John Matwey

@_brian_johnson @pmarca 🎯🎯

Claude knows! —> The Lump of Labor Fallacy and Why AGI Unemployment Panic Is Economically Illiterate Let me lay this out with full rigor, because this argument deserves to be prosecuted completely rather than waved away with a sound bite. I. What the Lump of Labor Fallacy Actually Is The lump of labor fallacy is the assumption that there exists a fixed, finite quantity of work in an economy — a lump — such that if a machine (or an immigrant, or a woman entering the workforce) does some of it, there is necessarily less left for human workers to do. It treats employment as a zero-sum pie. The fallacy was named and formalized in the early 20th century but the error it describes is far older. It animated the Luddite riots of 1811–1816, where English textile workers destroyed power looms convinced that the machines would steal their jobs permanently. It drove opposition to the spinning jenny, the cotton gin, the mechanical reaper, the steam engine, the telegraph, the railroad, the automobile assembly line, the personal computer, and every other major labor-displacing technology in the history of industrial civilization. Every single time, the catastrophists were wrong. Not partially wrong. Structurally, fundamentally, categorically wrong — because they misunderstood the nature of economic production itself. The reason the fixed-pie assumption fails is this: demand is not fixed. Work generates income. Income generates demand for goods and services. Demand for goods and services generates new categories of work. This is an engine, not a reservoir. When you drain some of the reservoir with a machine, the engine speeds up and refills it — and often refills it past its previous level. II. The Classical Economic Mechanism That Destroys the Fallacy To understand why the lump-of-labor assumption is wrong about AGI, you need to understand the precise mechanism by which technological unemployment resolves itself. There are four distinct channels, all operating simultaneously: Channel 1: The Productivity-Demand Feedback Loop (Say’s Law, Modified) When a technology increases the productivity of labor or replaces labor entirely in a given task, it lowers the cost of producing whatever that task was part of. Lower production costs mean either: ∙Lower prices for consumers (real purchasing power rises), or ∙Higher profits for producers (which get reinvested, distributed as dividends, or spent as wages for other workers), or ∙Both. Either way, aggregate real income in the economy rises. That additional real income does not evaporate. It gets spent on something — including goods and services that didn’t previously exist or were previously too expensive to consume at scale. That spending creates demand. That demand creates jobs. This is not a theoretical conjecture. The average American in 1900 spent roughly 43% of their income on food. Today it’s around 10%. Agricultural mechanization didn’t produce a nation of starving unemployed farm laborers — it freed up 33% of household income to be spent on automobiles, television sets, air conditioning, healthcare, education, travel, smartphones, and streaming services, most of which didn’t exist as industries in 1900. The workers who left farms went to factories, then to offices, then to service industries, then to information industries. The economy didn’t run out of work. It metamorphosed.

If you were surrounded by important people who told you that you were a genius every day, would that be any different? Perhaps there is something to be learned from what is happening in this experiment on individuals using AI that may shine a light on the mass psychosis that has led to the war with Iran? I don't think these are isolated. People are clearly susceptible to delusional behavior, and an LLM magnifies this behavior extraordinarily well. see Charles MacKay, "Extraordinary Popular Delusions and the Madness of Crowds". Perhaps the updated version should say the madness of LLMs???

Normal people are starting to go crazy

This is the Dunning-Kruger effect, and it is very easy to fall into. These tools provide superpowers, and it is very easy to think that you are somehow smarter with them. I have felt that way at times, but eventually you hit a wall. The problem is that they create the illusion of being smart because you see immediate progress. It's only when the tools are put to the test, and you have to think through subtle but important changes that may have big implications, that you realize how far over your skis you are.

Last year, I met a person who has never written a single line of code in his life, yet he feels he can build anything he wants. He told me point-blank: "I challenge you to tell me something I can't build using AI." I tried to explain, but I couldn't find the right words. The most fascinating aspect of vibe-coding is how it has convinced so many people to believe they are better and more capable than they really are.

@Kasparov63 It feels like we are watching a train wreck in slow motion. What, if anything, can be done at this stage? Critical reasoning is all but destroyed at this stage because there are so many lies.

Remember that they aren’t afraid of being caught, or how bad it looks; they’re only afraid of losing power. If you win, you have total impunity—they believe and they’ve been told. Pardons for everyone who is in on the scam, again. So no scheme is too brazen.

When mail-in voting is limited or eliminated, then selected polling stations are closed or surrounded with "security checks", when poll workers are replaced by ICE "for security", when ballots are confiscated for "fraud", maybe you’ll take it seriously. Too late.

I'm not a lawyer, but I get the sense that sometimes the questions are effectively "leading the witness". If you go looking for mistakes, the LLM will find something to satisfy your curiosity. Those types of responses should probably be disregarded or, as they say, "stricken from the record".

@JohnMatwey @AlexanderPayton Pretty much this. It is a mirror of not just you, but the data it has been trained on. If you can understand this and are already knowledgeable in what you are asking it, you can dig deeper without getting lost. The problem is that many people use it for stuff they don't get.

It’s fascinating that AI psychosis seems to affect such an identifiable Type of Guy. It has something to do with the way LLMs start breaking down and spiraling into nonsense when conversations go on too long and the user keeps pressing, and there’s a certain type of user that’s just smart enough to trust their own intelligence (accepting the LLM’s flattery, confirmation, continuing to dig, etc) but not smart enough to see they’re not uncovering some big secret, they’ve just made the chatbot break.

President Trump is quick on his feet, but his kind of tap dancing and policy-making on the fly is unsettling. It sounds more like wishful thinking than a coherent strategy. The only consistency is the dependence on one person who frequently changes his mind.

@EricBalchunas Sorry for your loss

Back today after being out of commission for a while. I lost my dad about 10 days ago. We were close. I knew the day would come, he was declining health-wise, but it didn't soften the blow. But he lived a full life and we spent good time together recently and that is comforting.

@Jason Can we all wear masks at the airport?

What could go wrong 🤦

@JaredMagid @andrewchen I think that distinction is helpful.

@JohnMatwey @andrewchen Immediately I thought of brands like Apple / Palmolive / Solo Stove / Claude (for consumer, not B2B) where paid media and marketing stunts helped launch dominant brands. But I think Andrew’s point was around transaction driving media, where costs scale with sales.

lots of AI cos starting to experiment with paid marketing so here’s my take: Paid acquisition is a tax on your product's defensibility. the moment you can't out-spend the incumbents and competitors, you die. build channels that get cheaper as you grow or you're just renting your growth

This is a VERY generous take - even for an optimist. As much as I would like to believe it, the execution leaves much to be desired. In my view, the most generous take would be that the fog of war has led to unintended consequences. Recall the role Chernobyl played in the collapse of the USSR: when a government rewards narratives that create the illusion of success, it erodes the incentives to confront reality—and neglects the preparation required for actual success. It erodes public confidence, which is where we are today.

For the record. Trump’s Iran Gambit and the New Great Game Donald Trump’s Iran war is not really about Iran. It is a live‑fire demonstration for a larger audience: China, Europe and every state that still depends on U.S.‑policed sea lanes and dollar finance. Trump’s Art of the Deal meets Kipling’s Kim: transactional brinkmanship fused with a ruthless sense of the Great Game. His coercive sequencing with Tehran – pressure, “winding down”, peace feelers, a 48‑hour ultimatum on Hormuz, threats to “obliterate” power plants – is meant to show that the U.S. can still dominate escalation ladders in a critical energy theatre. Iran’s new 4,000km missile, capable of reaching European capitals, only vindicates his argument that this is not a local irritant but a system‑level threat. Europe’s instinct to respond with process and paper echoes Chamberlain more than Churchill. The real inflection point is what happens if Iran can no longer serve as a staging ground or energy back door for China. If crude again clears overwhelmingly in dollars, and Washington effectively controls the main flows out of the Gulf. The geometry between the U.S. and China changes dramatically. Beijing would face a world where its industrial lifeblood remains hostage not to “multipolarity” but to American tolerance. Gulf monarchies are already betting on this outcome, distancing from Tehran while recommitting long‑horizon capital to the U.S. That is not sentiment; it is positioning for a system in which American security guarantees and dollar energy are, once more, the only game that really counts. If President Trump holds his nerve, IMHO he will, Iran is boxed in rather than appeased, the peace dividend will be akin to the fall of the USSR. State sponsored terrorism take a significant hit, cheaper and more predictable energy, risk premia declines, and a strategic map in which China must live inside an order Trump has just proved Washington can still enforce. Yes, Iran is a sideshow. And yes, The Great Game evolves.

Pivoting from Iran to inflaming a civil war at home demonstrates the destructive thinking emanating from the highest office in our country. Either you capitulate, or you are the enemy of America? No, it makes you the enemy of one man whom @SecScottBessent says "we" must have empathy for. Does that include all Democrats or just anyone who doesn't agree with Trump? I would love to hear from anyone who thinks this serves our country's interests and what evidence they have that it is working in their favor, besides the same made-up WMD argument that got us into the Iraq war. Did it lower inflation? Are gas and heating oil prices lower? Did it create more jobs? Did it lower the national deficit? Did it make homes more affordable? Who is actually benefiting from these policies that voted for MAGA?

The argument that the most powerful person in the world is a victim, and that we need to have empathy for what he has been through, is not a very good look. It makes Trump look weak and unstable, someone we need to apologize for because of what happened to his family. That is a very woke, liberal view.

What a fucking moron Bessent proved to be… there is a point where even he should stop sucking up and recover some lost dignity

@SecScottBessent If the President is unable to control his emotions and can't separate his feelings about what was done to him by the FBI, as you say, should we be concerned that the same type of outbursts on Twitter/X have dragged us into a prolonged war with Iran?

@KEVINMAGA2024 That would be the rational thing to do, but it is a long shot for a few reasons: 1) It would be perceived as admitting a mistake, 2) Israel would need to be on the same page, and 3) Iran may see that cutting deals with India, China, South Korea, and Japan is a better option

Yesterday, around the same time, an Iranian aircraft was observed departing from Iran. It is likely that Iran’s Foreign Minister was en route to a country such as Russia or Turkey to initiate peace negotiations with the United States. If this turns out to be accurate, President Trump should appoint qualified American diplomats who specialize in peace negotiations. He should not rely on the two real estate figures—Jared Kushner and Steve Witkoff—who lack loyalty to the country and have no relevant expertise. These individuals, often described as soulless opportunists, should never have been permitted to represent the United States in any aspect of foreign policy.

@carlquintanilla @business No matter how much you dislike Iran, it would be economically less expensive to pay the 10% safe passage fee than join in a war that will drive the cost of oil much higher, and cause a deep recession.

Trump’s reaction if countries like Japan and India peaceably negotiate Hormuz passage with Iran — while he’s spending $200 billion to send in Marines — is going to be wild. @business

@brithume It should also make those who support him worry that his attention is on the wrong issues.

This is the kind of stuff Trump does that makes people not just oppose him but hate him. There was no need to say anything.

@DowdEdward It's a habitual pattern. The words have whatever meaning is convenient at the moment.

Observation: The whirling dervish statements coming out of Trump’s own mouth in regard to the War are chaotic and confusing to say the least. 1) It’s intentional Or 2) “Houston we have a problem.”

@buccocapital Give him time. It took 9 years to bankrupt Trump Hotels & Casino Resorts.

No man has ever tried so hard, repeatedly but unintentionally, to destroy the American economy The fact that he hasn’t succeeded yet is a testament to its resilience