The System of the World is Changing (Again)

The System of the World Is Changing Again

From Human Constrained to Post-Constraint Economies

Like most science ficiton geeks I've attempted to read Neal Stephensons's Baroque Cycle. The attempt was not entirely unsuccessful though I will admit I did not make it all the way through those three massive volumes. I did make it far enough to get the basic gist of the central idea. 

To summarize; the three books are adventure story set in the late 16th and early 16th century. But they ate more than an adventure story they are an attempt to chronicle the emergency of our modern "system of the world". 

They assert that the world is governed by a set of socioeconomic and geopolitical systems, by common global structures and interactions, not just individual intent. And that around the time the book covers (late 17th and early 18th centuries) that system fundamentally and materially changed, relatively quickly, to give birth to a new set of rules and constraints that we still operate under today.

This shift was essentially a shift from local, material, and person-to-person systems (feudal government, gold, land, patronage, religion, regional trade) to a global, abstract, rule-governed system (nation states, credit and paper money, long-distance trade networks, scientific laws, and institutional power) 

It's a fascinating idea, with a fair amount of historical backing and creditability. It’s not an idea created in a vacuum as well there are plenty of “system” theories of history out there. And it's a very much a system approach, and since I am a techy, I love me some systems approaches.

A fascintaing model and certainly wrong in many ways. The world is not so simple after all, and any attempt to generalize it will introduce copious error. But "all models are wrong, some are useful." still holds. 

As the AI revolution got underway and myself and many of my friends were trying to come to terms with what it all means, it gave me a framework to think about it that I found useful.

It’s just like in the baroque cycles. The System of the World is Changing. Again.

A Useful Framing 

To understand how things are changing  and why we need to start with the right lens

Most discussions about AI and the economy focus on jobs:

- What will be automated?

- What new roles will emerge?

- How fast will this happen?

These are useful, but they’re downstream. Side effects of the real changes. The deeper question is:

What happens when humans are no longer the primary constraint in economic production?

To answer that, it helps to think in terms of system constraints—what actually limits output.

Historically, those constraints have been human or natural world constraints. Constraints around a peeling that extracted calories from the natural world using primarily the human body as the engine of work. Gradually as technology advanced, more parts of this pipeline became less human constrained, however the human element was always the bottleneck somewhere.

What’s changing now is the final human bottlnecks and constraints are releaxing.

The Three Layers of Human Value Add

To understand how the system changes, we need to be precise about what humans actually contribute to production.

Across all historical economies, human value add can be decomposed into three functional layers:

Muscle — Energy Input. Humans provide raw physical energy, force applied to the environment.

Examples:

• farming
• hauling
• mining
• transport

Where does the energy to do work come from? Human muscle.

Dexterity — Physical Execution: Humans provide:

• fine motor control
• manipulation of objects
• Tool crafting

Examples:

• crafting tools
• building structures
• driving vehicles
• operating machinery

How do we create and manipulate tools through which physical work is carried out in the real world?

Intellect — Control and Coordination: Humans provide:

• planning and sequencing
• decision-making under uncertainty
• coordination across people and systems
• goal selection

Examples:

• Group hunting strategies
• Long Term agricultural planning (irrigation etc)
• Making war
• Storing and allocating resources
• solving novel problems

What work should be done, and how should it be organized? How can we hedge for the future?

This was true in the neolithic. This was true in the Roman Empire. This is true in the Middle Ages and in the 20th century. Technology didn't fundamentally remove either constraint it just optimized and scaled the workflows and moved the bottlenecks

Why These Three Layers Matter

These are not just categories, they are constraints. At any point in history: one or more of these layers limits total output. It was not the ONLY limiting factor (the natural world is another important one) but it was often the dominate one, and more importantly it was the one humans were economically incented to participate in

As technology advanced, and the overall throughput of the system improved, bottlenecks didn’t vanish they moved. And the economic incentive systems reorganized around the new bottleneck

You can think of them like a production stack:

• Energy (muscle) enables action
• Execution (dexterity) carries it out
• Control (intellect) directs it

If any layer is constrained, the entire system is constrained.

Economic Development and Humans

Economic development is not random innovation. It is a process of: progressively externalizing (outsourcing) these three layers to first domesticated animals and later more and more to machines. And then incenting human activity to focus on the remaining non-outsourced part of the value chain.

• first muscle
• then dexterity
• now intellect

Each transition removes a constraint—and shifts the system to the next one. Human labor follows the shift, reconcetrating on the parts of the pipeline that are not yet oursourcable. Humans don't do any less work, they do the same work, but the efficiency ad throughput of the entire system improves 

Now you can probably see where this is going. 

Intersecting Externalization

The pattern of technological advancement is a staggered and overlapping externalization of the core capabilities and value add of humans:

Each phase:

- partially externalizes a new layer

- completes the externalization of the layer started in the previous phase

No layer disappears instantly.

Each moves through:

human-bound → partially externalized → largely externalized

System 0: The Fully Human-Bound World

Before large-scale external energy systems, the economy operated under a simple condition. All three layers of production—muscle, dexterity, and intellect—were human-constrained and locally bound. Total human economic activity was a direct function of the number of humans.  Human populations generally grew until they hit natural world resource limits and the constraint moved to the natural world. They then overshot and stabilized. Maslow's law.

Energy (Muscle): Energy came from human bodies, with some small-scale animal use (later)

Characteristics:

• low power density
• non-scalable
• tightly tied to population

Implication: Total output was directly limited by available human energy, until the population became large enough that the bottleneck moved to the natural world itself. 

Execution (Dexterity)

All physical work required human hands and manual tools. Tools gradually got better and incorporated simple machines (sling, athlas, bow) but the power source was stll human muscle. This layer essentially also scaled with available humans.

Control (Intellect)

Planning and coordination were local. There was low information flow across local groups (not zero though ) and very weak long distance coordination. The amount of humans that could be coordinated started off small but gradually grew via more and more complex social hierarchies. However there were still essential limits to coordination and planning, it all had to be done by humans.

Implication:

Systems could not scale beyond human cognitive reach and large social systems suffered from n^2 network effects as the number and layers of humans required to coordinate them grew and grew.

System-Level Properties

This produces a world that is local, has little long-distance coupling, relatively low throughput, low information exchange, where output grows slowly until it becomes environment-bound. They key contraint is that humans are generally the bottleneck in every layer

• Energy = human
• Execution = human
• Control = human

There is no external system to offload onto.

Phase 1: Wind, Water and Early Machinery

This was the first major system of the world change that the Barque cycle discussed. The main characterization of this period is the breakdown of hyper-localization that lead both to both global trade networks and knowledge sharing that then fed into the scientific revolution, 

Key developments:

- water and wind mills

- long range, reliable wind-powered shipping

Wind-powered trade creates:

- early global networks

- loose price coupling across regions

- knowledge sharing

- The Scientific Method

Early Machines create the printing press which accelerated the process by increasing knowledge sharing. 

Knowledge and understanding of the natural world explodes

Bottlnecks

- muscle is now being partially externalized

- dexterity remains human

- intellect remains human

Phase 2: Fossil Energy and Industrialization

With coal and steam the system shifted again:

- energy becomes dense and controllable

- production becomes continuous

This completes:

- muscle externalization

And begins:

- dexterity externalization

Factories automate some structured tasks, but human dexterity requirements persists in real-world environments.

Phase 3: Oil, Electrification, and Global Systems

With oil:

- dexterity is reduced more but not eliminated

- global supply chains emerge

Humans remain essential in:

- driving

- logistics edges

- maintenance

System state:

- Muscle = externalized

- Dexterity = partially externalized

- Intellect = dominant

Phase 4: The Current Transition: Externalizing Intellect

Computer, the Internet and then AI begins intellect externalization:

- numeric operations  / record keeping 

- decision-making

- optimization

- planning

- design

The control layer is now being compressed. Most importantly automated intelligence is now becoming smart enough to manage dexterity related tasks. 

Why Dexterity Is the Real Inflection Point

Dexterity has been the largest employment base in the last few phases:

- driving

- logistics

- construction

- service work

Autonomy does not need perfection. It only needs economic viability at scale.

Once reached:

- human labor moves to edge cases

- labor demand collapses

The Critical Condition

We now have:

- Muscle = fully externalized

- Dexterity = effectively externalized

- Intellect = partially externalized

This is enough to trigger a system transition.

Humans are no longer economically required at scale.

The Loss of the Absorption Mechanism

Previously:

- labor moved up the stack

  - muscle → dexterity

  - dexterity → intellect

Each major phase shift was ushered in by economic disruption but the system righted itself by using economic incentives to remap human labor to the parts of the value chain that still required them. 

Now:

- no higher layer exists to move to

- intellect is shrinking, dexterity is gone or soon to be gone.  Labor can no longer absorb displacement. There is no further remapping possible. 

Energy as the Underlying Substrate

Phase 0:

- Human Muscle

Phase 1:

- ambient energy (wind, water)

Phase 2–3:

- fossil energy (coal, oil)

Phase 4:

- solar, wind, storage

- software-controlled grids

Energy becomes abundant and programmable.

Energy × Intelligence

Two constraints relax simultaneously:

- Energy → abundant

- Intellect → partially automated

Result:

machine-driven production systems

The New System State

Humans are present, but not required in large numbers.

This is the key discontinuity.

Economic Consequences

- Wage distribution weakens

- Bargaining power collapses

- Capital concentration accelerates

Four Possible Outcomes

Capital-Dominant

Techno-Feudalism: concentrated ownership. In this state the only thing that effectively matters is ownership of the land, resources and means of production. 

Broad Ownership (Hack Capitalism)

similar to the above but postulate societal mechanisms that keep capitalism alive by enforcing distributed ownership in a capitalist system (requires maintenance). Everyone is a shareholder. 

Civic System (Techno-Socialsism)

Economic distribution via membership in society. Capitalism goes away and is replaced by state ownership of land, resources and the means of production. Universal basic income. 

Wet Firecracker: AI fails to fully automated intellect

- partial automation

- limited employment of the best and brightest

- unstable but functional

Sort of a yuppies rule the world scenario. Cyberpunk. 

The Core Shift

Not about jobs disappearing.

About removal of humans as the dominant constraint.

The Question That Matters

If humans are not required to produce output:

On what basis do they receive it?

- ownership

- limited participation

- membership

Closing

We are moving from:

human-constrained production

to

machine-driven systems

The old rules may not survive.

We should take no comfort in previous cycles successfully remapping labor “up the stack” because we’ve reached the top of the stack. There is nowhere left to go.

The key question:

Do humans remain necessary enough to anchor the economic system?

Possibly not at scale.