I have a theoretical question. At what point does capitalism become the other side of the coin from communism.
Like there's communism which is centralized planning and the state owning the means of production.
Then I think there's Adam Smiths ideal form of capitalism that I think can loosely be described as independent demand signals allocate resources throughout the economy.
What happens when a capital accumulates in a smaller pool of folks who choose how to allocate those resources. Silicon Valley isn't responding to demand, it's essentially centrally planning where to assign resources to create demand.
fra · 2026-08-28 16:08:24 UTC
The demand signals never allocated the resources, a small number of people always did. Those people react to the demand signals (and they still do).
IMO a more important question is: what happens when the market power of a segment of society grows much greater than the rest? In a "K-shaped" economy, the top 20% have so much spending power (and even more future spending power) than their demand signals can overwhelm the rest. Then IMO the market won't respond to the demand signals of the bottom 20% and capitalism stops working for all. Add to that the possibility of AI automating more and more work and you have a system that only works for folks at the tops.
This isn't a resource allocation problem! it's a purchasing power distribution problem.
Eddy_Viscosity2 · 2026-08-28 16:30:40 UTC
If you in the top part of the K, this is a feature not a problem.
arjie · 2026-08-28 16:47:30 UTC
This doesn’t strike me as a problem. There are sufficient entrepreneurs that market need common to a total 20% of the population will be met. In the USA that 70 million is a sufficiently large number. After all, that’s $700 million of MRR at $10/month.
The things limiting provision of services are physical limits like the audience being widely dispersed or just characteristics like not all sharing the same needs and therefore not actually being addressable.
You obviously are well aware that addressability does not track with income category automatically but it does for many businesses. E.g. payday loans, rent to own, check cashing, dollar stores.
Since a large section of this group is in use of government credits, at the least businesses will evolve to meet the use of those. EBT grocers, Medicaid-focused care, etc.
The majority of the effort will be spent where the greatest economic opportunity is, but entrepreneurs will match their ability to address the market to their audience. It’s not possible for a dollar store to sell GPUs to Baseten. They don’t have the capability to do something useful there.
4rffs · 2026-08-28 17:23:38 UTC
Demand doesnt allocate resources... price and expected economic profit does.
Thats literally how the whole economic system functions.
alfiedotwtf · 2026-08-28 16:09:21 UTC
The word you’re looking for, is Serfdom.
anon-3988 · 2026-08-28 16:11:41 UTC
I have a theory that this issue happens because we put money into the stock market for our pension. This creates a concentration of wealth/money into a relatively few organizations. I think money and wealth should be created more locally.
Of course, this is very idealistic and simplistic.
However, what did people think was going to happen when the common wisdom is to put your money into an index and then shut up? It simply cannot be true that putting money into the index means you win. There's cost somewhere, a parasite on the system, that is going to come due at some point.
NhanH · 2026-08-28 16:11:57 UTC
That is the entire Marx's Das Kapital. The main argument being free market will lead to concentration of power and then capitalism collaspe. He expanded on what he thought the not-capitalism could be.
Then Lenin concluded that if you will always have concentration of power and some folks doing centralized planning, it might well be the state.
subw00f · 2026-08-28 16:52:35 UTC
And ever since that and the supposedly marginalist “revolution” people keep pretending their sliced up tautological economics is a science separated from politics because it’s convenient to those who wield capital. Truth is Marx might’ve not made the best case for the general law of profit equalization and presented the transformation of value to price in the best of mathematical terms, but I’ll be damned if the empirical evidence makes up for everything he missed.
Der_Einzige · 2026-08-28 17:00:10 UTC
Crazy how historically wrong Das Kapital is as a book. The labor theory of value has done enormous amounts of damage to humans world-wide with its lies. Watching Marx turn himself into pretzels to explain how to calculate the "Socially necessary labor time" is entertaining if it didn't have the baggage of motivating dozens of horrible, no good revolutions, useless, damaging revolutions.
Until we have true AGI there is no value without labor. The shares of Amazon that make Bezos so rich would be worthless without the 1.5 million people working for it.
0x262d · 2026-08-28 17:11:05 UTC
That's certainly an opinion... Quite a lot of condemnation for no real argument. I personally think surplus value and socially necessary labor time are quite straightforward, intuitive concepts. Meanwhile, I found this tidbit on Henry George's wikipedia page: "Upon Marx's death, George admitted he has not read any of his works, which were untranslated into English at the time,"
For anyone interested in reading more from Marx's side, Wage Labour And Capital by Marx is a pamphlet meant for mass distribution and not a difficult read. I've heard A People's Guide To Capitalism recommended as a high quality modernized version of the same ideas.
4rffs · 2026-08-28 17:03:15 UTC
"Then Lenin concluded that if you will always have concentration of power and some folks doing centralized planning, it might well be the state."
This is exactly where things are heading.
Theres no need for firms anymore at the extreme - the govt can own all.
tinfoilhatter · 2026-08-28 16:13:00 UTC
The same group of minds that were behind communism were also behind modern capitalism. It's no surprise that these systems produce the same net results - it was by design.
cousinbryce · 2026-08-28 16:17:38 UTC
Fun fact: Internally all corporations are organized by central planning
4rffs · 2026-08-28 17:07:27 UTC
Yes its decentralised still. And the idea is that competition is the force that keep things in check - with shareholders interests taken care of with the focus of manager's being to optimise for whatever makes the owners better off.
At the extreme with 'AI' - there's no need for firms to exist.
'Power to the people' was always transitory - do you think the govt is dumb? Lets take a simple form of capital: cameras. Would cheap cameras exist without the private sector competing for shareholders interests? Probably not.
They aid and abet it. It benefits their own interests. This game goes on until the govt no longer see's the need for a private sector anymore.
Avicebron · 2026-08-28 16:22:53 UTC
"....It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."
- Adam Smith, final paragraph of Book I, An Inquiry into the Nature and Causes of the Wealth of Nations
Warning about companies being able to command regulation on themselves. We're far past anything Adam Smith would have thought was a good idea for how we organize capital and commerce.
skybrian · 2026-08-28 16:36:07 UTC
You can do a lot of central planning if you can convince investors to give you a large enough pile of money, but it still doesn't compare to what the US government can do. You're not going to fund social security that way.
arjie · 2026-08-28 16:52:43 UTC
That doesn’t sound right. Silicon Valley is clearly responding to massive demand for AI services. The reason Nvidia has so much money is that people are paying them for something only they can make. It’s not like they’re issuing stock into a meme stock spike or something. They’re selling hardware that companies are demanding in large quantities because those companies need the hardware to provide services that people and companies want so badly that every marginal hardware dollar spent earns a large number of service dollars.
This is probably the most demand-mediated response of all time. The natural form of that is that the guy who we give lots of money to for his stuff is going to have lots to spend.
0x262d · 2026-08-28 17:21:00 UTC
To what extent is it organic demand rather than manufactured demand? Clearly there's some demand for AI use but a lot of it has been shoved down people's throats with usage quotas, pushing it into every webpage and application, etc. To me it seems like there is a large degree of central dictate to use it pushed, at some level, by the perceived need to invest in it faster than China.
WorldMaker · 2026-08-28 16:54:57 UTC
There are old words for this: Monopolies and Trusts. The US around this point last century put a lot of work in Trust-Busting and Anti-Monopoly/Anti-Corruption work.
The other related word is Oligarchy, rule by a select few that think they know better than everyone else. Oligarchy seems to be a failure case of most modes of politics and economics. Capitalism and communism both fail over to oligarchy when left unchecked.
It's been argued that for as many centuries as humanity spent under feudalism that oligarchy is almost the "default state" of politics and economics and it takes great effort to avoid it. Adam Smith saw economic monopolies and knew they were a failure case of capitalism from early on. Capitalism was built on top of breaking apart monopolies like the East India Trading Company. We've always known that capitalism is just as likely to slip into oligarchy as any other "ideal" form of resource allocation/economics, especially because it started as oligarchy.
legitster · 2026-08-28 17:03:55 UTC
> Then I think there's Adam Smith's ideal form of capitalism
People have this idea that Adam Smith "idealized" capitalism or that the Wealth of Nations is some sort of manifesto. It's much more of an empirical research (by the standards of the time) with observations and findings. It's equally useful if you're a communist or a free-market capitalist.
Adam Smith himself was fairly skeptical of massive corporations capital accumulation:
> "The directors of such companies, however, being the managers rather of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master's honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company."
0x262d · 2026-08-28 17:17:30 UTC
This observation is exactly the Marxist prediction of how capitalism gradually transforms society from early capitalism, which nearly fit the Econ 101 assumptions of many small producers and consumers and such, into something that operates economically more like communism by being centrally planned, but with the severe drawbacks of a minority ruling class and being run undemocratically on the basis of private profit not usefulness to people. This is an interesting book on the subject of how far we have come in this regard: https://en.wikipedia.org/wiki/The_People%27s_Republic_of_Wal...
lefty2 · 2026-08-28 17:09:50 UTC
So, Nvidia are backstopping $100B for the Ohio project, yet at the same time OpenAI are developing their Jalapeño processor, which will mean it will no longer need Nvidia GPUs for inference. That does not really make any sense to me.
pier25 · 2026-08-28 17:32:27 UTC
Even if Jalapeño is successful it will probably take multiple generations until it’s competitive.
Comments
Like there's communism which is centralized planning and the state owning the means of production.
Then I think there's Adam Smiths ideal form of capitalism that I think can loosely be described as independent demand signals allocate resources throughout the economy.
What happens when a capital accumulates in a smaller pool of folks who choose how to allocate those resources. Silicon Valley isn't responding to demand, it's essentially centrally planning where to assign resources to create demand.
IMO a more important question is: what happens when the market power of a segment of society grows much greater than the rest? In a "K-shaped" economy, the top 20% have so much spending power (and even more future spending power) than their demand signals can overwhelm the rest. Then IMO the market won't respond to the demand signals of the bottom 20% and capitalism stops working for all. Add to that the possibility of AI automating more and more work and you have a system that only works for folks at the tops.
This isn't a resource allocation problem! it's a purchasing power distribution problem.
The things limiting provision of services are physical limits like the audience being widely dispersed or just characteristics like not all sharing the same needs and therefore not actually being addressable.
You obviously are well aware that addressability does not track with income category automatically but it does for many businesses. E.g. payday loans, rent to own, check cashing, dollar stores.
Since a large section of this group is in use of government credits, at the least businesses will evolve to meet the use of those. EBT grocers, Medicaid-focused care, etc.
The majority of the effort will be spent where the greatest economic opportunity is, but entrepreneurs will match their ability to address the market to their audience. It’s not possible for a dollar store to sell GPUs to Baseten. They don’t have the capability to do something useful there.
Thats literally how the whole economic system functions.
Of course, this is very idealistic and simplistic.
However, what did people think was going to happen when the common wisdom is to put your money into an index and then shut up? It simply cannot be true that putting money into the index means you win. There's cost somewhere, a parasite on the system, that is going to come due at some point.
Then Lenin concluded that if you will always have concentration of power and some folks doing centralized planning, it might well be the state.
If you want a good starting point book for an alternative to traditional capitalism and with a focus on the commons with none of this baggage, I highly recommend Henry George (https://en.wikipedia.org/wiki/Henry_George) and "Progress and Poverty" (https://en.wikipedia.org/wiki/Progress_and_Poverty) as it is a head-and-shoulders better read.
For anyone interested in reading more from Marx's side, Wage Labour And Capital by Marx is a pamphlet meant for mass distribution and not a difficult read. I've heard A People's Guide To Capitalism recommended as a high quality modernized version of the same ideas.
This is exactly where things are heading.
Theres no need for firms anymore at the extreme - the govt can own all.
At the extreme with 'AI' - there's no need for firms to exist.
'Power to the people' was always transitory - do you think the govt is dumb? Lets take a simple form of capital: cameras. Would cheap cameras exist without the private sector competing for shareholders interests? Probably not.
They aid and abet it. It benefits their own interests. This game goes on until the govt no longer see's the need for a private sector anymore.
Warning about companies being able to command regulation on themselves. We're far past anything Adam Smith would have thought was a good idea for how we organize capital and commerce.
This is probably the most demand-mediated response of all time. The natural form of that is that the guy who we give lots of money to for his stuff is going to have lots to spend.
The other related word is Oligarchy, rule by a select few that think they know better than everyone else. Oligarchy seems to be a failure case of most modes of politics and economics. Capitalism and communism both fail over to oligarchy when left unchecked.
It's been argued that for as many centuries as humanity spent under feudalism that oligarchy is almost the "default state" of politics and economics and it takes great effort to avoid it. Adam Smith saw economic monopolies and knew they were a failure case of capitalism from early on. Capitalism was built on top of breaking apart monopolies like the East India Trading Company. We've always known that capitalism is just as likely to slip into oligarchy as any other "ideal" form of resource allocation/economics, especially because it started as oligarchy.
People have this idea that Adam Smith "idealized" capitalism or that the Wealth of Nations is some sort of manifesto. It's much more of an empirical research (by the standards of the time) with observations and findings. It's equally useful if you're a communist or a free-market capitalist.
Adam Smith himself was fairly skeptical of massive corporations capital accumulation:
> "The directors of such companies, however, being the managers rather of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master's honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company."