories and think about the economy from a different angle — one more suited to the reality of the twenty-first century: the exchange of knowledge.

The Industrial Revolution is usually told as a story about our capacity to manufacture. The combination of capital and labor made us vastly more productive, and that is why we are so much wealthier. But producing something, if you have no one to sell it to, counts for little. What truly changed the world was the expansion of trade — which from 1800 onward had grown far faster than population or production, and which, coinciding with the stalling of capitalism’s engine, flatlined.

Which leads to the next question: what exactly do human beings exchange with one another? And why are we doing less of it?

The answer is less obvious than it seems. We’ve grown accustomed to thinking about what we buy and sell as objects — as the heavy, countable output of a material world. But they never were. When we buy a car, a medicine, or a phone, it’s because we don’t have the knowledge needed to make it ourselves. What we exchange, therefore, is knowledge. The goods traded by the industrial economy were fragments of knowledge pressed into products.

So the next question is: what happened to the human knowledge that produced the greatest economic expansion in history? And what happened afterward?

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A Brief History of Human Knowledge

For most of our existence, knowledge advanced at geological speed. Thousands of years passed between the mastery of fire and the emergence of symbolic language, and thousands more between the Agricultural Revolution and the first formal mathematical systems. Several thousand more had to pass before those systems culminated, in the seventeenth century, in the scientific method and Galileo.

Throughout all that time — just as with other animal species similar to our own — knowledge spread from individual to individual until it reached the limits of each population, exactly like a virus. If one person knew how to use fire, or build a windmill, that knowledge replicated organically — the way elephants pass knowledge to each other, or macaques — until it reached the entire social group.

This meant that trading in knowledge was not possible, because everyone had the same knowledge. That is why commerce throughout history was always marginal, and only in cases where political power exercised rigid control over its distribution — as China did to protect its silk industry, or the medieval guilds did in Europe — was trade in knowledge even conceivable.

But during the Industrial Revolution, something extraordinary happened. All the accumulated knowledge that had been building since the Scientific Revolution, two centuries earlier, crystallized into a cascade of discoveries: the steam engine, the railway, electricity, the internal combustion engine, the telephone, antibiotics, anesthesia, vaccines, the airplane, television, plastics, synthetic fertilizers, nuclear fission, the transistor, computers, the internet, GPS, genome sequencing, and smartphones.

That acceleration produced a historical anomaly: there were barely enough people capable of managing it.

At the dawn of the Industrial Revolution, fewer than 10% of the world’s population could read and write. There were very few universities, and most were more devoted to the study of religion than science. In the decades that followed, despite the breakneck pace of technological progress, it was still driven by very few people — perhaps a few thousand, in Europe and the United States.

Meanwhile, the rest of humanity was just as illiterate in 1920 as it had been in the Middle Ages. There were not enough engineers, mathematicians, or teachers in the world for knowledge to become universal as it had been for millennia. Complex ideas could not circulate beyond those tiny circles — simply because there weren’t enough people capable of understanding them.

For that reason, for two centuries, the entire world depended on the elites of a handful of countries to manufacture cars, extract oil, maintain supply chains, synthesize medicines, build infrastructure, write software, and launch satellites into space. What’s more, even in Western countries, most of the population could not make consumer decisions on its own.

What we call “capitalism” or the “industrial economy” was, therefore, a colossal mechanism designed to allow vast numbers of people — who lacked the necessary education — to enjoy things like home appliances, financial products, fossil fuels, and international travel that would never otherwise have been within their reach.

That is what made the “industrial era” possible. For a couple of centuries, the monopoly on knowledge allowed a handful of companies in a handful of countries to sell it — packaged in consumer goods — first to the rest of society, and then to the rest of the planet.

Meanwhile, in 1950, two thirds of the world’s population still could not read or write.

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The Age of Optimism

Until, in the second half of the twentieth century, everything changed. At the end of the Second World War, the world made a colossal effort to extend the benefits of welfare and progress to the majority — including education.

First, in the 1950s, 60s, and 70s, billions of people gained access to basic schooling. Illiteracy plummeted — collapsing within a matter of decades. Then, in the closing chapters of the century, a new promise emerged: a “knowledge society” would be born.

Making that dream possible would require more than oil and machines. It would need a new kind of capital: “human capital.” The future needed engineers, lawyers, and doctors; scientists and philosophers; publishers, writers, and creators; sociologists, political scientists, and linguists. Astronauts.

And so the world conspired to produce an unprecedented experiment. A generation — hundreds of millions of young people — would go to university, and emerge from it as a different kind of human being: infinitely more capable of transforming reality than any of their predecessors, equipped with a backpack full of self-belief and the assignment to build the future.

Those children are — we are — the children of optimism of the twentieth century.

And just as our parents — who had been the first or second generation in their families to attend school — gave rise to television and newspapers to satisfy their curiosity, the children of optimism created our own medium, tailored to our ambitions: the Internet.

A Change of Era

It’s been said so many times it feels tedious to repeat — but it’s true: we are living through a change of era. A thousand years from now, when future historians explain the moment we lived through, they will say it was an extraordinary one, a historical inflection point.

The dream of the knowledge society blew apart the chains that had kept knowledge restricted for 200 years. For the first time, hundreds of millions of people could command a volume of knowledge that, just a few decades earlier, would have been considered revolutionary.

The impact was enormous — as if a million scientific revolutions had hit us simultaneously. Within just a few years, the structures that had served to maintain the monopoly of knowledge in a world of illiterates began to crumble.

First, the great newspapers, the unions, and the mass political parties — the great intermediary institutions of contemporary society — began to fade. Political scientists and sociologists, who understand this phenomenon well, call it “political disintermediation” and are acutely aware that it represents a paradigm shift. What we have not yet fully grasped is the impact it had on the economy.

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The Shrinking Economy

In the twentieth century, music was a scarce good. It required very specific — and carefully restricted — knowledge to manufacture CDs, produce them at scale, and distribute them. Precisely for this reason, a market could exist that sold billions of units and sustained entire distribution chains employing millions of people. In major cities, entire shopping centers were built around the trade of this particular form of entertainment.

The children of optimism stopped needing those intermediaries. An entire sector of the economy disappeared. Then the same thing happened to newspapers. Then to travel agencies, hotel chains, retail stores, bank branches, administrative workers, insurance brokers, video rental shops, employment agencies, television, and radio.

Just as it happened to the mass political parties, with each good that no longer required intermediaries, entire economic sectors vanished — along with millions of jobs and investment opportunities. The “destructive” side of capitalism was rendering them obsolete.

This is the simplest — and most condensed — explanation for the great mystery of our time: the children of optimism, realizing the dream their parents had for them, dismantled the industrial world and inaugurated a new one.

The economy we had known — the one that carried us to the threshold of the twenty-first century — was not the natural, inevitable continuation of our species. It was an exception; an anomaly; an ephemeral moment that arose at the confluence of exceptional historical circumstances, and that depended on a single condition: that knowledge remained restricted and controlled by a few people in a few countries.

And it is not coming back.

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Abundance or Barbarism

The paradox of the present is this: we have convinced ourselves that we live in a time of scarcity, when the only truth is the opposite. Our world is becoming more abundant by the day. We are increasingly capable not only of producing material goods, but of satisfying our needs in far more sophisticated ways than through the possession of objects. (This is what we mean when we talk about “digitalization.”)

The problem is that the rules of our society are not designed for abundance. Quite the contrary. Solving the “economic problem” — scarcity — has been our primary occupation, not just for the past few centuries, but throughout our entire existence, and throughout the history of life itself. Even today, society is precisely this: a system designed to produce and allocate limited goods. A mechanism that expects all of its members to contribute to alleviating that age-old scarcity by contributing effort (labor) or sacrifice (capital), and that assigns each person a position in the social order based on the results of that contribution.

So every time knowledge threatens to make another corner of existence abundant, we find ourselves at the same crossroads: if we want music to be abundant, how do we pay the artists? If we buy products cheaply in places with no sales staff (like Amazon or big-box stores), what will the neighborhood shopkeepers do? If knowledge collapses the price of food, how will farmers live well? If technology frees us from work, what will we live on?

What we have called “artificial intelligence” is the most extreme expression of the same phenomenon. Generative AI promises to make intelligence abundant. But if that happens, what will happen to the workers it displaces? What will happen to the business owners whose companies go under?

And just when it seemed it couldn’t go further, that million simultaneous scientific revolutions is now reaching the very root of scarcity itself: energy. What for centuries appeared to be a limited resource has proven increasingly abundant, thanks to renewables.

That is why the debate between abundance and scarcity is the defining political struggle of our time. Because there are only two paths: either we remain stuck in a scarcity paradigm, defending the trenches of the twentieth century (labor, effort, sacrifice) — or we accept that the world is, in fact, a place of abundance, and begin transforming our institutions to take advantage of its opportunities.

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humanity’s coming of age

“That is quite definitely the answer. I think the problem, to be quite honest with you,
is that you’ve never actually known what the question is”.

Douglas Adams, The Hitchhiker’s Guide To The Galaxy

So the premise of Hijos del Optimismo (Children of optimism). is this: abundance is not the answer to our problems — it is not the end of a road we need to travel. Abundance is the question. How do we live in a world that is no longer ordered by scarcity? How do we decide who is valuable and who is not? How do we distribute power in an abundant world? How do we produce public goods — which are themselves abundant? What does it mean to contribute to society when work is no longer necessary?

What is happening to us, at its core, is that we have grown up. Like children who have become adults — capable of making their own way in the world — we have no choice but to confront the promise and the demand of our own freedom.

What will we do with it?

While you think it over, you can always pick up Hijos del Optimismo (Children of optimism) on Amazon, at Casa del Libro, on the Debate website, or at your favorite local bookshop.

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The original (Spanish) version of this article can be found here.

I don’t know about you, but I can’t shake the feeling that we’re living in Groundhog Day. With one difference: instead of a charming rodent, what keeps showing up every morning is Abaddon, the angel of the abyss, commanding an army of locusts with human heads, lion’s teeth, scorpion tails, and the specific mission of tormenting mankind until we seek death and cannot find it.

Another war. Gas prices spiking at pumps thousands of miles away. Governments worldwide scrambling to cushion the blow. Stock markets in free fall. A recession looming. How many front-page headlines have we racked up so far this year?

But if you step back and look closely, there’s a pattern in the middle of the chaos. We’re living through the final weeks — maybe the final days — of a 17-year cycle that has run its course. The political and economic framework that carried us to 2026 is on the verge of collapse, its gears grinding under the weight of a reality that won’t let them keep turning.

In recent hours, the stars have aligned. A cascade of political and economic events is threatening one final, spectacular implosion — the simultaneous collapse of the political cycle and the economic cycle. The simultaneous collapse of Donald Trump and AI.

No. I’m not exaggerating. The signals are stacking up everywhere: Trump’s increasingly erratic maneuvering, the quiet deflation of US markets, Bitcoin’s price crash, and rising bond yields are all tolling the bell on the final movements of a cycle.

Here’s how it sounds:

THE END OF THE POLITICAL CYCLE: TRUMPISM IS DEAD

To make sense of this mess, we need to start with one question: Why did Trump attack Iran?

The answer: because he was cornered. The Supreme Court had suspended his signature policy — the one that had propelled him to the presidency twice — tariffs. He was mired in a debate over whether he owed Americans refunds on what they’d overpaid. Meanwhile, his approval ratings were in free fall ahead of midterm elections he looks set to lose badly. Trump, a master of capturing attention, needed a new lifeline — a new scandal, a new global crisis to dive into. He found it in Iran.

His plan probably wasn’t to stumble into this irreversible quagmire. He likely thought he could assassinate the Ayatollah and be out of Tehran in a couple of days, the way he’d handled Venezuela. Or he’d been fed bad intelligence and hadn’t accounted for the regime’s resilience, nor the economic fallout back home. Doesn’t matter. The point is that Trump — with no real agenda, backed into a corner — has careened from crisis to crisis like a true kamikaze, until he finally crashed into the immovable wall of the ayatollahs.

As we’ve covered before, regimes like Trump’s, in their final phase, tend to go one of two ways: they either consolidate and find some stability, or they launch into an increasingly desperate, agonizing forward flight. What we’re watching is that Trumpism has failed to find that equilibrium — and has chosen option B.

Donald Trump came to power wielding a story: that the cause of the decay Americans were feeling (a decay carefully stoked by alt-right influencers in the years prior) was an unfair deal that soft elites had cut with the rest of the world. The fix was simple — reorder the balance of power, put America First, make it Great Again. None of it has materialized. He’s deployed every tool at his disposal — tariffs, threats, even the kidnapping of foreign heads of state — to force the world to pay what he claims it owes, and it has produced zero meaningful effect on the American economy, which sits, at best, exactly where it was under Biden.

In other words, Trumpism doesn’t work. It cannot make America Great Again. What was once a fairly successful political common sense has curdled into a fringe obsession believed only by the most fervent devotees. It’s spent.

Today, there isn’t a single analyst in the world who isn’t already planning for the post-Trump era.

NO MORE TACOs

One of Trump’s most powerful weapons throughout all of this has been the blind confidence the big money had in him. Since he took office, the world of investment funds, banking, and big business had concluded that the Republican was one of their own — a man with the sensibility and track record of any other billionaire. No matter how much noise he made for the New York Times, the people who move markets knew that when things got dicey for Wall Street, Trump would always do whatever it took to course correct.

And Trump had been proving them right, time and again. Every time his antics rattled stock markets or bond markets, he backed down — often in fairly humiliating fashion. So much so that this pattern has its own name: TACO (Trump Always Chickens Out).

Riding that confidence, US markets had been locked in an “all news is good news” loop since Trump’s inauguration: when employment and growth data looked strong, stocks rose because it was good news; when it looked weak, stocks also rose, because markets expected Trump to pressure the Fed into cutting rates to compensate.

But then we ran into the ayatollahs. The stubborn reality of a regime that has no intention of negotiating the way Venezuela did, combined with the damage already done to oil production infrastructure, means that the last two TACOs — a 5-day ceasefire announcement followed immediately by a 10-day one — have done nothing to calm markets.

We’ve run out of TACOs.

THE FINAL GASP

Beyond the specifics of the energy crisis this fool has dragged us into, what the death of the TACO effect reveals is that Trump’s political momentum is finished — and at the worst possible moment. In recent months it has become increasingly clear that the American economy was already slowing down, even before the war with Iran. Some very influential voices — including the CEO of BlackRock, the world’s largest asset manager, and the President of the ECB — are sounding the alarm about a real threat of global recession in the coming months, a possibility now priced a between 30% and 50% for the US alone.t

Meanwhile, US Treasury bonds are straining, Bitcoin has lost half its value over the past several months, and gold… nobody quite understands what’s happening with gold anymore.

But what’s really got me gripped is the shift in market behavior.

Both the S&P 500 — the broad US market index — and the Nasdaq — the tech index — had been on a steep upward trajectory ever since ChatGPT burst onto the scene at the end of 2022. (The jagged dip in April 2025 was the scare from Trump’s first tariff threat, which he then walked back in his first TACO.)

But in recent months — and with growing intensity in recent weeks — markets have broken their upward trend and are heading decisively south. The Nasdaq is down 10% since October, while the S&P 500 has shed 11% from its January peak.

This wouldn’t be remarkable in any other context. Markets go up and down. But what defies explanation is that this is happening in direct contradiction to the pattern of absolute confidence investors had shown in Trump — and at the very moment when Big Tech is posting the best results in its history.

In the final quarter of 2025, America’s tech giants published earnings that would have looked like science fiction just three years ago. Apple, Microsoft, Alphabet, NVIDIA, and Meta all beat analyst estimates by an average of 11.2%, combining for $178.4 billion in quarterly revenue — year-over-year growth of 18.6%.

And yet their stock prices keep falling. To almost everyone’s bewilderment, this combination — extraordinary results followed by a market sell-off — has become the defining pattern of today’s markets.

How is that possible?

AI’S GREAT MISFIRE

Hold on. Weren’t we supposed to be on the cusp of a new industrial revolution — one that would reshape one in three jobs worldwide and add several percentage points to GDP every year? Weren’t those multinational earnings the proof of a revolutionary technology that was going to transform everything? How can anyone seriously be talking about recession?

What on earth is going on?

What’s going on is this: just as Trump has reached the end of his forward flight, the same slap of reality has landed squarely on AI.

I won’t wade into any debate in this article about the limits of what we’ve bundled together under the label of “AI.” But let’s talk about the promises its boosters have been making for years:

First, we were told AI would eliminate 300 million jobs and that two out of every three roles would be at least partially automated.

Then someone announced that the path to “artificial general intelligence” — capable of replacing humans at any task — had been clearly mapped out.

Then that all cars would be driven by AI.

Or that it would wipe out the entire legal profession.

Or that it was “the next frontier of productivity.”

And just when we thought there wasn’t a single hype-stick left to throw on the fire, in recent weeks the talk has turned to how a new wave of agentic AI could replace software developers entirely.

Not one — NOT ONE — of these things has come to pass. Maybe it’s worth revisiting how much credibility we extend to these so-called “experts.” But I don’t want to get lost in that rabbit hole. The truth is, it doesn’t actually matter whether any of these things ever happen or not.

What matters — the reason a bubble burst feels not just possible but inevitable in the coming days — is that three years after the launch of ChatGPT, AI still has no business model. It still has no product it can sell at a scale that even begins to justify the trillion-dollar investments being made on the hope that it might eventually be useful for something.

Like Google Glass. Like the Oculus. Like the Metaverse. Like NFTs. AI is miraculous in theory and could be genuinely transformative — but there doesn’t seem to be many people willing to pay for any of it.

What’s become increasingly impossible to ignore is that the results these multinationals publish quarter after quarter rest on a web of circular agreements so incestuous they’d make the Habsburg family tree look like a picture of genetic health. To date, AI has created no real added value. What exists is money spinning so fast, and in such tight circles, that the sheer velocity makes it look like a lot more than it is.

And what is now beyond dispute is that, whatever AI does, it will not generate economic growth. If it succeeds and delivers on any of its promises, it will produce the opposite result: replacing vast numbers of workers without creating anything new that generates jobs elsewhere. In other words, even if AI succeeds, what it will achieve is a smaller economy, not a larger one. Will it boost productivity? Perhaps in some companies — but that counts for very little if it keeps its promise of gutting entire sectors of the economy in return.

Just as it happened to Trump, AI has now had its own encounter with reality — and reality has left it exposed: its promises of generating economic growth simply don’t hold up.

Just days ago, the CEO of the world’s leading AI company, Jensen Huang, trotted out the AGI story once more — and it landed exactly the way Trump’s TACOs have been landing lately. Nobody believed him.

THE PERFECT STORM

Here’s the thing: just as the US has its midterms this year, AI has its own version of an election — except it won’t be decided at the ballot box. It’ll be decided in the capital markets.

Within a few months, the three biggest startups in the sector — SpaceX, OpenAI, and Anthropic — are set to go public at astronomical valuations: over $3 trillion combined.

Market analysts rarely agree on anything. On this, there is near-unanimity: there simply isn’t enough money in public equity markets to absorb all three. If they all go through, it would be “like dropping a boulder into a fishpond” — it would drain the water and crater the valuations of every other company alongside them.

What’s more, none of these companies has revenue figures that come close to justifying their valuations. And going public means a full financial striptease in front of regulators — their opaque books thrown open for the entire world to see. The problem is they have no alternative. Because private investment certainly doesn’t have enough runway left to sustain these valuations either.

The AI IPOs are to the economy what the American midterms are to global politics: the moment of reckoning for the model that brought us here.

This, in my view, is what the market sell-off and the death of the TACO effect are reflecting. Trump and the AI bubble have weeks left, not months. I’d go further: the bubble has already burst — that’s why valuations are deflating. The only reason it isn’t exploding more violently is that, as the Financial Times noted recently, investors have nowhere else to go.

In the days and weeks ahead, we’ll watch this same process enter a far more acute phase. Perhaps the outright collapse of the stock market. Perhaps Trump finally following through on pulling the US out of NATO. Whatever form it takes, it will be the final gasp of a model that is dying.

REASONS FOR OPTIMISM

Regular readers know I don’t like leaving things on a note this bleak — mostly because I genuinely don’t believe this is a moment for pessimism. If anything, the opposite: an extraordinary window of opportunity is opening up in front of us.

Because the apparent collapse of everything around us is, in large part, a mirage. What is shaking is not society itself. The things that actually matter for human life — the indicators that, a hundred years from now, will tell whether our era was one of progress or regression — are doing just fine. Science continues to advance at breathtaking speed in the treatment of cancer, Parkinson’s, and Alzheimer’s. We keep producing more with less, and as a result, we continue — albeit not nearly fast enough — to reduce poverty and child mortality. And in recent years, we’ve been handed another reason for hope: the staggering progress of renewable energy is making a world free from fossil fuels feel genuinely within reach, one where abundant, clean energy is the norm.

What is breaking down is the economic project we’ve lived inside for the past 25 years. What we called the “knowledge economy” never worked — and today it is cracking apart because it always had an irresolvable contradiction at its core.

The economy is, at its most fundamental, the part of human activity that deals with scarcity. Things have economic value precisely because they are limited — because not everyone can have them. Oil is worth money because there’s a finite amount of it. Knowledge works in exactly the opposite way. When I teach something to someone, I don’t lose it. When a song is digitized, a million people can listen to it simultaneously without any one of them taking anything away from the others. Knowledge, once created, can be reproduced and distributed at virtually zero cost. Its natural tendency is to escape every attempt to turn it into a commodity and become free — and when it does, the entire economic activity built around its artificial scarcity collapses.

When the West made the most ambitious decision in its history — sending an entire generation to university, the first in their families to set foot in a lecture hall — it planted the seeds of its own economic model’s destruction.

In the decades that followed, those same young people, armed with knowledge and the internet, rendered entire economic sectors obsolete — one after another. It happened to music, to film, to journalism, to retail, to traditional banking, to large swaths of travel and tourism, and to dozens of other professions. In every case, the pattern was identical: the further knowledge spread, the more the ability to profit from its scarcity shrank.

Hence the deepest irony of our time: the more successful a knowledge society becomes — the more it educates its population, the more it innovates, the more freely it shares information — the more it destroys its own economic foundations. The “knowledge economy” was always, in a very precise sense, a contradiction in its own terms. An oxymoron.

The conclusion was always inevitable, even if it still isn’t obvious to everyone: in the twenty-first century, as knowledge has advanced, the economy has contracted. Today we see the most brutal expression of this process in artificial intelligence: if the promise of universal knowledge is ever truly fulfilled, it wouldn’t just make one sector redundant — it would threaten to make human work itself redundant.

The crisis of Donald Trump and the crisis of AI are, at their root, the same phenomenon. The industrial world of the twentieth century handed off a mandate to the “knowledge economy”: take care of its two main actors — capital and labor. But the knowledge economy failed to offer either of them an equivalent place to the one they’d held in the old world. Today, capital has nowhere to go — which is why it keeps producing one bubble after another. Labor, meanwhile, has lost the central role it once had. At least for a significant portion of the population. And it is that vast, displaced minority that is fueling Trumpism across the globe.

With the “knowledge economy,” it isn’t the things that truly matter in society that are shaking — it’s our beliefs. What’s collapsing are the rules of the old world. This is the end of an ideological cycle, of a system that never worked, that has been limping along for 25 years, and has now entered its death throes — producing one tragedy after another.

But is this really a threat? Wasn’t it always our final goal? Wasn’t this what we dreamed of — freeing ourselves from the tyranny of scarcity and toil?

If we can understand this moment — and stay united, clear-headed, and purposeful, the way we did during COVID, during the invasion of Ukraine, during the World War and the reconstruction of Europe 75 years ago — we will find that we have never been better equipped to face the challenges ahead than we are right now.

We are a society of extraordinary knowledge. We live longer than ever before. We have built solid political agreements that have allowed us to live in peace for decades. And we can build new ones. We have the intelligence and the capacity to move forward and find solutions to whatever stands in our way. No matter how savage the coming crisis; no matter how erratically the strongmen in the US, Israel, or Russia keep lurching from one disaster to the next — if we commit, if we come together, and if we give it our very best, there is nothing to fear.

If you enjoyed this article, you’ll love Hijos del Optimismo (Children of Optimism). It’s my first book, the older sibling of this newsletter, and a project I’ve been working on for years

.

— Bad Bunny.

The original (Spanish) version of this article can be found here.

Robert Kennedy said that GDP ‘measures everything except what makes life worthwhile.’ It’s obvious: money or possessions, hours worked or the title that appears in your email signature are not what really define our experience. If anything, they are parts of an exoskeleton that holds within it a life made up of emotions, passions and fears.

Even so, every time a question arises — ‘Why is the far right growing?’, ‘Why are we losing confidence in democracy?’, ‘Why do we feel that society is in crisis?’ — instead of looking at what really matters, we return to GDP, to the hard, easy-to-find data of the economy. It is not surprising, then, that much of our understanding of the world falls painfully short.

I cannot help thinking that there is something prophylactic about all this. The economy is such a sterile field that no one has to reveal anything about themselves to talk about it. Over GDP, one can fight tooth and nail without revealing oneself. But if, instead of statistics, we look at art, television, cinema or literature, and ask ourselves where we really feel life in crisis, we will see that it is not our bank account that hurts us most, but love. Paradoxically, the more connected we seem to be, the lonelier we feel. Love has become a scarce commodity that many people lack and many others fear losing.

How silly, isn’t it? If anything is truly abundant, it is

So, for this Valentine’s Day weekend, a few weeks ago I decided to write a little theory about my particular —and somewhat unusual— way of understanding love from the perspective of abundance.

To my surprise, this post, which was intended to be a lightweight note among the rest of the economic and technological content, has ended up saying some very important things about a nascent theory of abundantism that I hope you will like.

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What is love?

Love is, in essence, curiosity. We say we love someone when we are interested in and involved in their existence. Love is ‘active concern for the life and growth of those we love’1 or ‘the condition in which another’s happiness is essential to your own happiness’2.

In English, there is a phrase that explains it particularly well: to be invested in someone (or something) is something like being interested, but not just superficially, but having something at stake; to be invested in someone is to have placed part of one’s own time, energy, even identity in the future of another. So to love is to stop being a spectator and become an interested party in another story.

Notice how, from this definition, it is not necessary for that emotion to be reciprocated; one can perfectly love someone who does not return that love. This is why teenagers can become infatuated with a K-pop star living thousands of kilometers away, just as mothers can fall in love with each of their children long before those babies are old enough to reciprocate. For this reason, someone may continue to love their father even after his death, while another person might be enamored with an idealized version of a first love from their youth, which, most likely, was not even exactly as they had imagined.

Love is as abundant as our capacity to pay attention: we could be in love with half of humanity or, at least, with as many people as we can evoke simultaneously without neglecting others. We could fall in love with many men and many women—some known, others less so. We could live in that experience all the time, every minute, until it overflowed our entire existence. Just as it seems we live immersed in hatred, we could live in love.

If we do not, it is because today this abundant form of love is proscribed. It was canceled the day love became synonymous with commitment.

Love as Commitment

For millennia, love and commitment were two very distinct things. Demosthenes claimed that good Greek citizens had “lovers for pleasure, concubines for daily care, but wives to bear legitimate children and be faithful guardians of their homes.”3

Until the Modern Age, aristocrats married whoever suited the family to produce legitimate heirs to manage the heritage; marriages were arranged and materialized long before the brides and grooms were old enough to understand what was happening. Common people, although lacking lineage, also married for convenience; they brought strength for labor, the possibility of a dowry, land, or simply the ability to share tasks necessary for survival.

In the Middle Ages, early romantic tales of love had no relation to commitment. Instead, they represented a rebellion against that mandate: the possibility of a life beyond duty. Romeo and Juliet, Tristan and Isolde, or Lancelot and Guinevere challenged the established order by falling in love outside of marriage.

However, in the early 19th century, with the rise of the first major cities and urban development, the game of social status began to transform rapidly. The worth of an individual ceased to be defined by the land they owned, and personal attributes—reputation, titles, skills, social networks—began to carry equal or greater weight than agrarian property. Marriage became a strategic investment in human relationships, and that romantic love which had emerged as protest gradually transformed into the cultural justification for marital commitment.

Over time, the bond between love and commitment solidified until, after World War II, it had established itself as the only legitimate glue not only for marriage, but for family and each person’s life project.

Commitment, unlike love, is scarce. We cannot live simultaneously with half of humanity, nor can we impose upon ourselves the burden of paying half their rent and birthing their children. When love became tied to commitment, the possibility of loving freely and abundantly became dangerous. Because if the justification for commitment, upon which domestic economies and social stability rested, was an emotion, it could not be volatile, immeasurable, and difficult to govern: its abundance became a formidable threat.

If not regulated or tied to a social contract, love endangered societal stability: thus, it had to be scarce and stable. Permanent. As predictable as the other parts of the industrial machinery. It had to be linked to commitment and limited to reciprocal affections, those that operated almost like an exchange of value.

Thus, transactional love, the one associated with commitment, solidified as the only “true love.” Only those forms of love that served to facilitate the devotion of another human being survived as valid expressions of this type of curiosity. Marriage, the highest form of commitment, emerged as the supreme bond, while children and family—who are expected to commit to us—occupied a discreet second place.

All other forms of love, which had always existed and would continue to do so, were proscribed, often through shame. Some, through direct social sanctions, such as extramarital relationships. Others, by making them seem ridiculous. Since then, in teenage romantic comedies, love hurts when it is unreciprocated; characters are caricatured for being overly in love or for falling for someone “out of their league,” while overly affectionate friends are depicted as foolish. Meanwhile, the main characters are always those who are “hard to get,” those with scarce love, who never give themselves unconditionally—that is, without a transactional.

Thus, a singular type of love—the one directed toward a partner and expected to last a lifetime—solidified as true love. Love in all its other forms—the affection we have for K-pop stars, or friendships, or love for lovers and concubines—was relegated to the margins, as if it did not count, as if it did not deserve such a name.

That love, which was an abundant emotion, was reduced to a scarce thing.

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The Most Painful Scarcity

Without any theoretical framework to support me, I assert that this scarcity of love we have imposed is the cause of today’s most acute pain in society. It is this precariousness that lies behind the statistics showing that everyone is angry and furious and that “society is broken.” The lack of love is that thing worth pursuing that cannot be explained by all the GDP numbers.

Because love, in this definition we are exploring, is the precondition for what is essential to our existence: connecting with other humans. If we strip it of the cultural baggage it carries today, it becomes evident that this genuine curiosity about another person’s story— or even about another animal—is the substrate from which those sparks can emerge, in which we experience a profound connection with others; those moments that leave us with an overwhelming sense of being whole, of lacking nothing. Those explosions that occur in (good) sex, or in nights of laughter that leave us sore, or when we half-discover an idea with another person that no one had understood before, or when we celebrate a goal with our best friend. That experience where it seems the universe aligns with you, like when you hug a child.

That we have to describe these experiences as “flashes” or “moments,” rather than as a daily habit, gives us an idea of the lacerating scarcity in which we live.

“What makes love a form of madness,” says Eva Illouz, “is that it has no connection to reality.” And for that reason, because it only lives within us and is not tied to the limits of the physical world, love is not scarce; it is abundant and holds the promise of returning to that intense experience of being a complete human, connected to others.

I want to imagine that those men and women from Classical and Medieval times, who did not bear the moral weight of scarce love, although they married for lineage, still sought love everywhere. But we cannot even allow ourselves that. In our lives, love has been restricted to the capacity for commitment we can offer and that can be offered to us. When someone put love in the closed box of marriage, they robbed us of the possibility of connecting with others.

As a result, people see how that possibility of truly connecting with other human beings is becoming increasingly limited. We find ourselves surrounded by cardboard relationships, sustained by clichés and elevator conversations that hardly produce the deep intimacy that makes us fully human. I have no doubt that it is the desperate search for more opportunities to feel that connection that drives the consumption of alcohol and drugs.

Fifty years ago, capitalism promised to end that scarcity. The “knowledge society” was supposed to bring a world of connected intellectuals living a life of sparkling experiences like those in Woody Allen’s films. Pure connection.

It did not happen. And today we drown in the life we have, in scarce love, rummaging through the internet in hopes of finding— not just on Tinder, by any means— other human beings with whom to share that bond.

And this, in my opinion, is why hatred prevails today. Because while love became scarce, hatred remained abundant. So it is no surprise that you might detest the president or even generic groups of people, but you would be locked away in a very dark place if you claimed, with the same fervor, that you were in love with him.

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A Small Theory of (Free) Love

A few years ago, I found myself tangled in one of those relationships where love and commitment cease to align. Over time—and with a great deal of therapy—I discovered one thing. What was truly painful for me was not that this person had stopped loving me (in reality, that hadn’t happened), but that once our commitment was broken, for some reason, I felt obliged to stop loving him, to stop being invested in him. To lose the connection we had.

I have the feeling that this is quite universal. What hurts us when commitment ends, or when we are not “reciprocated,” is that we feel compelled to give up the love we had. But it is an optical illusion: we are convinced that we desire to be loved solely because we have forbidden ourselves to love without being reciprocated.

Thus, the love we had is proscribed, just like a teenager’s love for their idols or a woman’s love for the child who died before birth. We have convinced ourselves that love must be measured in the same way it is tied to commitment, so one cannot be madly, intensely in love with all their friends. Nor can one continue to love an ex-partner, much less acknowledge loving someone who doesn’t even notice them.

But what if we allowed ourselves to love wildly, expecting nothing in return? What if we were capable of loving with the same freedom with which we hate today?

If we let go of that mantle of scarcity in love, what emerges is the opposite: we must love to the limits of our own capacity. To bathe in that emotion. To wake up every morning in love with a K-pop star, with your friends, with that guy you occasionally share a bed with, with your children, of course, but also with the children of all your friends, and even with your partner’s children, even if you didn’t give birth to them. Loving while relinquishing any expectation of reciprocity returns to us the possibility of abundance because when your love is infinite, you do not need it to be paid back.

It is here that it becomes clearer that abundance is synonymous with freedom. It has nothing to do with having more scarce goods (that is, more commitments) but rather with allowing ourselves to live in a world of limitless things. And in beginning to recognize a higher status not to those who possess more limited goods, but to those who know how to live a good life (extraordinarily good, even!) in an abundant place.

So I have stopped tying my hands behind my back in love. And since then, I move forward without brakes. I live in love with many people. My curiosity and desire to connect with others are no longer limited by the commitment we may have, nor even by the time we spend together, but in every moment we share, and in all the time I dedicate to thinking about those other people, I allow myself to feel the same ecstasy that most people reserve for the “love of their life.”

In French, they say that people who are very romantic have “a heart of artichoke,” “un cœur d’artichaut,” because they go through life giving a petal to each person. I reclaim that spirit, and I give pieces of myself until I exhaust myself.

And I seem like a weirdo, I confess. There are likely people who think I am too naïve, or too intense, or too goody-goody. But you know what? I don’t care. Because the consequence is that my inner life resembles that of adolescents living on a cloud thinking about their K-pop star, except my stars are flesh and blood, and I see them often: they are my friends, my lovers, my family, and the people I encounter who dazzle me, even if I never see them again.

And I am very happy. There is not a sliver of space left in me for hate.

Commensalism

While writing this article, I realized that this small theory of love has everything to do with a larger one that is at the center of all the things I think and write about.

Long ago, Adam Smith proposed that people act out of selfishness, and that this pursuit of individual interest magically produces a collective good. Other authors later tried to correct Smith and prove that humans are not selfish but altruistic: they do the right thing for everyone in the expectation that others will do the same. They care, hoping to be cared for; they drive on the right side of the road, trusting that others will do the same.

There is certainly some truth in all of this, but I would argue that the highest expression of humanity lies in the idea of being “commensalist.”

Commensalism is a form of biological interaction in which one individual benefits while the other is neither harmed nor benefited. The term comes from the Latin cum mensa, meaning “sharing the table,” and was created to describe the relationship in which one species takes advantage of the waste of another without harming it, like the dogs and cats that followed the early communities of hunter-gatherers.

But something extraordinary happens with humans: we have almost everything we need. We are capable of producing much more than we require. That’s why we can exist in a world of abundance: we are the only species capable of systematically creating more than we consume.

An innumerable amount of human behaviors—I would say almost all that go beyond mere survival—are commensalist: writing a book (or a newsletter like this), composing music, or software, doing science, caring, teaching, painting, dancing, producing art, or inventing tools. Our essence is to give, to create things that benefit others without expecting anything in return, simply because it makes us happy. In love, as in knowledge and art, our life experiences generate more than what is needed to create.

In fact, we could say, without fear of being wrong, that human progress is a consequence of this commensalism. From Socrates to Aristotle, Gutenberg, Newton, Curie, Kant, Lincoln, Martin Luther King Jr., Tim Berners-Lee, and even Smith himself, the great figures who have pushed the world forward did not do so out of a desire for profit; on the contrary, they dedicated themselves to creating ideas that could be used by all without being depleted. The same is true in literature and art. Does anyone really believe that Camus, or Shakespeare, or Beethoven wrote expecting the world to give them something in return?

We could even say that something went awry the day we began to look at that generosity with suspicion and made that selfless giving seem naïve or ridiculous.

There are many species of selfish animals and many altruistic ones, but that ability to give without harming and without expecting reciprocity is, for me, the purest form of our existence, what makes us genuinely human.

So if I had to start liberating abundance somewhere, I would begin here, with love. I would start by allowing ourselves to love without measure, without filters, without any accounting. By unleashing that curiosity for others until we are filled to the brim and leave no space for hatred. And by silencing those who seek to shame us.

We need to make having a heart of artichoke a trend. ;-)

If you are also an abundance thinker, you will like Hijos del optimismo (Children of Optimism). It is my first book, the older sibling of this newsletter, and a project I have been working on for many years.

You can already order Hijos del Optimismo on Amazon, La Casa del Libro, El Corte Inglés and the publisher’s website, Debate.

You can also read more about me and the story that inspired me to write it

‘When people have nothing to eat, they will eat the rich’.

Jean-Jacques Rousseau (attributed)

That everything is going wrong is the only consensus that seems to survive in our time. On everything else, there are today as many positions as there are theories about who is to blame.

Among all of them, one stands out: the argument that wealth has concentrated in very few hands, and that as a result, even as the world keeps growing, a great many people feel an ever-greater sense of scarcity. We are being robbed.

It is a rather extraordinary thing, because translating macroeconomic concepts — such as inequality — into public opinion is very difficult. But years ago the Occupy Wall Street movement produced a slogan that ended up seeping into global common sense to the bone:

“We are the 99%.”

It was the hangover from the 2008 crisis, and the world was hearing in prime time the story of how a handful of bankers had turned the financial system into a casino. They — those men of flesh, bone, and wallet — were to blame for the bubble and the crash. The battle was to be everyone against the 1 percent.

Fifteen years later, the majority of people around the world believe that the accumulation of wealth has a negative effect on society. Major political leaders point to “billionaires” as the architects of the political and social crisis, and the slogan “tax the rich” has become an unlikely artefact of popular culture — one that some candidates have turned into merchandise lines and others have worn to film galas.

Following the success Zohran Mamdani had wielding this argument in his New York mayoral campaign, the British Greens’ candidate Zack Polanski returned to it a few days ago in a video that went viral far beyond the United Kingdom: “When the rest of us work ourselves to the bone to create wealth and almost none of it returns to our communities, it’s going somewhere — upwards, into the pockets of the super-rich.”

The idea that billionaires are to blame for the widespread discontent Polanski describes is a winning argument in this political cycle.

But beyond its undeniable political power, is it actually true? Is the accumulation of wealth responsible for the deterioration in living conditions in recent years? Or have we reached for the easiest target and missed the point?

In other words: is eating the rich enough to fix the world? Or are we going to walk away hungry?

Inside the “1%”.

Like all good stories, this one about the 1 percent contains a measure of truth. In every country there exists a super-wealthy majority that hoards an immense share of global patrimony. In the United States, the wealthiest 1 percent hold almost as much wealth as the poorest 90 percent of the population combined. Across the planet as a whole, the divide between rich and poor countries makes that proportion even more extreme.

But like all good stories, this one also has something of a fairy tale about it. The reality is not a uniform 1 % detached from a uniform society, but a wealth that becomes ever more concentrated as you climb the scale. This means that if you look inside the 1%, you find evidence still more striking: the top 0.1 %of the US population — 342,000 people — hold 14% of the country’s total wealth, half of everything owned by the entire 1 %.

And if you were to look inside that 0.1%, you would find that concentration continues to intensify until it can no longer be captured in a survey. But according to the Forbes list, which studies America’s largest fortunes each year, a third of the wealth of that 0.1%— 6.6 trillion dollars — is in the hands of the 400 richest people in the country. That is to say, 0.00001 percent of the population holds more wealth than the 177 million people who make up the poorest half.

And we could go further. We could look inside the Forbes list and find that of those 400 billionaires, the 10 wealthiest have a combined net worth of 2.4 trillion dollars — a third of the entire list.

Compared to these 10 billionaires, every other American — the 99.99999975 % — is poorer today than they were ten years ago.

The paradox is this: if the goal is to build political majorities, following the same logic as the “99 %,” one could construct a “99.99999975 % coalition.” It would be a grouping of interests that could bring together 342 million Americans alongside the other 390 billionaires on the Forbes list, plus all the millionaires who don’t make the cut, together with all of their staff.

And something considerably more thorny: if we look down the scale rather than up, we find that the population group running from the 1st to the 90th percentile — the 9% sitting between the wealthiest 1% and the poorest 90%, what we might loosely call the “upper-middle class” — owns 37% of total wealth.

Add both groups together — the 1% and the 9% — and the wealthiest 10 percent of the United States holds nearly 70% of the country’s wealth.

And this is not an isolated phenomenon. According to the World Inequality Lab — directed by Thomas Piketty — the wealthiest 10% of the population in each country holds, on average, 73 percent of that country’s wealth.

Three Sad Thirds

A far more productive way of understanding this problem, then, would be the following.

Wealth today divides into three thirds. The wealthiest 1 % takes one; the next 9%— the upper classes, colloquially speaking — captures another; and the following 40%— the middle classes — shares the last of the three. For the remaining 50%, the poorer half of the population, what is left is a pile of debts and scraps.

Societies have become a four-speed world, in which:

• A tiny economic elite has emancipated itself from the reality in which the rest of us live. These are the billionaires.

• A broader cultural and political elite — the wealthiest 10%— is seeing its relative position improve, and holds interests and levers of power in its hands. These are the lawyers, prosecutors, judges, the corporate world, senior civil servants, some journalists, much of the medical profession, media directors, some university professors, business owners, and some politicians too.

• A middle class trapped between the aspiration to climb into the upper class and the fear of falling into the great mass below. These are the schoolteachers and secondary school teachers, nurses, civil servants, police officers, firefighters, some university professors, some journalists.

• A working class that has nothing and lives only to pay everyone else. These are the waiters, supermarket cashiers, call centre workers, administrative staff, hospital orderlies, cleaners, carers, delivery drivers, security guards, construction labourers, and taxi and ride-share drivers.

I believe the virtue of this model is that it allows us to understand the problem of wealth distribution in its full complexity, without trying to reduce it to an idea simple enough to fit on a slogan.

I also believe that from this vantage point one can begin to understand the other universal consensus of our time: the one that has formed against political elites. But I do not want to get into that today — I will save it for another piece, which will give you an excellent reason to subscribe to this newsletter and receive it in your inbox in the coming days.

Is the Concentration of Wealth the Cause of the Malaise?

So we all agree that wealth is progressively concentrating toward the upper layers of society. But is that inequality the cause of the widespread discontent being felt around the world?

It is hard to see how, because this is not a recent phenomenon. On the contrary, we have been a three-thirds society for many decades.

Before the Second World War, elites accumulated more than 90% of wealth. Between 1945 and 1975, that concentration fell dramatically — through the effect of the “share issuance” by countries in the form of housing we discussed last week — before rising again between 1980 and 2000. But since 2000, the gap between what different social groups accumulate has been essentially flat. Even as far back as 1980, the wealthiest 10 percent already held 76% of global patrimony. Wealth is very concentrated — but it has been for a very long time.

In the United States, by far the most unequal country in the Western world, the top 1% already owned 23% of wealth in 1989, while the next 9% owned 38%— a figure that remains very similar today, at 36.4%.

The total wealth of the remaining 90% of society was 39.2% in 1989 and is 32.6% today — a difference of fewer than 6 percentage points. Six points that are explained by the outsized growth in the wealth of the 0.1%, which over these 35 years has gone from owning 8.8% to 14% of the country’s wealth.

Do those 6 points justify the galloping contemporary malaise? If we want to believe they do, then we will have to acknowledge another cause that represents a far greater difference.

The Elephant in the Room of the Western World

Over the past 35 years, total wealth has grown exponentially — multiplying eightfold. And what we can observe is that, unlike the concentration of wealth, which is a very ancient occurrence, this explosive growth in the volume of wealth is a recent phenomenon, specific to the last two or three decades — one that has accelerated extraordinarily, first from 2000, and far more dramatically from 2008.

Put another way: wealth is not much more concentrated today than it was 35 years ago. What has happened is that there is simply far more of it.

Of course, this should not be a problem in itself. Growing wealth is the leitmotif of our economic system. It becomes a problem because for decades wealth has been growing faster than the economy.

In the United States, total wealth rose from 20.44 trillion dollars in 1990 to 42 trillion in 2000, reaching 167.7 trillion in 2025. Relative to the economy, Americans’ wealth has grown at twice the speed of GDP. Where in 1990 wealth stood at 3.6 times GDP, by 2025 it is 5.6 times. And wages? Over the same period, the median weekly earnings of full-time workers have grown by only a factor of 2.8.

Across countries as a whole, wealth has gone from representing 3.9 times global GDP in 1980 to 6 times in 2025.

This is the macroeconomic explanation — with all its charts and data — that makes sense of a daily reality everyone understands: economic life is becoming progressively harder for the majority. Because in lived experience, that mountain of wealth materialises as “investment assets” that expect to be remunerated — and that we are obliged to remunerate in many ways: through rent or mortgage payments, through price increases that flow from rising rents and mortgages, through rising share prices. By the same logic, when taxes keep going up, it is because pensioners and public sector workers, like all other citizens, find themselves obliged to service that mass of wealth.

And so we are a society that must devote ever more money and effort to remunerating a growing mountain of wealth. It would be a relief to say that it sits entirely in the hands of a 1 percent, so as to have someone to blame — but the truth is that it makes no difference whose hands it is in.

This is why, even though two adults now work in nearly every household, even though far more money comes into homes than 35 years ago, the perception of scarcity keeps growing. More than that: since everyone can sense that the trend is toward wealth continuing to multiply, most people feel that they are falling further and further behind, that there is no way to keep pace — precisely as Polanski signals in his viral video.

The Global Warming of Wealth

Where does all this “wealth” come from? How is it possible? Is wealth not supposed to be the product of economic activity? Should it not grow in parallel with the economy?

So it should — and so it more or less did, until around 2000. But around that year, the economy stopped growing at the pace it had demonstrated in previous decades. The natural consequence would have been for wealth to stop growing too. But that would have meant ending the dream of infinite growth in which the society of that era was installed — and still is: telling people they were no longer going to become rich, confirming that their children would live worse than they did.

Instead, governments embraced a policy of stimulus-driven reactivation to keep the economy growing. But the economy did not grow again. What happened instead is that wealth emancipated itself from the economy — and for the past twenty-five years it has no longer grown as a product of economic activity, but through the appreciation of assets: specifically, stock markets, which have multiplied in value twenty-fivefold since 1989, and real estate assets, which have appreciated to seven times the value they held at the start of the Federal Reserve’s measurement series.

And here we remain. Policies that normalise the idea of people “investing” or “saving” in housing are the clearest expression of this attempt. In a world that no longer grows, where there are no new industries in which capital makes sense, countries normalise the continued extraction of profit from reselling real estate assets that produce no new value whatsoever.

All of that mountain of artificial “wealth” — paper wealth — is the truly distinctive phenomenon of these last twenty-five years. It is the great elephant in the room of contemporary society. And anyone who genuinely wants to resolve the contemporary malaise — rather than merely win votes by the quickest route — should attend to the causes and mechanisms that produce this runaway and unjustified inflation of wealth.

The reason not many people are willing to do this is that the mountain of wealth has an uncomfortable, difficult-to-confront origin: it is the twentieth-century dream of universal prosperity — the dream we refuse to relinquish — that has brought us to this dead end.

To fix it, what we need is a new dream :D

If you are also searching for a new dream, you can’t miss Hijos del optimismo (Children of Optimism). It is my first book, the older sibling of this newsletter, and a project I have been working on for many years.

You can already order Hijos del Optimismo on Amazon, La Casa del Libro, El Corte Inglés and the publisher’s website, Debate.

You can also read more about me and the story that inspired me to write it

Photo by Lea Kobal on Unsplash

— Ridley Scott, The Kingdom of Heaven

The original (Spanish) version of this article can be found here.

I have a theory that I suspect will be controversial — one that may even cause offence. But I find myself increasingly convinced that Meredith Whittaker is entirely right when she argues that failing to tell the truth, and failing to uphold it consistently, makes us stupid. Because it forces us to operate intellectually inside a charade — one that ends up atrophying our reasoning, as we build castles of pretended certainties that are nothing more than dogma.

Of all the dogmas of our culture, perhaps the most powerful is that of absolute evil. When something frightens us, we rush to invent a monster in order to exorcise it — so that the terror is no longer inside us, but inhabits an external body we can blame, fear, and hate.

And so, while we lived at the mercy of the natural world, the Yeti, the Loch Ness Monster, Bigfoot, and the Chupacabra were among the many variations of a single universal fear of nature. Later, vampires were the invention of a society traumatised by plague and tuberculosis. And when the world began to fear progress, it conjured up the creature of Doctor Frankenstein. Since it is usually the unknown that frightens us most, medieval mapmakers would typically inscribe the unexplored regions of their charts with a warning: Hic sunt dracones. There are always dragons in what we cannot yet explain.

We, the human beings of the twenty-first century, living in terror of the phenomenon of digital interconnection, have also invented the demon of our time. A being without a body, without a face, without a soul, which we have called “the algorithm.”

And since, at bottom, what frightens us most is not monsters but other human beings, we have convinced ourselves that this being is a weapon of mass destruction in the hands of creatures so malevolent they would have nothing to envy of Dracula: the tech bros. We have persuaded ourselves that, in their hands, social media will be the ruin of humanity — the hell in which children will burn and women will be violated.

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But monsters, you will agree with me, do not exist. On the contrary: every change that has ever frightened us has always been driven by a social phenomenon — by a plurality of interests, actors, and circumstances too complex to reduce to a monster.

And so today I am wading into dangerous territory, to argue against the widely held dogma that everything wrong with the world is the fault of social media. More than that: I maintain that social media, as we have known it, is dead. Or at least on its way out. In all likelihood, the children of a few years from now will have no interest whatsoever in using it.

And I do not believe it has been killed by the tech bros — but by the same agent that finished off Facebook: ordinary people. Or, put another way: it is not the algorithm. What is ruining the platforms is an invasion of users who have nothing to say.

Let me explain.

The first social networks — Twitter, Facebook, Reddit, Tumblr, LinkedIn — were built on an expectation of horizontality. Facebook promised to connect everyone with everyone else. Twitter occupied an adjacent space, but on the same principle. The format — those minimal posts that anyone could create with no effort — served that function: ordinary people talking about their lives on an equal footing with other ordinary people.

This was, to a large extent, an inheritance from internet culture itself. The thing is that software, in its first iteration, always tries to replicate the hardware it runs on — and in the early days, the internet was conceived as a kind of road network in which many nodes, the computers, connected with one another on equal terms. As a consequence, those first social networks of the 2000s replicated that architecture and conceived of themselves as “distributed.”

But that was a prehistoric vision of the internet — however firmly it remains lodged in some people’s heads. It makes far more sense to think of the internet not as a territory, but as a channel through which a torrent of information flows — created by billions of springs, each one of us. If, instead of thinking about the internet from the hardware perspective — the connected machines — we think about it from the human experience, it becomes clear that the internet is not a road map: it is a river.

The “feed” of each social network is a tributary of that river, but our WhatsApp chats are another, and websites — particularly those of news outlets — are a third, to take three familiar examples. The internet is us; it is humanity. And the best way to describe it is not a static map, but a process, a story — a becoming.

While the river was small, in the early 2000s, it was more or less comprehensible to the human brain. Facebook, at its best, did not contain everyone — only a small slice of society. A group of early adopters willing to invest considerable time in creating content and to modify their behaviour to adapt to the culture of the platform. It was a network of peers.

But over time, Facebook went mainstream and filled up with late adopters who were no longer willing to do any of that. The river became an immense and incomprehensible torrent.

Twitter, which was a far more niche platform, held on for a few more years — but ultimately suffered the same fate. In its early days it was the closest thing to a pub or a living room: a place of trust, an improved version of the many forums that had dominated the internet. But as it filled with late adopters unwilling to adapt to the local culture, it became a cacophony.

Reddit survived — more or less — because it never became entirely mainstream. To this day it remains a relatively closed community of peers, held together by the effort participation requires.

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The Algorithm Against Meaninglessness

Faced with that flood of late adopters, Twitter and Facebook encountered a problem. The feed was filling up with updates that held no interest, no importance, and no relevance for those receiving them. The human brain needs to invest a certain amount of time reading each update, and if it is forced to scroll through several that mean nothing to it, it grows bored and leaves.

And so those platforms modified their user experience to prevent that avalanche of irrelevant content from overwhelming them. They stopped displaying posts in the chronological order in which they were published, and began promoting their own version of what mattered. The algorithmic feed was born.

The social media algorithm is known as “predictive.” In essence, what it does is take an immense amount of data and a user’s prior actions, and attempt to infer what they will want to see next.

“Engineers assign a point value to each type of interaction users can perform on a post — liking, commenting, sharing, and so on.

For each post that could potentially be shown to you, these point values are multiplied by the probability that the algorithm believes you will perform that interaction. These multiplied pairs of numbers are added together, and the total is the post’s personalised score for you.

There are a few additional details, but broadly speaking, your feed is created by ranking posts according to these scores, from highest to lowest.”

(This link provides a detailed explanation of how Facebook’s algorithm works, and this one explains how Twitter’s algorithm works.)

At bottom, this is the same thing Google has been doing for twenty-five years — a function without which the internet could never have reached where it is today: ordering an enormous quantity of information that the human brain, on its own, cannot process.

The algorithms of social networks do not have to be the devil. In reality, they serve a function that is genuinely necessary in this interconnected world we inhabit: they explore content far beyond anything you could consume on your own, and attempt to infer which part of that mountain of information actually interests you.

And although the idea has taken hold that they were trying to control what we saw, I remain convinced that was not the case — at least initially. In their early days, social media algorithms were reacting to the fact that chronological feeds had become irrelevant, tedious, and incomprehensible.

If some networks have become cesspools, it is for two reasons. The first is that their users — the versions of themselves they present on those platforms — were seeking out that kind of content: confrontational, violent, or designed to serve as an echo chamber. The most compelling evidence is that while some platforms resemble spittoons, others, like LinkedIn, are a passable imitation of a tea room run by the late Queen of England at Buckingham Palace. If the algorithm were the problem, they would all be equally awful.

The second reason is that certain platforms — to some extent Facebook and YouTube, but above all Twitter — when particular users began exploiting the algorithm for their own political or financial ends, did nothing to correct it. They allowed far-right bots and professional fake news creators to flood users’ feeds and ultimately degrade the platform for everyone.

Of course, the phenomenon of users trying to exploit an application’s internal mechanisms for their own ends was nothing new. Google, on many occasions over the past twenty-five years, has made sweeping changes to its algorithm to correct exactly these kinds of drift. Readers will recall, for instance, that for a time every headline seemed to read something like “This girl went out on the street — you won’t believe what happened next,” and that at another point the internet was flooded with short recipe videos that then vanished as if they had never existed.

Companies whose business is organising information on the internet tend — out of a basic instinct for survival — to make decisions that prioritise the quality of their service over the interests of a few.

And this is what is truly new about the present moment. Mark Zuckerberg took, many years ago, an apparently inexplicable decision: to allow the platform to fill with low-quality content in order to keep charging for advertising. Over time, Elon Musk followed the same path and has ended up turning Twitter into the new Facebook. What both are signalling is that their platforms have failed at that model of creating a “distributed society,” and now have only a captive audience that will last them a few more years — and which they intend to squeeze for everything it is worth.

Peak Algorithm

As a result, these distributed social networks have stopped fulfilling their promise. They are no longer neutral spaces for conversation between equals. Publishing on them has become an extreme sport that exposes you to constant judgment, misunderstandings, and pile-ons. The ease of posting has made it far too cheap to attack those who put themselves out there. And to that must be added the ever more intensive presence of advertising and brand-generated content.

The result has been a silent withdrawal by the very people who once made these networks interesting: fewer and fewer posts, fewer likes, fewer retweets, and ever more passive consumption. The prevailing feeling is that, in order to protect your own identity and mental peace, it is safer today to watch than to speak.

As a result, these networks are dying. Facebook and Twitter’s user bases are in freefall, and social media use in general is declining too — at least outside the United States.

Meanwhile, the function that Facebook once served — keeping us connected with the people we know — has migrated to messaging platforms like WhatsApp and Telegram. The “distributed social network” now exists across multiple personal, private group chats.

And this has happened largely because we discovered years ago that we did not want to share the same updates with our mothers as with our friends — but also because the algorithmic feed culture of distributed networks has failed: it has become unbearable, irrelevant, incapable of making sense of reality and information.

Substack: The Moment of the Tribes

What the continued need for the algorithm ultimately reveals is something fundamental to human experience: we do not want a distributed society where every voice is heard equally. We do not want to listen to everyone. We want to pay attention to the people we find interesting at any given moment. On the contrary, having to engage with anyone who wanders past and fires off a tweet is a terrible waste of time — not unlike having to sift through every possible search result on Google to find the one that matters. It is something we simply cannot afford in a life where we need to stay connected to what is important.

For this reason, the next-generation platforms — TikTok, Substack, and, to some extent, Instagram — no longer share even a trace of that ambition for horizontality. No one expects us all to make videos or write lengthy articles, or to have the best photographs. We have abandoned the aspiration of living in a network of equals. We accept that there will be influencers and content creators whom the rest of us will follow, because they are the ones making the effort to create things of value. The new platforms look far more like a television channel made by many than like what Facebook once intended to be.

The meteoric rise of Substack is the consequence of that trend. This platform is today offering the content and connection to public debate that Twitter provided ten years ago. It is the new public square. Substack is the new Twitter.

Like TikTok, but unlike Twitter and Facebook, what is new about Substack is that it professionalises content creation by demanding a greater effort from anyone who wants to be an author. A 140-character tweet no longer suffices to claim an audience’s attention. By the same logic, mounting a bot campaign out of nowhere to attack an argument on Substack is no longer possible either.

Eighteen years after the birth of Facebook, we are closing the age of open, distributed networks. The experiment by which we gave a voice, simultaneously and without filter, to every person equally has not worked, and it is dying. And my instinct tells me that we are heading toward something that more closely resembles the organic texture of pre-modern human societies: decentralised networks organised around community leaders — a society of tribes.

In the years ahead, I believe we will see a decentralised network emerge — or, put another way, a network with many small centres, likely disconnected from one another. Every influencer of a certain stature will have a community, a group that trusts them and follows them everywhere.

I would wager that the next great platform will no longer be public, but will require an invitation to participate, or some form of credential. I would also wager that there will be far more of them than there are now.

I find myself wondering whether, after the tribes, something resembling nation-states might also emerge on the internet. But before that, we will have to confront another challenge: that of holding together a society that will no longer have shared public spaces, but a decentralised network in which each of us belongs to our own tribe.

If you’re interested in technology, you’ll like Hijos del optimismo (Children of Optimism). It’s my first book, the older sibling of this newsletter, and a project I’ve been working on for many years.

You can already order Hijos del Optimismo on Amazon, La Casa del Libro, El Corte Inglés and the publisher’s website, Debate.

You can also read more about me and the story that inspired me to write it

I have been studying Donald Trump for most of my adult life. Fifteen years ago, before his name began to appear on Republican shortlists, one of his flagship projects was a golf resort a few minutes from my family home in Scotland. That resort became a foreign body in the local landscape — because that remote place, where almost nothing newsworthy ever happens, spent years on the front pages of newspapers across the United Kingdom.

Do you know how he managed it?

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A few months before the resort opened, Trump — already an American television star and a fixture in the British media — sued the Scottish government, demanding that it halt the installation of a series of wind turbines.

Despite being an oil producer, Scotland had been one of the first countries in the world to make the energy transition a point of national pride, and lacking sunshine, around 2010 it was putting up wind turbines everywhere. Trump argued that this was unacceptable because the turbines “ruined the views” from the club.

What followed was a legal and media circus in which the tycoon went so far as to take out press adverts accusing the Scottish First Minister of releasing terrorists. He stirred up such a cultural storm that for many years the story kept resurfacing, delivering millions of pounds’ worth of free publicity in media outlets across the United Kingdom.

In time, he lost the case. In reality, it never had any prospect of succeeding — not only because the turbines were in the North Sea, more than two kilometres offshore on land that did not belong to him, but because it should be self-evident that the interests of a private developer cannot be allowed to obstruct a country’s project to overcome its dependence on fossil fuels.

But along the way, at a decisive moment, Trump planted on every front page the idea that democratic governments were servants of elites intent on changing British ways of life — dismantling what remained of the empire, selling the country out to foreign powers, and installing a woke agenda (even though that word had not yet been invented).

Trump lost the case. But a few months later, he won Brexit.

Does any of this sound familiar?

Since then, Donald Trump’s modus operandi has always been the same. The businessman has built a political career by placing the same narrative everywhere: democracy is a sham, and beneath a false appearance, we are governed by extractive elites working for a privileged minority that has seized power by co-opting institutions. Fortunately, these villains are a spineless bunch of bureaucrats — soft, lazy, and cowardly. When confronted with a strong man, they crumble. This is why the world should hand power to strong men like him, who are the only ones capable of putting an end to the woke elites.

More than that: Trump understands something that other politicians seem to struggle to grasp. Reality does not exist — except as an impression in our minds. What we call reality is nothing more than a narrative in our subconscious. So if one can make people believe that something is happening, it does not need to actually be happening. You do not need to win the case for it to appear, for a time, that a businessman can hold the governments of the United Kingdom to ransom. You do not need to invade Venezuela to make the world believe the country is under your control. You do not need to abolish fundamental freedoms across the United States for it to seem like a lawless state. It is enough for people to believe that all of this is true.

Or that it could be, in the future.

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In psychology, there is the theory of “broken windows.” In the 1980s, two criminologists argued that visible signs of crime or civic disorder create an urban environment that ends up encouraging the emergence of further crime and disorder — including serious offences.

“Social psychologists and police officers tend to agree that if a window in a building is broken and not repaired, soon all the others will be broken too. This is equally true in affluent neighborhoods and in run-down areas. Window breaking does not necessarily occur on a large scale because some areas are inhabited by window breakers and others by window lovers; rather, an unrepaired broken window is a sign that no one cares, and so breaking more windows costs nothing.”1

In other words: it is not rules that make the culture of a society. In fact, everywhere there are rules that are not observed at all — think of traffic laws or drug use, for example. On the contrary, it is culture that dictates which rules, out of all those that exist on paper, are actually followed and which are not.

I like to explain this theory through the example of shellfish bars in Spain. In some bars — traditionally those that serve prawns — the custom is to throw the shells on the floor. As a result, the floors of these establishments are typically covered in an amount of organic matter that would be considered revolting in any other context. There are, of course, also bars where dropping anything on the floor would be an outrage. Neither type has a sign on the door telling customers where to put their rubbish — yet everyone understands the rules in both.

Culture makes the rules. This is why no one studies the criminal code of the country they are going on holiday to. They arrive, observe, and behave as they perceive the locals around them to behave. It is also why the international order sometimes operates as international law dictates — and sometimes does not.

And if someone is capable of conveying that a culture has shifted — in favour, say, of a lawless society ruled by strong men — they can, without changing the written rules, without altering what is actually happening at its source, eventually change reality itself. Or bend it to their preference.

The Broken Windows Coalition

Trump’s obsession, then, is to convince us that we live in a dangerous place — full of villains and crime, a world where the rules we once trusted have stopped working. This is why he devotes himself to breaking windows: through ICE raids, “coups” in other countries, and proclamations that he is going to open a resort in Gaza.

The trouble is that a single broken window does not make a culture. For us to have come to believe what Trump wants us to believe, an enormous international coalition has had to form in recent years — a motley collection of actors united by their relentless insistence on pointing out every window that is, they claim, broken.

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In the front line of that coalition stands the far right across the world, parroting the same message Trump never tires of broadcasting: migrants, woke ideology, elite betrayal.

But in the second line stand the media outlets that the alt-right has labelled the “legacy media.” The great newspapers of the twentieth century, stripped of a viable business model by the transition from print to digital, have become addicted — much against their better instincts, it must be said — to alarm and outrage, chasing the clicks that guarantee their advertising revenue.

This works because, as human beings, we are wired to detect signals of danger even before we have fully understood them. Evolution has shaped us to pay attention to whatever might threaten us: an unusual movement, an unexpected sound, a broken window. Our brains prioritize what is perceived as risk — they make us look at and react to threats first, and analyse them later. This is why, when someone insistently signals that the world is full of dangers — even if many of them are imaginary or exaggerated — our attention falls immediately on those broken windows, and we feel compelled to click.

And so the media, one after another, buy into and amplify the Trumpist narrative, because pointing to broken windows generates far more clicks than offering balanced analyses of the state of democracy.

Silicon Valley, too — with Sam Altman, Peter Thiel, and Elon Musk at the vanguard — has signed up to proclaim that the world has ceased to be a solid and trustworthy place. This is why everyone involved in the artificial intelligence scam tries to make us believe that LLMs are going to displace millions of jobs and upend entire industries — because in that AI-dominated world, they are the ones in charge.

It is irrelevant that three years have passed since the launch of ChatGPT and none of this has happened, nor shows any sign of happening. What matters is not changing reality, but making us believe it is about to change. Pointing to the broken windows so that we believe we live in a lawless world, and go looking for shelter in the solutions they offer.

And a section of the left — what we might call the populist left — also wallows in that vision of an unjust world in which elites have been delivered into the hands of a minority (not the woke, in this version, but the billionaires). Just as consolidating democracy, seventy-five years ago, required the left and the right to agree that it was the best model available, weakening liberal states today is also requiring a certain connivance between a certain left and a certain right.

I do not believe Trump will invade Greenland. I think he is a braggart and a con man. Touching Greenland would trigger a war with the second most powerful military in the world, as well as an immediate global economic collapse.

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But I do believe that Europeans and liberals should go to war. Not only against Donald Trump, but against this broken windows coalition.

To win it, we need to build a coalition of our own: one committed to stopping the pointing at broken windows. One that refuses to keep proclaiming that nothing works. Because it is not true. But even if it were — if you are old enough to read this, you are old enough to decide what comes out of your mouth.

Like those volunteer groups that organise to pick up litter thrown in the countryside, let us organise to remind ourselves — as often as possible — how far we have come. Never before, across all the millennia of human history, did democracy exist. International institutions did not exist. The recognition of fundamental rights did not exist. I would never have been able to write this blog — or anything else — without the advances of equality.

Progress did not stop in the twentieth century. On the contrary: in the last twenty-five years, 1.5 billion people have been lifted out of extreme poverty, global GDP per capita has risen from thirteen thousand to twenty thousand dollars, life expectancy has increased by seventeen years, and child mortality has been reduced by two thirds. Today, 67 % of the world’s population has access to the internet, and half can connect to 5G networks — something unimaginable barely a quarter of a century ago.

In that same period, technological advances have allowed us to sequence and edit the human genome, develop messenger RNA vaccines, and glimpse the possibility of curing cancer. Meanwhile, the discovery of the Higgs boson and of gravitational waves brings us closer to understanding the universe in ways that, just a few years ago, were pure fantasy.

Today, the global rollout of renewable energy invites us to imagine a world in which climate change ceases to be a threat. And as the price of solar panels has fallen by a factor of twenty-five and installed capacity has multiplied by fifteen hundred, we stand at the unprecedented threshold of a future of clean, abundant energy.

For all the problems they may have, democracies have given us an extraordinarily long period of peace — remarkable, when we consider the speed and force with which societies have been transformed. Trade, international mobility, and a web of global institutions, for all their flaws, have proven to be a good adhesive, and have provided a guarantee of stability between nations.

Human progress has not stopped. On the contrary, it is advancing at a dizzying speed, transforming our civilisation and demonstrating that we can build a more prosperous and more free world.

We live — and I challenge anyone who disagrees to prove it with data — in the best place in the world and at the best moment in history. If we feel the world lurching beneath our feet, it is not because people have turned wicked, but because all our norms were built for a society that exhausted itself in the twentieth century, and we do not yet have new ones.

If anything binds us today to fear, hatred, and war, it is not the direction in which the world is transforming, but our stubborn resistance to change — our insistence on continuing to point at the broken windows.

The good news is that it is actually within our power to stop. :D

If you want to stop pointing out the broken windows in the world, you’ll like Hijos del optimismo (Children of Optimism). It’s my first book, the older sibling of this newsletter, and a project I’ve been working on for many years.

You can already order Hijos del Optimismo on Amazon, La Casa del Libro, El Corte Inglés and the publisher’s website, Debate.

You can also read more about me and the story that inspired me to write it

“The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.”

John Maynard Keynes

This post is the second and final part of a masterclass on understanding the global housing problem. If you have not already done so, you may want to start with the first part:

Here we go with the second one. From a comment by Jesús Zamora Bonilla, I have picked out a question that is a big debate (in some forums).

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Does Housing Produce Value?

No. “Having value” and “producing value” are not the same thing. Things have the value that people assign to them — but that does not mean they produce a distinct value of their own. A gold bar may have value, but it produces no more value than it holds as an asset. It creates nothing new.

Neither does housing.

Those who build and finance the construction of homes — developers, contractors, banks, investors — produce value. Those who buy a completed property in order to sell or rent it are not creating anything new. The built home would exist whether or not it changed hands. And putting it on the market is not, as we have seen, some act of generosity — insofar as homes are an administrative title conferring the right to enjoy a portion of the city, keeping them in active use is an obligation.

We might acknowledge some residual value in maintenance — though in reality this is not a voluntary act of value creation: the granting of the license requires that properties be maintained, on pain of having it revoked. This also reveals who the true owner of the licenses is: if the property owner failed to fulfil this duty, the state — as the real titleholder — would step in to keep the property in the necessary condition.

Stretching the argument considerably, someone might argue that buying a property frees up the previous owner’s capital and contributes to a larger pool of builders and developers. But this is absurd, because as long as licenses remain capped by the consensus of existing owners, there is no shortage of builders relative to what can actually be built. On the contrary, the capital circulating in the real estate market does nothing but concentrate, accumulating ever more homes in ever fewer hands.

Perhaps the most compelling argument that the buying, selling, and renting of housing generates no value is offered, paradoxically, by those who defend rentierism by insisting that it is not a business activity at all — merely an informal practice by “ordinary people” who “supplement” their pension with a rental income. Both things cannot be true at once. Either housing is a service that generates value — in which case there must be entrepreneurs or workers behind it actually doing something — or these are helpless elderly people, in which case no value generation is possible.

I lean toward the second.

So why are they being revalued?

To understand why housing appreciates, the company share analogy reasserts itself with full force. It is not the shares that appreciate — it is the company. It is cities; it is countries that grow and accumulate ever more capital. That capital takes the form of public services, roads, transport networks, universities, technology parks, communities, cultural movements, national brand and tourist appeal, and the concentration of human capital.

When cities appreciate, their shareholders — the homeowners — see the value of their titles rise without doing anything at all.

To make this clearer, consider an example that is by no means science fiction — similar things have happened in many places. Imagine a developer who built two identical residential towers during the property boom, but only had a license for one of them. When the works come to be legalized, the local authority grants the residents of Block A their license, but not those of Block B. Block A therefore has street lighting, electricity, sanitation, internet connection; its children can enrol in the local school and visit the neighbourhood health centre. Its residents can also register their homes and sell them if they wish.

Without a license, Block B sits empty and abandoned.

In Block A, the homes are worth half a million euros. In Block B they are worth nothing — they cannot even be sold, because they have no license and are not registered in the property registry.

One day, a particularly clever lawyer rummaging through an archive finds a document. The original developer’s license referred not to Block A, but to Block B. He goes before a judge and succeeds in having Block A’s licenses revoked and transferred to the owners of Block B.

Nothing about the buildings has changed. The owners are the same people. Which flats are now worth half a million?

If you think it is Block B’s, then you understand perfectly that housing has no intrinsic value — only the value of the city in which it sits.

This is why the appreciation of housing, absent any change to the properties themselves or the construction of new ones, is considered “paper wealth” — a form of patrimony that arises from the revaluation of assets, not from the creation of new value, but from a mismatch between supply and demand for a rigid good whose supply cannot be expanded by the market alone. It is a well-known, widely acknowledged, and extensively studied phenomenon.

Can Property Tax Be Made Progressive Based on the Number of Properties Owned?

Yes — and in fact it already is, in some places. France applies different property tax rates to second and third homes. And the United Kingdom charges higher stamp duty on second homes and on purchases by non-residents.

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Can Short-Term Tourist Rentals Be Prohibited?

Not only can they be — they already are, in effect. To operate any accommodation business, a license is required that the vast majority of tourist flats do not hold. The problem is that public authorities, for reasons that defy understanding, do nothing to enforce this. And so we have a proliferation of unlicensed mini-hotels — without insurance, without the most basic guarantees — operating in the heart of our cities.

Which is a shame, because the Airbnb model could have been something genuinely valuable for cities, had it been properly regulated. As it stands, it has become a free-for-all for companies of dubious ethics operating in an unregulated space.

Why Have REITs Not Been Abolished?

Because, as we have seen, rising property prices and a market with strong demand for those titles of ownership are features of the system, not bugs. REITs were invented precisely to stimulate demand and drive prices up. They remain for that reason. In reality, no one actually wants to deflate the market.

Can Empty Homes Be Penalized?

They can be penalized, and in my view they should be prohibited. All licensing systems include a provision ensuring that if you do not use your license, you lose it. This is the case with taxis, shellfish harvesting permits, pharmacies, notaries, and any other activity that depends on a public license.

That said, I think the idea that there are large numbers of empty homes in major cities is a myth. The small percentage that appears in statistics likely belongs to people who split their time between two locations, or who have a property temporarily vacant because a tenant has moved to a care home, and so on. Given the stratospheric returns available from renting, it makes no sense for an investor to buy a property for profit and then leave it empty.

Empty homes are, however, a serious problem in smaller towns and villages. Consider the absurdity: the state makes an investment; buyers acquire the properties but leave them vacant, squandering the public investment they represent. This is not science fiction — it happens in every village in Spain.

Paradoxically, empty homes are also a significant problem at the luxury end of the market. London has suffered severe abandonment in its wealthiest neighbourhoods, because foreign investors — Russians, Saudis — have bought up entire streets purely as financial assets, without spending a single night in them. “Foreign investors,” ran one headline, “are using the capital’s finest homes like a life-sized Monopoly board.”

It is a perfect illustration of what happens when a country’s shares are turned into an “asset” that foreigners can buy.

Can Developers Be Required to Build on Serviced Land?

Absolutely — they can be, they should be, and the law already provides for it, at least in Spain. But as with tourist flats, it is never monitored or enforced. Developers who sit on serviced plots without building on them are effectively holding on to a portion of a country-company’s shares.

Is Squatting a Problem?

Many people have pointed out that squatting rates are negligible. But I would like to offer a different argument. Anyone who rents out a property is a business owner — regardless of whether they are a helpless elderly person. They have entered into business. And all businesses have to deal with non-payment. It is part of the risk of doing business. Sometimes you sign a contract with someone who seemed solvent and turns out not to be. Sometimes you serve a table of ten and they walk out without paying. Sometimes a dispute arises between client and supplier and they decide not to pay. It is commonplace.

So commonplace, in fact, that most businesses “provision” for these losses — they factor into their accounts in advance that a certain percentage of customers will not pay.

By the same logic, the fact that 0.05 % of tenants do not pay seems entirely normal for a business sector. Quite low, actually. By way of comparison, Madrid’s most prestigious luxury hotel openly acknowledges unpaid debts of 1.8 million euros, and no one seems remotely troubled by it.

“But other businesses aren’t forced to keep providing their service.”

Actually, they are. All businesses providing services deemed essential are subject to special obligations, even when customers do not pay. Energy companies, for example, cannot cut off supply to households where minors or vulnerable people live. The same applies to water, healthcare, and basic telecommunications.

This is not an arbitrary or capricious intervention by the state. It is a direct consequence of constitutional architecture. In modern democracies, rights are not all equal — there is an implicit hierarchy among them. The right to property is not absolute; it is limited by other rights considered superior or more fundamental, such as human dignity, physical integrity, and the right to life. When these rights come into conflict, the legal order prioritizes the most important ones: the protection of the vulnerable and social cohesion over the strict logic of the market.

Housing, in this sense, is not merely an asset or a private contract. It is a space where economic rights and fundamental rights collide. And when that happens, the state logically intervenes — on the side of what it deems indispensable for a society to remain viable.

Nor is this an anomaly unique to renting. All businesses are required to absorb costs arising from rights that do not answer to market logic. An employer pays wages when a worker is on sick leave, when they take parental leave, when they accompany a child to a medical appointment, or when they suffer a prolonged incapacity lasting months or even years. From a strictly commercial standpoint, those costs are not the company’s to bear. But from a legal and political standpoint, they are the price of living in a society that has decided certain rights take precedence over economic efficiency.

Renting operates within that same architecture: it is not a contract between equals in a moral vacuum, but an economic activity subordinated to an order of rights that limits what the market can — and cannot — do.

That said: investing in housing is not compulsory. If a business owner dislikes this sector, they are always free to move to another. What is not acceptable is wanting the returns of a startup with the protections of government bonds — and without lifting a finger.

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How Can It Be Fixed?

Let us first define what “the problem” actually is. This is not a habitability problem — it is an intergenerational conflict over the distribution of collective capital: country-capital. The solution cannot therefore consist of renting as a model for one portion of society while the other continues to own. Not at any price. That “solution” leads us toward a feudal world, where some pay — little, a lot, or something in between — simply for the right to till someone else’s land.

Moreover, citizenship remains tied to homeownership — as does people’s financial security. What we need, therefore, is a system through which everyone can access those country shares.

The solution is a mechanism by which all generations can access the same portion of a society’s capital with the same level of effort.

Furthermore, this is a problem that today threatens to tear society at the seams. Proposals such as “building a public housing stock” — which would take decades to materialize — are not real solutions. They are empty gestures.

The housing problem can and must be fixed within the next five years.

Housing as a Country’s Share Capital

One option would be to retain the idea that housing represents a country’s shares, and to ensure that everyone has access to homeownership. To achieve this:

• New issuances of country shares: The state should be obligated to expand the supply of housing licenses in line with population growth — that is, to increase the permitted density of urban land and accept that buildings must be extended or demolished to make way for new ones. At present, the opposite is happening: masterplans are barely touched, and the buildable capacity of plots never changes. So when the population grows, the only option offered to new generations is to move ever further out. But if some hold capital at kilometre zero and others at kilometre one hundred, we are not distributing that capital equitably.

• A country’s shares in the hands of its citizens: Purchases by institutional investors and by non-resident foreigners should be prohibited. It is absurd that a country’s shareholding should be held by private companies and foreign owners.

• Licenses in active use: If properties are left empty — that is, closed indefinitely and unused, which is distinct from an owner splitting their time between two homes — the license should be forfeited. If the owner wishes to use the property again, they should have to reapply.

• A license to rent: To convert a property into a rental business — whether short-term tourist or long-term residential — a specific accommodation license should be required, equivalent to that held by hotels. Exactly as would be the case if someone wished to open any other kind of business in the city, urban lettings should be regulated by the relevant authority, to ensure they match actual demand and meet a minimum set of requirements — safety, sanitation, and so on — that are not even demanded today.

An Idea Worth Considering

As is so often the case in this world of abundance, creative solutions that go beyond what is currently on the table can resolve problems that seem intractable.

I have on occasion proposed an idea that has always struck me as genuinely virtuous. Since the majority of the housing stock was built in the postwar years, every country has entire neighbourhoods constructed in a period of great scarcity, with very low quality. These are poorly insulated buildings with little natural light, entirely out of step with the expectations of twenty-first-century life. As a result, these neighbourhoods routinely become pockets of poverty.

A measure that would activate the private sector to build far more housing in a very short time would be to increase the permitted density of these plots — so that where four homes exist today, eight could be built tomorrow, for example. This could even be time-limited to force owners and developers to act quickly.

When a private developer constructs a building, they are in effect exploiting an urban resource, and are therefore required to make “contributions” to the state — surrendering a portion of what they build. For decades, the norm has been to “monetize” these contributions: rather than handing over flats, the developer paid the state in cash and retained 100 percent of the building.

But it does not have to work this way. Entire neighbourhoods could be expanded — or demolished and rebuilt — creating millions of new homes across Europe, with the state contributions yielding a public housing stock in very little time. All of this without resorting to state-led construction, and without spending a single euro of public money, by harnessing the mechanisms of the market.

It is one of those rare ideas that achieves multiple things at once: regenerating neighbourhoods, making them more sustainable, injecting resources into the most disadvantaged sections of society, and creating both market-rate and public housing — in very little time.

But you have to want to do it, of course.

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If you are interested in housing issues, don’t miss Hijos del optimismo (Children of Optimism). This book explains how the housing crisis is the result of the immense transformations we are currently undergoing.

It is my first book, the big brother of this newsletter, and a project I have been working on for many years.

You can already order Hijos del Optimismo on Amazon, La Casa del Libro, El Corte Inglés and the publisher’s website, Debate.

You can also read more about me and the story that inspired me to write it

.Photo by Sean Lee on Unsplash