The Daily Planet #83: The AI Bubble, Part 8

First of two Daily Planets on Cognitive Capitalism

We can't make sense of the massive investment in data centers by the “Magnificent Seven” and other AI firms without understanding two things. First, there's the millenarian belief in artificial general intelligence - a quasi-religious conviction that AGI is imminent and inevitable. Second, there's their clear understanding of the sources of their own economic success.

We all know the story: in the late 1970s, a wave of outsourcing began moving factories and manufacturing work from the U.S. to East Asia, especially China. This shift coincided with neoliberal economic policy — market-first decision-making, free trade, low tariffs, deregulation, and the retreat of the state from industrial planning.

But what that familiar narrative usually doesn’t tell us is what filled the void in the economy enabled by outsourcing and the neoliberal turn?. We know what it stopped: the U.S. stopped making things, and it largely stopped regulating. But what rose in its place?

One obvious answer is knowledge work. And it is the framework of cognitive capitalism that helps me understand the immense profits generated by knowledge work — whether in finance, technology, or related domains. These industries became the core of the American economy.

IMHO knowledge work is not just accounting and lawyering; it's also the way of war - drones, airpower and surveillance. Sometimes I think of the US as a brain in a tank.

Which leads to this observation - from an essay by Joseph Heath. Except that he underestimates the extent to which cognitive elites control both wealth and power in cognitive capitalism.

People are not rebelling against economic elites, but rather against cognitive elites. Narrowly construed, it is a rebellion against executive function.

Crucially, knowledge work cannot be outsourced in the same way manufacturing could. A lawyer in another country can’t easily try cases in U.S. courts; a Wall Street trader can’t operate under foreign regulatory regimes. Yet this is exactly where AI becomes so appealing: it promises to “outsource” knowledge work — not to cheaper labor markets abroad, but to machines owned by U.S.-based firms.

Companies that built their power by capturing the surplus generated from knowledge work now see AI as a way to deepen their hold on the most profitable sectors of the economy. This isn't just about replacing jobs or automating tasks — though that's part of the story. It’s about becoming indispensable to how knowledge is produced and monetized.

Cognitive-cultural economy

Cognitive-cultural economy or cognitive-cultural capitalism is represented by sectors such as high-technology industry, business and financial services, personal services, the media, and the cultural industries. It is characterized by digital technologies combined with high levels of cognitive and cultural labor.