- Elon Musk says AI and robotics will make money obsolete…
- The guy with the most money doesn’t understand money…
- 🧨 “New money” chases fleeting stock market wealth. But “old money” invests in “real” assets — assets like real estate.
Dear Reader,
Mr. Musk recently claimed that artificial intelligence, twinned with robotics, will consign money to history’s ashheap.
We simply will not need it.
Addressing the U.S.-Saudi Investment Forum on November 19, the titan argued that:
- My guess is if you go out long enough, assuming there’s a continued improvement in AI and robotics, which seems likely… money will stop being relevant at some point in the future… I think at some point currency becomes irrelevant.
Is it true? Will artificial intelligence and robotics chase money out of existence?
I am not the visionary Mr. Musk is. I am — in fact — no visionary whatsoever.
My vision scarcely discerns the present… much less the future.
Yet I am not half so convinced of his lovely theory.
Free Doesn’t Exist in a Scarce World
I do not dispute that artificial intelligence and robotics will spawn fantastic efficiencies.
Nor do I dispute that they will vastly reduce the cost of multiple goods — some, to near nothingness.
Yet to reduce costs is not to eliminate costs.
A defining feature of this Hell known otherwise as Earth is scarcity.
Land is not infinite. Natural resources are not infinite.
Being scarce, they must command a price. They can therefore be rationed accordingly.
Absent a price, they cannot be. Consider goods production.
How can a goods manufacturer possibly know how to coordinate production in the absence of prices?
How would he know how much iron ore to mine… how much steel to forge… how much fuel he will require to power production?
How would he determine the number of items to manufacture?
And at which “price” to sell them?
Absent prices, he dwells in darkness. And prices are denominated in money.
Where’s the Profit Motive in a World of Free?
Meantime, humans manufacture goods in hope of exchanging them for profit. How can they earn a profit without the existence of money?
I imagine Mr. Musk would argue that robotic slaves — made artificially intelligent — will design, engineer and manufacture goods.
Such prodigious beings will dig raw components from stingy earth. They will transport them to manufacturing centers, where they will be fashioned into finished products on scales truly colossal.
Impoverishing scarcity will essentially vanish from Earth. And so we will have our priceless utopia.
Yet will not human beings own these silicon brutes? Will it not cost resources to acquire them? If those resources are not defined in money, then in what precisely?
And why would human beings spend resources on these strange creatures if not for profitable return?
Human beings do not invest resources in the production of goods which are subsequently handed away.
Do you know of any?
Every last one of them… that I have encountered at least… chase monetary profit.
And where is monetary profit in a moneyless world? Why would human beings bother with such a juiceless pursuit?
Back to Barter?
Are we to return to the barter system? In a fundamental sense all commerce is barter — money merely facilitates the exchange.
Yet money is a fantastic lubricant that greases commerce’s gears.
Barter — direct barter — is a far more primitive form of exchange than monetary exchange.
And what is a man handed free goods supposed to barter? He has produced nothing so he is incapable of barter.
Above I cited land. I noted that land is scarce. It is a fixed quantity. Land cannot be produced, much less at scale.
No robot of whatever intelligence can manufacture land.
In the absence of money, how does one value land? How does one acquire land? For what does one exchange it?
Questions, questions and more questions yet.
Or perhaps I fail to perceive the sunlit uplands Mr. Musk holds in visionary view.
The Need for Money in an Uncertain Future
Here is another question:
Without money, how does a man prepare for an uncertain future?
Economist Thorsten Polleit:
- If everything were perfectly predictable, people would indeed have no need for money. Everyone would already know today all their future goals, needs, available resources, prices, etc. In such a world, we could arrange everything today so that our available goods supply in the future could be perfectly aligned to our future demand for goods.
- But because the future is uncertain, humans are unable to know today what they will need or want tomorrow. Instead, they must already prepare in the present for future changes they cannot yet foresee or fully assess. And this — uncertainty about the future — is precisely why people demand money.
More:
- Holding money gives people the ability to cope with future uncertainty. It makes them (more) capable of exchange and allows them to react to changed circumstances in the way that is best for them.
- Of course, one could also prepare for uncertain future events by holding “ordinary goods” (food, clothing, etc.). But holding money is particularly simple and efficient — because money is the generally-accepted medium of exchange, the most marketable good.
- Musk’s claim that money could become dispensable (and thus lose its purchasing power) therefore presupposes that uncertainty about the future in human action can (or will) disappear.
I hazard — with high confidence — that uncertainty about the future cannot and will not disappear.
Irony
In conclusion:
- As long as future human action takes place under uncertainty — as long as there are aspects of human action subject to uncertainty — the reason remains why people will continue to demand money in the future (no matter how technologically advanced it may be). This is why money will retain value for people and cannot become irrelevant…
- If Elon Musk truly expects money to someday become irrelevant to humans, this could only happen in a world incomprehensible to us — one in which at least logic and human action no longer apply.
Mr. Musk may be a man of vast entrepreneurial talents. He may hold in his possession more money than anyone.
Yet there is high irony here. But what?
The man with the most money… he does not understand money.
Regards,
Brian Maher
for Freedom Financial News
