In the era of abundance, money moves to a different place.
Over the last few years I spend a great deal of time explaining why traditional economic thought is flawed and how much of it is inapplicable to this age. Technology altered things where the models of the past are no longer valid. Nowhere is this more true than with money.
We are now 4 decades into the digital age. It is a realm that is accelerating, with more of the world being swallowed up by it. While the vast majority of economic output is still related to physical goods, much of that is changing.
As Marc Andreeson once said, software is eating the world.
He made this statement about 15 years ago. For much of that time, it was hard to see that he was right. Due to what took place in the last couple years, it is now evident.
Abundance changes the entire basis of money which has, historically, been based upon scarcity.
That is no longer the case.
What is money?
When we dive into it, we always come back to energy. This is what fosters economic output. That was always the case.
For much of human history, energy came in the form of humans. The basis unit was the calories, which humans derived from food. Of course, we can add in animals, which followed the same model.
Machinery propelled things forward. The economic gains from automation skyrocketed. We saw a major explosion with the introduction of the Industry Revolution.
Capital is the ability to purchase energy. Companies have used money to either pay wages (human labor) or machinery. It is a rather simply formula. The energy was then used to generate economic output in the forms of goods or services.
It is the foundation of our entire economy.
As stated things are changing. The first is the fact that automation is growing, taking over from labor. Energy is shifting to non-biological (although animals arent really in the equation anymore). Soon humans will follow the horse or mule.
Capital is going towards machinery (computers) and away from humans.
The second change could have even more impact.
How fast can the energy be pushed through? This is the question concerning the future.
A lot of times this is categorized as transactions. Thinking in this manner, but expanding it some, we can see the energy component, i.e. more economic output, resides in speed. How quickly can the energy equate to growing numbers (whatever they apply to).
It is rather clear in the world of compute. Take a chatbot. People are amazed at how quickly things can be done. Information is delivered in seconds.
This means the Quantity Theory of Money (QTM) has another flaw. It is no longer about units of currency. Instead, it is bandwidth that drives everyone.
For example, how many songs can you download from iTunes before Apple runs out? Of course, it is absurd. There is no limit. That means you can spend an unlimited amount of money without affect the price of anything. The energy required to deliver that product is very low.
That said, we cannot spend an unlimited amount of money because there is a constraint. The system, consisting of Apple servers, our WiFi, the processing on the phone or laptop, and internet connection all affect the throughput.
Bandwidth is the overriding factor, not units. This is the potential bottleneck.
Instead of focusing upon the money stock, it is the flow of money that is important.
Consider the issues plaguing the world with regards to energy. What is the presumed issue?
Many feel the worlds demand for energy is going to far outpace it ability to generate it. This means the world needs more energy and to deliver it faster.
This is true no matter what the level.
If more tasks are automated, the fuel for that is no longer the calories (from food). Instead, it is derived from the energy grid, using electricity that was generated from whatever source.
The link between money, energy, and output should be clear. We are in a period where, simply put, more is needed.
No better example of this exists than semiconductors. Here we have a physical product that grew exponentially in output. This means the cost per performance has dropped a billion fold over the last 50 years.
In spite of this, the industry grew at 13% annually. Each dollar purchases an ever growing amount of compute while the industry, as a whole, is growing. Of course, there is no expectation of a reversal of this. Certain types of semiconductors might see demand wane but the overall is still in expansion.
These are core components in the energy used to generate economic output. It is why billions will turn into trillions.
