The Spigot

I keep thinking about how we ended up here.

My kids are three and five. I have been in this industry for twenty two years. You would think that somewhere along the way I would have put together a coherent mental model of how the technology industry works, and make sense of what is happening. Something that I could wrap up as wisdom, or advice, or maybe just a pointer as my kids think about their future in a few years time.

Instead, I have been reacting. Lurching from one cycle to another. Mobile, Cloud, Crypto, AI and whatever comes next. As I navigate each cycle, like a befuddled tourist, the scale gets bigger. Each time, it seems that fewer people are thinking and the explanations for what is happening and why are more confused.

So I have been reading. Postman. Karen Hao’s Empire of AI on Sam Altman and OpenAI. Sebastian Mallaby’s The Infinity Machine on Demis Hassabis and DeepMind. Kyla Scanlon on the strange economics of the moment. And I have been trying to put together a through-line. The outline of a semi-coherent narrative that gestures towards why we end up here – arguing about data centers, fretting about AI, as the world literally burns.

I think it starts with a banner ad.

October 27, 1994

Bill Clinton was President, and Marc Andreessen had just released the Mosaic web browser just a year earlier. On that date, Wired Magazine’s digital spinoff, HotWired, launched its website with about a dozen paid advertisements. One of them was for AT&T. It was 476 by 56 pixels. It asked: “Have you ever clicked your mouse right HERE? You will.” Clicking it took you on a virtual tour of the world’s great museums.

By today’s standards, it was quaint. I suspect it was quaint even by the standards of 1994. But it was the beginning of something that would birth an enormous range of products and services: from social media to AI slop. But at the time, nobody involved thought they were the catalyst to the creation of a giant industry.

Within a year of HotWired’s launch, it was followed by Lycos, Excite, InfoSeek, and others – each company created with advertising as their primary business model. By the time Google created AdWords in 2000, the model was established. By 2014, Google alone was generating $60 billion a year in ad revenue. In 2025, Google brought in nearly $295 billion.

Nobody planned this. Andrew Anker, the former investment banker who wrote HotWired’s business plan, settled on advertising because it was, as an oral history of the era describes the only logical revenue stream he could envision. So, the humble beginnings of the business model that today underpins Meta,Google, and one that upstarts like OpenAI are staking their future on. An incidental decision, that became possibly the most profitable business model ever invented.

The same decision was also the inflection point from where technology went from being the domain of a handful of nerds and dreamers in a sleepy suburb of San Jose to the dominating social and economic force it is today. It is also where the trouble starts.

The Spigot Opens

Digital advertising became the canonical business model as the world went online. Technology meant zero marginal costs, global reach, and rapid dissemination. It generated staggering amounts of surplus capital concentrated in a handful of companies. Google, Facebook, Yahoo before them and many others to follow. The venture capitalists who were early investors in these companies generated mind boggling returns. Serving targeted ads at scale became a money printer.

All that surplus capital needed somewhere to go.

Capital chases returns. When you have that much money looking for a home, the bar for “this might work” drops dramatically. The entire Venture Capital business model is predicated on finding that one unicorn that would generate massive returns. You can see multi-billion dollar bets on businesses leasing office space for a loss while wearing the accoutrements of a technology company were justified.

For a VC, sitting on uninvested funds means your fund underperforms, your investors look to greener pastures. So you fund whatever has the ceremonial language of disruption. You fund NFTs, you fund fancy juice makers, because the alternative would be irrelevance.

The post-pandemic crypto boom seems like a fever dream now. Billions raised on the promise that pixelated pictures of digital apes would one day sublimate into collectible and unique art. Investors poured money into automated money-making machines based on complicated DeFi (Decentralized Finance) protocols that required a PhD in applied mathematics and the willingness to suspend disbelief.

I wasn’t immune. I spent way too much time trying to understand how Bitcoin works (and wrote a terrible science fiction story trying). I spent my hard-earned money on staking out some space on the blockchain. Money that could have gone to my kids’ 529 plans. Sorry girls. I wasn’t the outlier though. People way smarter than me poured millions into something that was, when you stripped away the jargon and the vibes, the world’s slowest and most expensive database.

How did this happen? How did so much capital get allocated (and is still allocated!) on something that is so obviously broken?

It is downstream of the spigot. There is so much money in the system, generated by that initial accident of online advertising, that it has to go somewhere. And the job of any ambitious entrepreneur is to provide it a plausible channel. Once the money starts flowing, it becomes self-reinforcing. More money validates the narrative. The narrative attracts more believers. More believers attract more capital. FOMO reigns supreme. The cycle runs until something breaks the spell.

Technopoly

Neil Postman wrote Technopoly in 1992, before the Internet was really a thing. I finished it a few weeks ago and it’s been rattling around in my head ever since.

Postman, a famously skeptical and uncompromising media critic, defined a technopoly as a society that has surrendered its decision-making to technology. Not in a “I welcome our robot overlords” way, but through a blind submission to metrics and statistics of dubious value. His examples – IQ tests, a man “drowning in a river that is, on average, four feet deep”. A society where technology becomes dominant through a self-perpetuating loop where it drives investment in itself, regardless of the impact on human-well being. Does this sound familiar?

I am also reading Sebastian Mallaby’s The Infinity machine. What comes through in his account of Demis Hassabis, Elon Musk, Larry Page and other industry titans is just how each of them operates with a profoundly different view on Artificial Intelligence – set to be the dominant technology of the 2020s and beyond. Hassabis comes across almost monk-like – viewing AI as the means to understand the nature of existence. Page as a transhumanist who sees the body as a shell to be discarded and the machine as the vessel for eternal life. Musk as a self-appointed guardian of a very particular vision of humanity – presumably with him as some sort of God-Emperor. These are the people who are deciding how and where the most consequential technology in a generation is deployed.

Consider the data center buildout. Trillions of dollars of private capital are being deployed to construct AI infrastructure at a pace that makes the railroad boom look modest. Even adjusted for inflation.

The rationale behind the investment seems to follow a circular logic. AI requires compute for training and inference, so you build data centers and fill them with compute. You fill them with compute which makes rapid deployment of AI possible and sparks massive competition between foundation model companies and hyperscalers to build, fundamentally, the same things. That in turn drives further demand for compute, and so on.

And AI is not just another speculative bet sitting alongside the economy. In 2026, it is the economy. Kyla Scanlon put it plainly: as AI swallows more and more capital, it has become the stock market and the economy simultaneously. The same companies – Microsoft, Google, Amazon, NVIDIA, etc. bankrolling the AI infrastructure buildout are also its biggest customers. Data center construction and investment in AI is driving GDP growth without growing jobs. Scanlon calls it a “jobless expansion“.

The prosperity exists in balance sheets and in the giant data centers sprouting up along state highways in places like Northern Virginia and Tennessee. It does not exist in communities that have been hollowed out as manufacturing evaporated and a career meant becoming the meat interface of a faceless algorithm directing you to the next gig.

Postman would have recognized this instantly. Nobody is in the driver’s seat. No single actor decided this was a good idea for society. No democratic process approved it. The technology cycle itself is driving societal change without any significant discussion. We have abdicated to the technology itself.

I wrote this in my notes on the book: “FOMO-driven investment in AI data centers with little to no prospect of broad societal benefits. We could have spent this money on climate change remediation or education or universal healthcare but here we are.”

Here we are.

The Arbitrage Trap

So there is a clear sense of a backlash brewing against technology. Try posting a pro-AI take on Threads or Bluesky and see the reaction. It’s not just the keyboard warriors who are ready to fight. A young man threw a molotov cocktail at OpenAI CEO Sam Altman’s house last weekend. Politicians who oppose moratoriums on data center constructions are threatened. There is a sense of rage as a new generation emerges into the post-ChatGPT landscape of disappearing knowledge work and the deep sense of careers and meaning being stolen by algorithms and trillion-parameter models.

But there is a key point that is missing in the public discourse. When Bernie Sanders “debates” Claude, it isn’t a meeting of equals. Bernie is an influential Senator and can call for moratoriums, hearings, and regulation. But Anthropic just raised billions of dollars in private capital. Claude runs not on the public dime, but on VC dollars. If Sanders pushed for a ban on data centers in Vermont, they will just build them in North Dakota. It doesn’t really matter where the data center sits. If the capacity is built out, compute will be deployed, and that compute will reshape the day-to-day work of people whether they want it or not.

But the backlash lacks a mechanism to break the capital flow. Moratoriums work only if they are coordinated and enforced. Otherwise you just get regulatory arbitrage. Capital exits to friendlier jurisdictions, and the places that resisted end up with neither the investment nor the jobs. That is the trap.

And if you want to see the arbitrage logic taken to its absurd conclusion, look no further than Elon Musk’s push for building data centers in space. As they say, in space, no one can hear your strident demands for a datacenter moratorium.

Spending a trillion dollars to deploy millions of GPUs in space seems insane, but it is also internally consistent with the incentive structure.

The Ratchet

The AI investment cycle can be best described as a ratchet. It moves only in one direction before locking in place. We seem to be committed to seeing where this cycle plays out – even if it ends in tears.

Sun points out the worst case scenario in a recent post – “One nightmare is a future where we get AI that’s good enough to wreak social and economic havoc, but not yet good enough to cure cancer / solve climate change / deliver 10% GDP growth. In that world… who pays?”

I work with AI every day. I run teams that build with it. I can see the utility. I have watched it compress weeks of work into hours and deliver real value for my clients. I am no old man shaking my fist at the clouds. But I also know that when the backlash arrives in full force, when the torches are lit and the pitchforks come out, the distinction between “I used AI thoughtfully” and “I profited from AI” will not matter. I worked in investment banking in 2008, I know what it means to be a social pariah.

People like me, who have bet careers on this technology being useful, will be caught in the same sweep as the people who bet billions on it being transformative. Everyone on the ratchet moves in the same direction. And yet, apart from the odd paper, there are little to no concrete suggestions from the same billionaires about how to make technology work for everyone apart from some vague gesturing to super-intelligence and to abundance.

And what feels like willful delusion rather than mere miscalculation is that the ratchet keeps clicking forward even as the world around it deteriorates. The United States, Israel, and Iran are in an active military conflict with direct strikes and counter-strikes. The Strait of Hormuz, through which a quarter of the world’s traded oil passes, is under threat. Russia’s invasion of Ukraine grinds on. These are the kinds of events that should be sending capital fleeing to safety. Instead, the markets shrug and carry just .. carry on?

Trying and Failing to Understand the World

I started this year realizing that I did not have a coherent mental model to explain what was happening. I read Postman, Hao, Sun and Scanlon to try and see how others made sense of a world so utterly dominated by technology and the eccentric billionaires who control it.

I ended up with a series of explanations that seem to involve some sort of hardware. Spigots, ratchets, and data centers in space. But I do not think I have a mental model. I do not think I can predict what comes next except a vague feeling that we will continue to spin faster until the whole edifice comes crashing down or we ascend to the singularity.

Postman’s views on the subservience of humanity to technology appeal to me because they seem to be manifest everywhere I look. From people scrolling aimlessly on their phones to pouring out their darkest secrets and deepest fears into the maw of a trillion-parameter language model. It is grim stuff.

But Postman also offers a solution. He calls it a “thoughtful rebellion.” Maybe the movement to touch grass, the surging sales of physical books and vinyl are signs that there is a genuine desire to disengage from digital technology. But how much of that movement is itself driven by mimetic desires pushed by algorithms, through BookTok and the like?

Perhaps technology provides its own means of meaningful disengagement. And maybe that is the only, if unsatisfactory, answer.

My kids will inherit a world shaped by decisions nobody consciously made, funded by a torrent of money nobody voted to spend, run on infrastructure nobody asked for. The best I can do is to show them the machinery that drives the world. And hope that they can find a way.