Macrobius
06-20-2007, 06:00 PM
This post is with respect to the Entroy strikes dying empire thread:
http://www.thephora.net/forum/showthread.php?t=24629&page=5
All current empire-building entities will have to deal with their failure, using their existing economic structures, to comprehend the importance of COMPUTING RESOURCES with respect to Economics. This failure will lead to significant miscalculation by all potential players, and also provides an opportunity for new players who understand the game to either dominate existing players, or to enter the game.
First of all it must be understood that economic behaviour in general is automatic, mechanical, and emergent. That is, any system with tokens that have the requisite properties (including actors who make choices, a medium of exchange, a store of value, etc.) will exhibit phenomena *analogous* to the economic phenomena of current Nation-States, as previously of households, firms, and individuals.
Computing resources (notably, CPU-minutes, though one must not forget disk space and network or i/o bandwidth in the analysis) have all the properties needed to be the monetary basis ('gold') in an economy. This is not 'Software Economics' as normally considered -- looking on software production as an economic function in its own terms -- but as self-referential. CPU-minutes are the unit of productivity, in the same sense that the Physiocrats held 'Solar power' and 'Labour' to be fundamental to Nation-State economies.
The economic development (or if you prefer para-economic but that is a meaningless distinction) of CPU resources has already resulted in the invention of 'fractional reserve banking' (multitasking operating systems) and 'foreign trade' (networking and more ominously *the* internet), i.e., an articulated and fractal-like collection of micro and macro economic systems, with well-defined emergent properties.
We are presently at the stage of the accumulation of capital (previously defined as the virtual labour stored in an operating system, but now newly mobile)
It should be recognised that CPU-minutes are now *themselves* the new currency, and that the legacy economy, important as it is as a sector of the New Economy, is by no means the totality or dominating portion of it. The 'old economy' serves the same purpose as the Agricultural Sector in the 19th and 20th centuries. Necessary of course, but also undergoing a dissolution and transformation that both the Agriculturalists and the Nation-States that dominated them failed to understand -- vide the Depression for what I mean by lack of understanding.
The most important missed factor, in terms of its Legacy Economic impact, is the possibility of capital transfers between Nation-State sized economies ('Outsourcing'). Outsourcing is currently analysed entirely in terms of gold-backed or fiat-backed currency transfers -- i.e., in terms of the wrong Capital. In terms of real capital, it amounts to the possibility that the consumption of CPU-minutes will take place in India, while the production of them takes place in Data Centers in the US. It should be obvious that this analysis I am opening up is a *class* of economic theories, not a single one. There could be a Marxian analysis, a Classical, a Distributist, and so forth.
CPU-minutes are not only *like* money, they *are* money, since without CPU minutes there is no way to store value in a modern economic system, so that strictly speaking all the other currencies are secondary abstractions relative to the primary one of Machines-doing-work.
The failure to omit such a critical factor in modern Economics -- e.g., the fraction reserve nature of Financial Banking, the bubble-like nature of joint-stock companies, the importance of Gold and Silver discovery to Empire building, or indeed any other significant factor, allows one to PREDICT IN ADVANCE the failures of Nation-States. There is *no* Nation-State or governmental or business entity that will *knowingly* credit CPU-minutes as intrinsic economic phenomena. They will *only* be valued in trade in the mercantile sense of the old economy. We are in the phase of Capitalism before Adam Smith, in other words, in which economic players might, randomly or by intuition, act correctly, but without actual knowledge or understanding, they will just as often miscalculate.
Anyway, here is my original post on 'Networked Distributism' from OD:
http://www.originaldissent.com/forums/showthread.php?t=2980
Networked Distributism
Since we are discussing, in another thread, 'the future of the forum', I thought it would be useful to publish a few thoughts on 'what is going to happen next' -- both as to the internet and as it relates to small dissident 'free speech' groups, such as WNs, paleos, kinists, and TradCons, not to mention more leftish groups such as Libertarians or Leftists, who sometimes have similar interests, at least in degenerate form. I will call these people collectively WNs for convenience, though of course the title doesn't fit all.
First off, it is necessary to understand in advance what the 'next big thing' on the internet is going to be. It seems that most of the last couple years, the internet has been groping in a certain direction that is only now becoming clear to the most forward looking thinkers. To motivate the discussion, I'm going to tell a little parable:
Computing has just, in the past 5-10 years, because sufficiently complex that one could imagine the central government creating a data file on every single person, and attempting to capture a complete record of all transactions in the economy. This is Total Information Awareness, and the ostensible point to it would be fighting terrorism and internal law enforcement, but in fact the upshot is likely to be an economy that is completely transparent (to looters).
So, for the first time, we can envision a gigantic central computer, called The Matrix, running a simulation of the economy in which every transaction, every bank account, and all information about everyone is present. Let's say it is located in Langley. However, this is a dumb system to try to build -- at least on the banking industry side. It is far more efficient for The Fed to simply demand that all banks in the Federal Reserve system supply it with a fraction of their computing power and run a certain program. Thus, a distributed system can be created, and information gathered and stored locally, but in a way that is centrally accessible.
The whole point of this little parable was to bring the reader to the point where he will ponder the full weight of the phrase 'providing a fraction of their computing resources', because this allows us to short-circuit to the heart of the discussion: currently, the banking system is layered on top of an asset, which is essentially a set of entries in an accounting system representing claims on resources. The resources claimed are somewhat shadowy, in that at some point in the past the claims were convertible to gold and silver specie, though never for everyone at once.
In a digital economy, computing resources are distinctly central -- cpu-seconds are fungible, divisible, transportable, and intrinsically valuable. In other words, they have all the attributes of a money substitute. In fact, they *are* the digital currency, in a very real sense. Other digital currencies are services layered on top of the fundamental ones of cpu-cycles, disk storage, and network bandwidth. All three of these have a fixed exchange rate relative to the 'dollar', now that Amazon has made available its S3 Storage service and EC2 computing beta test. We will thus refer, simply, to the Amazon Standard, which is as I write this 10 cents per cpu-hour in current units. Obviously, different makes of computers have different CPU benchmarks, but these are convertible because they are measurable.
The internet economy is in the late stages of barter trade, and starting to develop a real 'capitalist' economy, with computer labour as the productive asset in which real values can be measured. This is very important, because whereas the government can confiscate gold and silver, or demand that its paper currency be accepted in trade as a fiat currency, they cannot confiscate CPU-cycles without taking away computing, and hence the virtual world itself, in a very real sense. It is possible to image all sorts of taxes, tolls, restrictions, patents, software blocks, virus looting of resources, security problems, and so on, but at the end of the day you either get your packets or you don't; you get your compute job done and the results saved to disk, or you don't. Productive work is non-forgeable, and is in finite supply.
Once you realise that the only natural digital currency is your compute power (either directly managed by you, or purchased through a proxy service for consumption or resale), then you realise what your wealth is too. You are in a similar position to the 'naive' farmer who does not have a fully developed, intensive farming operation. To a certain extent you use your land, or wealth, for your own purposes, you pay rent and ownership costs, and you have trouble when other people come and freeload on it -- but unless you give your resources to charity, through a distributed screensaver like seti@home, or participate in a peer-to-peer network, your compute power is 'undeveloped' and outside the digital exchange economy, in the same way a subsistence farmer is outside the modern world.
What will the digital economy look like when it is fully formed? Here we can only guess, but rest assured that because there *is* an analogy to money, that digital currency *is* money and economic behaviour will require it behave *like* money.
Get used to it: CPU-Hours are wealth, and Gold is just a backup currency for when the lights go out.
Right now, consolidation is occurring on the Internet. Large players -- mostly Google, MS, Yahoo, and Amazon, are buying similar portfolios of computing resources (data centers), advertising companies, subscribers and advertisers, content inventories, fulfillment and delivery systems, and quasi-banking payment systems. They think what they are doing is 'monetising digital assets'. But the paradigm shift hasn't clicked yet (it will, in the next two to three years). The paradigm shift is that you don't gold-monitise your CPU assets, you CPU-monetise your gold-assets.
They *think* they are creating advertising models to gain Fed-backed revenue from compute cycles and other resources, which are 'cost centers'. In fact, the cost centers are the wealth, and the goal should be attracting usage patterns that allow them to amass CPU wealth, then resell. Amazon stumbled on to the huge demand for mediated compute resources (i.e., a real digital banking system), almost by accident. They still do not allow conversion between the 'old money' economy and the 'new money' economy of the EC2 Beta. Let us learn from their mistake, when we build a distributed equivalent of the big central data centre operations.
Amazon's and the others' failure to experience the full force of the digital paradigm shift is easily explained because they are lusting after the wrong kind of power. They can imagine lusting after a dollar bill, because Americans have all been behaviourally trained to value those. Gold and Silver have been lusted after since as long as anyone can remember -- along with such wealth as land, buildings, warehouses, fleets of trucks (transport capacity), corner offices, pretty executive assistants, and large prospect lists filled with wealthy marks. But lusting after CPU-cycles has so far been confined to geeks.
It is because the holders of CPU-cycles have not yet realised their wealth (or a acquired an infinite lust for more of them, and all that power can buy) that they are ripe for the fleecing, or as it is known in the trade, 'there is a business opportunity'.
It is also a political opportunity. Once you know *what* is going to happen, and realise that most people don't, you can profit, or take the political advantage. Here is where those seeking 'free speech' zones and similar can steal a march on the economy. At the moment, if you try to open a money bank, or engage in anything at all that touches the 'Fed', directly or indirectly, you run into a morass of regulation and just plain people out to get you. Compare your odds in 'money farming' to your odds at successful 'digital farming'. A digital farming operation would start with a CPU-cartel -- a group of persons who supply compute resources to one another on a cooperative basis (not unlike a darknet). If there were several large ones, they would doubtless establish a trading relationship to share excess capacity, deal with temporary overloads, provide portability of the underlying consumption of resources, and so on.
Besides the opportunity to *be* wealthy (and the comparative advantage of having developed land -- and thus higher rent district), there is a second opportunity for WNs. That is to develop a para-economy, in a situation in which the laws of economics are better understood by one side than the other. Intelligence can be nimble, and out-maneuver the existing interests and their bought-and-paid for government. Privacy laws are much more favourable for the confiscation of CPU-cycle wealth than for tangible assets. The government and homeland security already have bank deposit boxes marked , numbered, and inventoried for gold or possibly weapon confiscations. Manufactured items like drugs or cigarettes are merely money substitutes, not currency themselves. Confiscating CPU-cycles (demanding taxes be paid in real New Money) is not yet thought of, except by hackers, virus writers, and spammers, who are proscribed groups. The government hasn't (yet) realised the business it wants to be in is to be the biggest meanest CPU thief on the planet. One day it will, but those of us who can still think for ourselves get to fire our rounds off first.
The Government also hasn't thought to restrict, control, or get a cut of CPU-banking, CPU-cycle laundering, CPU-cycle tax evasion, or a host of other one-day-to-be-capital offences. It is like the barbarian warlord who doesn't have any clue what a book is or why it is more valuable than the gold leaf pried from the cover. Homeland Security is coming for you -- but they'll go for the sparkly or the shiny in your 'safety box' every time, and forget about the sparks in your other, digital 'box'.
Once you realise CPU-hours *are* money, you can figure out the rest. You can form a plan because you have a model (an easy to guess matter of economic behaviour, once you identify the money tokens and allow for 'foreign exchange rate' to the existing non-digital economy) -- which model predicts what will and will not work 'in the real world'. Businesses will fail, mysteriously, because they don't understand some feature of dynamic behaviour that you will understand. Understand, observe, and profit.
The most urgent task for 'Free Speech' zones, such as those needed by WNs, Paleos, and the like, is to realise the economic problem confronting them, and solve it to the advantage of themselves, their freedoms, and their community. The problem is that their wealth is on the table, out in the market place, gold bars stacked up with a 'steal me' sign on them. Prowling around is a jealous Government that doesn't even know what gold is (yet), but wants chickens, and have a big stick. They are in the business of stealing chickens from peasants using their stick. The defense is to get into business, form a bank, and lend money to the guys with the sticks. They'll never know what hit them.
http://www.thephora.net/forum/showthread.php?t=24629&page=5
All current empire-building entities will have to deal with their failure, using their existing economic structures, to comprehend the importance of COMPUTING RESOURCES with respect to Economics. This failure will lead to significant miscalculation by all potential players, and also provides an opportunity for new players who understand the game to either dominate existing players, or to enter the game.
First of all it must be understood that economic behaviour in general is automatic, mechanical, and emergent. That is, any system with tokens that have the requisite properties (including actors who make choices, a medium of exchange, a store of value, etc.) will exhibit phenomena *analogous* to the economic phenomena of current Nation-States, as previously of households, firms, and individuals.
Computing resources (notably, CPU-minutes, though one must not forget disk space and network or i/o bandwidth in the analysis) have all the properties needed to be the monetary basis ('gold') in an economy. This is not 'Software Economics' as normally considered -- looking on software production as an economic function in its own terms -- but as self-referential. CPU-minutes are the unit of productivity, in the same sense that the Physiocrats held 'Solar power' and 'Labour' to be fundamental to Nation-State economies.
The economic development (or if you prefer para-economic but that is a meaningless distinction) of CPU resources has already resulted in the invention of 'fractional reserve banking' (multitasking operating systems) and 'foreign trade' (networking and more ominously *the* internet), i.e., an articulated and fractal-like collection of micro and macro economic systems, with well-defined emergent properties.
We are presently at the stage of the accumulation of capital (previously defined as the virtual labour stored in an operating system, but now newly mobile)
It should be recognised that CPU-minutes are now *themselves* the new currency, and that the legacy economy, important as it is as a sector of the New Economy, is by no means the totality or dominating portion of it. The 'old economy' serves the same purpose as the Agricultural Sector in the 19th and 20th centuries. Necessary of course, but also undergoing a dissolution and transformation that both the Agriculturalists and the Nation-States that dominated them failed to understand -- vide the Depression for what I mean by lack of understanding.
The most important missed factor, in terms of its Legacy Economic impact, is the possibility of capital transfers between Nation-State sized economies ('Outsourcing'). Outsourcing is currently analysed entirely in terms of gold-backed or fiat-backed currency transfers -- i.e., in terms of the wrong Capital. In terms of real capital, it amounts to the possibility that the consumption of CPU-minutes will take place in India, while the production of them takes place in Data Centers in the US. It should be obvious that this analysis I am opening up is a *class* of economic theories, not a single one. There could be a Marxian analysis, a Classical, a Distributist, and so forth.
CPU-minutes are not only *like* money, they *are* money, since without CPU minutes there is no way to store value in a modern economic system, so that strictly speaking all the other currencies are secondary abstractions relative to the primary one of Machines-doing-work.
The failure to omit such a critical factor in modern Economics -- e.g., the fraction reserve nature of Financial Banking, the bubble-like nature of joint-stock companies, the importance of Gold and Silver discovery to Empire building, or indeed any other significant factor, allows one to PREDICT IN ADVANCE the failures of Nation-States. There is *no* Nation-State or governmental or business entity that will *knowingly* credit CPU-minutes as intrinsic economic phenomena. They will *only* be valued in trade in the mercantile sense of the old economy. We are in the phase of Capitalism before Adam Smith, in other words, in which economic players might, randomly or by intuition, act correctly, but without actual knowledge or understanding, they will just as often miscalculate.
Anyway, here is my original post on 'Networked Distributism' from OD:
http://www.originaldissent.com/forums/showthread.php?t=2980
Networked Distributism
Since we are discussing, in another thread, 'the future of the forum', I thought it would be useful to publish a few thoughts on 'what is going to happen next' -- both as to the internet and as it relates to small dissident 'free speech' groups, such as WNs, paleos, kinists, and TradCons, not to mention more leftish groups such as Libertarians or Leftists, who sometimes have similar interests, at least in degenerate form. I will call these people collectively WNs for convenience, though of course the title doesn't fit all.
First off, it is necessary to understand in advance what the 'next big thing' on the internet is going to be. It seems that most of the last couple years, the internet has been groping in a certain direction that is only now becoming clear to the most forward looking thinkers. To motivate the discussion, I'm going to tell a little parable:
Computing has just, in the past 5-10 years, because sufficiently complex that one could imagine the central government creating a data file on every single person, and attempting to capture a complete record of all transactions in the economy. This is Total Information Awareness, and the ostensible point to it would be fighting terrorism and internal law enforcement, but in fact the upshot is likely to be an economy that is completely transparent (to looters).
So, for the first time, we can envision a gigantic central computer, called The Matrix, running a simulation of the economy in which every transaction, every bank account, and all information about everyone is present. Let's say it is located in Langley. However, this is a dumb system to try to build -- at least on the banking industry side. It is far more efficient for The Fed to simply demand that all banks in the Federal Reserve system supply it with a fraction of their computing power and run a certain program. Thus, a distributed system can be created, and information gathered and stored locally, but in a way that is centrally accessible.
The whole point of this little parable was to bring the reader to the point where he will ponder the full weight of the phrase 'providing a fraction of their computing resources', because this allows us to short-circuit to the heart of the discussion: currently, the banking system is layered on top of an asset, which is essentially a set of entries in an accounting system representing claims on resources. The resources claimed are somewhat shadowy, in that at some point in the past the claims were convertible to gold and silver specie, though never for everyone at once.
In a digital economy, computing resources are distinctly central -- cpu-seconds are fungible, divisible, transportable, and intrinsically valuable. In other words, they have all the attributes of a money substitute. In fact, they *are* the digital currency, in a very real sense. Other digital currencies are services layered on top of the fundamental ones of cpu-cycles, disk storage, and network bandwidth. All three of these have a fixed exchange rate relative to the 'dollar', now that Amazon has made available its S3 Storage service and EC2 computing beta test. We will thus refer, simply, to the Amazon Standard, which is as I write this 10 cents per cpu-hour in current units. Obviously, different makes of computers have different CPU benchmarks, but these are convertible because they are measurable.
The internet economy is in the late stages of barter trade, and starting to develop a real 'capitalist' economy, with computer labour as the productive asset in which real values can be measured. This is very important, because whereas the government can confiscate gold and silver, or demand that its paper currency be accepted in trade as a fiat currency, they cannot confiscate CPU-cycles without taking away computing, and hence the virtual world itself, in a very real sense. It is possible to image all sorts of taxes, tolls, restrictions, patents, software blocks, virus looting of resources, security problems, and so on, but at the end of the day you either get your packets or you don't; you get your compute job done and the results saved to disk, or you don't. Productive work is non-forgeable, and is in finite supply.
Once you realise that the only natural digital currency is your compute power (either directly managed by you, or purchased through a proxy service for consumption or resale), then you realise what your wealth is too. You are in a similar position to the 'naive' farmer who does not have a fully developed, intensive farming operation. To a certain extent you use your land, or wealth, for your own purposes, you pay rent and ownership costs, and you have trouble when other people come and freeload on it -- but unless you give your resources to charity, through a distributed screensaver like seti@home, or participate in a peer-to-peer network, your compute power is 'undeveloped' and outside the digital exchange economy, in the same way a subsistence farmer is outside the modern world.
What will the digital economy look like when it is fully formed? Here we can only guess, but rest assured that because there *is* an analogy to money, that digital currency *is* money and economic behaviour will require it behave *like* money.
Get used to it: CPU-Hours are wealth, and Gold is just a backup currency for when the lights go out.
Right now, consolidation is occurring on the Internet. Large players -- mostly Google, MS, Yahoo, and Amazon, are buying similar portfolios of computing resources (data centers), advertising companies, subscribers and advertisers, content inventories, fulfillment and delivery systems, and quasi-banking payment systems. They think what they are doing is 'monetising digital assets'. But the paradigm shift hasn't clicked yet (it will, in the next two to three years). The paradigm shift is that you don't gold-monitise your CPU assets, you CPU-monetise your gold-assets.
They *think* they are creating advertising models to gain Fed-backed revenue from compute cycles and other resources, which are 'cost centers'. In fact, the cost centers are the wealth, and the goal should be attracting usage patterns that allow them to amass CPU wealth, then resell. Amazon stumbled on to the huge demand for mediated compute resources (i.e., a real digital banking system), almost by accident. They still do not allow conversion between the 'old money' economy and the 'new money' economy of the EC2 Beta. Let us learn from their mistake, when we build a distributed equivalent of the big central data centre operations.
Amazon's and the others' failure to experience the full force of the digital paradigm shift is easily explained because they are lusting after the wrong kind of power. They can imagine lusting after a dollar bill, because Americans have all been behaviourally trained to value those. Gold and Silver have been lusted after since as long as anyone can remember -- along with such wealth as land, buildings, warehouses, fleets of trucks (transport capacity), corner offices, pretty executive assistants, and large prospect lists filled with wealthy marks. But lusting after CPU-cycles has so far been confined to geeks.
It is because the holders of CPU-cycles have not yet realised their wealth (or a acquired an infinite lust for more of them, and all that power can buy) that they are ripe for the fleecing, or as it is known in the trade, 'there is a business opportunity'.
It is also a political opportunity. Once you know *what* is going to happen, and realise that most people don't, you can profit, or take the political advantage. Here is where those seeking 'free speech' zones and similar can steal a march on the economy. At the moment, if you try to open a money bank, or engage in anything at all that touches the 'Fed', directly or indirectly, you run into a morass of regulation and just plain people out to get you. Compare your odds in 'money farming' to your odds at successful 'digital farming'. A digital farming operation would start with a CPU-cartel -- a group of persons who supply compute resources to one another on a cooperative basis (not unlike a darknet). If there were several large ones, they would doubtless establish a trading relationship to share excess capacity, deal with temporary overloads, provide portability of the underlying consumption of resources, and so on.
Besides the opportunity to *be* wealthy (and the comparative advantage of having developed land -- and thus higher rent district), there is a second opportunity for WNs. That is to develop a para-economy, in a situation in which the laws of economics are better understood by one side than the other. Intelligence can be nimble, and out-maneuver the existing interests and their bought-and-paid for government. Privacy laws are much more favourable for the confiscation of CPU-cycle wealth than for tangible assets. The government and homeland security already have bank deposit boxes marked , numbered, and inventoried for gold or possibly weapon confiscations. Manufactured items like drugs or cigarettes are merely money substitutes, not currency themselves. Confiscating CPU-cycles (demanding taxes be paid in real New Money) is not yet thought of, except by hackers, virus writers, and spammers, who are proscribed groups. The government hasn't (yet) realised the business it wants to be in is to be the biggest meanest CPU thief on the planet. One day it will, but those of us who can still think for ourselves get to fire our rounds off first.
The Government also hasn't thought to restrict, control, or get a cut of CPU-banking, CPU-cycle laundering, CPU-cycle tax evasion, or a host of other one-day-to-be-capital offences. It is like the barbarian warlord who doesn't have any clue what a book is or why it is more valuable than the gold leaf pried from the cover. Homeland Security is coming for you -- but they'll go for the sparkly or the shiny in your 'safety box' every time, and forget about the sparks in your other, digital 'box'.
Once you realise CPU-hours *are* money, you can figure out the rest. You can form a plan because you have a model (an easy to guess matter of economic behaviour, once you identify the money tokens and allow for 'foreign exchange rate' to the existing non-digital economy) -- which model predicts what will and will not work 'in the real world'. Businesses will fail, mysteriously, because they don't understand some feature of dynamic behaviour that you will understand. Understand, observe, and profit.
The most urgent task for 'Free Speech' zones, such as those needed by WNs, Paleos, and the like, is to realise the economic problem confronting them, and solve it to the advantage of themselves, their freedoms, and their community. The problem is that their wealth is on the table, out in the market place, gold bars stacked up with a 'steal me' sign on them. Prowling around is a jealous Government that doesn't even know what gold is (yet), but wants chickens, and have a big stick. They are in the business of stealing chickens from peasants using their stick. The defense is to get into business, form a bank, and lend money to the guys with the sticks. They'll never know what hit them.