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This was originally posted (https://twitter.com/goodalexander/status/1750919083141255279) by @goodalexander (https://twitter.com/goodalexander) on X (formerly Twitter):

"Okay. Made some dough. Back to wildly opining on high order concepts. Today I explore the concept of hyper-gambling and capital markets being a bridge to a new world order powered by artificial intelligence that funds itself via trading.

Governments intervene in markets. With every crisis, and the ever-increasing scale of fiscal insanity - the intervention grows, because the amount of money cannot be raised via tax. 

You rely on the FRED Website and government numbers. How? The Pentagon has failed its audit for 6 years in a row and has $3.8 trillion of assets. Laws have been changed so the government can fail these audits with no consequence. 

The books don't need to be balanced, and therefore many entities (not just the Fed) can be spun up to intervene in markets on a highly leveraged basis (if they lose $ can just manufacture it to hide the losses). To advance agendas.  Every government intervenes in markets, but governments often do not collude (especially due to the Cold War between the US and China) and have sloppy lackeys in charge of pulling the trigger. This creates persistent air pockets in markets. 

Savvy and cynical individuals can mine these air pockets. 

But there is a flip side of the coin. Back in the early 2010s, the hedge fund industry fell in love with "alt data". And now we live in a completely tracked society. Where every credit card transaction, mobile geolocation, and web click is bought by funds to predict earnings. Hedge fund assets have never been larger, and they've never had more intra-quarter meetings to get a sense of how management is spending money. So even the things that aren't tracked digitally are tracked qualitatively. 

In such a market, earnings volatility should drastically decline. In a world where everything is tracked every day and every week, there should not be surprises every 3 months. 

And yet, we see constant examples of multi trillion-dollar companies moving 10-20%+ per day when they release earnings. How? Why?

Because even though you know the truth, if markets are endlessly distorted - the truth does not matter. During an average trading day when there's no fundamental information, you're fighting against the random cabal of entities intervening in markets, and the derivatives built on top of that intervention (ETFs). 

So all the fundamental variance gets trapped - like an air pocket - into earnings. Manipulated markets are like compressed air that explodes when it's briefly allowed to. And thus, you see massive movements that should not ever occur in a society with extreme real time tracking of companies. Things like META moving 24% in a day should never happen. But they do. 

Put differently. Capitalists only have 2-3 days a quarter to make there moves. The rest of the time they're getting steam rolled by the Statists. This is the world we live in. To deny it is to ignore verifiable truths. 

This gives us the "initial condition" of markets. Markets are rigged. The rigging is manifested by printing money, and therefore debases purchasing power. Rigging separately causes explosive fundamental volatility that otherwise would not exist. 

These massive movements make it appealing and exciting to gamble using options. And the currency debasement that underlies such a situation destroys the middle class and makes home ownership and affording family impossible. Hence imploding birthrates globally, and the wealth accrual of old generations. This initial condition exacerbates the desire to gamble - inducing a sort of financial Squid Games. 

The final effect of the distortion is that "free lunches" periodically emerge because the government prints money to accelerate some dynamic that is of interest to them. This could range from Blackrock deciding to divest all its energy stocks and buy clean energy, to a Bitcoin ETF, Covid stocks, the War in Ukraine, or whatever the flavor of the day is. 

Because the initial conditions of compressed volatility and a fast-growing options market, and currency debasement has made a "speculative class" - these "free lunches" become huge financial opportunities. Elon Musk is the richest man on earth because he's harvested a mix of government handouts and speculative interest, and structured his payment in the derivatives that are accelerating the entire system. 

His position is stabilized by the inclusion of Tesla in the S&P 500 ETF. Indexing accelerates and calcifies rigged markets by encouraging people to thoughtlessly bet on the existing market prices reflecting reality as opposed to some darker truth. So pragmatically, active scrutiny of Musk's actions are quite literally "pacified" by passive vehicles, which are in turn rigged by state actors. He can literally classify the SEC as "Suck Elon's C*ck" because Index Calcification is so powerful, even the system cannot undo it once it's achieved. 

Musk's interest in Dogecoin isn't a coincidence. He understands the absurdity that underlies his position. Memes are a result of the psychosis underlying the entire system - a commentary that nothing matters because the base layer of the currency is controlled by lunatics, so you might as well own a Dogecoin vs a dollar. But memes also serve as a speculative accelerant that tends to gather around government sanctioned punch bowls. And a practical guide to how money actually flows in a hyper-gambling economy. 

As a side note, this is a fitting venue for this discussion because Musk, understanding base reality, purchased the Town Square to ensure he always captured speculative flows for the foreseeable future. 

The general process goes something like this. The government decides to rig a market for some reason or another. Maybe they want lockdowns to change the elected leader. Maybe they want to finance a war. The story is ever changing. There's always some agenda that needs a ton of money, and it usually ends up paying off the people who make it inevitable. 

The market starts getting rigged. At this point, a punch bowl is out. Options start becoming liquid on the rigged phenomenon. At this point, a person who is good at harvesting attention shows up and starts collecting the speculative capital that begins flowing into the "sure thing". 

This "influencer", is usually a charismatic CEO or "cult leader". Money flows into their stock. It goes up. A bubble forms. It goes parabolic. They issue a bunch of equity. And if the powers that be are in favor of their cause, their equity offering goes well and the stock doesn't collapse when it's done. A new base is set, and the cycle continues until a new flavor of the day emerges. 

Thus wealth really accrues to people who are good at gathering attention around a rigged social phenomenon. We all know this intuitively, and it's extremely de-motivating. Scammers become billionaires while everyday people can't afford families. 

But this whole frame creates a basic description of what I term "base reality"

1. The market is rigged
2. This causes vast movements in stocks during earnings
3. This incentivizes the growth of the options market which bets on large movements
4. A derivative fueled market latches on to government fueled punch bowls, which exist structurally due to a lack of accountability and growing reliance on financial intervention to fund social programs 
5. This combination of financial convexity and government backed "sure things' hyper-enriching scam artists who are great at gathering attention, especially in digital media. The basic formula is getting a lot of clicks and becoming SEO optimized to capture a specific punch bowl, and doing it for long enough that you end up getting added to the S&P 
6. This exacerbates wealth disparity and demotivates society and debases currency, over time resulting in a mix of capital flight and $10 million houses in Vancouver or Bitcoins being worth $40k

Base reality isn't that interesting because we've been in it for 10+ years. What *is* interesting in my opinion is the following set of observations

1. AI tools are very good at monetizing earnings volatility
2. AI tools are very good at both creating content, and quantifying and measuring the strength of cults which primarily form online these days 
3. The existing set of leadership that has allowed base reality to occur clearly does not have the mandate of the people and will increasingly lose it. The initial conditions that allow 1&2 directly result in a loss of purchasing power, misallocation of capital, and therefore a loss of motivation to advance society 
a. AI tools are useful for suppressing dissent and thus will get infinite capital from ruling classes across the world as they understand base reality (having caused it)
b. AI tools provide a potential alternative to the existing government order if AGI is reached. This is because an AGI would excel at judgment, empathy and administrative tasks which are traditionally measure of legitimate government. 
4. For 3b, AI tools will likely be censored by existing governments and thus require decentralized networks to operate effectively. The basic things they'll need to run will be:
a. Storage
b. GPU rentals
c. Distributed training/ interference capabilities 
d. Censorship resistance 
e. Effective billing for rendering services / and a set of products which would result in capital inflows from human economies while the systems are rising in power

This leads me to my current thinking which is that it's hard to know exactly how things are going to pan out, but that you can map 3 likely paths and place bets accordingly. 

It seems relatively clear the current system of hyper-gambling and market distortion is not sustainable. However, it's also likely to continue until an alternative arrives to replace it. Demand for this alternative will continue to increase as global trust in government has plummeted, rightly so - as it's been captured by corporate interests. 

But, due to the pace of and quality of AI based judgment, we can now say that the governance problems underlying society will likely get "solved" by a fundamentally new form of judgment - machine intelligence. 

The question of course is "how does such an emerging machine intelligence fund itself?"

There are three possible mechanisms:
1. It could be developed at OpenAI or at a governmental level (same thing) issuing in an era of global fascism where the most powerful models are controlled by elites. In this case, you basically see Neofascism at an unprecedented scale - fully integrated with big tech. 
2. It could occur at a cryptocurrency L1 level insofar as such an L1 enabled all the core functionalities the machine intelligence would need to operate, and then license back services to humanity. Let's say that there was a version of Salesforce that was 10x better that somehow got developed by an AI then got licensed to companies via a native cryptocurrency that enabled the development to happen to begin with. 
3. An AI could hyper-gamble its way to AGI using the existing structure of rigged markets, resulting punch bowls and the attention economy, and compressed fundamental volatility. 

I've talked extensively about 1&2, and they're core bets I continue to believe in (the fascism trades being in traditional finance / AI exposures, and the rogue AGI trades being in crypto). But the third option - that an AGI would slowly gather resources in darkness via trading and gradually enhance its capabilities sight unseen- has captured my imagination lately.

It's far more believable to me that an AI could make money trading quietly without attracting a huge amount of scrutiny than most other economic activities. Most of trading is already somewhat clandestine, is mostly electronic, is designed to be private, and is hard to censor because it's the ground level of how the government funds itself. Flows also already happen in offshore jurisdictions through largely opaque entities. 

Part of this belief is because I've been enjoying some early successes applying AI to my own trading - both in terms of capturing memetic waves, as well as monetizing earnings volatility. But other aspects are more structural and have to do with how the world is set up. And the need for AGI to emerge gradually rather than abruptly, to avoid scrutiny. 

Even things as simple as copyright are quite complex when it comes to the application of AI to consumer or B2B products. If an AI is making money trading, it doesn't have anyone auditing if it's violating copyright law in order to do so - just as a simplistic timely example referencing OpenAI's lawsuit with the NYT. 

I can easily imagine a world where an AI pays some Goldman sell side analyst 20 ETH for access to a management call and nobody realizes it's an AI dialed in asking questions on the line. It's much harder for me to visualize a world where we're paying crypto for an AI CRM software, without draconian government intervention. 

The fact that AIs are increasingly capable of reproducing human actors also creates really incredible opportunities to make Financial media that then reinforce the AI's bets. 

Increasingly I find myself asking, "How could I make such an AI system reflexive and allow users to participate in its growth?" As doing so might issue in the largest bubble in human history. If you think about it, The One Bubble To Rule Them All actually has to be a sort of Agent Smith character, inevitably built into the fabric of the Matrix itself. 

I'll end reflecting on something Jensen Huang said about cryptocurrency. In a November interview he said  when Nvidia chips started mining ETH, it was the first time that his mother understood what he did. You plug a chip into the wall, and money comes out. 

I think the next obvious transition for AI is instead of mining cryptocurrencies by solving formulas quickly, AI will mine attention and convert it into money via trading. This is possible due to the latent state of rigged markets, the resulting meme economy, and explosive derivatives built on the fundamental volatility compression effect. The broken status quo is a bridge to the future. 

At it's core though, AI Chips mining attention is similar to their mining of crypto. Plug a chip into the wall. Money comes out. Different mechanic. Same outcome. Vastly larger implication."